HEALTHEON CORP, S-1, 1998-07-31

HEALTHEON CORP
S-1, 1998-07-31

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1998

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
---------------------

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
-------------------

HEALTHEON CORPORATION
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7374 94-3236644
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

4600 PATRICK HENRY DRIVE
SANTA CLARA, CA 95054
(408) 876-5000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
---------------------
W. MICHAEL LONG
CHIEF EXECUTIVE OFFICER
4600 PATRICK HENRY DRIVE
SANTA CLARA, CA 95054
(408) 876-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:

<TABLE>
<S> <C> <C>
LARRY W. SONSINI JACK DENNISON GORDON K. DAVIDSON
STEVEN E. BOCHNER VICE PRESIDENT AND LAIRD H. SIMONS III
MARK L. REINSTRA GENERAL COUNSEL JEFFREY R. VETTER
Wilson Sonsini Goodrich & Rosati 4600 Patrick Henry Drive MICHAEL J. MCADAM
Professional Corporation Santa Clara, CA 95054 Fenwick & West LLP
650 Page Mill Road (408) 876-5000 Two Palo Alto Square
Palo Alto, CA 94304-1050 Palo Alto, CA 94306
(650) 493-9300 (650) 494-0600
</TABLE>

---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
---------------------

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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
- ----------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
---------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $0.0001 par value....................................... $75,000,000 $22,125
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o). A portion of the proposed maximum aggregate
offering price represents shares that are to be offered outside of the
United States but that may be resold from time to time in the United States.
Such shares are not being registered for the purpose of sales outside the
United States.
---------------------

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

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: (1) one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and (2) the other to be used in connection with a concurrent
offering outside of the United States and Canada (the "International Prospectus"
and, together with the U.S. Prospectus, the "Prospectuses"). The U.S. Prospectus
and the International Prospectus are identical in all respects except for the
front cover page. The front cover page of the International Prospectus is
included herein after the final page of the U.S. Prospectus and is labeled
"Alternate Page for International Prospectus." Final forms of each of the
Prospectuses will be filed with the Commission pursuant to Rule 424(b)
promulgated under the Securities Act of 1933, as amended.
<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 JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)

ISSUED JULY 31, 1998

[LOGO]

COMMON STOCK

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

OF THE SHARES OF COMMON STOCK OFFERED HEREBY, SHARES ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS
AND SHARES ARE BEING OFFERED INITIALLY OUTSIDE OF THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS."
ALL OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD
BY THE COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC
MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY
ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN
$ AND $ PER SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION
OF THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE. APPLICATION HAS BEEN MADE TO LIST
THE COMMON STOCK FOR QUOTATION ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "HEON."

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

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON
PAGE 5 HEREOF.

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

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.

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

PRICE $ A SHARE

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

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
--------------------- ----------------------- -----------------------
<S> <C> <C> <C>
PER SHARE.................................... $ $ $
TOTAL(3)..................................... $ $ $
</TABLE>

- ------------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ .
(3) THE COMPANY HAS GRANTED THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
ADDITIONAL SHARES AT THE PRICE TO PUBLIC, LESS UNDERWRITING DISCOUNTS
AND COMMISSIONS FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF ANY. IF
THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL PRICE TO
PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO COMPANY
WILL BE $ , $ AND $ , RESPECTIVELY. SEE "UNDERWRITERS."

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

THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY FENWICK & WEST LLP, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1998 AT THE OFFICE OF
MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR IN
IMMEDIATELY AVAILABLE FUNDS.

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

MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.

HAMBRECHT & QUIST VOLPE BROWN WHELAN & COMPANY

, 1998
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS 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 OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
-------------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
-------------------

FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY THE COMPANY OR BY ANY UNDERWRITER THAT WOULD PERMIT A
PUBLIC OFFERING OF THE REGISTERED SECURITIES OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED,
OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS
COMES ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES
ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE REGISTERED
SECURITIES AND THE DISTRIBUTION OF THIS PROSPECTUS.
-------------------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................ 3
The Company....................... 4
Risk Factors...................... 5
Use of Proceeds................... 17
Dividend Policy................... 17
Capitalization.................... 18
Dilution.......................... 19
Selected Consolidated Financial
Data............................ 20
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 21
Business.......................... 30

<CAPTION>
PAGE
----
<S> <C>
Management........................ 44
Certain Transactions.............. 55
Principal Stockholders............ 59
Description of Capital Stock...... 61
Shares Eligible for Future Sale... 64
Certain United States Tax
Consequences to Non-U.S. Holders
of Common Stock................. 66
Underwriters...................... 68
Legal Matters..................... 71
Experts........................... 71
Additional Information............ 73
Index to Consolidated Financial
Statements...................... F-1
</TABLE>

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

The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent public
accounting firm and quarterly reports containing unaudited consolidated
financial data for the first three quarters of each year.
-------------------

Healtheon, Healtheon's logo, Virtual Healthcare Network, VHN and
ProviderLink are trademarks of the Company. SBCL SCAN is a trademark of
SmithKline Beecham Clinical Laboratories, Inc., and each other trademark, trade
name or service mark of any other company appearing in this Prospectus is the
property of its holder.
-------------------

UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I) ASSUMES
NO EXERCISE OF THE U.S. UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) GIVES EFFECT
TO THE FILING, PRIOR TO THE CLOSING OF THIS OFFERING, OF A CERTIFICATE OF
INCORPORATION AUTHORIZING 150,000,000 SHARES OF COMMON STOCK AND 5,000,000
SHARES OF UNDESIGNATED PREFERRED STOCK AND (III) GIVES EFFECT TO A 5,000,000
SHARE INCREASE IN THE NUMBER OF SHARES RESERVED UNDER THE COMPANY'S 1996 STOCK
INCENTIVE PLAN (THE "1996 PLAN"). IN THIS PROSPECTUS, UNLESS THE CONTEXT
OTHERWISE INDICATES, REFERENCES TO "HEALTHEON" OR THE "COMPANY" ARE TO HEALTHEON
CORPORATION, A DELAWARE CORPORATION, AND ITS CONSOLIDATED SUBSIDIARIES.
-------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

Healtheon is pioneering the use of the Internet to simplify workflows,
decrease costs and improve the quality of patient care throughout the healthcare
industry. Healtheon has designed and developed an Internet-based information and
transaction platform (the "Healtheon Platform") that allows it to create Virtual
Healthcare Networks ("VHNs") that facilitate and streamline interactions among
the myriad participants in the healthcare industry. The Healtheon VHN solution
includes a suite of services delivered through applications operating on its
Internet-based platform. Healtheon's solution enables the secure exchange of
information among disparate healthcare information systems and supports a broad
range of healthcare transactions, including enrollment, eligibility
determination, referrals and authorizations, laboratory and diagnostic test
ordering, clinical data retrieval and claims processing. Healtheon provides its
own applications on the Healtheon Platform and also enables third-party
applications to operate on the platform. In addition to Virtual Healthcare
Networks, Healtheon provides comprehensive consulting, implementation and
network management services to enable its customers to take full advantage of
the capabilities of the Healtheon Platform. The Company has established
strategic relationships with leading healthcare companies, including United
HealthCare Corporation, SmithKline Beecham Clinical Laboratories, Inc., Brown &
Toland Physician Services Organization and Beech Street Corporation, to enhance
its application portfolio, provide important specialized industry expertise and
increase its market penetration.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered:
U.S. offering............................................... shares
International offering...................................... shares
Total..................................................... shares
Common Stock to be outstanding after the offering(1).......... shares
Use of proceeds............................................... To retire short-term debt and for general corporate
purposes, including working capital and capital
expenditures. See "Use of Proceeds."
Proposed Nasdaq National Market symbol........................ "HEON"
</TABLE>

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA(2):
Revenue................................................................... $ 2,175 $ 11,013 $ 13,390 $ 4,286 $ 20,653
Loss from operations...................................................... (3,936) (20,452) (23,684) (11,827) (20,943)
Net loss.................................................................. $ (4,458) $ (22,517) $ (26,266) $ (13,307) $ (21,447)
Basic and diluted net loss per common share............................... $ (3.42) $ (3.64) $ (1.85) $ (1.22)
Weighted-average shares outstanding used in computing basic and diluted
net loss per common share(3)............................................ 6,583 7,223 7,193 17,632
Pro forma basic and diluted net loss per common share (unaudited)(4)...... $ (.59) $ (.46)
Shares used in computing pro forma basic and diluted net loss per common
share (unaudited)(3).................................................... 44,715 46,631
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
--------------------------
ACTUAL AS ADJUSTED(5)
--------- ---------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA(2):
Cash, cash equivalents and short-term investments.............................................. $ 12,801 $
Working capital................................................................................ 2,560
Total assets................................................................................... 48,122
Long-term obligations, net of current portion.................................................. 1,459
Stockholders' equity........................................................................... 30,427
</TABLE>

- ------------
(1) Based on the number of shares outstanding as of June 30, 1998. Excludes (i)
8,997,995 shares of Common Stock issuable upon the exercise of options then
outstanding, with a weighted average exercise price of $1.17 per share, (ii)
5,022,523 shares reserved for issuance under the 1996 Plan, (iii) 2,077,240
shares of Common Stock issuable upon the exercise of warrants then
outstanding, with a weighted average exercise price of $2.81 per share and
(iv) 1,600,000 shares of Common Stock issuable in connection with the
proposed acquisition of Metis LLC. In July 1998, the Company granted options
to purchase 2,390,200 shares of Common Stock. See "Management -- Employee
Benefit Plans," "Description of Capital Stock" and Notes 10, 11 and 14 of
Notes to Consolidated Financial Statements.
(2) The consolidated financial data reflects the business combination of
Healtheon and ActaMed, which was accounted for as a pooling of interests for
accounting purposes. All statements of operations prior to the acquisition
on May 19, 1998 have been restated to reflect the combined results of
Healtheon and ActaMed from inception. The consolidated statement of
operations data for the year ended December 31, 1995 are derived solely from
the ActaMed statement of operations for such period because Healtheon did
not commence operations until January 1996. See Notes 1 and 2 of Notes to
Consolidated Financial Statements for a discussion of the accounting for the
acquisition of ActaMed.
(3) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of shares used in computing basic and diluted net loss per Common share.
(4) Pro forma adjustments reflect the conversion of Healtheon's Convertible
Preferred Stock and ActaMed's Convertible Redeemable Preferred Stock into an
aggregate of 39,272,329 shares of Common Stock.
(5) As adjusted to give effect to the sale of the shares of Common Stock offered
hereby at an assumed initial public offering price of $ per share,
after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company and the application of
the net proceeds therefrom. See "Use of Proceeds" and "Capitalization."

3
<PAGE>
THE COMPANY

Healtheon is pioneering the use of the Internet to simplify workflows,
decrease costs and improve the quality of patient care throughout the healthcare
industry. Healtheon has designed and developed an Internet-based information and
transaction platform (the "Healtheon Platform") that allows it to create Virtual
Healthcare Networks ("VHNs") facilitate and streamline interactions among the
myriad participants in the healthcare industry. The Healtheon VHN solution
includes a suite of services delivered through applications operating on its
Internet-based platform. Healtheon's solution enables the secure exchange of
information among disparate healthcare information systems and supports a broad
range of healthcare transactions, including enrollment, eligibility
determination, referrals and authorizations, laboratory and diagnostic test
ordering, clinical data retrieval and claims processing. Healtheon provides its
own applications on the Healtheon Platform and also enables third-party
applications to operate on the platform. In addition to Virtual Healthcare
Networks, Healtheon provides comprehensive consulting, implementation and
network management services to enable its customers to take full advantage of
the capabilities of the Healtheon Platform. The Company has established
strategic relationships with leading healthcare companies, including United
HealthCare Corporation, SmithKline Beecham Clinical Laboratories, Inc., Brown &
Toland Physician Services Organization and Beech Street Corporation, to enhance
its application portfolio, provide important specialized industry expertise and
increase its market penetration.

The Internet's open architecture, universal accessibility and growing
acceptance make it an increasingly important environment for
business-to-business and business-to-consumer interaction. For many industries,
the Internet is connecting previously disconnected business processes and
allowing companies to automate workflows, lower distribution costs and extend
their market reach. The Company believes the healthcare industry, because of its
size, fragmentation and extreme dependence on information exchange, is
particularly well suited to benefit from greater use of the Internet.

The Healtheon Platform is designed to ensure security, scalability,
reliability, availability and flexibility. The platform includes a CORBA-based
distributed application framework that allows reliable, simultaneous access by
large numbers of users. Open architecture and object-oriented design permit
standards-based integration with legacy systems and third-party applications,
and a combination of advanced technologies, including digital incryption,
digital certificate and audit trail tracking, ensures security. The platform is
deployed on redundant, fault tolerant servers and software to create 24-hour
availability.

Healtheon's objective is to become the leading provider of Internet-based
transaction and information services to the healthcare industry. The Company's
strategy includes leveraging Internet technology to provide secure transactions
and communications across a broad range of healthcare participants, regardless
of their computing platforms; expanding the functionality and transaction
capability of its platform through the development, acquisition or enablement of
Internet-based applications; forming additional strategic relationships to
increase its portfolio of applications and services, to increase the number of
connected healthcare participants and to provide specialized industry expertise
for its new applications; targeting regional markets where it can gain critical
mass, thereby expanding nationally region by region; and employing its
usage-based business model to reduce the initial investment required by
customers to obtain the benefits of high-end information technology systems and
enable physicians, small organizations and individuals to gain access to
advanced information systems for the first time.

The Company was incorporated in Delaware in December 1995 and commenced
operations in January 1996. In May 1998, the Company completed its acquisition
of ActaMed Corporation, a leading provider of network services to the healthcare
industry. The Company's executive offices are located at 4600 Patrick Henry
Drive, Santa Clara, California 95054. Its telephone number at this location is
408-876-5000.

4
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THE RESULTS CONTEMPLATED BY THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE DISCUSSED BELOW AND
ELSEWHERE IN THIS PROSPECTUS.

LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT AND UNPROVEN BUSINESS
MODEL. The Company was founded in December 1995, commenced operations in
January 1996 and had not recognized substantial revenue and until late 1997 was
considered to be in the development stage. In May 1998, the Company acquired
ActaMed Corporation ("ActaMed"). As a result of the limited operating history of
Healtheon and ActaMed as a combined entity and the emerging nature of the
markets in which the Company operates, the Company's historical financial data
is of limited value in projecting future operating results. The combined
Company's limited revenue to date has been derived primarily from proprietary
non-Internet network services offered by ActaMed and from management and
operation of customers' information technology infrastructure. The Company has
incurred net losses since inception, and as of June 30, 1998, had an accumulated
deficit of $73.0 million. The Company intends to continue investing heavily in
acquisitions, infrastructure development, application development and sales and
marketing. As a result, the Company expects to incur substantial operating
losses at least through 1999, and there can be no assurance that the Company
will ever achieve significant revenue or profitability, or if significant
revenue and profitability are achieved, that they can be sustained. The
Company's business model is still in an emerging stage, and revenue and income
potential from the Company's business is unproven, making an evaluation of the
Company and its prospects difficult. Investors should not use the Company's past
results as a basis to predict future performance. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

EMERGING MARKET; UNCERTAIN ACCEPTANCE BY THE HEALTHCARE INDUSTRY. The
healthcare industry in general has been extremely resistant to adopting new
information technology solutions. Electronic information exchange and
transaction processing by the healthcare industry is still developing, and
complexities in the nature and types of transactions that must be processed have
hindered the development and acceptance of information technology solutions.
There can be no assurance that conversion from traditional methods to electronic
information exchange will continue to occur or that any such conversion will
occur as rapidly as the Company anticipates. Even if the conversion does occur
as rapidly as the Company anticipates, there can be no assurance that healthcare
industry participants will use the Company's applications and services.

Healtheon's success is dependent on its ability to attract a significant
number of customers from the healthcare industry. There can be no assurance that
the Company will be successful in achieving widespread acceptance of its
applications and services or in achieving market share before competitors offer
products, applications or services with features similar to the Company's
current or proposed offerings. The Company's business plan is based on its
belief that the value and market appeal of its solution will grow as the number
of participants and the scope of the transaction services available on the
Company's platform increase. If a significant number of participants fail to
adopt the Company's information technology solutions or adopt such solutions
slower than anticipated, the number of transactions conducted over the Company's
platform will be lower than expected and the Company may not achieve the
critical mass of users it believes is necessary to enable the success of its
applications and services. The Company anticipates generating a substantial
portion of its revenue from subscription and transaction-based fees.
Consequently, any significant shortfall in the number of users or transactions
occurring over the Company's platform from those anticipated by the Company
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Industry Background."

5
<PAGE>
RELIANCE ON STRATEGIC RELATIONSHIPS. The Company is substantially dependent
on establishing and maintaining strategic relationships with multiple healthcare
industry leaders in a number of healthcare segments to extend the reach of
Healtheon's applications and services to the various participants in the
healthcare industry, to obtain specialized healthcare expertise, to develop and
deploy new applications, to establish the Healtheon brand and to generate
revenue. The Company has limited experience in establishing and maintaining
strategic relationships with healthcare industry participants. The Company's
ability to build strategic relationships is complicated by the fact that some of
the Company's partners and potential partners are possible competitors of the
Company. In addition, as the Company builds relationships with particular
partners, it may become difficult or impossible for the Company to build
relationships with competitors of these partners, who may also be key
participants in the healthcare industry. Consequently, it is important that the
Company be perceived as independent of any particular customer or partner.
Moreover, many potential partners may be hesitant to work with the Company until
the Company's applications and services have been successfully introduced and
have achieved market acceptance.

The Company's success will depend both on the success of the other party to
the strategic relationship and on the ability of the other party to drive
increased adoption and usage of the Company's platform, applications and
services. Failure of one or more of the Company's strategic relationships to
increase the adoption and usage of the Company's platform, applications and
services could have a material adverse effect on the Company's business,
financial condition and results of operations. To date, the Company has
established only a limited number of strategic relationships, and the loss of
any of these strategic relationships, the failure to enter into new strategic
relationships in the Company's target markets or the failure of the Company's
strategic partners to actively pursue these relationships could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Strategy" and "-- Strategic Relationships."

NEED TO EXPAND SUITE OF APPLICATIONS. The Company believes that its success
is partially dependent upon its ability to introduce new applications in several
healthcare markets in a relatively short period of time. The Company currently
offers a limited number of applications on its platform. The Company does not
have the internal resources and specialized healthcare expertise to
independently develop all such applications and, consequently, must rely on a
combination of internal development, strategic relationships, licensing and
acquisitions. Each of these methods has risks, including the risk of
unanticipated costs and delays. See "-- Reliance on Strategic Relationships" and
"-- Risks Associated with Acquisitions." Any such applications, whether
developed internally by the Company or licensed or acquired from third parties,
must be integrated and customized to operate with existing customer legacy
systems and the Company's platform. These development, integration and
customization efforts will require significant expenditures by the Company, and
there can be no assurance that the Company will be able to develop such
additional applications and services or integrate or customize such applications
and services in a timely manner, or at all. Even if the Company is able to
develop and introduce additional applications for the Healtheon Platform, there
can be no assurance that these new applications will achieve market acceptance.
The inability of Healtheon to significantly expand the breadth of applications
available on its platform in a timely manner, or the failure of new applications
introduced by the Company to achieve market acceptance, could have a material
adverse effect on the Company's business, financial condition and results of
operations.

RISKS ASSOCIATED WITH ACQUISITIONS. A principal component of the Company's
growth strategy is the acquisition of other healthcare technology companies and
technologies to increase the number and variety of applications on the Company's
platform and to increase the Company's customer base. For example, in May 1998,
Healtheon acquired ActaMed, and in June 1998 the Company signed a definitive
agreement to acquire Metis LLC. The Company's ability to expand successfully
through acquisitions depends on many factors, including the identification of
applications, technologies or businesses that are complementary to those of
Healtheon, the integration of disparate technologies and corporate cultures and
the operation of a geographically dispersed company. In addition, acquisitions
could divert management's attention from

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<PAGE>
other business concerns, expose the Company to unforeseen liabilities or risks
associated with entering markets in which the Company may have no direct prior
experience or to risks associated with the market acceptance of acquired
applications and technologies, or result in the loss of key employees of the
Company or the acquired company. See "-- Dependence on Key Personnel."

The Company's future performance will depend on its ability to integrate the
organizations and technologies acquired by the Company, which, even if
successful, may take a significant period of time, will place a significant
strain on the Company's resources, and could subject the Company to additional
expenses during the integration process. In addition, existing or potential
customers might be threatened by certain strategic relationships that acquired
companies have with competitors of Healtheon's customers. As a result, there can
be no assurance that the Company will be able to integrate any acquired
businesses or technologies successfully or in a timely manner, to operate any
acquired businesses on a profitable basis, or to achieve operating synergies
necessary to make the acquisitions successful. There is significant competition
for acquisition opportunities, which may intensify due to increasing
consolidation in the healthcare industry. The Company competes for acquisition
opportunities with other companies that have significantly greater financial and
managerial resources than the Company. The Company's inability to identify
appropriate acquisition opportunities, consummate acquisitions or integrate
acquired applications, technologies, operations, personnel or businesses
successfully could have a material adverse effect on the Company's business,
financial condition and results of operations.

Healtheon intends to use its securities as consideration for future
acquisitions, which may result in potentially dilutive issuances of securities.
To date the Company has not used cash for acquisition consideration; to the
extent the Company chooses to do so in the future, the Company may be required
to obtain additional financing, and there can be no assurance that such
financing will be available on favorable terms, if at all. In addition,
Healtheon may be required to amortize significant amounts of goodwill and other
intangible assets in connection with future acquisitions and may incur
additional compensation expenses which could have a material adverse effect on
the Company's results of operations. See "-- Future Capital Needs; Uncertainty
of Additional Financing."

MANAGEMENT OF GROWTH. The Company has rapidly and significantly expanded
its operations and anticipates that significant future expansion will be
required. Such growth has placed, and is expected to continue to place, a
significant strain on the Company's managerial, operational, financial and other
resources. As of June 30, 1998, the Company had grown to 379 employees, from 109
employees on December 31, 1997, primarily as a result of its acquisition of
ActaMed in May 1998, which resulted in the addition of 196 employees. In
addition, the Company has only recently hired its Chief Financial Officer, as
well as other members of senior management. The Company expects that continued
hiring of new personnel will be required to support its business. The Company is
in the process of evaluating its accounting and management information systems
and anticipates that it may implement new systems within the next 12 months. The
Company could experience interruptions to its business in transitioning to new
systems. There can be no assurance that the Company's systems, procedures or
controls will continue to be adequate to support the Company's operations or
that the Company's management will be able to achieve the rapid execution
necessary to exploit the market for the Company's applications and services.

UNCERTAIN ADOPTION OF INTERNET SOLUTIONS. Growth in the market for the
Company's applications and services will depend upon the adoption of Internet
solutions by healthcare participants. The adoption of Internet solutions for
commerce and communications requires the acceptance of a new way of conducting
business and exchanging information. The healthcare industry, in particular,
relies on legacy systems, which may be unable to benefit from Healtheon's
Internet-based platform. The Internet may not prove to be a viable commercial
marketplace for a number of reasons, including inadequate development of the
necessary infrastructure, security concerns, lack of development of
complementary products, such as high speed modems and high speed communication
lines, implementation of competing technologies, delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity or governmental regulation. The Internet has experienced, and
is expected to continue to

7
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experience, significant growth in the number of users and volume of traffic.
There can be no assurance that Internet infrastructure will continue to be able
to support the demands placed on it by this continued growth. If critical issues
concerning the ability of Internet solutions to improve business processes are
not resolved or if the necessary infrastructure is not developed, the Company's
business, financial condition and results of operations will be materially
adversely affected.

The adoption of the Company's solution depends upon the acceptance of
network computing, in which computers with relatively little software and
storage capacity use Internet protocol networks to access software functions and
databases which are contained on remote servers. Although the Company's
applications and services can generally accommodate legacy and client-server
systems, customers using these systems may be reluctant to adopt new systems
when they have made extensive investment in hardware, software and training for
older systems. Furthermore, although aspects of the network computing model
exist today, large-scale implementation is untested. Problems with speed,
access, server reliability, security and public acceptance of Internet protocol
networks could materially adversely affect the adoption of Internet-based
systems such as the Company's platform. For the Healtheon Platform to be as
successful as the Company desires, healthcare participants must be willing to
allow sensitive information to be stored in Healtheon's databases. Although
Healtheon processes transactions for healthcare participants who maintain
information on proprietary systems, the benefits of connectivity and
sophisticated information management which the Company provides are limited
under such circumstances. If any of the foregoing limits the acceptance or
effectiveness of network computing, the Company's business, financial condition
and results of operations could be materially and adversely affected.

SECURITY, NETWORK AND CONFIDENTIALITY RISKS. Critical issues concerning the
use of Internet solutions including security, reliability and confidentiality
remain unresolved and may affect the growth and use of such technologies to
solve business problems. If these issues are not addressed successfully, the
Internet may not prove to be a viable means of conducting complex business
transactions, which would have a material adverse effect on the Company's
business, financial condition and results of operations.

The Company currently processes substantially all its customer transactions
and data at its facilities in Santa Clara, California and Atlanta, Georgia.
While the Company has safeguards for emergencies, the Company has no mirror
processing site to which processing could be transferred in the case of a
catastrophic event at either of these facilities. Consequently, transactions
supported in one facility cannot be supported in the Company's other facility
should a catastrophic event occur. The occurrence of a major catastrophic event
at either the Santa Clara or the Atlanta facility could lead to an interruption
of data processing or loss of stored data and could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the ability of the Company to process health-related transactions
is dependent on the efficient operation of the Internet connections from
customers to its systems. Such connections, in turn, are dependent upon
efficient operation of Web browsers, Internet service providers and Internet
backbone service providers, all of which have had periodic operational problems
or experienced outages in the past. Any such problems or outages could adversely
affect customer satisfaction with the Company's applications and services, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company retains confidential customer and patient information in its
processing centers. Therefore, it is critical that the Company's facilities and
infrastructure remain secure and that such facilities and infrastructure are
perceived by the marketplace to be secure. Despite the implementation of
security measures, the Company's infrastructure may be vulnerable to physical
break-ins, computer viruses, programming errors, attacks by third parties or
similar disruptive problems. Any material security breach could result in
liability to the Company and damage to its reputation. There can be no assurance
that the Company will be successful in maintaining the security of its
operations or the data stored at its processing centers.

RAPID TECHNOLOGICAL CHANGE; NEW APPLICATION AND SERVICES INTRODUCTIONS. The
emerging market for healthcare information exchange and transaction processing
is characterized by rapid technological

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<PAGE>
developments, frequent new product introductions and evolving industry
standards. The emerging nature of this market and its rapid evolution will
require that the Company continually improve the performance, features and
reliability of its applications and services, particularly in response to
competing offerings, and that it introduce new applications and services or
enhancements to existing applications and services as quickly as possible and
prior to its competitors. The success of new application and service
introductions is dependent on several factors, including proper definition of
new applications or services, timely completion and introduction of new
applications and services, differentiation of new applications and services from
those of the Company's competitors and market acceptance. There can be no
assurance that the Company will be successful in developing and marketing new
applications and services that respond to competitive and technological
developments and changing customer needs. The failure of the Company to develop
and introduce new applications and services successfully on a timely basis and
to achieve market acceptance for such applications and services could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the widespread adoption of new Internet,
networking or telecommunication technologies or standards or other technological
changes could render its applications and services obsolete or require
substantial expenditures by the Company to adapt its applications and services.
Moreover, there is a risk that a competitor's product might become the standard
for healthcare information services. See "Business -- Healtheon's Services" and
"-- Development and Engineering."

UNPROVEN PLATFORM INFRASTRUCTURE AND SCALABILITY. To date, the type and
volume of transactions processed over the Company's platform and the number of
healthcare participants connected to it have been relatively limited. The
Company must continue to expand and adapt its network infrastructure to
accommodate additional users, increased transaction volumes and changing
customer requirements. The expansion, adaptation and maintenance of the
Company's network infrastructure will require substantial financial, operational
and management resources. Increased usage will place additional stress upon the
Company's network hardware and traffic management systems. Due to the limited
deployment of the Company's services to date, the ability of the Company's
networks to connect and manage a substantially larger number of customers and
transactions at high transmission speeds is as yet unknown, and the Company
faces risks related to the networks' abilities to scale to expected customer
levels while maintaining sufficient performance. Many of the Company's services
agreements contain performance standards, and the failure by the Company to meet
these standards could result in the termination of these agreements, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that the Company will be
able to expand or adapt its network infrastructure to meet additional demand or
its customers' changing requirements on a timely basis and at a commercially
reasonable cost, or at all. If the Company's platform architecture is unable to
scale to support the variety and number of transactions and healthcare
participants anticipated, the Company's business, financial condition and
results of operations would be materially adversely affected.

CUSTOMER CONCENTRATION. Four customers have historically accounted for the
substantial majority of the Company's revenue. United HealthCare Corporation
("United HealthCare"), SmithKline Beecham Clinical Laboratories, Inc.
("SmithKline Labs"), Brown & Toland Physician Services Organization ("Brown &
Toland") and Beech Street Corporation ("Beech Street"), each of which accounted
for over 10% and collectively accounted for over 90% of the Company's revenue
for the six months ended June 30, 1998. In addition, United HealthCare and Brown
& Toland, each accounted for over 10% and collectively accounted for over 60% of
the Company's revenue for the year ended December 31, 1997. The Company expects
that a small number of customers will continue to account for a substantial
portion of the Company's revenue for the foreseeable future. The loss of one or
more of the Company's significant customers, or the failure of the Company to
generate anticipated revenue from these customers, could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Strategic Relationships."

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<PAGE>
COMPETITION. The market for healthcare information services is intensely
competitive, rapidly evolving and subject to rapid technological change. Many of
the Company's actual and potential competitors have announced or introduced
Internet strategies. The Company's competitors can be divided into several
groups: healthcare information software vendors, including HBO & Company and
Shared Medical Systems Corporation; healthcare electronic data interchange
companies, including ENVOY Corporation and National Data Corporation; and large
information technology consulting service providers, including Andersen
Consulting, International Business Machines Corporation and Electronic Data
Systems Corporation. Each of these companies is expected to compete with the
Company within certain segments of the healthcare information technology market.
Furthermore, major software information systems companies and others, including
those specializing in the healthcare industry that are not presently offering
applications competitive with those offered by the Company, may enter the
Company's markets. In some cases, large customers may have the ability to
compete directly with the Company as well. The Company also competes with
smaller regional competitors. Many of the Company's competitors and potential
competitors have significantly greater financial, technical, product
development, marketing and other resources and greater market recognition than
the Company. Many of the Company's competitors also currently have, or may
develop or acquire, substantial installed customer bases in the healthcare
industry. As a result of these factors, the Company's competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their applications or services than the Company. There can be no
assurance that the Company will be able to compete successfully against current
and future competitors or that competitive pressures faced by the Company will
not materially adversely affect its business, financial condition and results of
operations.

CHANGES IN THE HEALTHCARE INDUSTRY. The healthcare industry is highly
regulated and is subject to changing political, economic and regulatory
influences that may affect the procurement practices and operation of healthcare
organizations. Changes in current healthcare financing and reimbursement systems
could result in the need for unplanned enhancements of applications or services,
in delays or cancellations of orders or in the revocation of endorsement of the
Company's applications and services by healthcare participants. Federal and
state legislatures have periodically considered programs to reform or amend the
U.S. healthcare system at both the federal and state level. These programs may
contain proposals to increase governmental involvement in healthcare, lower
reimbursement rates or otherwise change the environment in which healthcare
industry participants operate. Healthcare industry participants may react to
these proposals and the uncertainty surrounding such proposals by curtailing or
deferring investments, including investments in the Company's applications and
services. The Company cannot predict what impact, if any, such proposals or
healthcare reforms might have on the Company. In addition, many healthcare
providers are consolidating to create integrated healthcare delivery systems
with greater regional market power. As a result, these emerging systems could
have greater bargaining power, which might lead to price erosion for the
Company's applications and services. The failure of the Company to maintain
adequate price levels could have a material adverse effect on the Company's
business, financial condition and results of operations. As the number of
healthcare delivery enterprises decreases due to further industry consolidation,
each new customer will become more significant and competition for such customer
will become greater.

GOVERNMENT REGULATION. Laws and regulations may be adopted with respect to
the Internet or other on-line services covering issues such as user privacy,
pricing, content, copyrights, distribution and characteristics and quality of
products and services. The adoption of any additional laws or regulations may
impede the growth of the Internet or other on-line services, which could, in
turn, decrease the demand for the Company's applications and services and
increase the Company's cost of doing business, or otherwise have an adverse
effect on the Company's business, financial condition and results of operations.
For example, under current Health Care Financing Administration guidelines,
Medicare eligibility information cannot be transmitted over the Internet.
Moreover, the applicability to the Internet of existing laws in various
jurisdictions governing issues such as property ownership, sales and other
taxes, libel and personal

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<PAGE>
privacy is uncertain and may take years to resolve. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to the Company's business, or the application of
existing laws and regulations to the Internet and other online services could
have a material adverse effect on the Company's business, financial condition
and results of operations.

The confidentiality of patient records and the circumstances under which
such records may be released for inclusion in the Company's databases are
subject to substantial regulation by state governments. These state laws and
regulations govern both the disclosure and the use of confidential patient
medical record information. Although compliance with these laws and regulations
is at present principally the responsibility of the hospital, physician or other
healthcare provider, regulations governing patient confidentiality rights are
evolving rapidly. Additional legislation governing the dissemination of medical
record information has been proposed at both the state and federal level. This
legislation may require holders of such information to implement security
measures that may require substantial expenditures by the Company. There can be
no assurance that changes to state or federal laws will not materially restrict
the ability of healthcare providers to submit information from patient records
using the Company's applications.

Legislation currently being considered at the federal level could impact the
manner in which the Company conducts its business. For example, the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA") mandates the use
of standard transactions, standard identifiers, security and other provisions by
the year 2000. The Company is designing its platform and applications to enable
compliance with the proposed regulations; however, until such regulations become
final, they could change, which could require the Company to expend additional
resources to comply with the revised standards. In addition, the success of the
Company's compliance efforts may be dependent on the success of healthcare
participants in dealing with the standards.

International regulations with respect to the Internet, privacy and
transborder data flows are considerably more developed than such regulations in
the United States. The Company intends to develop applications and services to
be used on a worldwide basis and, consequently, will be required to comply with
international regulations regarding the Internet and electronic commerce, as
well as with U.S. regulations. The Company has not evaluated the effect that
these regulations would have on its business, and there can be no assurance that
such regulations will not have an adverse effect on the Company's ability to
compete internationally.

The United States Food and Drug Administration ("FDA") is responsible for
assuring the safety and effectiveness of medical devices under the Federal Food,
Drug and Cosmetic Act. Computer applications and software are considered medical
devices and subject to regulation by the FDA when they are indicated, labeled or
intended to be used in the diagnosis of diseases or other conditions, or in the
cure, mitigation, treatment or prevention of disease, or are intended to affect
the structure or function of the body. The Company does not believe that any of
its current applications or services are subject to FDA jurisdiction or
regulation; however, the Company plans to expand its application and service
offerings into areas that may subject it to FDA regulation. The Company has no
experience in complying with FDA regulations. Healtheon's compliance with FDA
regulations could prove to be time consuming, burdensome and expensive, which
could have a material adverse effect on the Company's ability to introduce new
applications or services in a timely manner.

VARIABILITY IN QUARTERLY OPERATING RESULTS. The Company's quarterly revenue
and operating results have varied in the past and are likely to vary
substantially in the future. Quarterly revenue and operating results may
fluctuate as a result of a number of factors, including: changes in
relationships with the Company's present or prospective strategic partners; the
timing and significance of any future acquisitions by the Company; the timing
and significance of the entry by the Company into new healthcare markets; the
timing and significance of new customer acquisitions; changes in the Company's
application and service offerings; software defects, delays in application
development and other quality factors; demand for the Company's applications and
services; the ability of the Company to meet project milestones or otherwise

11
<PAGE>
meet customer expectations; the mix of consulting and transaction fee revenue
recorded by the Company; variability in demand for Internet-based healthcare
solutions; changes within the healthcare industry; and seasonality of demand.

The Company intends to increase its marketing, sales, research and
development, and administrative activities and to increase other operating
expenses as required to integrate the operations, technologies and networks of
recent and any future acquisitions and to expand its platform infrastructure and
operations. The Company anticipates that these expenses could significantly
precede any revenue generated by such increased spending. If the Company does
not experience significantly increased revenue from these efforts, the Company's
business, financial condition and results of operations could be materially and
adversely affected. In addition, the Company's expense levels are based in part
upon its expectations concerning future revenue and are relatively fixed in the
short-term. Consequently, if the Company's revenue are below expectations in any
period, the Company may not be able to adjust its spending levels in a timely
manner, which could have an immediate and material adverse effect on the
Company's business, financial condition and results of operations. For these and
other reasons, in some future quarters, the Company's results of operations may
fall below the expectations of securities analysts or investors, which could
have a material adverse effect on the market price of the Company's Common
Stock.

RISK OF PRODUCT-RELATED CLAIMS. Applications and services as complex as
those offered or developed by the Company frequently contain defects or
failures. There can be no assurance that, despite testing by the Company and
potential customers, defects or errors will not occur in existing or new
applications or that the Company's platform will not experience problems in
security, availability, scalability or other critical features, any of which
could result in loss of or delay in revenue, loss of market share, failure to
achieve market acceptance, diversion of development resources, injury to the
Company's reputation, or increased insurance costs, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, many of the Company's services agreements
contain performance standards, and the failure by the Company to meet these
standards could result in the early termination of these agreements, which could
have a material adverse effect on the Company's business, financial condition
and results of operation.

Many of the Company's strategic relationships and services agreements
involve the development, implementation and maintenance of Internet or
electronic data interchange-based applications and services that are critical to
the operations of its clients' businesses. In many cases, these services are
provided within a complex environment of legacy or client-server systems or rely
on third party applications. The Company's failure or inability to meet a
client's expectations in the performance of its services (particularly with
regard to proprietary information and patient records) could injure the
Company's reputation or result in a claim for substantial damages against the
Company, regardless of the Company's responsibility for such failure. In
addition, if healthcare industry participants receive incorrect information or
fail to receive required information in a timely manner, patient care may be
adversely affected, which could lead to claims of liability against the Company.
There can be no assurance that the Company's insurance would protect it from
such risks. Any unauthorized disclosure or use of this confidential information
could result in a claim for substantial damages.

The Company attempts to limit contractually its damages arising from
negligent acts, errors, mistakes or omissions in rendering its services; however
there can be no assurance that any contractual protections will be enforceable
or would otherwise protect the Company from liability for damages. Although the
Company maintains general liability insurance coverage, including coverage for
errors and omissions, there can be no assurance that such coverage will continue
to be available on reasonable terms or will be available in sufficient amounts
to cover one or more large claims, or that the insurer will not disclaim
coverage as to any future claim. The successful assertion of one or more large
claims against the Company, with respect to which the Company is uninsured or
that exceed available insurance coverage or result in changes to the Company's
insurance policies, including premium increases or the imposition of a large

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<PAGE>
deductible or co-insurance requirements, could adversely affect the Company's
business, financial condition and results of operations.

DEPENDENCE ON PROPRIETARY TECHNOLOGY; POTENTIAL LITIGATION. The Company
relies upon a combination of trade secret, copyright and trademark laws, license
agreements, confidentiality procedures, employee nondisclosure agreements and
technical measures to protect its intellectual property. Substantial litigation
regarding intellectual property rights exists in the Company's industry, and the
Company expects that its applications may be increasingly subject to third-party
infringement claims as the number of competitors in the Company's industry
segment grows and the functionality of applications overlaps. There can be no
assurance the Company will be able to prevent misappropriation of its
intellectual property. Effective intellectual property protection may not be
available in every country in which the Company intends to offer its services.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate or that third parties will not infringe or
misappropriate the Company's copyrights, trademarks and similar proprietary
rights, or that the Company will be able to detect unauthorized use of its
intellectual property and take appropriate steps to enforce its rights. There
can be no assurance that other parties will not assert infringement claims
against the Company. Such claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources by the Company. If
it were determined that the Company infringed the intellectual property rights
of third parties, the Company would be required to develop noninfringing
technology, obtain a license to such intellectual property or cease selling the
applications that contain the infringing intellectual property. There can be no
assurance that the Company would be able to develop noninfringing technology or
that it could obtain a license on commercially reasonable terms, or at all.
Moreover, if it is determined that the Company infringed the intellectual
property rights of others, it could be required to pay substantial damages,
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

LENGTHY SALES AND IMPLEMENTATION CYCLES FOR CERTAIN APPLICATIONS AND
SERVICES. A key element of the Company's strategy is to market its applications
and services directly to large healthcare organizations. Based on its sales
experience to date, the Company expects that the sale and implementation of its
applications to these large healthcare organizations will be lengthy and involve
a significant technical evaluation and commitment of capital and other resources
by these organizations. Therefore, the Company expects that the sale and
implementation of the Company's healthcare applications and services will be
subject to the risk of delays associated with customers' internal budgets and
other procedures for approving large capital expenditures, deploying new
technologies within their networks and testing and accepting new technologies
that affect key operations. For these and other reasons, the sales and
implementation cycles associated with certain of the Company's applications and
services are expected to be unpredictable and are subject to a number of
significant risks that are beyond the Company's control.

In addition, the Company will be required to expend substantial resources to
integrate its applications with the existing architectures of these large
healthcare organizations. The Company has very limited experience in integrating
its applications with large legacy and client-server architectures, and there
can be no assurance that it will not experience delays in integrating its
applications with these large healthcare organizations. Any delays in the
Company's implementation of its applications would delay its ability to generate
revenue from such applications. Because of the anticipated lengthy
implementation cycle and the potentially large size of such orders, if orders
forecasted for a specific customer for a particular quarter are not realized or
revenue is not otherwise recognized in that quarter, the Company's business,
financial condition and results of operations could be materially adversely
affected. See "-- Variability in Quarterly Operating Results" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

YEAR 2000 COMPLIANCE. Many currently installed computer systems and
software products are unable to distinguish between twentieth century dates and
twenty-first century dates. As a result, many companies' software and computer
systems may need to be upgraded or replaced to comply with such "Year 2000"
requirements. Although the Company believes that its internally developed
applications and systems are

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<PAGE>
designed to be Year 2000 compliant, the Company utilizes third-party equipment
and software that may not be Year 2000 compliant. Also, two systems acquired by
ActaMed, specifically SBCL SCAN ("SCAN") and ProviderLink, which together
accounted for approximately 47% of the Company's revenue during the six months
ended June 30, 1998, will require modifications to become Year 2000 compliant.
The Company plans to release Year 2000 upgrades to these systems in late 1998 or
early 1999. In addition, the Company's SCAN product is installed on
approximately 4,400 Company-owned workstations located in provider offices. Many
of these workstations are not Year 2000 compliant and must be upgraded or
replaced by the Company. However, the Company could experience delays and cost
overruns in the development of these upgrades, such upgrades could contain
defects and the Company could experience difficulties in getting the Company's
installed base of physicians to implement these upgrades in a timely manner. If
the Company experiences these or other difficulties in developing and deploying
its Year 2000 upgrades, revenues from SCAN and ProviderLink could be
significantly reduced, which could have a material adverse effect on the
Company's business, financial condition and results of operations. Failure of
such third-party or Healtheon equipment or software to operate properly with
regard to the Year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. In certain of its agreements, the Company warrants that its
applications and services are Year 2000 compliant. Failure of the Company's
applications and services to be Year 2000 compliant could result in the
termination of these agreements or in liability for damages, the occurrence of
either of which could have a material adverse effect on the Company's business,
financial condition and results of operations.

Furthermore, the success of the Company's efforts may depend on the success
of other healthcare participants in dealing with their Year 2000 issues. Many of
these organizations are not Year 2000 compliant, and the impact of widespread
customer failure on the Company's systems is difficult to determine. Customer
difficulties due to Year 2000 issues could interfere with healthcare
transactions or information which might expose the Company to significant
potential liability. If client failures result in the failure of Healtheon
systems, the Company's business, financial condition and results of operations
would be materially adversely affected. Furthermore, the purchasing patterns of
these customers or potential customers may be affected by Year 2000 issues as
companies expend significant resources to become Year 2000 compliant. The costs
of becoming Year 2000 compliant for current or potential customers may result in
reduced funds available to purchase and implement the Company's applications and
services.

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING. The Company
currently anticipates that the net proceeds from this offering, together with
its available cash resources and credit facilities, will be sufficient to meet
its presently anticipated working capital, capital expenditure and business
expansion requirements for at least the next 12 months. However, the Company may
need to raise additional funds prior to such time to support expansion, develop
new or enhanced applications and services, respond to competitive pressures,
acquire complementary businesses or technologies or take advantage of
unanticipated opportunities. The Company's future liquidity and capital
requirements will depend upon numerous factors, including the success of the
Company's existing and new application and service offerings and competing
technological and market developments. The Company may be required to raise
additional funds through public or private financing, strategic relationships or
other arrangements. There can be no assurance that such additional funding, if
needed, will be available on terms acceptable to the Company, or at all.

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF COMMON STOCK PRICE. Prior to
this offering, there has been no public market for the Company's Common Stock,
and there can be no assurance that an active public market for the Common Stock
will develop or be sustained after the offering. The initial public offering
price, which will be established by negotiation between the Company and the U.S.
Underwriters based upon a number of factors, may not be indicative of prices
that will prevail in the public market. See "Underwriters" for a discussion of
the factors to be considered in determining the initial public offering price.
The stock market has experienced significant price and volume fluctuations that
have particularly

14
<PAGE>
affected the market prices of equity securities of many technology companies and
that often have been unrelated or disproportionate to the operating performance
of such companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock. In addition, the market price of the
Company's Common Stock is likely to be highly volatile and could be subject to
wide fluctuations in response to quarterly variations in operating results,
announcements of technological innovations, announcements relating to strategic
relationships of the Company, developments in the Company's relationships with
its customers and conditions affecting the Internet or healthcare industries, in
general, or other events or factors. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. Such
litigation could result in substantial costs and the diversion of management's
attention and resources, which would have a material adverse effect on the
Company's business, financial condition and results of operations.

DEPENDENCE ON KEY PERSONNEL. The Company's future success will be highly
dependent on the performance of its senior management team and other key
employees. The Company's success will also depend on its ability to attract,
integrate, motivate and retain additional highly skilled technical personnel,
particularly trained and experienced professionals capable of developing,
selling and installing complex healthcare information systems. There is intense
competition for personnel at all levels, including senior management and
technical professionals. The Company's management believes that its executive
management, including Michael Long, CEO, and Pavan Nigam, Vice President,
Engineering, is critical to the success of Healtheon. The Company does not
maintain key person life insurance for any of its officers or key employees. The
loss of the services of any member of the Company's senior management team or
other key employees or the failure of the Company to attract, integrate,
motivate and retain additional key employees could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Employees" and "Management."

CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's
Certificate of Incorporation and Bylaws could have the effect of delaying,
deferring or preventing a change of control of the Company. These provisions
provide, among other things, that the Board of Directors is divided into three
classes to serve staggered three-year terms, that stockholders may not take
actions by written consent and that the ability of stockholders to present
proposals or director nominations at stockholder meetings is restricted. In
addition, the Company is subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law, which will prohibit the Company from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner.

Furthermore, the Company's Certificate of Incorporation and Bylaws provide
that the Company will indemnify its directors and officers to the fullest extent
permitted by Delaware law. The Company has also entered into separate
indemnification agreements with its directors and executive officers. Such
indemnification provisions and agreements may be broad enough to cover losses
that such officers and directors may incur in connection with investigations and
legal proceedings resulting from services performed in connection with takeover
defense measures, and may have the effect of preventing changes in the
management of the Company. See "Description of Capital Stock."

In addition, the Board of Directors has the authority to issue up to
5,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company.

SHARES ELIGIBLE FOR FUTURE SALE. Sales of a substantial number of shares of
Common Stock in the public market following this offering could adversely affect
the market price of the Company's Common

15
<PAGE>
Stock. The number of shares of Common Stock available for sale in the public
market is limited by restrictions under the Securities Act of 1933, as amended
(the "Securities Act"), and lock-up agreements executed by the security holders
of the Company under which such security holders have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the date
of this Prospectus without the consent of Morgan Stanley & Co. Incorporated.
Morgan Stanley & Co. Incorporated may, however, in its sole discretion and at
any time without notice, release all or any portion of the shares subject to
lock-up agreements. In addition to the shares of Common Stock offered
hereby (assuming no exercise of the U.S. Underwriters' over-allotment option),
there will be shares of Common Stock outstanding as of the date of this
Prospectus. On the date of this Prospectus, 667,404 shares other than the
shares offered hereby will be eligible for immediate sale. Upon the
expiration of lock-up agreements, an additional 48,604,105 shares will become
eligible for sale in the public market on , subject in the case of all
but 11,010,300 shares to the volume limitations and other conditions of Rule 144
adopted under the Securities Act ("Rule 144"). In addition, the Company intends
to file a registration statement on Form S-8 with the Securities and Exchange
Commission shortly after this offering covering the 43,159,170 shares of Common
Stock reserved for issuance under the Company's Stock Plan. The holders of
approximately shares of Common Stock are also entitled to certain rights
with respect to registration of such shares of Common Stock for offer or sale to
the public. If such holders, by exercising their registration rights, cause a
large number of shares to be registered and sold in the public market, such
sales could have a material adverse effect on the market price for the Company's
Common Stock.

CONTROL BY OFFICERS, DIRECTORS AND AFFILIATED ENTITIES. Upon the completion
of this offering, the present executive officers and directors of the Company
and their affiliates will, in the aggregate, own approximately % of the
Company's outstanding Common Stock ( % if the U.S. Underwriters' over-allotment
option is exercised in full). As a result, such persons, acting together, will
be able to significantly influence the management and affairs of the Company and
will have the ability to control all matters requiring stockholder approval,
including the election and removal of directors and the approval of significant
corporate transactions, such as a merger or consolidation of the Company or a
sale of significantly all of the Company's assets. Such concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control of the Company, and may adversely affect the market price of the
Company's Common Stock and the voting and other rights of the Company's other
stockholders. See "Principal Stockholders."

16
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company hereby are estimated to be approximately $
million (approximately $ million if the U.S. Underwriters' over-allotment
option is exercised in full), at an assumed initial public offering price of $
per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company. The
principal purposes of this offering are to obtain additional capital, to create
a public market for the Company's Common Stock, to enhance the ability of the
Company to acquire other businesses, products or technologies, and to facilitate
future access by the Company to public equity markets.

The Company currently expects to use approximately $3.5 million of the net
proceeds of this offering to retire short-term debt and use the remainder of the
net proceeds of this offering for general corporate purposes, including working
capital and capital expenditures. The Company may also use a portion of the net
proceeds of this offering to acquire or invest in complementary businesses or
technologies, although the Company has no present plans, commitments or
agreements with respect to any such acquisition or investment and is not
currently engaged in any negotiations with respect to any such transaction.
Pending such uses, the Company intends to invest such funds in short-term,
interest-bearing, investment grade securities.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock or other securities and does not intend to pay any cash dividends with
respect to its Common Stock in the foreseeable future. The Company intends to
retain any earnings for use in the operation of its business and to fund future
growth. In addition, the terms of the Company's credit agreement prohibit the
payment of cash dividends on its capital stock.

17
<PAGE>
CAPITALIZATION

The following table sets forth the total capitalization of the Company as of
June 30, 1998 (i) on an actual basis and (ii) on an as adjusted basis to reflect
the receipt by the Company of the estimated net proceeds from the sale of the
shares of Common Stock offered hereby (at an assumed initial public
offering price of $ per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by the
Company).

<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligations, net of current portion........................................ $ 1,459 $ 1,459
---------- -----------
Stockholders' equity:
Convertible Preferred Stock, $.0001 par value; no shares authorized, no shares issued
or outstanding, actual; 5,000,000 shares authorized, no shares issued or outstanding,
as adjusted.......................................................................... -- --
Common Stock, $.0001 par value; 75,000,000 shares authorized, 51,704,947 shares issued
and outstanding, actual; 150,000,000 shares authorized, shares issued and
outstanding, as adjusted(1).......................................................... 5
Additional paid-in capital............................................................. 106,832
Deferred stock compensation............................................................ (3,411) (3,411)
Accumulated deficit.................................................................... (72,999) (72,999)
---------- -----------
Total stockholders' equity........................................................... 30,427
---------- -----------
Total capitalization............................................................... $ 31,886 $
---------- -----------
---------- -----------
</TABLE>

- ---------

(1) Excludes (i) 8,997,995 shares of Common Stock issuable upon the exercise of
options outstanding on June 30, 1998, with a weighted average exercise price
of $1.17 per share, (ii) 5,022,523 shares reserved for issuance under the
1996 Plan, (iii) 2,077,240 shares of Common Stock issuable upon the exercise
of warrants then outstanding, with a weighted average exercise price of
$2.81 per share, and (iv) 1,600,000 shares of Common Stock issuable to
equity holders and employees in connection with the proposed acquisition of
Metis LLC. In July 1998, the Company granted options to purchase 2,390,200
shares of Common Stock. See "Management -- Employee Benefit Plans,"
"Description of Capital Stock" and Notes 10, 11 and 14 of Notes to
Consolidated Financial Statements.

18
<PAGE>
DILUTION

The net tangible book value of the Company as of June 30, 1998 was
approximately $13.5 million, or $.26 per share. "Net tangible book value" per
share is determined by dividing the net tangible book value of the Company
(total tangible assets less total liabilities) by the number of shares of Common
Stock at that date. Dilution per share represents the difference between the
amount per share paid by purchasers of shares of Common Stock in the offering
made by the Company hereby and the net tangible book value per share of Common
Stock immediately after completion of the offering. After giving effect to the
sale of shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $ per share and after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by the Company) and the application of the estimated net proceeds
therefrom, the Company's net tangible book value at June 30, 1998 would have
been $ , or $
per share. This represents an immediate increase in pro forma net tangible book
value to existing stockholders of $ per share and an immediate dilution to
new investors of $ per share. The following table illustrates the per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $
Net tangible book value per share as of June 30, 1998........... $ .26
Increase per share attributable to new investors................
------
Net tangible book value per share after this offering.............
------
Dilution per share to new public investors........................ $
------
------
</TABLE>

The following table sets forth, on a pro forma basis, as of June 30, 1998,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors (at an assumed initial public
offering price of $ per share and before deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by the
Company):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- --------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------ ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 51,704,947 % $ 101,722,000 % $ 1.97
New public investors..........
------------ ----- -------------- -----
Total....................... 100.0% $ 100.0%
------------ ----- -------------- -----
------------ ----- -------------- -----
</TABLE>

As of June 30, 1998, there were options outstanding to purchase a total of
8,997,995 shares of Common Stock, with a weighted average exercise price of
$1.17 per share, and warrants to purchase a total of 2,077,240 shares of Common
Stock, with a weighted average exercise price of $2.81 per share. To the extent
that any of these options or warrants are exercised, there will be further
dilution to new public investors. In July 1998, the Company granted options to
purchase 2,390,200 shares of Common Stock. See "Capitalization," "Management --
Employee Benefit Plans," "Description of Capital Stock" and Notes 10, 11 and 14
of Notes to Consolidated Financial Statements.

19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Consolidated Financial Statements and
Notes thereto, which are included elsewhere in this Prospectus. During the six
months ended June 30, 1998, Healtheon acquired ActaMed in a transaction
accounted for as a pooling of interests. All financial information has been
restated to reflect the combined operations of the Company and ActaMed. The
consolidated statements of operations data for the three year period ended
December 31, 1997 and the consolidated balance sheet data at December 31, 1996
and 1997 are derived from, and are qualified by reference to, the audited
Consolidated Financial Statements included elsewhere in this Prospectus. The
consolidated statements of operations data for the two year period ended
December 31, 1994 and the consolidated balance sheet data at December 31, 1993,
1994 and 1995 are derived from, and are qualified by reference to, audited
Consolidated Financial Statements that are not included in this Prospectus. The
statements of operations data for the six month periods ended June 30, 1997 and
1998 and the balance sheet data as of June 30, 1998 are derived from unaudited
financial statements included elsewhere in this Prospectus and, in the opinion
of the Company, include all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair presentation of the financial
position and the results of operations for these periods. Historical operating
results are not necessarily indicative of results in the future, and the results
for interim periods are not necessarily indicative of the results that may be
expected for the entire year.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ---------
1993 1994 1995 1996 1997 1997
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA(1):
Revenue.................................................... $ -- $ 190 $ 2,175 $ 11,013 $ 13,390 $ 4,286
Cost of revenue............................................ -- 507 1,916 5,423 8,808 2,857
Development and engineering expense........................ 1,002 1,863 2,446 8,596 12,986 6,409
Sales, general and administrative expense.................. 769 938 1,749 9,042 11,031 4,723
Amortization of intangible assets.......................... -- -- -- 3,189 4,249 2,124
Write-off of acquired in-process research and development
costs.................................................... -- -- -- 5,215 -- --
--------- --------- --------- --------- --------- ---------
Loss from operations....................................... (1,771) (3,118) (3,936) (20,452) (23,684) (11,827)
Interest income............................................ 5 172 208 539 611 254
Interest expense........................................... (117) (57) (6) (56) (323) (128)
Dividends on ActaMed's convertible redeemable preferred
stock.................................................... -- (423) (724) (2,548) (2,870) (1,606)
--------- --------- --------- --------- --------- ---------
Net loss................................................... $ (1,883) $ (3,425) $ (4,458) $ (22,517) $ (26,266) $ (13,307)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Basic and diluted net loss per common share................ $ (3.42) $ (3.64) $ (1.85)
Weighted-average shares outstanding used in computing basic
and diluted net loss per common share(2)................. 6,583 7,223 7,193
Pro forma basic and diluted net loss per common share
(unaudited).............................................. $ (.59)
Shares used in computing pro forma basic and diluted net
loss per common share (unaudited)(2)..................... 44,715

1998
-----------

<S> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA(1):
Revenue.................................................... $ 20,653
Cost of revenue............................................ 17,217
Development and engineering expense........................ 8,332
Sales, general and administrative expense.................. 12,123
Amortization of intangible assets.......................... 3,924
Write-off of acquired in-process research and development
costs.................................................... --
-----------
Loss from operations....................................... (20,943)
Interest income............................................ 637
Interest expense........................................... (251)
Dividends on ActaMed's convertible redeemable preferred
stock.................................................... (890)
-----------
Net loss................................................... $ (21,447)
-----------
-----------
Basic and diluted net loss per common share................ $ (1.22)
Weighted-average shares outstanding used in computing basic
and diluted net loss per common share(2)................. 17,632
Pro forma basic and diluted net loss per common share
(unaudited).............................................. $ (.46)
Shares used in computing pro forma basic and diluted net
loss per common share (unaudited)(2)..................... 46,631
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA(1):
Cash, cash equivalents and short-term investments.......... $ 74 $ 4,186 $ 9,386 $ 7,539 $ 21,804
Working capital (deficit).................................. (1,737) 4,226 7,244 2,505 14,790
Total assets............................................... 899 5,379 10,801 30,496 51,575
Long-term obligations, net of current portion.............. 159 63 -- 1,210 932
Convertible redeemable preferred stock..................... -- 7,919 16,029 39,578 50,948
Stockholders' equity (net capital deficiency).............. (1,335) (2,838) (7,697) (18,464) (12,102)

JUNE 30,
1998
-----------

<S> <C>
CONSOLIDATED BALANCE SHEET DATA(1):
Cash, cash equivalents and short-term investments.......... $ 12,801
Working capital (deficit).................................. 2,560
Total assets............................................... 48,122
Long-term obligations, net of current portion.............. 1,459
Convertible redeemable preferred stock..................... --
Stockholders' equity (net capital deficiency).............. 30,427
</TABLE>

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

(1) The consolidated financial data reflects the business combination of
Healtheon and ActaMed, which was accounted for as a pooling of interests.
All statements of operations prior to the acquisition on May 19, 1998 have
been restated to reflect the combined results of Healtheon and ActaMed from
inception. The consolidated statements of operations and balance sheet data
as of and for the years ended December 31, 1993, 1994 and 1995 are derived
solely from the ActaMed statements of operations and balance sheets for such
period because Healtheon did not commence operations until January 1996. See
Notes 1 and 2 of Notes to Consolidated Financial Statements for a discussion
of the accounting for the acquisition of ActaMed.

(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of the weighted average shares used in computing basic
and diluted net loss per common share.

20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
RESULTS CONTEMPLATED BY THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

Healtheon is pioneering the use of the Internet to simplify workflows,
decrease costs and improve the quality of patient care throughout the healthcare
industry. Healtheon's VHN Solution enables the secure exchange of information
among a wide array of disparate healthcare information systems and provides a
framework for a broad range of healthcare transactions.

Healtheon was incorporated in December 1995, commenced operations in January
1996 and had not recognized substantial revenue and until late 1997 was
considered to be in the development stage. In May 1998, the Company acquired
ActaMed, which was incorporated in 1992. The acquisition of ActaMed was
accounted for as a pooling of interests. The financial information presented
reflects the combined financial position and operations of Healtheon and ActaMed
for all dates and periods presented. The Company's limited revenue to date has
been derived primarily from proprietary non-Internet network services offered by
ActaMed and from management and operation of customers' information technology
("IT") infrastructure. In March 1996, ActaMed acquired EDI Services Inc.
("EDI"), a wholly owned subsidiary of United HealthCare, in a transaction
accounted for as a purchase. Accordingly, the operations of EDI are included in
the Company's consolidated statements of operations beginning March 1996. In
June 1998, the Company signed a definitive agreement to acquire Metis LLC, a
leading consulting, design and development firm focused on Internet and
intranet-based solutions for medical centers and integrated delivery networks.

The Company earns revenue from providing access to its network-based
services (including fixed fee and transaction-based services), performing
development and consulting services and licensing software. Customers may
purchase some or all of the Company's applications and services and the customer
relationship may evolve from utilizing consulting and development services to
utilizing transaction and subscription-based services. The Company earns
network-based services revenue from fixed fee subscription arrangements, which
is recognized ratably over the term of the applicable agreement, or revenue from
arrangements that are priced on a per-transaction or per-user basis, which is
recognized as the services are performed. Revenue from development projects is
recognized on a percentage-of-completion basis or as such services are
performed, depending on the terms of the contract. Revenue from consulting
services is recognized as such services are performed. Cash received in excess
of revenue recognized relating to such services has been recorded as deferred
revenue. As of June 30, 1998, the Company had deferred revenue of approximately
$3.5 million. The Company recognizes license revenue in accordance with the
American Institute of Certified Public Accountants' Statement of Position 97-2.
The Company does not expect that it will earn a material amount of revenue from
licensing in the foreseeable future.

The Company has developed strategic relationships with healthcare industry
leaders, including United HealthCare, SmithKline Labs, Brown & Toland and Beech
Street. These four companies each of which accounted for over ten percent, and
together accounted for over 90% of the Company's revenue for the six months
ended June 30, 1998. The Company expects that a small number of customers will
continue to account for a substantial portion of the Company's revenue for the
foreseeable future. The loss of one or more of the Company's significant
customers, or a decline in volume of business generated by such

21
<PAGE>
customers, could have a material adverse effect on the Company's business,
financial condition and results of operations.

Cost of revenue consists of costs related to services the Company provides
to customers and costs associated with the operation and maintenance of
Healtheon's networks. These costs include salaries and related expenses for
consulting and development personnel, network operations personnel, customer
support personnel, telecommunication costs, depreciation and maintenance of
network equipment, a portion of facilities expenses and leased personnel and
facilities costs. Given the Company's limited operating history, changes in
revenue mix, limited history of Internet-based network services, recent
investments in personnel, amortization of infrastructure investments, and
evolving business model, the Company believes that analysis of historical cost
of revenue as a percentage of revenue is not meaningful. The Company anticipates
that its cost of revenue will increase in absolute dollars in the future.

Development and engineering expense (which excludes development expenses
that are included in cost of revenue) consists primarily of salaries and related
expenses associated with the development of applications and services and
includes compensation paid to engineering personnel, fees to outside contractors
and consultants, a portion of facilities expenses, and the depreciation and
amortization of capital equipment used in the development process. The Company
believes its success is partially dependent upon its ability to introduce new
applications in several healthcare markets in a relatively short period of time.
Accordingly, the Company intends to continue recruiting and hiring experienced
engineering personnel and to continue making other investments in development
and engineering. The Company expects that development and engineering expenses
will continue to increase in absolute dollars. Currently, all development and
engineering expenses are expensed as incurred.

Sales, general and administrative expense consists primarily of salaries and
related expenses for sales, account management, marketing, administrative,
finance, legal, human resources and executive personnel, commissions, costs and
expenses for marketing programs and trade shows, fees for professional services,
and costs of accounting and internal control systems to support the operations
of the Company. The Company anticipates that sales, general and administrative
expense will continue to increase in absolute dollars as it adds sales,
marketing and administrative personnel, increases its marketing and promotional
activities, and incurs costs related to being a public company, such as
directors' and officers' liability insurance premiums and professional fees.

The Company's business model is still in an emerging stage, and revenue and
income potential from the Company's business is unproven. Moreover, the
Company's limited operating history under its current business model makes an
evaluation of the Company and its prospects difficult; investors should not use
the Company's past results as a basis to predict future performance. The Company
has incurred net losses since inception and, as of June 30, 1998, had an
accumulated deficit of $73.0 million. The Company intends to continue investing
heavily in acquisitions, infrastructure development, application development and
sales and marketing. As a result, the Company expects to incur substantial
operating losses at least through 1999. There can be no assurance that the
Company will achieve significant revenue or profitability or, if significant
revenue or profitability are achieved, that they can be sustained. See "Risk
Factors -- Limited Operating History; Accumulated Deficit and Unproven Business
Model."

22
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth certain data expressed as a percentage of
revenue for the periods indicated.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------ ---------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenue............................ 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of revenue.................. 88.1 49.2 65.8 66.6 83.4
Development and engineering...... 112.5 78.0 97.0 149.5 40.3
Sales, general and
administrative................. 80.4 82.1 82.4 110.2 58.7
Amortization of intangible
assets......................... -- 29.0 31.7 49.6 19.0
Write-off of acquired in-process
research and development
costs.......................... -- 47.4 -- -- --
------ ------ ------ ------ ------
Total operating costs and
expenses......................... 281.0 285.7 276.9 375.9 201.4
------ ------ ------ ------ ------
Loss from operations............... (181.0) (185.7) (176.9) (275.9) (101.4)
Interest income.................... 9.6 4.9 4.6 5.9 3.1
Interest expense................... (0.3) (0.5) (2.4) (3.0) (1.2)
Dividends on ActaMed's convertible
redeemable preferred stock....... (33.3) (23.1) (21.4) (37.5) (4.3)
------ ------ ------ ------ ------
Net loss........................... (205.0)% (204.4)% (196.1)% (310.5)% (103.8)%
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>

SIX MONTHS ENDED JUNE 30, 1998 AND 1997

REVENUE. Revenue increased to $20.7 million in the first six months of 1998
from $4.3 million in the same period in 1997. The significant increase in
revenue was due principally to new contracts with Brown & Toland and Beech
Street for the management and operation of their IT infrastructure beginning in
late 1997 and a new contract with SmithKline Labs in December 1997 to service
its SCAN laboratory test order and results service. To provide these services,
the Company utilizes its own personnel, certain outside contractors and certain
personnel and facilities of the customers that are leased to the Company. The
cost of these leased customer employees and facilities are included as part of
the total costs of the IT and development services billed to the customers by
the Company.

For the six months ended June 30, 1998, the Company recognized revenue for
IT services of $7.3 million, which included costs of leased personnel and
facilities of $6.1 million. In addition, the Company recognized revenue of
approximately $2.5 million for development services in the same period.

COST OF REVENUE. Cost of revenue increased to $17.2 million in the first
six months of 1998 from $2.9 million in the same period in 1997. The increase in
cost of revenue resulted from increased personnel and network operations costs
necessary to support increased transactions, primarily from the Company's SCAN
services. Cost of revenue also increased due to services provided to Beech
Street and Brown & Toland.

DEVELOPMENT AND ENGINEERING. Development and engineering expense (which
excludes development expenses that are included in cost of revenue) increased to
$8.3 million in the first six months of 1998 from $6.4 million in the same
period in 1997. The increase in development and engineering expenses was caused
by a significant increase in the number of engineers engaged in the development
of the Company's applications and services.

23
<PAGE>
SALES, GENERAL AND ADMINISTRATIVE. Sales, general and administrative
expense increased to $12.1 million in the first six months of 1998 from $4.7
million in the same period in 1997. The increase resulted primarily from the
addition of sales personnel and executive management, and from the amortization
of deferred compensation. The Company recorded deferred compensation of $2.4
million during the six months ended June 30, 1998, and recorded $1.1 million of
amortization of deferred compensation in this period. In July 1998, the Company
recorded deferred compensation of approximately $6.0 million. Deferred
compensation represents the difference between the purchase or exercise price of
certain restricted stock and stock option grants and the deemed fair value of
the Company's Common Stock at the time of such grants. The remaining deferred
compensation will be amortized over the vesting period, generally four years, of
the respective option or restricted stock grants. Amortization is estimated to
total $3.1 million for the last six months of 1998, $4.0 million for 1999, $1.7
million for 2000, and $.6 million for 2001.

AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets was
$3.9 million in the six months ended June 30, 1998 and $2.1 million in the six
months ended June 30, 1997. This amortization relates to the acquisition of EDI
in March 1996 and certain intangible assets related to SCAN in December 1997. At
June 30, 1998, a total of $16.9 million remained to be amortized, and the
amortization charges are estimated to be for the six months ending December 31,
1998 and for the years ending 1999 and 2000, $5.2 million, $6.5 million and $5.2
million, respectively, assuming no impairment of the remaining unamortized
intangible asset balances. The Company anticipates that it will incur additional
amortization of intangible assets in connection with its planned acquisition of
Metis LLC.

INTEREST INCOME AND EXPENSE. Interest income has been derived primarily
from cash investments which increased in the first half of 1998 compared to the
first half of 1997. This increase was from the Company's $25.0 million Preferred
Stock offering in October 1997. Interest expense results from the Company's
borrowings and from capitalized lease obligations for equipment purchases.

DIVIDENDS ON ACTAMED'S CONVERTIBLE REDEEMABLE PREFERRED STOCK. As dividends
on ActaMed's convertible redeemable preferred stock were cumulative whether
declared or not, the Company accrued such dividends on a quarterly basis.
Dividends of $1.6 million and $890,000 respectively, are shown as a charge
against income in the consolidated statement of operations for the six months
ended June 30, 1997 and 1998, respectively. None of the dividends were paid,
and, in conjunction with approving the acquisition of ActaMed by the Company,
the Preferred Stockholders waived their right to the dividends and agreed to
receive Healtheon Common Stock in exchange for their Preferred Stock.

INCOME TAXES. At June 30, 1998, the Company had net operating loss
carryforwards for federal income tax purposes of $50.0 million and federal tax
credits of $1.0 million, both expiring from 2009 through 2013. Of these net
operating losses, $20.0 million relates to a consolidated subsidiary. This loss
carryforward is available only to affect future taxable income of that
subsidiary. Because of the "change of ownership" provisions of the Internal
Revenue Code, a portion of the Company's net operating loss carryforwards and
tax credit carryforwards may be subject to an annual limitation regarding their
utilization against taxable income in future periods. A portion of these
carryforwards may expire before becoming available to reduce future income tax
liabilities.

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

REVENUE. Revenue increased to $13.4 million in 1997 from $11.0 million in
1996 and from $2.2 million in 1995. The significant increase in service revenue
was due principally to revenue attributable to ProviderLink, which was acquired
from United HealthCare in March 1996, and the contract with Brown & Toland in
October 1997. This increase was partially offset by a decrease in software
license revenue to $1.8 million in 1997 from $5.0 million in 1996, primarily due
to a decline in license fees from IBM.

For the year ended December 31, 1997, the Company recognized revenue for IT
services of $2.1 million, which included costs of leased personnel and
facilities of $1.9 million.

24
<PAGE>
COST OF REVENUE. Cost of revenue was $8.8 million in 1997 compared to $5.4
million in 1996 and $1.9 million in 1995. The increase resulted from the
significant growth in personnel and network operations costs necessary to meet
increased demand for the Company's services.

DEVELOPMENT AND ENGINEERING. Development and engineering expense (which
excludes development expenses that are included in cost of revenue) was $13.0
million in 1997 compared to $8.6 million in 1996 and $2.4 million in 1995. The
increase in development and engineering expense was caused by a significant
increase in the number of engineers engaged in the development of the Company's
applications and services.

SALES, GENERAL AND ADMINISTRATIVE. Sales, general and administrative
expense was $11.0 million in 1997, compared to $9.0 million in 1996 and
approximately $1.7 million in 1995. The increase resulted primarily from the
addition of sales personnel and executive management and from the amortization
of deferred compensation. The Company recorded deferred compensation of $2.7
million during 1997 and recorded $.6 million of amortization of deferred
compensation in 1997.

AMORTIZATION OF INTANGIBLE ASSETS. Amortization of acquisition-related
costs including intangible assets was $4.2 million in 1997 and $3.2 million in
1996. This amortization relates to the acquisition of EDI in March 1996.

WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT COSTS. The
write-off of acquired in-process research and development costs of $5.2 million
in 1996 relates to the acquisition of EDI in March 1996. Consistent with the
Company's tests for internally developed software, the Company determined the
amounts to be allocated to developed software and in-process research and
development based on whether technological feasibility had been achieved and
whether there was any alternative future use for the technology. At the date of
the acquisition of EDI Services, Inc., the Company concluded that the in-process
research and development had no alternative future use after taking into
consideration the potential for usage of the software in different products,
resale of the software and internal usage.

INTEREST INCOME AND EXPENSE. Interest income was derived from cash
investments following the Company's issuance of Preferred Stock and imputed
interest on payments due from IBM beginning in early 1997. Interest expense
increased in 1997 as a result of bridge financing and bank borrowings of the
Company and from capitalized lease obligations for equipment purchases.

25
<PAGE>
QUARTERLY FINANCIAL RESULTS

The following table presents the Company's operating results for each of the
six quarters in the period ended June 30, 1998, as well as such data expressed
as a percentage of the Company's revenue for the periods indicated. The
information for each of these quarters is unaudited and has been prepared on the
same basis as the audited consolidated financial statements appearing elsewhere
in this Prospectus. In the opinion of management, all necessary adjustments
(consisting only of normal recurring adjustments) have been included to present
fairly the unaudited quarterly results. This data should be read in conjunction
with the Consolidated Financial Statements and the Notes thereto appearing
elsewhere in this Prospectus. These operating results are not indicative of the
results of any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1997 1997 1998 1998
--------- --------- --------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:

Revenue......................................... $ 1,922 $ 2,364 $ 2,714 $ 6,390 $ 9,754 $ 10,899
Operating costs and expenses:
Cost of revenue............................... 1,411 1,447 1,567 4,383 7,513 9,704
Development and engineering................... 3,247 3,162 3,272 3,305 3,919 4,413
Sales, general and administrative............. 2,501 2,221 2,754 3,555 4,966 7,157
Amortization of intangible assets............. 1,062 1,062 1,063 1,062 1,949 1,975
--------- --------- --------- --------- --------- ----------
Total operating expenses.................... 8,221 7,892 8,656 12,305 18,347 23,249
--------- --------- --------- --------- --------- ----------
Loss from operations............................ (6,299) (5,528) (5,942) (5,915) (8,593) (12,350)
--------- --------- --------- --------- --------- ----------
Interest income................................. 146 108 105 252 358 279
Interest expense................................ (50) (77) (49) (147) (116) (135)
Dividends on ActaMed's convertible redeemable
preferred stock............................... (783) (823) (776) (488) (890) --
--------- --------- --------- --------- --------- ----------
Net loss........................................ $ (6,986) $ (6,320) $ (6,662) $ (6,298) $ (9,241) $ (12,206)
--------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- ----------
AS A PERCENTAGE OF REVENUE:

Revenue......................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of revenue............................... 73.4 61.2 57.7 68.6 77.0 89.0
Development and engineering................... 168.9 133.7 120.6 51.7 40.2 40.5
Sales, general and administrative............. 130.1 94.0 101.5 55.6 50.9 65.7
Amortization of intangible assets............. 55.3 44.9 39.2 16.6 20.0 18.1
--------- --------- --------- --------- --------- ----------
Total operating expenses.................... 427.7 333.8 319.0 192.5 188.1 213.3
--------- --------- --------- --------- --------- ----------
Loss from operations............................ (327.7) (233.8) (219.0) (92.5) (88.1) (113.3)
--------- --------- --------- --------- --------- ----------
Interest income................................. 7.6 4.6 3.9 3.9 3.7 2.6
Interest expense................................ (2.6) (3.3) (1.8) (2.3) (1.2) (1.2)
Dividends on ActaMed's convertible redeemable
preferred stock............................... (40.7) (34.8) (28.6) (7.6) (9.1) --
--------- --------- --------- --------- --------- ----------
Net loss........................................ (363.4)% (267.4)% (245.5)% (98.5)% (94.7)% (111.9)%
--------- --------- --------- --------- --------- ----------
--------- --------- --------- --------- --------- ----------
</TABLE>

Revenue has grown each quarter as demand for the Company's services has
increased. Cost of revenue increased in the quarter ended December 31, 1997 due
primarily to expenses related to the Brown & Toland contract, and in the two
quarters ended March 31, 1998 and June 30, 1998 primarily due to expenses
related to the Beech Street and SmithKline Labs contracts. In addition, in the
quarter ended June 30, 1998, cost of revenue increased due in part to an
increase in amortization of internally developed

26
<PAGE>
software. Development and engineering expense increased in the two quarters
ended March 31 and June 30, 1998 due to a significant increase in personnel
engaged in the development of the Company's applications and services. Sales,
general and administrative expenses increased in each of the quarters ended
September 30, 1997 through June 30, 1998 due to increases in sales and executive
personnel and due to amortization of deferred compensation. In addition, the
Company recorded substantial professional fees related to the acquisition of
ActaMed in the quarter ended June 30, 1998.

The Company's quarterly revenue and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. The Company intends to increase its marketing, sales,
development and engineering, and administrative activities and to increase other
operating expenses as required to integrate the operations, technologies and
networks of recent and any future acquisitions and expand its healthcare network
infrastructure and operations. It is anticipated that these expenses could
significantly precede any revenue generated by such increased spending. If the
Company does not experience significantly increased revenue from these efforts,
the Company's business, financial condition and results of operations could be
materially and adversely affected. In addition, the Company's expense levels are
based in part on its expectations concerning future revenue and are relatively
fixed in the short-term. Consequently, if the Company's revenues are below
expectations in any period, the Company may not be able to adjust its spending
levels in a timely manner.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations since inception primarily through the
private placement of equity securities, through which it has raised net proceeds
of $59.6 million through June 30, 1998. The Company has also financed its
operations through equipment lease financing and bank borrowings. As of June 30,
1998, the Company had outstanding equipment lease financing and bank borrowings
of $6.5 million. As of June 30, 1998, the Company had approximately $12.8
million of cash, cash equivalents and short-term investments.

Cash used in operating activities was $1.3 million in 1995, $9.9 million in
1996 and $16.4 million in 1997. The cash used during these periods was primarily
attributable to net losses of $4.5 million, $22.5 million and $26.3 million in
1995, 1996, 1997, respectively, offset in part by depreciation and amortization,
write off of acquired process research and development, net of acquisition costs
and dividend on ActaMed's Convertible Redeemable Preferred Stock. These losses
were principally related to increased development and engineering expenses and
sales, general and administrative expenses. Cash used in operations for the six
months ended June 30, 1998 was $9.1 million, reflecting a net loss partially
offset by depreciation and amortization expenses.

Investments in property and equipment and internally developed software were
$.5 million, $3.0 million, $3.1 million and $2.7 million for the years ended
1995, 1996 and 1997, and the six months ended June 30, 1998, respectively.

Cash provided by financing activities was $7.0 million, $11.1 million and
$34.6 million for the years ended December 31, 1995, 1996 and 1997,
respectively, resulting primarily from net proceeds from the sale of Preferred
Stock, and to a lesser extent from a bank line and bridge note financing in
1997. In addition, cash provided by financing activities for the six months
ended June 30, 1998 was $2.8 million, primarily from the net proceeds from the
sale of Preferred and Common Stock, partially offset by payments on capital
lease obligations.

As of June 30, 1998, the Company did not have any material commitments for
capital expenditures. The Company's principal commitments on December 31, 1997
consisted of obligations under operating leases and capital leases of $14.4
million and $2.2 million, respectively. See Note 6 of Notes to Consolidated
Financial Statements.

27
<PAGE>
The Company currently anticipates that the net proceeds from this offering,
together with its available cash resources and credit facilities, will be
sufficient to meet its presently anticipated working capital, capital
expenditure and business expansion requirements for at least the next 12 months.
However, the Company may need to raise additional funds prior to such time to
support expansion, develop new or enhanced applications and services, respond to
competitive pressures, acquire complementary businesses or technologies or take
advantage of unanticipated opportunities. The Company's future liquidity and
capital requirements will depend upon numerous factors, including the success of
the Company's existing and new application and service offerings and competing
technological and market developments. The Company may be required to raise
additional funds through public or private financing, strategic relationships or
other arrangements. There can be no assurance that such additional funding, if
needed, will be available on terms acceptable to the Company, or at all.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are unable
to distinguish between twentieth century dates and twenty-first century dates.
As a result, many companies' software and computer systems may need to be
upgraded or replaced to comply with such "Year 2000" requirements. Although the
Company believes that its internally developed applications and systems are
designed to be Year 2000 compliant, the Company utilizes third-party equipment
and software that may not be Year 2000 compliant. Also, two systems acquired by
ActaMed, specifically SCAN and ProviderLink, which together accounted for
approximately 47% of the Company's revenue during the six months ended June 30,
1998, will require modifications to become Year 2000 compliant. The Company
plans to release Year 2000 upgrades to these systems in late 1998 or early 1999.
In addition, the Company's SCAN product is installed on approximately 4,400
Company-owned workstations located in provider offices. Many of these
workstations are not Year 2000 compliant and must be upgraded or replaced by the
Company. However, the Company could experience delays and cost overruns in the
development of these upgrades, such upgrades could contain defects and the
Company could experience difficulties in getting the Company's installed base of
physicians to implement these upgrades in a timely manner. If the Company
experiences these or other difficulties in developing and deploying its Year
2000 upgrades, revenues from SCAN and ProviderLink could be significantly
reduced, which could have a material adverse effect on the Company's business,
financial condition and results of operations. Failure of such third-party or
Healtheon equipment or software to operate properly with regard to the Year 2000
and thereafter could require the Company to incur unanticipated expenses to
remedy any problems, which could have a material adverse effect on the Company's
business, financial condition and results of operations. In certain of its
agreements, the Company warrants that its applications and services are Year
2000 compliant. Failure of the Company's applications and services to be Year
2000 compliant could result in the termination of these agreements or in
liability for damages, either of which could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company does not believe that its expenditures to upgrade its internal systems
and applications will have a material adverse effect on its business, financial
condition and results of operations.

28
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company is required to
adopt SFAS No. 131 for the year ending December 31, 1998. SFAS No. 131 requires
disclosure of certain information regarding operating segments, products and
services, geographic areas of operation and major customers. Adoption of SFAS
No. 131 is expected to have no material impact on the Company's financial
position, results of operations or cash flows.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Company is required to adopt SFAS No.
133 for the year ending December 31, 2000. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. Because the Company
currently holds no derivative financial instruments and does not currently
engage in hedging activities, adoption of SFAS No. 133 is expected to have no
material impact on the Company's financial position, results of operations or
cash flows.

29
<PAGE>
BUSINESS

INDUSTRY BACKGROUND

GROWTH OF INTERNET COMMERCE AND FUNCTIONALITY

The Internet's open architecture, universal accessibility and growing
acceptance make it an increasingly important environment for
business-to-business and business-to-consumer interaction. Use of the Internet
is rapidly expanding from simple information publishing, messaging, and data
gathering to critical business transactions and confidential communications. For
many industries, the Internet is connecting previously disconnected business
processes and allowing companies to automate workflows, lower distribution costs
and extend their market reach. The Company believes the healthcare industry,
because of its size, fragmentation and extreme dependence on information
exchange, is particularly well suited to benefit from greater use of the
Internet.

NEED FOR REDUCED HEALTHCARE COSTS AND IMPROVED QUALITY OF CARE

According to the Health Insurance Association of America, healthcare is the
largest single sector of the U.S. economy, consuming approximately $1 trillion
annually, or 14% of the country's gross domestic product. The healthcare
industry consists of a complex mix of participants, which includes physicians,
medical practice groups, hospitals and other organizations that deliver medical
care, referred to as "providers;" the government agencies, insurance companies,
managed care organizations and other enterprises that pay the bills for
healthcare, referred to as "payors;" clinical laboratories, pharmaceutical
companies, and other groups that provide tests, drugs, x-rays and other
services, referred to as "suppliers;" and, finally, individual patients that
receive medical care, and the government agencies, employers and other
organizations that represent groups of individuals, all referred to as
"consumers."

All healthcare participants rely heavily upon information to perform their
role in the industry. Individuals compare medical plans, choose physicians and
submit claims for reimbursement. Employers select health plans, determine
benefit levels, enroll employees and maintain employee eligibility data.
Providers verify patient eligibility, collect patient histories, order
diagnostic tests and x-rays, receive and interpret test results, render
diagnoses, make referrals and submit claims to payors. Payors manage referrals,
establish medical care protocols and reimbursement policies and process claims.
Suppliers analyze and process patient samples or tests, provide results, fill
prescriptions and submit claims for reimbursement. These and many other
healthcare transactions are highly dependent on information, and each
participant is dependent on the others for parts of that information. In sum,
the finance and delivery of healthcare requires that consistent, accurate
information be shared confidentially across a large and fragmented industry.

Inefficiencies within the healthcare system consume enormous amounts of
time, resources, and dollars. It is estimated that over $250 billion (or 25% of
every healthcare dollar) is wasted through the delivery of unnecessary care,
performance of redundant tests and procedures and excessive administrative
costs. The Company believes much of this inefficiency and waste is a direct
result of poor information exchange among healthcare participants. Consumers do
not have easy access to the detailed information they need to compare health
plans, select physicians, or manage their own healthcare and benefits. Providers
often lack timely access to relevant patient information, and this lack of
information causes them to prescribe unnecessary tests or procedures and hinders
their ability to diagnose and treat patients. Providers and suppliers often rely
on manual processes to share data, and errors and information bottlenecks
resulting from these manual processes cause delays in determining eligibility,
approving referrals, reporting test results and paying claims. These
inefficiencies contribute to the rising cost of healthcare. As a result, the
government and other purchasers of healthcare have increasingly placed pressure
on the healthcare industry to improve the cost-effectiveness of healthcare while
maintaining the quality of care.

30
<PAGE>
LIMITATIONS OF TRADITIONAL FUNCTIONAL APPROACH TO HEALTHCARE INFORMATION
MANAGEMENT

The unique characteristics of the healthcare industry have limited the scope
of previous technology solutions. The sheer number of participants, the
complexity of healthcare transactions, and pervasive concerns about
confidentiality have precluded any comprehensive solution that would deliver
connectivity and automated workflows across the entire industry. Healthcare
organizations and their traditional technology vendors have focused on
automating discrete business processes, such as billing and scheduling for
physicians, or claims processing for hospitals and payors. As a result, the
industry currently uses thousands of different mainframe and client/server
systems that lack cross-platform compatibility. While these legacy systems serve
the narrow functions for which they were designed, they have compounded the
industry's connectivity problems. Information the industry needs to share is
trapped in isolated, proprietary databases using non-standardized data formats.
In this environment, many physician offices, particularly those with limited
financial resources, have been reluctant to invest in information technology
solutions. Current solutions may provide connectivity to a single payor or
supplier, or to a limited subset of payors or suppliers, leaving the physician
office with its old manual processes for the majority of its transactions. The
following examples illustrate how poor information management and the lack of
connectivity result in costly, inefficient healthcare services:

ENROLLMENT AND ELIGIBILITY. The enrollment process typically begins with
employees choosing a health plan and completing paper forms; the employer
manually enters the employee information into its human resources information
system and subsequently sends the data (often via a paper report) to the
relevant health plan. The plan manually enters the information into its
membership system and sends the information, again often in paper form, to other
entities, such as provider groups, pharmacies, pharmacy benefit management
companies and diagnostic laboratories, who in turn must manually enter this
information into their own systems. By the time this process is complete, the
information may be months old and contain data entry errors, and the disparate
healthcare information systems of the various participants may contain
conflicting information about the same member. The participants must then expend
costly, time-consuming extra effort to manually correct these errors. In the
interim, patients may be denied treatment or providers may go unpaid for their
services.

REFERRALS AND AUTHORIZATIONS. Managed care organizations may require
physicians to obtain prior approval to refer patients to specialists or to
render certain treatments. The approval process often requires physicians to
mail, fax or telephone requests for authorization to the health plan. The plan
manually enters the data into its own system, checks its guidelines regarding
conditions of referral (which can involve multiple parties in different
organizations), and replies via mail, fax or telephone with an approval or
denial, a process that can take two days to a week or more. Next, the patient
must schedule an appointment if the request is approved, or seek alternative
care if the request is denied. This lengthy authorization process is costly,
wastes valuable physician time and delays patient care.

CLINICAL INFORMATION EXCHANGE. To diagnose and treat a patient properly,
physicians need access to clinical information, such as medical history data,
laboratory and x-ray results, and medication lists. However, this information
typically resides in proprietary databases or is stored in paper form.
Therefore, the physician must submit requests for information by phone or fax to
various hospitals, laboratories, outpatient diagnostic centers or provider
offices. Even when the data is stored at the physician's office, it can be
time-consuming to locate in the physician's paper-based medical record system.
As a result, significant delays can occur before the physician obtains the
information required to accurately diagnose the patient's condition. Often,
physicians will require patients to repeat tests for which data is missing,
leading to unnecessary expense. More important, the lack of timely access to
accurate clinical information in an urgent care situation may lead to inaccurate
diagnoses resulting in delayed or inappropriate care. The problem is therefore
not only costly, but potentially harmful.

The limitations and inefficiencies of traditional healthcare information
management ultimately harm the individual consumer. Individual consumers have
little control or influence over how healthcare services

31
<PAGE>
are provided, in part because they lack easy access to information. It can be
difficult for consumers to perform simple tasks, such as changing primary care
providers, gaining access to their own medical records, or monitoring their own
care and compliance at home, because the information they need for these simple
tasks requires time-consuming phone calls or paper correspondence. Consumers,
frustrated by burdensome bureaucracy and lack of empowerment, often fail to take
ownership and control of their own treatment and recovery. The result is higher
costs of care and growing dissatisfaction with the healthcare experience.

HEALTHEON'S OPPORTUNITY

Healtheon believes a significant opportunity exists to leverage the power of
the Internet to provide secure, open, universally accessible network services
that connect participants and automate workflows throughout the healthcare
delivery process. The Company believes that such a solution has the potential to
create significant improvements in the way that information is used by the
healthcare system, enabling improved workflows, better decision-making and,
ultimately, higher quality care at a lower cost.

THE HEALTHEON VIRTUAL HEALTHCARE NETWORK

Healtheon is pioneering the use of the Internet to simplify workflows,
decrease costs and improve the quality of patient care throughout the healthcare
industry. Healtheon has designed an Internet-based information and transaction
platform that makes it possible to create Virtual Healthcare Networks that
facilitate and streamline interactions among the myriad participants in the
healthcare industry. The Healtheon VHN solution includes a suite of services
delivered through applications operating on its Internet-based platform.
Healtheon VHNs enable the secure exchange of information among disparate
healthcare information systems and support a broad range of healthcare
transactions, including enrollment, eligibility determination, referrals and
authorizations, laboratory and diagnostic test ordering, clinical data retrieval
and claims processing. Healtheon provides its own applications on the Healtheon
Platform and also enables third-party applications to operate on its platform.
The Healtheon Virtual Healthcare Network solution provides the following key
benefits:

ELIMINATION OF UNNECESSARY OR REDUNDANT EFFORTS. The Healtheon VHN solution
is designed to reduce paper-based transactions, eliminate redundant data entry,
shorten cycle times and decrease the communication inefficiencies created by
isolated proprietary systems. Healtheon believes that by decreasing redundant
tasks, errors, delays, and unnecessary tests and procedures, it can create
efficiencies and reduce costs across the healthcare industry.

EXTENDIBILITY ACROSS THE CONTINUUM OF HEALTHCARE. The Company leverages the
Internet to provide an open, low-cost information and transaction platform
capable of extending across a wide range of healthcare market segments. The
Healtheon VHN solution is designed to interconnect a broad range of practice
management, managed care, human resources and laboratory information systems.
The Company expects the benefits of its solution to increase as it adds
customers, enabling each user to exchange more data and complete more
transactions with a greater number and broader range of other healthcare
industry participants.

SCALABILITY AND FLEXIBILITY. The Healtheon VHN solution is designed to
support the Company's customers as their businesses grow and evolve. The
Healtheon Platform is designed to scale to accommodate high volumes of
transactions and large numbers of simultaneous users. In addition, Healtheon's
object-oriented platform provides flexibility so that customers can add or
modify applications and transaction capabilities to react to changes in the
healthcare marketplace.

HIGH DEGREE OF SECURITY. To enable the use of the Internet for transmission
of highly sensitive and confidential data, Healtheon utilizes advanced
technology designed to ensure a high degree of security. This technology
includes strict authentication requirements, sophisticated data encryption
techniques,

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system-wide network security monitoring and tightly controlled physical security
systems. These safeguards are designed to provide a secure environment for the
exchange of confidential patient and customer data. The Healtheon Platform is
designed to enable compliance with proposed government standards under the
Health Insurance Portability and Accountability Act of 1996, which mandate the
acceptance by payors of electronic transactions as well as the use of standard
transactions, standard identifiers and security features by the year 2000.

INCREASED ACCURACY AND TIMELINESS OF INFORMATION. The Healtheon VHN
solution is designed to increase information flows among all healthcare
participants, which ultimately results in more timely and appropriate
treatments. For example, on-line access to accurate, up-to-date eligibility
information facilitates patients' access to care on a more timely basis, reduces
frustration and costs and increases the likelihood that providers will be
compensated for their services in a timely manner. Similarly, using Healtheon's
VHN solution, consumers will have greater access to their healthcare
information, thereby enabling them to become more active participants in the
provision of their own healthcare. Healtheon believes that these and other
benefits provided by its solution will result in increased quality of care.

STRATEGY

Healtheon's objective is to become the leading provider of Internet-based
transaction and information services to the healthcare industry. The Company's
strategy includes the following key elements:

LEVERAGE INTERNET TECHNOLOGY. Healtheon leverages Internet technology to
create Virtual Healthcare Networks that provide secure transactions and
communications across a broad range of healthcare participants, regardless of
their legacy computing platforms. Unlike traditional proprietary solutions that
focus on point-to-point communications and narrowly defined transactions,
Internet technology allows the Company to integrate all categories of healthcare
participants--payors, providers, suppliers and consumers--to eliminate redundant
tasks and reduce costs. The Company believes that such connectivity will
optimize and simplify the flow of mission-critical information.

EXPAND FUNCTIONALITY AND TRANSACTION CAPABILITY. The Company seeks to
identify key functions that are critical to particular industry participants and
integrate applications supporting these functions into its VHN. The Company
plans to accomplish this by building native, Internet-based applications
encompassing the identified functionality, by acquiring businesses or
technologies, and by enabling industry-leading, third-party applications on its
platform. The Company has initially targeted those applications that are most
critical to each business segment of the healthcare industry, offer the highest
value to the participants, and are readily adaptable to a network computing
paradigm. For example, the Company developed its Benefits Administration
application suite to automate healthcare plan enrollment and is developing its
RACER application suite to manage eligibility, referrals, authorizations and
claims transactions between healthcare providers and payors.

FORM STRATEGIC RELATIONSHIPS WITH LEADING HEALTHCARE PARTICIPANTS. The
Company is aggressively pursuing strategic relationships with leaders in key
healthcare industry segments to increase its portfolio of applications and
services, increase the number of connected users and provide specialized
industry expertise for new applications. In addition, the Company plans to
acquire companies with strategic relationships with leading healthcare industry
participants. The Company believes this strategy also provides accelerated
market awareness and demand for Healtheon's services through the influence of
these partners both directly, through their use and sales efforts, and
indirectly through their relationships with other potential customers. To date,
Healtheon has established strategic relationships with the following
organizations: United HealthCare, the largest health maintenance organization in
the United States; SmithKline Labs, one of the largest independent clinical
laboratory companies in the United States; Brown & Toland, a leading medical
group in the San Francisco Bay Area; and Beech Street, one of the largest
preferred provider organizations in the United States.

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ESTABLISH A NATIONAL PRESENCE REGION BY REGION. The Company believes that
the value of its applications and services will grow as the number of connected
parties and the breadth of the transactions conducted on the Company's platform
increase. However, healthcare remains highly regional, driven by business
relationships and practices that are often unique to specific regions.
Therefore, the Company's approach is to target regional markets where it can
gain critical mass and to expand nationally region by region. The Company plans
to enter into, and to acquire companies with, strategic relationships with
national and regional healthcare participants who have significant market share
in specific regions. In addition, the Company intends to leverage its existing
relationships to penetrate new regions and markets.

PURSUE USAGE-BASED BUSINESS MODEL. The Company offers network-based
transaction and information services on a transaction or subscription fee basis.
This pricing model reduces the initial investment required to obtain the
benefits of high-end information technology systems, enabling physicians, small
organizations and individuals to gain access to such systems for the first time.
By enabling the shift from fixed information technology costs to variable costs,
the Company believes that it will be able to achieve a critical mass of users
and broad-based adoption of the Healtheon Virtual Healthcare Network solution.

PROVIDE A COMPLETE SOLUTION. In addition to its network-based transaction
and information services, the Company offers consulting, application
development, systems integration and network management services to provide
complete customer-specific solutions. By offering this range of services, the
Company can provide customers with a complete migration path from the customers'
legacy systems and processes to Healtheon's Internet-based model.

HEALTHEON'S SERVICES

Healtheon offers a suite of healthcare transaction and information services
delivered over the Internet or over private intranets and other networks. These
network-based services are provided by software applications operating on or
interfacing with the Healtheon Platform, which is designed to provide
connectivity across the healthcare industry and enable a broad array of secure,
mission-critical healthcare transactions. In addition to its platform and
Internet-based applications, Healtheon provides comprehensive consulting and
implementation services to enable its customers to take full advantage of the
capabilities of Healtheon's platform.

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Healtheon provides a broad range of applications and services that support
key healthcare transactions. The components of these application suites can be
combined and modified, or supplemented with new application components to
provide custom solutions for large, complex, multi-entity business enterprises.
These applications and services are typically sold on a transaction or
subscription fee basis, which varies across customers and market segments. The
following chart summarizes the key transactions supported by Healtheon,
organized by business function.

<TABLE>
<CAPTION>
BUSINESS CUSTOMERS/
FUNCTION USERS TRANSACTIONS SUPPORTED APPLICATIONS
<S> <C> <C> <C>
Membership Services Consumers - Enrollment Benefits
Payors - Plan comparison/selection Administration
- Provider search, selection, change
- Benefits inquiry
- Messaging
Healthcare Administration Payors - Eligibility determination ProviderLink
and Financial Management Providers - Referrals RACER*
- Authorization PACER*
- Claims submission and status
- Remittance advice
- Provider directories
- Provider files-management*
- Reporting
- Claims repricing*
Clinical Information Providers - Patient identification and SCAN+
Services Suppliers encounter history GMPI+
- Patient registration ActaLab*
- Lab orders and results
- Text document/transcription
distribution
</TABLE>

* Under development

+ Not Internet-enabled

The primary applications and services currently available or under
development are described in greater detail below. Certain of these applications
were acquired by the Company and are not yet Internet-enabled; the Company is
currently redeveloping or replacing these applications to integrate them with
the Healtheon Platform.

MEMBERSHIP SERVICES. Healtheon provides membership services through its
Benefits Administration application. The Benefits Administration application was
developed internally and operates on the Healtheon Platform. The application
provides Internet-based connectivity between healthcare payors and consumers and
supports transactions such as selection of health plans and providers,
enrollment for benefits and benefit inquiries. Benefits Administration users
also receive Healtheon's Health Risk Appraisal service, which provides consumer
education in wellness and health risks. Healtheon has deployed this application
directly and through aggregators to 25 companies, covering approximately 30,000
members.

HEALTHCARE ADMINISTRATION AND FINANCIAL MANAGEMENT. Healtheon supports
healthcare administration and financial management transactions through its
ProviderLink, RACER, and PACER applications. ProviderLink was licensed by the
Company's ActaMed subsidiary from United HealthCare Corporation. The Company is
currently developing a software interface between the Healtheon Platform and

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ProviderLink to integrate ProviderLink with the Company's network-based
services. ProviderLink is used by providers to support transactions and
workflows with payors. ProviderLink supports transactions such as eligibility
determinations, claims submission and status, and remittance advice. For
example, physicians use ProviderLink to determine eligibility of patients to
receive care and to submit health claims to payors. ProviderLink is currently
deployed in over 4,000 active provider sites in more than 20 major markets, and
processes over 2.5 million transactions per month.

The Company is developing RACER, a new Internet-based provider application
with support from Brown & Toland, one of the Company's strategic partners. RACER
is designed to provide all of the functionality of ProviderLink and also support
referrals, authorization, and provider directories reporting. Providers using
the RACER service will be able to receive real-time patient eligibility
verifications and referral authorizations over the Healtheon VHN.

The Company is developing PACER, a new Internet-based payor application,
with support from Beech Street, one of the Company's strategic partners. PACER
is designed to support the creation and management of networks of providers.
PACER is designed to enable the management of large, complex provider
directories and files, manage provider relationships and contracts and perform
certain claim adjudication functions, such as claim repricing. See "-- Strategic
Relationships."

CLINICAL INFORMATION SERVICES. The Company's SCAN product supports ordering
and distribution of clinical tests and test results between SmithKline Labs and
providers using SmithKline Labs' services. ActaMed acquired the SCAN application
from SmithKline Labs. SCAN is deployed on approximately 4,400 installed
workstations serving physicians throughout the United States. SCAN is not
Internet-enabled; however, the Company is developing a new Internet-enabled
application called ActaLab that will combine the functionality of SCAN and
ProviderLink. See "-- Strategic Relationships."

The Company's Global Master Person Index ("GMPI") enables the unique
identification of a patient and reconciliation of multiple records for the same
patient contained on diverse information systems. GMPI also supports access to
patient data and registration information as well as clinical records. GMPI is
an object-oriented application developed by ActaMed and is not yet
Internet-enabled. Healtheon intends to adapt and implement GMPI functionality on
the Healtheon Platform.

OTHER SERVICES. Healtheon also provides professional services to its
customers to enable them to define, develop and implement network-based
information systems that leverage the capabilities of the Healtheon Platform.
These services are typically sold on a fixed fee or time and materials basis.
These services include consulting on information systems strategy related to the
use of the Internet and secure networks, including design of information systems
functional specifications, mapping and redesign of business processes and
identification of enterprise transformation and training requirements to take
advantage of increased connectivity. Healtheon also provides custom development
of applications and enables the deployment of Healtheon services and integration
with legacy information technology systems. In addition, Healtheon provides
transitional network management services of its customers' networks.

CUSTOMERS AND MARKETS

Healtheon's target customers include providers, payors, suppliers and
consumers. Because the Company believes that the value and benefit of
Healtheon's services are directly related to both the number of participants
using Healtheon VHNs and the breadth of functionality supported, it intends to
initially focus on selected regions where it can quickly gain significant market
acceptance. Healtheon is presently targeting a number of regional markets across
the United States.

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PROVIDERS. Healtheon targets aggregators of individual physicians such as
large medical groups, independent practice associations, physician practice
management companies and other large, organized physician entities. In
particular, the Company seeks to form strategic relationships with providers
with a high degree of involvement in managed care, particularly providers who
are involved in activities such as capitation, which require them to bear some
level of insurance risk for each enrolled patient. Healtheon's services for
these providers include benefit eligibility determinations, referrals and
authorizations, claims processing, ordering of clinical tests and delivery of
results and maintenance of patient histories. Healtheon also targets as
potential customers large integrated delivery networks that combine multiple
healthcare facilities, such as hospitals, outpatient facilities, labs and
diagnostic centers, and affiliate with physicians and physician groups to
coordinate care, contract for managed care lives and manage healthcare resource
utilization. Healtheon offers these customers the following services: patient
identification, patient registration, ordering of clinical tests and delivery of
results and distribution of text documents across the network. The Company's
current customers in this category include Brown & Toland and the Greater Dayton
Area Hospital Association.

PAYORS. Healtheon's target payor customers include managed care
organizations, indemnity insurers, third party administrators and federal and
state governmental agencies. Target managed care organization customers include
mid-sized to large HMOs and PPOs. Healtheon's services for these customers
include eligibility determination, member customer service functions, referral
and authorization management, coordination of provider files and directories,
and submission and tracking of claims and patient encounter reports. Target
indemnity insurer and third party administrator customers include mid-sized to
large commercial entities, Medicare and other agencies of federal and state
government. The Company's current customers in this category consist of United
HealthCare, Beech Street, Sun Life of Canada, Blue Shield of California, CIGNA
HealthCare and the Health Care Financing Administration.

SUPPLIERS. Healtheon's target supplier customers include large national
laboratory companies, pharmaceutical companies and pharmacy benefit managers.
Healtheon's services for laboratory companies include ordering clinical tests
and reporting test results. The Company's principal customer in this category is
SmithKline Labs.

CONSUMERS. Healtheon's target consumer customers include employers, health
plans and health plan brokers. Healtheon's services for these consumer
representatives include health plan enrollment, benefits administration and
membership coordination. Healtheon's target employer group includes mid-sized
and large employers and, particularly, self-funded employers who have complex
benefits management needs. Healtheon's target health plan broker customers
include mid-sized to large brokers that aggregate small and medium employers and
administer healthcare benefits on their behalf. Healtheon's services 25
employers covering approximately 30,000 members.

STRATEGIC RELATIONSHIPS

The Company has entered into several strategic relationships that it
believes will enhance its application portfolio, provide important specialized
industry expertise, and increase its market penetration. Certain of these
relationships are described below:

UNITED HEALTHCARE CORPORATION. United HealthCare is the largest HMO in the
United States. In March 1996, the Company acquired United HealthCare's
ProviderLink network which supports over 4,000 active provider sites in more
than 20 major markets servicing over 2.5 million transactions per month. The
Company earns transaction fee revenue by providing certain healthcare
information services to United HealthCare, members of United HealthCare's
provider network and ProviderLink subscribers. The Company and United HealthCare
entered into a Services and License Agreement (the "United HealthCare
Agreement") under which the Company, using ProviderLink, provides claims
processing, referral, eligibility and enrollment services, to United
HealthCare's managed care providers and customers. Under the United HealthCare
Agreement, the Company currently receives a monthly fee for

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each user site enrolled with United HealthCare and a fee per transaction.
However, the United HealthCare Agreement does not guarantee any minimum level of
transactions or payments to the Company. United HealthCare has also agreed
during the term of the United HealthCare Agreement not to promote or contract
for services providing the same functionality as that provided by the Company,
although United HealthCare is permitted to continue to utilize services it was
utilizing when it entered into the United HealthCare Agreement. In addition,
through ActaMed, the Company has developed PLNet, an Internet-based version of
ProviderLink, which the Company intends to integrate into the Healtheon Platform
and offer to other major healthcare payors and providers. The Company is working
with United HealthCare to expand the applications and content available to
United HealthCare's provider network, to increase the size and geographic reach
of its provider network, and to assimilate newly acquired health plans. United
HealthCare is currently the Company's largest stockholder, and William McGuire,
M.D., the Chairman and CEO of United HealthCare, is a member of the Company's
Board of Directors. The United HealthCare Agreement is effective through March
2001, subject to earlier termination in the event the Company fails to meet
certain network performance standards or otherwise breaches its material
obligations under the United HealthCare Agreement.

SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. SmithKline Beecham Clinical
Laboratories, Inc. ("SmithKline Labs"), a subsidiary of SmithKline Beecham, is
one of the largest independent clinical laboratories in the United States. The
Company and SmithKline Labs entered into a Services Agreement (the "Services
Agreement") under which the Company provides lab order and results services to
the provider users of SCAN. SmithKline Labs has also agreed to promote the
Company as its preferred vendor for laboratory electronic connectivity services.
The Company acquired SCAN-related assets from SmithKline Labs, including
approximately 4,200 installed workstations in physicians' offices, hospitals and
other provider offices. The Company is currently developing ActaLab, an
Internet-based version of the SCAN system, which the Company plans to integrate
into the Healtheon Platform and to offer to physicians using SmithKline Labs'
services or to physicians using other laboratories. SmithKline Labs is a
stockholder of the Company, and Tadataka Yamada, M.D., President of SmithKline
Beecham Healthcare Services, is a member of the Company's Board of Directors.
The Services Agreement is effective through December 2002, with options for
successive two-year renewals, subject to earlier termination in the event the
Company fails to meet certain network performance standards or if the Company
otherwise breaches its material obligations under the Services Agreement.

BROWN & TOLAND PHYSICIAN SERVICES ORGANIZATION. Brown & Toland Medical
Group ("BTMG"), based in San Francisco, California, is a preeminent partnership
of approximately 2,000 physicians representing a merger of physicians from
California Pacific Medical Center, the University of California-San Francisco
and Stanford University. Brown & Toland Physician Services Organization ("Brown
& Toland"), a wholly owned subsidiary of BTMG, is the management company that
administers the managed care risk business on behalf of BTMG and other physician
organizations. The Company and Brown & Toland entered into an agreement under
which the Company is developing RACER, which the Company intends to market to
Brown & Toland and other payors and providers. The Company also manages the
information technology operations of Brown & Toland. Through its relationship
with Brown & Toland, the Company believes it is gaining valuable
industry-segment expertise from a leader in managed care and accelerating its
market presence in the San Francisco Bay Area. The Company's agreement with
Brown & Toland is effective through September 2000, although it may be
terminated by either party upon 120 days' notice.

BEECH STREET CORPORATION. Beech Street is one of the largest PPOs in the
United States. Beech Street's PPO network consists of approximately 4,300
hospitals and 320,000 physician locations serving 15 million individuals in 49
states, and its clients consist of major self-insured employers, insurance
companies and third-party administrators. The Company and Beech Street have
entered into an agreement under which the Company is developing PACER, which the
Company intends to offer to other payors and providers. The Company also manages
the information technology operations of Beech Street. The relationship with
Beech Street provides the Company with important industry-segment expertise and
a

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strategic entry-point into the PPO market segment. The Company's agreement with
Beech Street is effective through December 2002, although it may be terminated
by either party upon 180 days' notice.

THE HEALTHEON PLATFORM

The Healtheon Platform is a CORBA-based distributed application framework,
combined with software tools that ensure security, scalability, availability,
reliability and manageability, on which transaction intensive applications can
be delivered over the Internet or over other distributed environments. The
Healtheon Platform is deployed on a server complex at the Healtheon data center
in Santa Clara, California, which consists of SUN Solaris servers in a fault
tolerant configuration and redundant or fault tolerant network components. The
Healtheon Platform includes the following features:

SECURITY. The Healtheon Platform is designed to ensure the privacy and
integrity of data and communications by using a combination of security
methodologies to provide multiple lines of defense. All Internet communications
between Healtheon and its users employ the Secure Sockets Layer protocol. In
addition, Healtheon utilizes server digital certificates and username/password
schemes to authenticate users. Each user has a unique user ID and has one or
more roles that define the types of functionality and data access available. All
Healtheon's applications record logging information, creating an audit trail,
and protect privacy by encrypting sensitive data. The Company also uses a
multi-layered firewall complex to secure the Healtheon network infrastructure.
In addition, network vulnerability scanners are used on a regular basis to
actively monitor security status. Healtheon's physical security systems at its
Santa Clara facility consist of comprehensive physical controls and
multi-layered internal network and information system safeguards. The physical
controls include using fingerprint authentication, dual-level access points, and
multiple alarm systems.

SCALABILITY. The Healtheon Platform utilizes CORBA-based middleware which
enables a highly scalable distributed applications infrastructure. The platform
enables an application to run simultaneously on multiple host systems, allowing
for large numbers of simultaneous users while at the same time optimizing
network performance and resource utilization. In addition, the Healtheon
Platform has been designed to transparently deploy new services and hardware
while existing applications remain operational. Finally, the Healtheon Platform
reduces communications bottlenecks resulting from limited numbers of connections
to database servers through intelligent management of database connections and
object caches which reduce the need to query database servers for frequently
used data.

RAPID APPLICATION DEVELOPMENT AND INTEGRATION. The Healtheon Platform is
designed to enable rapid application development and integration. The platform
supports object-oriented programming which accelerates the design process
through object reuse. The Company maintains a comprehensive set of object
libraries, called core services, that allows developers to rapidly build complex
applications. The platform is also designed for deploying applications developed
by third parties with relative ease. The platform interfaces with legacy systems
by accepting industry standard ANSI X.12 and HL7 electronic data interchange
formats.

HIGH AVAILABILITY. The Healtheon Platform architecture is designed to
ensure high availability through the replication of applications and other
software services, failure detection and automatic restart of failed services
and applications. Running multiple copies of a service or application removes
any single point of failure within the system and ensures that at least some
copies of a service will be available while others may have failed. In addition,
the server that host Healtheon applications are duplicated to provide
redundancy. Healtheon uses duplicate fiber optic cable connections to Sprint and
WorldCom to ensure highly-available access to the Internet. The Company's
platform uses a mix of fault-tolerant hardware, redundant equipment and back-up
power systems.

MANAGEABILITY. The Healtheon management framework provides a single image
view of all Healtheon services, thus simplifying administration in a distributed
environment. Healtheon services can

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be managed from a Web-based management station. The Healtheon management and
administration framework monitors service performance and generates event
notifications of system abnormalities.

DISASTER RECOVERY PLANS. Although the Company believes its operations
facilities are highly resistant to systems failure and sabotage, it has
developed, and is in the process of implementing, a disaster recovery and
contingency operations plan. In addition, all of the Company's services are
linked to advanced storage systems that provide data protection through
techniques such as replication. The Company also maintains on-site backup power
systems.

AUDITS. The Company's information technology department periodically
performs, and retains accredited third parties to perform, audits of its
operational procedures under both internally-developed audit procedures and
externally-recognized standards.

CUSTOMER SUPPORT

The Company believes that a high level of customer support is necessary to
achieve wide acceptance of its solution. The Company provides a wide range of
customer support services through a staff of customer service personnel,
multiple call centers and an e-mail help desk. The Company also offers Web-based
support services that are available 24 hours a day, seven days a week and are
frequently updated to improve existing information and to support new services.
The Company also employs technical support personnel who work directly with its
direct sales force, distributors and customers of its applications and services.
The Company provides its customers with the ability to purchase maintenance for
its applications and services, which includes technical support and upgrades.
The Company also provides training programs for its customers. As of June 30,
1998, the Company had 164 employees in customer support functions, including
network services, provider services and customer support services.

SALES AND MARKETING

Healtheon's sales and marketing efforts are organized by its four main
customer segments: providers, payors, suppliers and consumers. Healtheon's
direct sales force targets significant potential customers in each market
segment by region. In certain instances, the Company's direct sales force works
with complementary brokers, value added resellers and systems integrators to
deliver complete solutions for major customers. In addition, senior management
plays an active role in the sales process by cultivating industry contacts. The
Company markets its applications and services through direct sales contacts,
strategic relationships, the sales and marketing organizations of its strategic
partners, participation in trade shows, articles in industry publications and by
leveraging its existing client base. Healtheon attends a number of major trade
shows each year and has begun to sponsor executive conferences, which feature
industry experts who address the information systems needs of large healthcare
organizations. The Company supports its sales force with technical personnel who
perform demonstrations of Healtheon's applications and assist clients in
determining the proper hardware and software configurations. The Company's
executive sales and marketing management is located in its Santa Clara,
California headquarters and in its Atlanta, Georgia and Minneapolis, Minnesota
facilities, while its account representatives are deployed across the United
States. As of June 30, 1998, the Company employed 44 sales executives, account
managers, direct sales representatives and sales support personnel.

DEVELOPMENT AND ENGINEERING

The Company believes that its future successes will depend in large part on
its ability to continue to maintain and enhance its platform, applications and
services. To this end, the Company leverages the modular nature of its platform
architecture to enable it to rapidly develop new applications and services. The
Company has developed applications and services both independently and through
acquisitions. The Company will continue to work closely with other companies in
its applications development efforts.

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The Company has several significant projects currently in development. These
include the continued enhancement of the platform architecture, development of
new applications such as RACER, PACER and ActaLab and integration of ActaMed's
platform, network and associated services. As of June 30, 1998, the Company
employed 144 people in the areas of applications design, research and
development, quality assurance and technical support.

In 1995, 1996, 1997 and the six months ended June 30, 1998, the Company's
development and engineering expense (which excludes development expenses
included in cost of revenue) totaled $2.4 million, $8.6 million, $13.0 million
and $8.3 million, respectively, representing 112%, 78%, 97% and 40%,
respectively, of its revenue. The Company believes that timely development of
new and enhanced applications and technology are necessary to remain competitive
in the marketplace. Accordingly, the Company intends to continue recruiting and
hiring experienced development personnel and to make other investments in
research and development.

The emerging market for healthcare information exchange and transaction
processing is characterized by rapid technological developments, frequent new
application introductions and evolving industry standards. The emerging nature
of this market and its rapid evolution will require that the Company continually
improve the performance, features and reliability of its applications and
services, particularly in response to competing offerings, and that it introduce
new applications and services or enhancements to existing applications and
services as quickly as possible and prior to its competitors. The success of new
application and service introductions is dependent on several factors, including
proper definition of new applications or services, timely completion and
introduction of new applications and services, differentiation of new
applications and services from those of the Company's competitors and market
acceptance. There can be no assurance that the Company will be successful in
developing and marketing new applications and services that respond to
competitive and technological developments and changing customer needs. The
failure of the Company to develop and introduce new applications and services
successfully on a timely basis and to achieve market acceptance for such
applications and services could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
widespread adoption of new Internet, networking or telecommunication
technologies or standards or other technological changes could render its
applications and services obsolete or require substantial expenditures by the
Company to adapt its applications and services. Moreover, there is a risk that a
competitor's product might become the standard for healthcare information
services. See "Risk Factors -- Rapid Technological Change; New Application and
Services Introductions."

INTELLECTUAL PROPERTY

The Company relies upon a combination of trade secret, copyright and
trademark laws, license agreements, confidentiality procedures, employee
nondisclosure agreements and technical measures to maintain the secrecy of its
proprietary information. The Company believes that patent, trade secret and
copyright protection are less significant to the Company's success than its
ability to further develop applications. The Company has several trademarks in
the United States and internationally. See "Risk Factors -- Dependence on
Proprietary Technology; Potential Litigation."

COMPETITION

The market for healthcare information services is intensely competitive,
rapidly evolving and subject to rapid technological change. Many of the
Company's actual and potential competitors have announced or introduced Internet
strategies. The Company's competitors can be divided into several groups:
healthcare information software vendors, including HBO & Company and Shared
Medical Systems Corporation; healthcare electronic data interchange companies,
including ENVOY Corporation and National Data Corporation; and large information
technology consulting service providers, including Andersen Consulting,
International Business Machines Corporation and Electronic Data Systems
Corporation. Each of these companies can be expected to compete with the Company
within certain segments of the healthcare information technology market.
Furthermore, major software information

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systems companies and others, including those specializing in the healthcare
industry that are not presently offering applications that compete with those
offered by the Company, may enter the Company's markets. In some cases, large
customers may have the ability to compete directly with the Company as well. The
Company also competes with smaller regional competitors. Many of the Company's
competitors and potential competitors have significantly greater financial,
technical, product development, marketing and other resources and greater market
recognition than the Company. Many of the Company's competitors also currently
have, or may develop or acquire, substantial installed customer bases in the
healthcare industry. As a result of these factors, the Company's competitors may
be able to respond more quickly to new or emerging technologies and changes in
customer requirements or to devote greater resources to the development,
promotion and sale of their applications or services than the Company. There can
be no assurance that the Company will be able to compete successfully against
current and future competitors or that competitive pressures faced by the
Company will not materially adversely affect its business, financial condition
and results of operations.

GOVERNMENT REGULATION AND HEALTHCARE REFORM

Laws and regulations may be adopted with respect to the Internet or other
on-line services covering issues such as user privacy, pricing, content,
copyrights, distribution and characteristics and quality of products and
services. The adoption of any additional laws or regulations may decrease the
growth of the Internet or other on-line services, which could, in turn, decrease
the demand for the Company's applications and services and increase the
Company's cost of doing business, or otherwise have an adverse effect on the
Company's business, prospects, financial condition and results of operations.
For example, under current Health Care Financing Administration guidelines,
Medicare eligibility information cannot be transmitted over the Internet.
Moreover, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. Any such new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to the Company's business, or the application of existing laws
and regulations to the Internet and other online services could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Legislation currently being considered at the federal level could impact the
manner in which the Company conducts its business. The Health Insurance
Portability and Accountability Act of 1996 mandates the use of standard
transactions, standard identifiers, security and other provisions by the year
2000. The Company is designing its Platform and applications to enable
compliance with the proposed regulations; however, until such regulations become
final, they could change, which could require the Company to expend additional
resources to comply with the revised standards. In addition, the success of the
Company's compliance efforts may be dependent on the success of healthcare
participants in dealing with the standards.

International regulations with respect to the Internet, privacy and
transborder data flows are considerably more developed than regulations in the
United States. The Company intends to develop

42
<PAGE>
applications and services to be used on a worldwide basis and, consequently,
will be required to comply with international regulations regarding the Internet
and electronic commerce, as well as with U.S. regulations. The Company has not
evaluated the effect that these regulations would have on its business, and
there can be no assurance that such regulations will not have an adverse effect
on the Company's ability to compete internationally.

The United States Food and Drug Administration is responsible for assuring
the safety and effectiveness of medical devices under the Federal Food, Drug and
Cosmetic Act. Computer applications and software are considered medical devices
and subject to regulation by the FDA when they are indicated, labeled or
intended to be used in the diagnosis of disease or other conditions, or in the
cure, mitigation, treatment or prevention of disease, or are intended to affect
the structure or function of the body. The Company does not believe that any of
its current applications or services are subject to FDA jurisdiction or
regulation; however, the Company plans to expand its application and service
offerings into areas that may subject it to FDA regulation. The Company has no
experience in complying with FDA regulations. Healtheon's compliance with FDA
regulations could prove to be time consuming, burdensome and expensive, which
could have a material adverse effect on the Company's ability to introduce new
applications or services in a timely manner.

EMPLOYEES

As of June 30, 1998, the Company had a total of 379 employees, of whom 101
engaged in customer and network services, 144 in development and engineering, 8
in consulting services, 63 in provider services, 44 in sales and marketing and
19 in general corporate finance and administration. None of the Company's
employees is represented by a labor union, and the Company has never experienced
a work stoppage. The Company believes its relationship with its employees to be
good. The Company's ability to achieve its financial and operational objectives
depends in large part upon its continuing ability to attract, integrate, retain
and motivate highly qualified sales, technical and managerial personnel, and
upon the continued service of its senior management and key sales and technical
personnel, most of whom are not bound by an employment agreement. Competition
for such qualified personnel in the Company's industry and geographical location
in the San Francisco Bay Area is intense, particularly in software development
and technical personnel. See "Risk Factors -- Dependence on Key Personnel."

FACILITIES

The Company's principal executive and corporate offices, development and
network operations are located in Santa Clara, California, in approximately
50,000 square feet of leased office space under a lease that expires in March
2008. The Company also maintains sales, development and network operations in
Atlanta, Georgia, in approximately 41,000 square feet of leased office space
under a lease that expires in July 2001; and sales, engineering and support
operations in Minneapolis, Minnesota, in approximately 16,500 square feet of
leased office space under a lease that expires in December 1999. The Company
believes that its facilities are adequate for its operations and that additional
leased space can be obtained if needed.

43
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the Company's
current executive officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- ----- -----------------------------------
<S> <C> <C>
James H. Clark(1)(2)............... 53 Chairman of the Board
W. Michael Long(3)................. 46 Chief Executive Officer and
Director
Michael K. Hoover.................. 43 President and Director
Ron Alvarez........................ 49 Vice President, Consumer Group
Kallen Chan........................ 43 Corporate Controller
Jack Dennison...................... 41 Vice President and General Counsel
Dennis Drislane.................... 49 Vice President, Customer and
Network Services
Nancy Ham.......................... 37 Vice President, Laboratories and
Pharmaceuticals
J. Philip Hardin................... 35 Vice President, Managed Care Group
John R. Hughes, Jr................. 45 Vice President, Provider Services
Pavan Nigam........................ 39 Vice President, Engineering
Charles Saunders, M.D.............. 43 Vice President, Consulting Services
and Medical Director
John L. Westermann III............. 53 Vice President, Chief Financial
Officer, Secretary and Treasurer
L. John Doerr(1)(2)................ 46 Director
C. Richard Kramlich(1)(2).......... 63 Director
William W. McGuire, M.D.(1)(2)..... 50 Director
P. E. Sadler(1)(2)................. 63 Director
Tadataka Yamada, M.D.(1)(2)........ 53 Director
</TABLE>

- ---------

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

(3) Member of the Stock Option Committee.

JAMES H. CLARK has served as Chairman of the Board of Directors of the
Company since he co-founded it in December 1995. Dr. Clark co-founded Netscape
Communications Corporation in April 1994 and has served as the Chairman of the
Board of Directors of Netscape since its inception. He served as President and
Chief Executive Officer of Netscape from its founding until December 1994. From
1981 until 1994, Dr. Clark served as Chairman of the board of directors of
Silicon Graphics, Inc., a company which he founded in 1981. Prior to founding
Silicon Graphics, Dr. Clark was an Associate Professor at Stanford University.
He holds a B.S. and an M.S. from the University of New Orleans and a Ph.D. from
the University of Utah.

W. MICHAEL LONG has served as Chief Executive Officer and a director of the
Company since joining the Company in July 1997. Prior to joining the Company,
Mr. Long was President and Chief Executive Officer of CSC Continuum, Inc.
("CSC") a unit of Computer Sciences Corporation from August 1996 to July 1997.
Prior to its acquisition by CSC, he was President and Chief Executive Officer of
The Continuum Company, Inc., a provider of IT and consulting services to the
financial industry. He holds a B.A. from the University of North Carolina.

MICHAEL K. HOOVER has served as President and a director of the Company
since the Company acquired ActaMed Corporation in May 1998. Mr. Hoover
co-founded ActaMed in May 1992, and served as its

44
<PAGE>
President from its inception to May 1998, and as its President and Chief
Executive Officer from December 1995 to May 1998. From 1989 to 1992, Mr. Hoover
served as the Executive Director of Financial Services of the MicroBilt division
of First Financial Management Corporation. Prior to that, he founded FormMaker
Software Corporation, a producer of electronic forms automation systems, and
served as its Chief Executive Officer from 1982 to 1988 and as its Executive
Vice President during 1988. Mr. Hoover holds a B.S. in engineering from the
University of South Alabama.

RON ALVAREZ has served as Vice President, Consumer Group since June 1998,
and prior to that served as Vice President, Sales since joining the Company in
July 1997. Prior to joining the Company, Mr. Alvarez spent ten years at Informix
Software, Inc. as Vice President of North American Sales and as head of its
Latin American operations. Prior to that time, he was District Sales Manager at
Metaphor Computer Systems. Mr. Alvarez has also held sales positions at Storage
Technology Corporation and Xerox Corporation. Mr. Alvarez holds a B.S. from
California State University in Sacramento and an M.B.A. from the University of
Missouri.

KALLEN CHAN has served as Corporate Controller of the Company since April
1996. Prior to joining the Company, Mr. Chan was the Director of Audit and Group
Controller for Worldwide Manufacturing at Cirrus Logic, Inc. since March 1995.
From January 1993 to February 1995, Mr. Chan was Vice President of Finance and
Chief Financial Officer of Comtech Labs Inc., a video imaging technology
company. From 1986 to 1992, Mr. Chan served as Chief Financial Officer for
various early stage companies, including Caeco Inc., Harmonic Lightwaves, Inc.
and Oasic Technology, Inc. Prior to 1993, Mr. Chan spent nine years at Philips
Semiconductor as a Division Controller. He holds a B.S. in commerce and an
M.B.A. from the University of Santa Clara.

JACK DENNISON has served as Vice President and General Counsel of the
Company since joining the Company in July 1998. Mr. Dennison served as Deputy
General Counsel of Computer Sciences Corporation from August 1996 to July 1998.
Prior to that time, Mr. Dennison served as Vice President and General Counsel of
The Continuum Company, Inc. Prior to joining Continuum in 1989, he was a partner
with Ford, Dennison & Byrne in Austin, Texas. Mr. Dennison holds a B.A. and a
J.D. from the University of Texas.

DENNIS DRISLANE has served as Vice President, Customer and Network Services
of the Company since joining the Company in July 1997. Prior to joining the
Company, Mr. Drislane was a division Vice President at Electronic Data Systems
Corporation ("EDS"), where he worked in various management roles on projects in
government, manufacturing, aerospace, defense, healthcare and communications. He
held various positions during his time at EDS, including Vice President of
Business Development in the Communications Industry Group and President of the
Healthcare Division. Mr. Drislane received both a B.S. and an M.S. in business
administration from California State University in Sacramento.

NANCY HAM has served as Vice President, Laboratories and Pharmaceuticals
Group at the Company since the Company acquired ActaMed in May 1998. Ms. Ham
served as Senior Vice President at ActaMed from June 1996 to May 1998. She
served as Chief Financial Officer and Secretary of ActaMed from 1993 to 1996.
From 1992 to 1993, she was a Corporate Finance Director for the Capital Finance
Group of Equifax, Inc. Prior to that, she was an Assistant Vice President at
G.E. Capital Corporation. Ms. Ham holds a B.A. in economics from Duke University
and a masters in international business studies from the University of South
Carolina.

J. PHILIP HARDIN has served as Vice President, Managed Care Group of the
Company since the Company acquired ActaMed in May 1998. Mr. Hardin served as
Vice President of Managed Care Operations of ActaMed from August 1997 until May
1998. He also served as Director of Payor Sponsorship for ActaMed from January
1997 to August 1997, and Project Executive from July 1995 to December 1996.
Prior to joining ActaMed, he served as Vice President, Finance, Director of
Finance and Controller of Melita International Corporation. Prior to that, he
held various accounting positions at

45
<PAGE>
Arthur Anderson & Company. Mr. Hardin holds a B.B.A. in accounting from the
University of Georgia and an M.B.A. from Stanford University.

JOHN R. HUGHES, JR. has served as Vice President, Provider Services of the
Company since the Company acquired ActaMed in May 1998. Mr. Hughes served as
Chief Operating Officer at ActaMed from March 1996 to May 1998. Prior to working
at ActaMed, Mr. Hughes served as General Manager of the EDI Services Group of
United HealthCare from August 1992 to March 1996. Mr. Hughes served as Vice
President of North American Sales for Revelation Technologies, a computer
software company, from 1990 to 1992. From 1980 to 1990, Mr. Hughes was Vice
President, Sales Manager and Product Marketing Manager at Harris Corporation.
Mr. Hughes holds a B.S. in business administration from the University of
Kansas.

PAVAN NIGAM co-founded the Company and has served as its Vice President,
Engineering since February 1996. Prior to joining the Company, Mr. Nigam worked
at Silicon Graphics from August 1989 to January 1996, where he was the division
manager for Silicon Graphic's Interactive Media Group and was responsible for
deploying Time Warner, Inc.'s Interactive TV project in Orlando, Florida. From
1989 to 1993 he was director of Silicon Graphics' Casevision products. Prior to
1989, Mr. Nigam was employed by Atherton Technologies and Intel Corporation. Mr.
Nigam holds a B.S.E.E. from the Indian Institute of Technology and an M.S.C.S.
from the University of Wisconsin-Madison.

CHARLES SAUNDERS, M.D. has served as Vice President, Consulting Services and
Medical Director since joining the Company in September 1997. Prior to joining
the Company, Dr. Saunders was a principal in the consulting firm of A.T.
Kearney, Inc./Electronic Data Systems Corporation from September 1994 to August
1997. Prior to that time, Dr. Saunders was Executive Director of managed care
programs at San Francisco General Hospital, and served as Medical Director of
the San Francisco Department of Public Health, Paramedic Division, from 1988 to
1994. He has conducted healthcare systems research for and has served on the
faculties of the University of California at San Francisco, Vanderbilt
University and the University of Colorado. Dr. Saunders holds a B.S. in biology
from the University of Southern California and an M.D. from Johns Hopkins
University.

JOHN L. WESTERMANN III has served as Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company since joining the Company in
July 1998. Prior to joining the Company, Mr. Westermann was Chief Financial
Officer and Vice President of CSC Continuum, Inc., a unit of Computer Sciences
Corporation. Prior to its acquisition by CSC, Mr. Westermann was Chief Financial
Officer, Vice President, Secretary and Treasurer of The Continuum Company, Inc.,
a provider of IT and consulting services to the financial industry. Mr.
Westermann holds a B.A. from Northwestern University and an M.B.A. from the
University of Chicago Graduate School of Business.

L. JOHN DOERR has served as a director of the Company since July 1997. He
has been a general partner at Kleiner Perkins Caufield & Byers ("KPCB"), a
venture capital firm, since 1980. Prior to joining KPCB, Mr. Doerr worked at
Intel Corporation for five years. He is a director of @Home Corporation,
Amazon.com, Inc., Netscape Communications Corporation, Intuit Inc., Platinum
Software Corporation and Sun Microsystems, Inc. He holds a B.S.E.E. and an
M.E.E. from Rice University and an M.B.A. from Harvard Business School.

C. RICHARD KRAMLICH has served as a director of the Company since July 1996.
Mr. Kramlich is the co-founder and has been a General Partner of New Enterprise
Associates, a venture capital firm, since 1978. He is a director of Ascend
Communications, Inc., Com 21, Inc., Lumisys, Inc., Silicon Graphics, Inc.,
Chalone Wine Group, Inc. and SyQuest Technology, Inc. Mr. Kramlich holds a B.A.
from Northwestern University and an M.B.A. from Harvard Business School.

WILLIAM W. MCGUIRE, M.D. has served as a director of the Company since the
Company acquired ActaMed in May 1998. He has been the President of United
HealthCare since 1989 and the Chief Executive Officer and Chairman of the Board
of Directors of United HealthCare since 1991. Prior to this,

46
<PAGE>
Dr. McGuire was Executive Vice President and Chief Operating Officer of United
HealthCare. Prior to this time, he served as President and Chief Operating
Officer ("COO") of Peak Health Plan. Before becoming President and COO, he held
a number of other positions within that organization. Dr. McGuire practiced
medicine in Colorado, specializing in cardiopulmonary medicine. He holds a B.A.
from the University of Texas and an M.D. from the University of Texas Medical
Branch.

P. E. SADLER has served as a director of the Company since the Company
acquired ActaMed in May 1998. He was Chairman of the Board of ActaMed from the
time that he helped co-found it in 1992 until it was acquired by the Company,
and served as its Chief Executive Officer from 1992 until May 1996. Prior to
founding ActaMed, Mr. Sadler founded MicroBilt Corporation, a computer
processing company, and served as its Chairman, Chief Executive Officer and
President from 1981 until MicroBilt was acquired by First Financial Management
Corporation ("FFMC") in 1989. Following the acquisition of MicroBilt, he served
as President of the MicroBilt division of FFMC until 1991. Mr. Sadler also
founded Agency Data Systems in 1972 and served as its President until the
company was acquired in 1975. Mr. Sadler also served on the board of
Knowledgeware, Inc. from 1990 to 1995 and currently serves on the Board of
Directors of Central Parking, Inc., an operator of parking lots. Mr. Sadler
holds a B.A. in business and economics from Vanderbilt University.

TADATAKA YAMADA, M.D. has served as a director of the Company since the
Company acquired ActaMed in May 1998. Dr. Yamada has been President and
Executive Director of SmithKline Beecham HealthCare Services since February 1996
and has been a non-executive director of SmithKline Beecham's Board of Directors
since February 1994. From June 1990 to February 1996, Dr. Yamada was Chairman of
the Internal Medicine department and Physician-in-Chief of the University of
Michigan Medical Center. Prior to that time, Dr. Yamada was a Professor and
Chief of the Gastroenterology Division at the University of Michigan Medical
School's Internal Medicine department. Prior to his work at the University of
Michigan, Dr. Yamada was an associate professor of medicine at the UCLA School
of Medicine. Dr. Yamada is also a director of Genevco, Inc. Dr. Yamada holds a
B.A. in history from Stanford University and an M.D. from the New York
University School of Medicine.

The Company's Bylaws authorize no fewer than six and no more than eight
directors. The size of the Board of Directors (the "Board") is currently set at
eight. The Certificate of Incorporation and the Bylaws of the Company also
provide for a staggered Board. Under this provision, the Board designates each
director position as one of three categories. Each year the directors' positions
in one of the categories are subject to election so that it would take up to
three years to replace the entire Board (absent resignation or premature
expiration of a director's term). Executive officers of the Company are
appointed by the Board and serve at the discretion of the Board. There are no
family relationships among any of the directors or executive officers of the
Company.

BOARD COMMITTEES

The Board currently has three committees: an Audit Committee, a Stock Option
Committee and a Compensation Committee.

The Audit Committee is currently comprised of Dr. Clark, Mr. Doerr, Mr.
Kramlich, Dr. McGuire, Mr. Sadler and Dr. Yamada. The Audit Committee reviews
and, as it deems appropriate, recommends to the Board the internal accounting
and financial controls for the Company and the accounting principles and
auditing practices and procedures to be employed in preparation and review of
the financial statements of the Company. The Audit Committee makes
recommendations to the Board concerning the engagement of independent public
accountants and the scope of the audit to be undertaken by such accountants.

The Stock Option Committee is currently comprised of Mr. Long and is charged
with overseeing the stock option plans as they relate to employees other than
officers and directors of the Company.

47
<PAGE>
The Compensation Committee is currently comprised of Dr. Clark, Mr. Doerr,
Mr. Kramlich, Dr. McGuire, Mr. Sadler and Dr. Yamada. The Compensation Committee
reviews and, as it deems appropriate, recommends to the Board policies,
practices and procedures relating to the compensation of the officers and other
managerial employees and the establishment and administration of employee
benefit plans. The Committee exercises all authority under the Company's
employee equity incentive plans and advises and consults with the officers of
the Company regarding managerial personnel policies.

DIRECTOR COMPENSATION

Directors do not receive any cash fees for their service on the Board or any
Board committee, but they are entitled to reimbursement of all reasonable
out-of-pocket expenses incurred in connection with their attendance at Board and
Board committee meetings. All Board members are eligible to receive stock
options under the 1996 Plan, and outside directors receive stock options
pursuant to automatic grants of stock options under the 1996 Plan. In July 1998,
the Company granted to each of Drs. McGuire and Yamada an option to purchase
30,000 shares of its Common Stock under the 1996 Plan with an exercise price
equal to the Company's fair market value on that date. The 1996 Plan provides
that each outside director will receive 5,000 options annually.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Dr. Yamada, a member of the Compensation Committee, is a director and
executive officer of SmithKline Beecham, which, through its subsidiary
SmithKline Labs, beneficially owns 8.5% of the Company's Common Stock, and has
entered into the Services Agreement and certain other agreements with the
Company. Dr. McGuire, a member of the Compensation Committee, is the Chairman
and Chief Executive Officer of United HealthCare, which, with its subsidiaries
and affiliates, beneficially owns approximately 17.0% of the Company's Common
Stock, and has entered into the United HealthCare Agreement and certain other
agreements with the Company. See "Certain Transactions." No interlocking
relationship exists between the Board or Compensation Committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

Section 102 of the Delaware General Corporation Law ("DGCL") authorizes a
Delaware corporation to include a provision in its certificate of incorporation
limiting or eliminating the personal liability of its directors to the
corporation and its stockholders for monetary damages for breach of the
directors' fiduciary duty of care. The duty of care generally requires that,
when acting on behalf of the corporation, directors exercise an informed
business judgment based on all material information reasonably available to
them. Absent the limitations authorized by such provision, directors are
accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Although Section 102 of the DGCL does not change a director's duty of care, it
enables corporations to limit available relief to equitable remedies such as
injunction or rescission. The Company's Certificate of Incorporation and Bylaws
include provisions that limit or eliminate the personal liability of its
directors to the fullest extent permitted by Section 102 of the DGCL.
Consequently, a director or officer will not 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 that
involve intentional misconduct or a knowing violation of law, (iii) unlawful
payments of dividends or unlawful stock repurchases, redemptions or other
distributions and (iv) any transaction from which the director derived an
improper personal benefit.

The Company's Certificate of Incorporation provides that the Company shall
indemnify, to the fullest extent permitted by law any person made or threatened
to be made a party to any action or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person or such

48
<PAGE>
person's testator or intestate is or was a director or officer of the Company or
any predecessor or serves or served at any other enterprise as a director,
officer or employee at the request of the Company.

The Company's Bylaws provide that the Company shall, to the maximum extent
and in the manner permitted by the DGCL, indemnify each person who (i) is or was
a director or officer of the Company or any subsidiary of the Company, (ii) is
or was serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) was
a director or officer of a corporation that was a predecessor corporation of the
Company or any of its subsidiaries or of another enterprise at the request of
such predecessor corporation or subsidiary, against expenses (including
attorneys' fees), judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that such person is or was an agent of the Company.

The Company intends to enter into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in the Company's
Certificate of Incorporation and Bylaws. These agreements, among other things,
indemnify the Company's directors and executive officers for certain expenses
(including attorneys' fees), judgments, fines, penalties and settlement amounts
incurred by any such person in any action or proceeding, including any action by
or in the right of the Company, arising out of such person's services as a
director, officer, employee, agent or fiduciary of the Company, any subsidiary
of the Company or any other company or enterprise to which the person provides
services at the request of the Company. In addition, the Company intends to
obtain directors' and officers' insurance providing indemnification for certain
of the Company's directors, officers and employees for certain liabilities. The
Company believes that these indemnification provisions and agreements are
necessary to attract and retain qualified directors and officers.

The limited liability and indemnification provisions in the Company's
Certificate of Incorporation and Bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty
(including breaches resulting from grossly negligent conduct) and may have the
effect of reducing the likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might otherwise benefit the
Company and it stockholders. Furthermore, a stockholder's investment in the
Company may be adversely affected to the extent the Company pays the costs of
settlement and damage awards against directors and officers of the Company
pursuant to the indemnification provisions in the Company's Certificate of
Incorporation and Bylaws.

At present, there is no pending or threatened litigation or proceeding
involving any director, officer or employee of the Company where indemnification
is expected to be required or permitted, and the Company is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.

49
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation
earned for services rendered to the Company in 1997 in all capacities by the
Company's Chief Executive Officer, the Company's former Chief Executive Officer
and the Company's four other most highly compensated executive officers who
earned more than $100,000 in 1997 and were serving as executive officers at the
end of 1997 (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
ANNUAL COMPENSATION -------------
SECURITIES ALL OTHER
---------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) ($)(1)
- ------------------------------------------------------------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
W. Michael Long(2)
Chief Executive Officer.................................... 234,849 -- 3,250,000(6) 2,766
Michael K. Hoover(3)
President.................................................. 175,000 75,000 -- 6,664
David Schnell(4)
Former President and CEO................................... -- -- -- --
Pavan Nigam
Chief Technology Officer................................... 200,004 50,000 125,000 5,571
Denise Shea(5)
Former General Counsel..................................... 135,312 -- 55,000 2,268
Kallen Chan
Controller................................................. 118,750 -- 20,000 4,073
</TABLE>

- ---------

(1) Represents life, medical and long-term disability insurance premiums paid by
the Company.

(2) Mr. Long joined the Company as Chief Executive Officer in July 1997, and was
paid at a rate of $500,000 per year.

(3) Mr. Hoover served as President and Chief Executive Officer of ActaMed
Corporation until it was acquired by the Company in May 1998.

(4) Mr. Schnell, a general partner of Kleiner Perkins Caufield & Byers, served
on an interim basis as President and Chief Executive Officer of the Company
from February 1996 to July 1997. In exchange for Mr. Schnell's services and
other services provided by KPCB, KPCB received a warrant to purchase
1,000,000 shares of Series B Preferred Stock of the Company which has been
converted into a warrant to purchase 1,000,000 shares of Common Stock.

(5) Ms. Shea became Assistant General Counsel of the Company on July 8, 1998.

(6) Includes 750,000 shares of Common Stock subject to a warrant granted to Mr.
Long upon the commencement of his employment with the Company. See "--
Employment Agreements."

50
<PAGE>
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1997

The following table sets forth certain information for the year ended
December 31, 1997 with respect to grants of stock options to each of the Named
Executive Officers:

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -------------------------
NAME GRANTED(1) IN 1997(2) SHARE(3) DATE 5% 10%
- ------------------------------------ ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
W. Michael Long..................... 2,500,000 45.3% $ 0.25 07/22/07 $ 393,059 $ 996,089
750,000(5) 13.6 2.00 7/10/00 943,342 2,390,614
Michael K. Hoover................... -- -- -- -- -- --
David Schnell....................... -- -- -- -- -- --
Pavan Nigam......................... 125,000 2.3 1.00 10/14/07 78,611 199,218
Denise Shea......................... 55,000 1.0 0.20 02/18/07 6,917 17,531
Kallen Chan......................... 20,000 0.4 0.20 02/18/07 2,515 6,375
</TABLE>

- ---------

(1) Options granted in 1997 were granted under the Company's 1996 Stock Plan.
With respect to the options granted to Mr. Nigam, Ms. Shea and Mr. Chan, 25%
of the shares vest on the first anniversary of the date of grant and 1/48 of
the shares vest each month thereafter. With respect to the options granted
to Mr. Long, 25% of the shares vested immediately upon grant, and, beginning
on the first anniversary of the date of grant, 1/48 of the total vest each
month thereafter. These options have a term of 10 years. See "-- Employee
Benefit Plans" for a description of the material terms of these options.

(2) The Company granted options or warrants to purchase 5,510,850 shares of
Common Stock to employees during 1997.

(3) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock, as determined in good faith by the Board of
Directors.

(4) Potential realizable values are net of exercise price before taxes, and are
based on the assumption that the Common Stock of the Company appreciates at
the annual rate shown (compounded annually) from the date of grant until the
expiration of the ten-year term. These numbers are calculated based on
Securities and Exchange Commission requirements and do not reflect the
Company's projection or estimate of future stock price growth.

(5) The Company issued Mr. Long a warrant to purchase up to 750,000 shares of
the Company's Series B Preferred Stock upon the commencement of his
employment with the Company. This warrant is currently exercisable for
750,000 shares of Common Stock. Shares issuable upon exercise of this
warrant are subject to a two-year lapsing right of repurchase held by the
Company. See "-- Employment Agreements."

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<PAGE>
AGGREGATE OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES

The following table sets forth information with respect to the Named
Executive Officers concerning option exercises in 1997 and exercisable and
unexercisable options held as of December 31, 1997:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1997(1) AT DECEMBER 31, 1997(2)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
W. Michael Long........................................... 625,000 1,875,000 $ 468,750 $1,406,250
750,000(3) -- -- --
Michael K. Hoover......................................... 893,268 -- 561,119 --
David Schnell............................................. -- -- -- --
Pavan Nigam............................................... -- 125,000 -- --
Denise Shea............................................... -- 55,000 -- $44,000
Kallen Chan............................................... -- 20,000 -- $16,000
</TABLE>

- ---------

(1) Except in the case of Mr. Hoover, options shown were granted under the
Company's 1996 Stock Plan and are subject to vesting as described in
footnote (1) to the option grant table above. Options held by Mr. Hoover
were granted under the ActaMed 1992, 1993 Class B Common and 1994 Stock
Option Plans which were assumed by the Company upon the consummation of the
acquisition of ActaMed. All of Mr. Hoover's shares are fully vested.

(2) Based on an assumed value of $1.00 per share, the deemed fair market value
as of December 31, 1997 as determined by the Board of Directors, and net of
the option exercise price.

(3) Represents shares issuable upon exercise of a warrant issued to Mr. Long
upon commencement of his employment with the Company. See "-- Employment
Agreements."

EMPLOYMENT AGREEMENTS

The Company's ActaMed subsidiary has an employment agreement with Michael
Hoover, Healtheon's President. The agreement provides for a base salary of
$85,000, and imposes a covenant not to compete upon Mr. Hoover for a period of
one year following the termination of his employment.

In July 1997, the Company and Mr. Long entered into an employment agreement
pursuant to which Mr. Long became the President and Chief Executive Officer of
the Company. The Company granted Mr. Long an option to purchase 2,500,000 shares
of Common Stock, 25% of which vested immediately, and the remainder of which
vests ratably each month during the second through the fourth year. In addition,
Mr. Long purchased 250,000 shares for $500,000, $499,750 of which was
represented by a promissory note to the Company, and was issued a warrant to
purchase an additional 750,000 shares at an exercise price of $2.00 per share.
The shares issuable upon exercise of this warrant are subject to a two-year
lapsing right of repurchase commencing on Mr. Long's employment start date. The
employment agreement provides that should Mr. Long leave the Company because he
is no longer offered a position with similar responsibility due to a change of
control of the Company, Mr. Long's option vests immediately as to 625,000 shares
and the Company's repurchase right lapses. Additionally, if the Company
terminates Mr. Long's employment without cause, he will receive six months'
salary in installments, his option will vest immediately as to 625,000 shares
and the Company's repurchase right will lapse.

EMPLOYEE BENEFIT PLANS

1996 STOCK PLAN. In February 1996 the Board of Directors adopted, and the
Company's stockholders approved, the Company's 1996 Stock Plan (the "1996
Plan"). The Company initially reserved for issuance 9,000,000 shares of Common
Stock under the 1996 Plan. In March 1998, the Board and the stockholders each
approved an amendment to the 1996 Plan to increase the number of shares of
Common Stock

52
<PAGE>
issuable thereunder to 10,000,000 shares. In July 1998, the Board approved an
amendment to increase the number of shares of Common Stock issuable under the
1996 Plan to 15,000,000 shares plus annual increases equal to the lesser of (i)
5% of the outstanding shares or (ii) a lesser amount determined by the Board.
Unless terminated sooner, the 1996 Plan will terminate automatically in February
2006. The 1996 Plan provides for the discretionary grant of incentive stock
options, within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), to employees and for the grant of nonstatutory stock
options and stock purchase rights ("SPRs") to employees, directors and
consultants. The 1996 Plan also provides for annual grants of options to
purchase 5,000 shares of Common Stock to each of the outside directors.

The 1996 Plan may be administered by the Board or a committee thereof (as
applicable, the "Administrator"). The Administrator has the power to determine
the terms of the options or SPRs granted, including the exercise price of the
options or SPRs, the number of shares subject to each option or SPR, the
exercisability thereof, and the form of consideration payable upon such
exercise. In addition, the Administrator has the authority to amend, suspend or
terminate the 1996 Plan, provided that no such action may affect any share of
Common Stock previously issued and sold or any option previously granted under
the 1996 Plan.

The exercise price of all incentive stock options granted under the 1996
Plan must be at least equal to the fair market value of the Common Stock on the
date of grant. The exercise price of nonstatutory stock options and SPRs granted
under the 1996 Plan is determined by the Administrator, but with respect to
nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the exercise
price must be at least equal to the fair market value of the Common Stock on the
date of grant. With respect to any participant who owns stock possessing more
than 10% of the voting power of all classes of the Company's outstanding capital
stock, the exercise price of any incentive stock option granted must be at least
equal 110% of the fair market value on the grant date and the term of such
incentive stock option must not exceed five years. The term of all other options
granted under the 1996 Plan may not exceed ten years. Options generally vest as
to 25% at the end of the first year and monthly thereafter over a period of
three years so that the entire option is vested after four years, based upon the
optionee's continued employment or consulting relationship with the Company.

In the case of SPRs, unless the Administrator determines otherwise, the
restricted stock purchase agreement will grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with the Company for any reason (including
death or disability). The purchase price for shares repurchased pursuant to a
restricted stock purchase agreement must be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option will lapse at a rate determined by the
Administrator.

Options and SPRs granted under the 1996 Plan are generally not transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1996 Plan must
generally be exercised within 30 days after the end of optionee's status as an
employee, director or consultant of the Company, or within one year after such
optionee's termination by disability or death, respectively, but in no event
later than the expiration of the option's term.

The 1996 Plan provides that, in the event of a merger of the Company with or
into another corporation, each outstanding option and SPR must be assumed or an
equivalent option substituted by the successor corporation. If the outstanding
options and SPRs are not assumed or substituted by the successor corporation,
such outstanding options and SPRs will terminate.

ACTAMED STOCK OPTION PLANS. In connection with its acquisition of ActaMed
(the "Merger"), the Company assumed the outstanding options of ActaMed under the
following ActaMed stock option plans (collectively, the "ActaMed Plans"):
ActaMed Corp. 1992 Stock Option Plan, ActaMed Corp. 1993 Class B

53
<PAGE>
Common Stock Option Plan, ActaMed Corp. 1994 Stock Option Plan, ActaMed Corp.
1995 Stock Option Plan, ActaMed Corp. 1996 Stock Option Plan, ActaMed Corp. 1997
Stock Option Plan and ActaMed Corp. 1996 Director Stock Option Plan. The
following directors and executive officers of the Company held ActaMed options
that were assumed by the Company: Michael Hoover (options to purchase 1,424,216
shares of ActaMed common stock), Nancy Ham (options to purchase 250,000 shares
of ActaMed common stock), J. Philip Hardin (options to purchase 80,000 shares of
ActaMed common stock), and John R. Hughes, Jr. (options to purchase 220,000
shares of ActaMed common stock). As a result of the merger, each option to
purchase shares of ActaMed common stock now represents an option to purchase a
number of shares of Healtheon Common Stock equal to .6272 times the number of
shares of ActaMed common stock originally subject to the option at the per share
exercise price equal to the original per share exercise price divided by .6272.
The Company will make no further grants under the ActaMed Plans. However, each
assumed ActaMed option continues to have and remains subject to substantially
the terms and conditions of the applicable ActaMed Plan under which such option
was originally granted as in effect immediately prior to the Merger. Generally,
options granted under the ActaMed Plans will automatically terminate ten years
following their adoption, and may be administered by the Board of Directors or a
committee of the Board (as applicable, the "Administrator"). Options granted
under the ActaMed Plans generally are not transferrable by the optionee, and
must generally be exercised within 30 days after the end of the optionee's
status as an employee or consultant of the Company or within 90 days after such
optionee's termination by disability or death, respectively, but in no event
later than the expiration of the option's term. Generally, in the event of any
merger, sale of stock, consolidation, liquidation, recapitalization,
reclassification, stock split up, combination of shares, share exchange, stock
dividend, or transaction having a similar effect, where the Company does not
remain in existence, the Administrator may (i) to the extent such options have
not previously been accelerated, declare that all ActaMed options shall vest in
full and be exercisable for a period of thirty (30) days following written
notice from the Administrator, after which all ActaMed options shall terminate,
(ii) provide that all ActaMed options shall be assumed by the successor
corporation, or (iii) a combination of (i) and (ii).

401(K) PLAN. The Company participates in a tax-qualified employee savings
and retirement plan (the "401(k) Plan") which covers all of the Company's
full-time employees who have completed three months of service. Pursuant to the
401(k) Plan, eligible employees may defer up to 20% of their pre-tax earnings,
subject to the Internal Revenue Service's annual contribution limit. The 401(k)
Plan permits additional discretionary matching contributions by the Company on
behalf of all participants in the 401(k) Plan in such a percentage amount as may
be determined annually by the Board. To date, the Company has made no such
matching contributions. The 401(k) Plan is intended to qualify under Section 401
of the Code, as amended, so that contributions by employees or by the Company to
the 401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made. The trustee under the 401(k) Plan, at the direction of
each participant, invests the assets of the 401(k) Plan in any of a number of
investment options.

54
<PAGE>
CERTAIN TRANSACTIONS

Since December 26, 1995, the Company's inception date, there has not been
nor is there currently proposed, any transaction or series of similar
transactions to which the Company or any of its subsidiaries was or is to be a
party in which the amount involved exceeds $60,000 and in which any director,
executive officer, holder of more than 5% of the Common Stock of the Company or
any member of the immediate family of any of the foregoing persons had or will
have a direct or indirect material interest other than (i) compensation
agreements and other arrangements, which are described where required in
"Management," and (ii) the transactions described below.

ACTAMED CORPORATION ACQUISITION

On May 19, 1998, the Company completed the acquisition of ActaMed by means
of a merger of a wholly-owned subsidiary of the Company with and into ActaMed,
with ActaMed surviving as a wholly owned subsidiary of the Company (the
"Merger"). Pursuant to the Merger, 23,271,355 shares of the Company's Common
Stock were issued in exchange for all of the issued and outstanding capital
stock of ActaMed, and all options to purchase ActaMed Common Stock were assumed
by the Company. The Merger was treated as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1996, as amended, and
as a "pooling-of-interests" transaction for accounting and financial reporting
purposes. All of the then outstanding shares of Preferred Stock of the Company
were converted into shares of Common Stock of the Company upon the consummation
of the Merger.

The Company and certain stockholders of the Company who together hold a
majority of the outstanding shares of Common Stock of the Company entered into a
Voting Agreement in connection with the Merger (the "Voting Agreement"). Among
other things, the Voting Agreement requires each of the signatories thereto to
vote its shares in favor of the election of four directors nominated by those
signatories who were ActaMed shareholders prior to the Merger and four directors
nominated by those signatories who were Healtheon stockholders prior to the
Merger. The Voting Agreement terminates upon the consummation of this offering.

TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS

On January 26, 1996, the Company sold 10,285,000 shares of its Series A
Preferred Stock for $0.50 per share. The purchasers of the Series A Preferred
Stock included, among others, Dr. James H. Clark (3,500,000 shares for a
purchase price of $1.8 million), Kleiner Perkins Caufield & Byers VII (2,999,500
shares for a purchase price of $1.5 million), KPCB VII Founders Fund (325,500
shares for a purchase price of $162,750), KPCB Life Sciences Zaibatsu Fund II
(175,000 shares for a purchase price of $87,500) and New Enterprise Associates
VI, Limited Partnership (2,000,000 shares for a purchase price of $1.0 million).
KPCB VII Founders Fund, KPCB Life Sciences Zaibatsu Fund II and Kleiner Perkins
Caufield & Byers VII, along with KPCB VII Associates and KPCB Java Fund, are
affiliated entities. L. John Doerr, a director of the Company, is a general
partner of KPCB VII Associates and the general partner of KPCB Life Sciences
Zaibatsu Fund II. Mr. Doerr disclaims beneficial ownership of the securities
held by such entities except for his proportional interest therein. C. Richard
Kramlich, a director of the Company, is a general partner of New Enterprise
Associates VI. Mr. Kramlich disclaims beneficial ownership of the shares of any
securities held by such entity except for his proportional interest therein.

On October 1, 1996, the Company sold 3,000,000 shares of its Series B
Preferred Stock for $2.00 per share. The purchasers of the Series B Preferred
Stock included, among others, Dr. Clark (1,125,000 shares for a purchase price
of $2.3 million), Kleiner Perkins Caufield & Byers VII (1,068,750 shares for a
purchase price of $2.1 million), KPCB Life Sciences Zaibatsu Fund II (56,250
shares for a purchase price of $112,500) and New Enterprise Associates VI,
Limited Partnership (500,000 shares for a purchase price of $1.0 million).

55
<PAGE>
In related transactions, on November 1, 1996, the Company issued a warrant
to purchase 1,000,000 shares of Series B Preferred Stock with an exercise price
of $2.00 per share to each of Clark Ventures, as an incentive for Dr. Clark to
continue to provide services to the Company, and KPCB VII Associates, in
consideration for services provided to the Company. The warrant issued to KPCB
VII Associates was valued at $504,900. Clark Ventures subsequently exercised its
warrant on May 1, 1998 for an aggregate purchase price of $2.0 million. Clark
Ventures is controlled by Dr. Clark. On July 11, 1997 the Company issued 250,000
shares of Series B Preferred Stock for a purchase price of $500,000 and a
warrant to purchase 750,000 shares of Series B Stock with an exercise price of
$2.00 per share to W. Michael Long. See "-- Employment Agreements." In order to
purchase the 250,000 shares of Preferred Stock, Dr. Long borrowed $499,750 from
the Company pursuant to an interest-free full recourse promissory note. The note
was paid in full on June 30, 1998.

Between April 15, 1997 and May 6, 1997, the Company borrowed an aggregate of
$2.0 million at an annual interest rate of 6% pursuant to promissory notes (each
of which included a right to receive certain Series B Preferred Stock warrants
at the time of repayment or upon cancellation of such note) in a bridge
financing transaction (the "Bridge Financing"). The lenders in the Bridge
Financing included, among others, Dr. Clark (who lent $765,750), Kleiner Perkins
Caufield & Byers VII (which lent an aggregate of $727,463), KPCB Life Sciences
Zaibatsu Fund II (which lent an aggregate of $38,000) and New Enterprise
Associates VI, L.P. (which lent $312,500). On July 1, 1997 the promissory notes
were cancelled in consideration for the issuance of Series C Preferred Stock (as
described below), and the Series B Preferred Stock warrants were issued as
follows: Dr. Clark received a warrant to purchase 17,229 shares, Kleiner Perkins
Caufield & Byers VII received a warrant to purchase 27,891 shares, KPCB Life
Sciences Zaibatsu Fund II received a warrant to purchase 1,468 and New
Enterprise Associates VI received a warrant to purchase 11,979 shares. All of
the Series B Warrants have an exercise price of $2.00 per share. Dr. Clark
subsequently exercised his warrant on May 1, 1998 for an aggregate purchase
price of $34,458.

On July 1, 1997, the Company sold 2,400,000 shares of its Series C Preferred
Stock for $2.50 per share. The purchasers of the Series C Preferred Stock
included, among others, Dr. Clark (612,600 shares for a purchase price of $1.5
million, including cancellation of the $765,750 promissory note given in the
Bridge Financing discussed above), Kleiner Perkins Caufield & Byers VII (290,985
shares for cancellation of the $727,463 in promissory notes given in the Bridge
Financing discussed above), KPCB Java Fund (306,300 shares for a purchase price
of $765,750), KPCB Life Sciences Zaibatsu Fund II (15,315 shares for
cancellation of the $38,288 in promissory note given in the Bridge Financing
discussed above) and New Enterprise Associates VI, L.P. (250,000 shares for a
purchase price of $625,000 including cancellation of the $312,500 promissory
note given in the Bridge Financing discussed above).

Between October 17, 1997 and December 19, 1997, the Company sold 4,807,692
shares of its Series D Preferred Stock for $5.20 per share. The purchasers of
the Series D Preferred Stock included, among others, Clark Ventures (1,730,769
shares for a purchase price of $9.0 million), Kleiner Perkins Caufield & Byers
VII (432,693 shares for a purchase price of $2.3 million), KPCB Java Fund
(480,769 shares for a purchase price of $2.5 million), KPCB Life Sciences
Zaibatsu Fund II (48,077 shares for a purchase price of $250,000), Kathy Clark
(96,154 shares for a purchase price of $500,000), Michael James Clark Trust
(96,154 shares for a purchase price of $500,000) and New Enterprise Associates
VI, Limited Partnership (576,923 shares for a purchase price of $3.0 million).
Kathy Clark and Michael James Clark are adult children of Dr. Clark.

In connection with the ActaMed Merger, each share of Preferred Stock of the
Company converted into one share of Common Stock on May 19, 1998.

On November 21, 1996, ActaMed entered into an Amended and Restated
Development Agreement with The SFA Limited Partnership ("SFA") under which
ActaMed granted SFA a license to ActaMed's object broker technology that
supports the GMPI functionality. SFA is controlled by P. E. Sadler, a director
of the Company. SFA was given the right to use such technology outside the
healthcare industry and must

56
<PAGE>
pay royalties on any revenues that would be derived from such use. This
agreement expires in November 2001. To date, no royalties have become payable to
the Company or ActaMed as a result of this agreement.

In September 1997, ActaMed received a loan from NationsBank, N.A. in the
aggregate principal amount of $2.1 million, all of which was personally
guaranteed by P. E. Sadler, a director of the Company. As a result of ActaMed
pledging a note receivable from IBM to NationsBank, N.A. in November 1997, Mr.
Sadler was released from the guarantee. In December 1997, ActaMed obtained a
line of credit in the aggregate principal amount of $2.3 million from
NationsBank, N.A. In exchange for a personal guarantee of this line of credit by
Mr. Sadler, ActaMed granted to Mr. Sadler a security interest in all of its
tangible assets other than the IBM note receivable. Upon the completion of the
acquisition of ActaMed by the Company, Mr. Sadler's guarantee was released. This
line of credit was repaid by the Company on July 31, 1998.

From 1995 through 1997, up to three companies affiliated with Mr. Sadler had
agreements with ActaMed whereby ActaMed provided office space, phone facilities
and computer network support. In 1995, 1996 and 1997, the Company was paid
$211,230, $186,880 and $77,555, respectively, under such agreements.

CERTAIN BUSINESS RELATIONSHIPS

Prior to the acquisition of ActaMed by the Company, ActaMed entered into a
series of agreements (the "SmithKline Agreements") with SmithKline Labs, which
agreements were assumed by the Company in the ActaMed Merger. Pursuant to the
SmithKline Agreements, ActaMed agreed to purchase certain intangible assets (the
"SmithKline Assets") located in four geographic regions, received a technology
license relating to the SmithKline Assets and agreed to provide certain
continuing development and network services to SmithKline Labs. In December
1996, SmithKline Labs transferred a portion of the SmithKline Assets from the
first region to ActaMed in exchange for $2.0 million in cash and 3,695,652
shares of ActaMed Preferred Stock (which shares were converted into 2,317,913
shares of the Company's Common Stock in connection with the ActaMed Merger). In
March 1998, SmithKline Labs transferred the SmithKline Assets from the second
region to ActaMed in exchange for 1,217,391 shares of ActaMed Preferred Stock
(which shares were converted into 763,548 shares of the Company's Common Stock
in connection with the ActaMed Merger). In June 1998, SmithKline Labs
transferred SmithKline Assets from the remaining two regions to the Company in
exchange for 1,339,209 shares of Common Stock.

Also pursuant to one of the SmithKline Agreements (the "Services
Agreement"), the Company will perform laboratory test order and results services
to providers utilizing SmithKline Labs' laboratory services through SCAN.
SmithKline Labs' is obligated to pay the Company a minimum of approximately
$10.0 million in 1998 for laboratory test orders and results transactions.
SmithKline Labs may be required to pay the Company certain additional fees for
transactions processed by the Company in the event the number of providers
accessing SmithKline Labs' laboratory services through SCAN increases. As of
June 30, 1998 SmithKline Labs had paid the Company $4.8 million in service and
transaction fees during 1998 under the Services Agreement. The Services
Agreement is effective through December 2002, and provides for automatic
successive two-year renewals, subject to each party's right to elect not to
renew the agreement no later than 180 days (in the case of SmithKline Labs) or
360 days (in the case of the Company) prior to the end of a term. In the event
that the Company gives notice of non-renewal, SmithKline Labs will be entitled
to continued to receive long-term order entry and results reporting services
from the Company on a per transaction pricing basis or, in the alternative, may
require the Company to develop a service for SmithKline that duplicates the
services the Company had been providing under the Services Agreement. Also under
the Services Agreement, SmithKline Labs is entitled, no more than once in any
three consecutive month period, to request that the Company engage in certain
exclusive development work for SmithKline Labs. SmithKline Labs has agreed to
use reasonable efforts to use the Company as its "preferred provider" of
electronic eligibility verification and claims processing services.

57
<PAGE>
In May 1998, the Company and SmithKline Labs entered into a letter agreement
under which the Company and SmithKline is obligated not to compete with
SmithKline Labs in the business of disease management, and has agreed to
exclusively promote SmithKline Labs' disease management products and services so
long as SmithKline continues to promote the Company as its preferred vendor. The
Company also agreed that in the event it performs development work related to a
disease management program for one of its customers or itself, it will pay 50%
of the profits from that development work to SmithKline Labs.

In March 1996, ActaMed acquired EDI Services, a wholly owned subsidiary of
United HealthCare, which had been formed by United HealthCare to deliver the
ProviderLink service to United HealthCare's provider network. In exchange for
EDI, ActaMed issued United HealthCare 10,344,828 shares of ActaMed preferred
stock valued at $21.0 million (which were converted into 6,488,276 shares of the
Company's Common Stock in connection with the Merger). In April 1996 ActaMed
also entered into a Services and License Agreement with United HealthCare which
granted United HealthCare a license to certain ActaMed technology and granted
ActaMed the responsibilities of managing the ProviderLink service and of
providing other information technology services to United HealthCare. United
HealthCare pays the Company fees based on the number of ProviderLink sites in
use and transactions processed. In 1996 and 1997, United HealthCare paid ActaMed
approximately $4.8 million and $7.3 million, respectively, related to services,
transaction and license fees. In the first six months of 1998, ActaMed (prior to
the Merger) and the Company have been paid an aggregate of $4.6 million. The
Company is also obligated to provide certain support and maintenance services to
United HealthCare. The Services and License Agreement is effective through March
2001 subject to earlier termination in the event the Company fails to meet
certain network performance standards or otherwise breaches its material
obligations under the United HealthCare Agreement. United HealthCare is a
principal stockholder of the Company and Dr. William McGuire, Chief Executive
Officer and Chairman of United HealthCare, is a director of the Company.

In February 1998, ActaMed issued a one-year promissory note in the aggregate
principal amount of $2.0 million to HLM Partners VII, L.P. ("HLM"), which bore
interest at a rate of 10% per annum. United HealthCare was a limited partner of
HLM and a director of United HealthCare, was a partner of HLM. HLM was also a
stockholder of ActaMed. Both UHC and HLM are stockholders of the Company. This
note was repaid at the time of the Merger.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 30, 1998 and as
adjusted to reflect the sale of the shares of Common Stock offered hereby by:
(i) each person who is known by the Company to beneficially own more than 5% of
the Company's Common Stock, (ii) each director of the Company, (iii) each of the
Named Executive Officers and (iv) all directors and executive officers of the
Company as a group.

<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF SHARES
SHARES BENEFICIALLY OWNED(1)
BENEFICIALLY ----------------------------------
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING AFTER OFFERING(2)
- ----------------------------------------------------------------- ------------- --------------- -----------------
<S> <C> <C> <C>
United HealthCare Corporation(3) ................................ 8,770,020 17.0%
William W. McGuire, M.D.
James H. Clark(4) ............................................... 8,485,598 16.4
Clark Ventures
Monaco Partners, L.P.
Kleiner Perkins Caufield & Byers(5) ............................. 7,253,498 13.8
L. John Doerr
David Schnell
P. E. Sadler(6) ................................................. 5,001,993 9.6
SFA Limited Partnership
SmithKline Beecham(7) ........................................... 4,417,670 8.5
Tadataka Yamada
New Enterprise Associates VI, L.P(8) ............................ 3,338,902 6.5
C. Richard Kramlich
W. Michael Long(9)............................................... 1,677,083 4.3
Michael K. Hoover(10)............................................ 893,268 1.7
Pavan Nigam(11).................................................. 470,000 * *
Denise Shea(12).................................................. 145,625 * *
Kallen Chan(13).................................................. 57,500 * *
All officers and directors as a group (18 persons)(14)........... 41,823,974 76.6 *
</TABLE>

- ---------

* Less than one percent

(1) The number and percentage of shares beneficially owned are based on
51,704,947 shares of Common Stock outstanding as of June 30, 1998, and
shares outstanding after the offering. Beneficial ownership is
determined in accordance with the rules and regulations of the Commission.
Shares of Common Stock subject to options that are currently exercisable or
exercisable within 60 days of June 30, 1998 are deemed to be outstanding
and beneficially owned by the person holding such options for the purpose
of computing the number of shares beneficially owned and the percentage
ownership of such person, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person. Except
as indicated in the footnotes to this table, and subject to applicable
community property laws, such persons have sole voting and investment power
with respect to all shares of the Company's Common Stock shown as
beneficially owned by them.

(2) Assumes the Underwriters' over-allotment option is not exercised.

(3) Represents 6,488,276 shares held of record by United HealthCare, 502,069
shares held of record by United HealthCare Services, Inc., a subsidiary
thereof, 509,595 shares held of record by HLM Partners VII, L.P., of which
United HealthCare is a limited partner. Dr. McGuire, Chairman and Chief
Executive Officer of United HealthCare, is a director of the Company.
United HealthCare's address is 9900 Bren Road East, 300 Opus Center,
Minnetonka, MN 55343.

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<PAGE>
(4) Represents 4,612,600 shares held of record directly by Dr. Clark, 2,747,998
shares held of record by Clark Ventures and 1,125,000 shares held of record
by Monaco Partners, LP, a Nevada limited partnership. Dr. Clark is a
partner of both Clark Ventures and Monaco Partners. Dr. Clark disclaims
beneficial ownership of shares in Monaco Partners and Clark Ventures except
for his proportional interest therein. Dr. Clark is a director of the
Company. Dr. Clark's address is c/o Healtheon Corporation, 4600 Patrick
Henry Drive, Santa Clara, CA 95054.

(5) Represents 5,125,863 shares held of record directly by Kleiner Perkins
Caufield & Byers VII, 787,069 shares held of record by KPCB Java Fund, and
311,207 shares held of record by KPCB Life Sciences Zaibatsu Fund II. Also
represents 976,423 shares subject to warrants held of record by Kleiner
Perkins Caufield & Byers VII, and 52,936 shares subject to warrants held of
record by KPCB Life Sciences Zaibatsu Fund II, all of which are exercisable
within 60 days of June 30, 1998. KPCB Life Sciences Zaibatsu Fund II and
KPCB VII are wholly controlled by KPCB Associates, a partnership. KPCB Java
Fund is controlled by KPCB VII Associates. L. John Doerr, a general partner
of KPCB VII Associates, KPCB VII, and KPCB Life Sciences Zaibatsu Fund II,
is a director of the Company. Mr. Schnell, a general partner of KPCB, was
formerly the Chief Executive Officer of the Company. Mr. Doerr and Mr.
Schnell disclaim beneficial ownership of shares in such entities except for
their proportional interests therein. Kleiner Perkins Caufield & Byers'
address is 2750 Sand Hill Road, Menlo Park, CA 94025.

(6) Represents 2,975,140 shares held of record by P. E. Sadler and 2,026,853
shares held of record by SFA Limited Partnership, of which P. E. Sadler is
a general partner. Mr. Sadler's address is c/ o Healtheon Corporation, 4600
Patrick Henry Drive, Santa Clara, CA 95054.

(7) Dr. Yamada is President of SmithKline Beecham HealthCare Services and a
director of SmithKline Beecham. He is a director of the Company. SmithKline
Labs' address is 1201 South Collegeville Road, Collegeville, PA 19426.

(8) Represents 3,306,923 shares held of record directly by New Enterprise
Associates VI, L.P., 11,979 shares subject to warrants held of record by
New Enterprise Associates VI, L.P. exercisable within 60 days of June 30,
1998, and 20,000 shares held of record by NEA Ventures, which is controlled
by New Enterprise Associates VI, L.P. Mr. Kramlich is a partner of New
Enterprise Associates VI, L.P. Mr. Kramlich disclaims beneficial ownership
of shares held by such entities except for his proportional interest
therein. New Enterprise Associates' address is 1119 St. Paul Street,
Baltimore, MD 21202.

(9) Includes 650,000 shares held of record by Mr. Long. Also includes 750,000
shares subject to a warrant held of record by Mr. Long and 277,083 shares
subject to options held of record by Mr. Long, in each case exercisable
within 60 days of June 30, 1998. 343,750 shares underlying the warrant held
by Mr. Long are subject to a right of repurchase held by the Company within
60 days of June 30, 1998. Mr. Long is the Chief Executive Officer and a
director of the Company.

(10) Represents 893,268 shares subject to options held of record by Mr. Hoover
that are exercisable within 60 days of June 30, 1998. Mr. Hoover is the
President and a director of the Company.

(11) 168,750 shares are subject to a right of repurchase held by the Company
within 60 days of June 30, 1998. Mr. Nigam is the Vice President,
Engineering of the Company.

(12) Includes 3,438 shares subject to options held of record by Ms. Shea that
are exercisable within 60 days of June 30, 1998. Also includes 62,500
shares held by Ms. Shea that are subject to a right of repurchase held by
the Company within 60 days of June 30, 1998.

(13) Includes 2,500 shares subject to options held of record by Mr. Chan that
are exercisable within 60 days of June 30, 1998. Also includes 20,833
shares held by Mr. Chan that are subject to a right of repurchase held by
the Company within 60 days of June 30, 1998. Mr. Chan is the Controller of
the Company.

(14) Includes all shares described in above footnotes and an additional
1,312,817 shares held by other executive officers, of which 850,000 are
currently outstanding and 462,817 are shares subject to options or
warrants that are exercisable within 60 days of June 30, 1998.

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DESCRIPTION OF CAPITAL STOCK

The following summary of certain provisions of the Company's capital stock
describes all material provisions of the Company's Certificate of Incorporation
and Bylaws. This summary, however, does not purport to be complete and is
subject to, and qualified in its entirety by, the Certificate of Incorporation
and Bylaws, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part and by the provisions of applicable
law.

As of June 30, 1998, there were 51,704,947 shares of Common Stock
outstanding, par value $0.0001 per share. Upon consummation of this offering,
150,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock will
be authorized, and shares of Common Stock and no shares of Preferred
Stock will be issued and outstanding.

COMMON STOCK

The issued and outstanding shares of Common Stock are, and the shares of
Common Stock being offered by the Company will be upon payment therefor, validly
issued, fully paid and nonassessable. The holders of outstanding shares of
Common Stock are entitled to receive dividends out of assets legally available
therefor at such time and in such amounts as the Board of Directors may from
time to time determine. See "Dividend Policy." The shares of Common Stock are
not convertible and the holders thereof have no preemptive or subscription
rights to purchase any securities of the Company. Upon liquidation, dissolution
or winding up of the Company, the holders of Common Stock are entitled to
receive pro rata the assets of the Company which are legally available for
distribution, after payment of all debts and other liabilities. Each outstanding
share of Common Stock is entitled to one vote on all matters submitted to a vote
of the stockholders, including election of directors. There is no cumulative
voting in the election of directors.

PREFERRED STOCK

The Company's Certificate of Incorporation provides that the Preferred Stock
may be issued by the Company in one or more series and that the Board of
Directors has the authority, without further action by the stockholders, to fix
the rights, preferences and privileges thereof, including dividend rights,
conversion rights, voting rights, rights and terms of redemption, liquidation
preferences and sinking fund terms, any or all of which may be greater than the
rights of the Common Stock. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders would receive dividend payments and payments upon liquidation. Such
issuance could have the effect of decreasing the market price of the Common
Stock. The issuance of Preferred Stock may also have the effect of delaying,
deterring or preventing a change in control of the Company. The Company has no
present plans to issue any shares of Preferred Stock.

WARRANTS

The Company has outstanding warrants for the purchase of 2,077,240 shares of
Common Stock. Of these, warrants to purchase 1,794,718 shares of Common Stock
have an exercise price of $2.00 and warrants to purchase 282,522 shares of
Common Stock have an exercise price of $7.97. These warrants expire either three
years or five years after the date of issuance.

REGISTRATION RIGHTS

The holders of approximately 43,159,170 shares of Common Stock (representing
the purchasers of Common Stock at the founding of the Company in December 1995,
the purchasers of Preferred Stock of the Company prior to its conversion in the
acquisition of ActaMed Corporation, and certain former shareholders of ActaMed
who received shares of the Company's Common Stock pursuant to the Company's
acquisition of ActaMed and who had registration rights with respect to their
shares of ActaMed

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<PAGE>
capital stock) or their permitted transferees are entitled to certain rights
with respect to registration of such shares (the "Registrable Securities") under
the Securities Act pursuant to an Amended and Restated Investors' Rights
Agreement. At any time after 12 months following the effective date of this
offering, the holders of at least 40% of the Registrable Securities then
outstanding may require the Company to file a registration statement covering
Registrable Securities with an aggregate gross offering price of at least $10.0
million. In addition, two years after this offering, holders of registrable
securities may require, on up to four separate occasions, that the Company
register their shares for public resale on Form S-3 or any successor form,
provided the Company is eligible to use Form S-3 or any such successor form and
provided further that the value of the securities to be registered is at least
$1.0 million. Furthermore, in the event the Company elects to register any of
its shares of Common Stock or other securities for purposes of effecting any
public offering, the holders of registrable securities are entitled to include
their Registrable Securities in the registration, subject however to the right
of the Company to reduce the number of shares proposed to be registered in view
of market conditions. All expenses in connection with any registration (other
than underwriting discounts and commissions) will be borne by the Company.
Registration rights, other than the right to require the Company to register
shares on Form S-3 or any successor form, will terminate at such time as the
Company's shares are publicly traded and the holder is entitled to sell all of
its shares in any three month period under Rule 144 of the Securities Act. If
such holders, by exercising their registration rights, cause a large number of
securities to be registered and sold in the public market, such sales could have
an adverse effect on the market price for the Company's Common Stock. If the
Company were to initiate a registration and include Registrable Securities
pursuant to the exercise of registration rights, the sale of such Registrable
Securities may have an adverse effect on the Company's ability to raise capital.

CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS AND OF DELAWARE LAW

GENERAL. Certain provisions of the DGCL and the Company's Certificate of
Incorporation and Bylaws could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, control
of the Company. Such provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Company's Common Stock.
These provisions of Delaware law and the Certificate of Incorporation and Bylaws
may also have the effect of discouraging or preventing certain types of
transactions involving an actual or threatened change of control of the Company
(including unsolicited takeover attempts), even though such a transaction may
offer the Company's stockholders the opportunity to sell their stock at a price
above the prevailing market price.

DELAWARE TAKEOVER STATUTE. Following consummation of this offering, the
Company will be subject to the "business combination" provisions of Section 203
of the DGCL. In general, such provisions prohibit 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
transaction is approved by the board of directors prior to the date the
interested stockholder obtained such status; (ii) upon consummation of the
transaction that resulted in the stockholder's becoming an interested
stockholder, the 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 by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder. A
"business combination" is defined to include mergers, asset sales and other
transactions resulting in financial benefit to a stockholder. In general, an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of a corporation's
voting stock. The statute could prohibit or delay mergers or other takeover or
change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company.

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<PAGE>
CERTIFICATE OF INCORPORATION AND BYLAWS. The Company's Certificate of
Incorporation provides that any action required or permitted to be taken by the
stockholders of the Company must be effected at a duly called annual or special
meeting of the stockholders and may not be taken by a consent in writing by
stockholders. The Company's Bylaws provide that special meetings of the
stockholders of the Company may be called by the Board or by the President of
the Company, or by one or more stockholders holding at least 10% of the voting
power of the Company's outstanding capital stock, or any such person or persons
as may be authorized by the Certificate of Incorporation or the Bylaws (which
currently only give this authority to the Board). The Company's Bylaws also
require advance written notice by a stockholder of a proposal or director
nomination that such stockholder desires to present at an annual or special
meeting of stockholders. No business other than that stated in the notice may be
transacted at any special meeting. These provisions will have the effect of
delaying consideration of a stockholder proposal until the next annual meeting
unless a special meeting is called by the Board.

The Company's Bylaws provide that the authorized number of directors may be
changed by an amendment to the Bylaws adopted by the Board or by the
stockholders. Vacancies on the Board may be filled either by holders of a
majority of the Company's voting stock or a majority of directors in office,
although less than a quorum. The Certificate of Incorporation and the Bylaws of
the Company also provide for a classified Board. Under this provision, the Board
designates each director position as one of three categories. Each year the
directors' positions in one of the categories are subject to election so that it
would take three years to replace the entire board (absent resignation or
premature expiration of a director's term), which may have the effect of
deterring a hostile takeover or delaying or preventing changes in control or
management of the Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Company's Certificate of Incorporation limits the liability of directors
to the fullest extent permitted by the DGCL. In addition, the Certificate of
Incorporation and Bylaws provide that the Company will indemnify directors and
officers of the Company to the fullest extent permitted by Delaware law. The
Company has entered into separate indemnification agreements with its directors
and executive officers that provide such persons indemnification protection in
the event the Certificate of Incorporation is subsequently amended. See "Risk
Factors -- Certain Anti-Takeover Provisions."

TRANSFER AGENT AND REGISTRAR

has been appointed as transfer agent and registrar for
the Company's Common Stock.

LISTING

Application has been made to have the Common Stock accepted for quotation on
the Nasdaq National Market under the symbol "HEON."

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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common Stock
of the Company. The Company cannot predict the effect, if any, that sales of
shares of Common Stock or the availability of shares for sale will have on the
market price of the Common Stock prevailing from time to time. Nevertheless,
sales of a significant number of shares of Common Stock in the public market, or
the perception that such sales may occur, could adversely affect the prevailing
market price of the Common Stock.

Upon consummation of this offering, the Company will have shares of
Common Stock outstanding. Of the shares outstanding after the offering, the
shares of Common Stock ( shares if the U.S. Underwriters'
over-allotment is exercised in full) sold in the offering will be freely
tradeable without restriction under the Securities Act, except for any such
shares that may be acquired by an "affiliate" of the Company (an "affiliate"),
which shares will be subject to the volume limitations of Rule 144 under the
Securities Act. As defined in Rule 144, an "affiliate" of an issuer is a person
who, directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such issuer. The remaining
51,704,947 shares of Common Stock will be restricted securities (as that phrase
is defined in Rule 144) (the "Restricted Shares") and may not be resold in the
absence of registration under the Securities Act or pursuant to an exemption
from such registration, including the exemption provided by Rule 144 under the
Securities Act. Each of the Company's directors and officers and certain other
stockholders of the Company has agreed that it will not, subject to certain
exceptions, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, during the period ending 180 days
after the date of this Prospectus, it will not, directly or indirectly (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise.

On the date of this Prospectus (July 31), 667,404 of the Restricted Shares
(in addition to the shares offered hereby) will be eligible for
immediate sale. Upon the expiration of lock-up agreements, an additional
48,684,105 of the Restricted Shares will become eligible for sale in the public
market on , subject in the case of all but 11,010,300 shares to the
volume limitations and other conditions of Rule 144 adopted under the Securities
Act ("Rule 144"). The holders of approximately 43,159,170 shares of Common Stock
are also entitled to certain rights with respect to registration of such shares
of Common Stock for offer or sale to the public. If such holders, by exercising
their registration rights, cause a large number of shares to be registered and
sold in the public market, such sales could have a material adverse effect on
the market price for the Company's Common Stock.

Under Rule 144 as currently in effect, beginning 90 days after the date of
this Prospectus, a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities for at least one year would be entitled
to sell a number of shares of Common Stock within any three-month period equal
to the greater of 1% of the then outstanding shares of the Common Stock
(approximately shares immediately after the offering) or the average
weekly reported volume of trading of the Common Stock on the Nasdaq National
Market during the four calendar weeks preceding such sale, provided that certain
manner of sale and notice requirements and requirements as to the availability
of current public information concerning the Company are satisfied. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years (including the holding period
of any prior owner except an affiliate), is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144; therefore, unless otherwise restricted, "144(k)
shares" may be sold immediately upon the completion of this offering.

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Immediately after the offering, there will be options to purchase
approximately 8,997,995 shares of Common Stock outstanding. Subject to the
provisions of the lock-up agreements described above, holders of these options
may rely on the resale provisions of Rule 701 under the Securities Act, which
permits nonaffiliates to sell their shares without having to comply with the
current public information, holding period, volume limitation or notice
provisions of Rule 144 and permits affiliates to sell their shares without
having to comply with the holding period provision of Rule 144, in each case
beginning 90 days after the consummation of this offering. In addition, shortly
after this offering, the Company intends to file a registration statement on
Form S-8 covering all options granted under the 1996 Plan. Shares of Common
Stock registered under such registration statement will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the open
market, unless such shares are subject to vesting restriction with the Company
or the lock-up agreements described below. See "Management -- 1996 Plan."

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<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of certain United States federal
income and estate tax consequences relevant to holders of Common Stock that are
non-U.S. Holders. A non-U.S. Holder is a holder of Common Stock that is not, for
United States federal income tax purposes, any of the following: (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
state thereof, (iii) an estate, the income of which is subject to U.S. federal
income taxation regardless of its source, or (iv) a trust that meets the
following two tests: (A) a U.S. court is able to exercise primary supervision
over the administration of the trust, and (B) one or more U.S. persons have the
authority to control all substantial decisions of the trust. This discussion
does not consider the specific facts and circumstances that may be relevant to
particular non-U.S. Holders in light of their personal circumstances and does
not address the treatment of such holders under the laws of any state, local or
foreign taxing jurisdiction. Further, the discussion is based on provisions of
the United States Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder, and administrative and judicial interpretations
thereof, all as in effect on the date hereof and all of which are subject to
change or different interpretation on a possibly retroactive basis. THIS
DISCUSSION IS LIMITED TO NON-U.S. HOLDERS WHO HOLD THE COMMON STOCK AS A CAPITAL
ASSET. EACH PROSPECTIVE HOLDER IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT
TO THE UNITED STATES FEDERAL TAX CONSEQUENCES OF ACQUIRING, HOLDING AND
DISPOSING OF COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER
THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.

DIVIDENDS
Dividends paid to a non-U.S. Holder of Common Stock will be subject to
United States federal withholding tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty, unless the dividends are
effectively connected with the conduct of a trade or business within the United
States (and are attributable to a United States permanent establishment of such
holder, if an applicable income tax treaty so requires as a condition for the
non-U.S. holder to be subject to United States income tax on a net income basis
in respect of such dividends). Such "effectively connected" dividends are
subject to tax at rates applicable to United States citizens, resident aliens
and domestic United States corporations, and are not generally subject to
withholding. Any such effectively connected dividends received by a Corporate
non-U.S. Holder may also, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.

Under currently effective United States Treasury regulations, dividends paid
prior to January 1, 2000 to an address in a foreign country are presumed to be
paid to a resident of that country (unless the payor has knowledge to the
contrary) for purposes of the withholding discussed above and, under the current
interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. Under recently finalized
United States Treasury regulations that will generally be effective for
distributions after December 31, 1999 (the "Final Withholding Regulations"),
however, a non-U.S. Holder of Common Stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
requirements. In addition, under the Final Withholding Regulations, in the case
of Common Stock held by a foreign partnership, (i) the certification requirement
would generally be applied to the partners of the partnership and (ii) the
partnership would be required to provide certain information, including a United
States taxpayer identification number. The Final Withholding Regulations provide
look-through rules for tiered partnerships.

A non-U.S. Holder of Common Stock that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for refund
with the United States Internal Revenue Service.

GAIN ON DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to United States federal
income tax in respect of gain recognized on a disposition of Common Stock
unless: (i) the gain is effectively connected with a trade or business conducted
by the non-U.S. Holder in the United States (and is attributable to a permanent

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establishment maintained in the United States by such non-U.S. Holder if an
applicable income tax treaty so requires as a condition for such non-U.S. Holder
to be subject to United States taxation on a net income basis in respect of gain
from the sale or other disposition of the Common Stock); (ii) in the case of a
non-U.S. Holder who is an individual and holds the Common Stock as a capital
asset, such holder is present in the United States for 183 or more days in the
taxable year of the sale and certain other conditions exist; (iii) the Company
is or has been a "United States real property holding corporation" for federal
income tax purposes and, in the event that the Common Stock is considered
"regularly traded on an established securities market," the non-U.S. Holder
held, directly or indirectly at any time during the five-year period ending on
the date of disposition, more than 5% of the Common Stock (and is not eligible
for any treaty exemption); or (iv) the non-U.S. Holder is subject to tax
pursuant to certain provisions of the Code applicable to U.S. expatriates.
Effectively connected gains realized by a corporate non-U.S. Holder may also,
under certain circumstances, be subject to an additional "branch profits tax" at
a 30% rate or such lower rate as may be specified by an applicable income tax
treaty.

The Company believes it is not currently, and does not anticipate becoming,
a "United States real property holding corporation" for federal income tax
purposes.

FEDERAL ESTATE TAXES

Common Stock held by a non-U.S. Holder at the time of death will be included
in such holder's gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Under current law, United States information reporting requirements (other
than reporting of dividend payments for purposes of the withholding tax noted
above) and backup withholding tax generally will not apply to dividends paid to
non-U.S. Holders that are either subject to the 30% withholding discussed above
or that are not so subject because an applicable tax treaty reduces such
withholding. Otherwise, backup withholding of United States federal income tax
at a rate of 31% may apply to dividends paid with respect to Common Stock to
holders that are not "exempt recipients" and that fail to provide certain
information (including the holder's United States taxpayer identification
number). Generally, unless the payor of dividends has actual knowledge that the
payee is a United States person, the payor may treat dividend payments to a
payee with a foreign address as exempt from information reporting and backup
withholding. However, under the Final Withholding Regulations, dividend payments
generally will be subject to information reporting and backup withholding unless
applicable certification requirements are satisfied. See the discussion above
with respect to the rules applicable to foreign partnerships under the Final
Withholding Regulations.

In general, United States information reporting and backup withholding
requirements also will not apply to a payment made outside the United States of
the proceeds of a sale of Common Stock through an office outside the United
States of a non-United States broker. However, United States information
reporting (but not backup withholding) requirements will apply to a payment made
outside the United States of the proceeds of a sale of Common Stock through an
office outside the United States of a broker that is a United States person,
that derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States, that is a "controlled
foreign corporation" as to the United States, or, in the case of payments made
after December 31, 1999, a foreign partnership with certain connections to the
United States unless the broker has documentary evidence in its records that the
holder or beneficial owner is a non-United States person or the holder or
beneficial owner otherwise establishes an exemption. Payment of the proceeds of
the sale of Common Stock to or through a United States office of a broker is
currently subject to both United States backup withholding and information
reporting unless the holder certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption.

A non-U.S. Holder generally may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the United States Internal Revenue Service.

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UNDERWRITERS

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below for whom Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co., Hambrecht & Quist LLC and Volpe Brown Whelan & Company, LLC are
acting as U.S. Representatives, and the International Underwriters named below
for whom Morgan Stanley & Co. International Limited, Goldman Sachs
International, Hambrecht & Quist LLC & Volpe Brown Whelan and Company, LLC are
acting as International Representatives, have severally agreed to purchase, and
the Company has agreed to sell to them, severally, the respective number of
shares of Common Stock set forth opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated..............................................
Goldman, Sachs & Co............................................................
Hambrecht & Quist LLC..........................................................
Volpe Brown Whelan & Company, LLC..............................................
----------
Subtotal.....................................................................
----------
International Underwriters:
Morgan Stanley & Co. International Limited.....................................
Goldman Sachs International....................................................
Hambrecht & Quist LLC..........................................................
Volpe Brown Whelan & Company, LLC..............................................
----------
Subtotal.....................................................................
----------
Total....................................................................
----------
----------
</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and

68
<PAGE>
will not offer or sell, directly or indirectly, any Shares or distribute any
prospectus relating to the Shares in the United States or Canada or to any
United States or Canadian Person. With respect to any Underwriter that is a U.S.
Underwriter and an International Underwriter, the foregoing representations and
agreements (i) made by it in its capacity as a U.S. Underwriter apply only to it
in its capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement between
U.S. and International Underwriters. As used herein, "United States or Canadian
Person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares."

Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of any
number of Shares as may be mutually agreed. The per share price of any Shares
sold shall be the public offering price set forth on the cover page hereof, in
United States dollars, less an amount not greater than the per share amount of
the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired

69
<PAGE>
in connection with the distribution contemplated hereby, except for offers or
sales to Japanese International Underwriters or dealers and except pursuant to
any exemption from the registration requirements of the Securities and Exchange
Law and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to an
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.

The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ a share under the public offering price. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of $ a
share to other Underwriters or to certain other dealers. After the initial
offering of the shares of Common Stock, the offering price and other selling
terms may from time to time be varied by the Representatives.

The Company has granted to the U.S. Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the public offering price set forth
on the cover page hereof, less underwriting discounts and commissions. The U.S.
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby. To the extent such option is exercised, each U.S.
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the number set forth next to such U.S. Underwriter's name in the preceding table
bears to the total number of shares of Common Stock set forth next to the names
of all U.S. Underwriters in the preceding table.

The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.

At the request of the Company, the U.S. Underwriters have reserved up to
shares of Common Stock to be issued by the Company and offered hereby
for sale, at the initial public offering price, to directors, officers,
employees, business associates and related persons of the Company. The number of
shares of Common Stock available for sale to the general public will be reduced
to the extent such individuals purchase such reserved shares. Any reserved
shares which are not so purchased will be offered by the U.S. Underwriters to
the general public on the same basis as the other shares offered hereby.

Each of the Company and the directors, officers and certain other
stockholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of this Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The restrictions described in this
paragraph do not apply to (x) the sale of Shares to the Underwriters, (y) the
issuance by the Company of shares of Common Stock upon the exercise of an option
or a warrant or the conversion of a security outstanding on the date of this
Prospectus of which the Underwriters have been advised in writing or (z)
transactions by any person other than the

70
<PAGE>
Company relating to shares of Common Stock or other securities acquired in open
market transactions after the completion of the offering of the Shares.

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

Certain of the Underwriters from time to time perform various investment
banking services for the Company, for which such Underwriters receive
compensation.

PRICING OF THE OFFERING

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
between the Company and the U.S. Representatives. Among the factors to be
considered in determining the initial public offering price will be the future
prospects of the Company and its industry in general, sales, earnings and
certain other financial and operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies engaged
in activities similar to those of the Company. The estimated initial public
offering price range set forth on the cover page of this Preliminary Prospectus
is subject to change as a result of market conditions and other factors.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain legal matters in
connection with this offering will be passed upon for the Underwriters by
Fenwick & West LLP, Palo Alto, California.

EXPERTS

Healtheon was incorporated in December 1995 and did not commence operations
until January 1996. Thus, the financial statements of ActaMed for the year ended
December 31, 1995 also represent the financial statements of Healtheon on a
pooled basis for that period.

The consolidated financial statements of Healtheon Corporation at December
31, 1996 and 1997, and for the two years in the period ended December 31, 1997,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein which, as to the year ended December 31, 1996, is
based in part on the report of Deloitte & Touche LLP, independent auditors. The
consolidated financial statements referred to above are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

The consolidated financial statements of ActaMed Corporation for the year
ended December 31, 1995, included in this Prospectus and Registration Statement
have been audited by Deloitte & Touche LLP,

71
<PAGE>
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

The consolidated financial statements of ActaMed Corporation as of December
31, 1996 and for the year then ended, not separately presented in this
Prospectus and Registration Statement have been audited by Deloitte and Touche
LLP, independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

The statements of divisional net loss and United HealthCare Corporation's
net investment and of divisional cash flows of EDI Services Group (a division of
United HealthCare Corporation) included in this Prospectus and Registration
Statement have been audited by Deloitte and Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.

72
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 under the Securities Act,
and the rules and regulations promulgated thereunder, with respect to the Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document that is filed as an exhibit to the Registration Statement are not
necessarily complete and each such statement is qualified in all respects by
reference to the full text of such contract or document. For further information
with respect to the Company and the Common Stock, reference is hereby made to
the Registration Statement and the exhibits and schedules thereto, which may be
inspected and copied at the principal office of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of all or any part thereof may be obtained at
prescribed rates from the Commission's Public Reference Section at such
addresses. Also, the Commission maintains a World Wide Web site on the Internet
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission.

Upon completion of this offering, the Company will become subject to the
information and periodic reporting requirements of the Exchange Act, and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the regional
offices, public reference facilities and Web site of the Commission referred to
above.

73
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS OF HEALTHEON CORPORATION:

<S> <C>
Report of Ernst & Young LLP, Independent Auditors.................................... F-2

Report of Deloitte & Touche LLP, Independent Auditors................................ F-3

Consolidated Balance Sheets.......................................................... F-4

Consolidated Statements of Operations................................................ F-5

Consolidated Statement of Convertible Redeemable Preferred Stock and Stockholders'
Equity (Net Capital Deficiency).................................................... F-6

Consolidated Statements of Cash Flows................................................ F-8

Notes to Consolidated Financial Statements........................................... F-9

FINANCIAL STATEMENTS OF EDI SERVICES, INC.:

Report of Deloitte and Touche LLP, Independent Auditors.............................. F-30

Statement of Divisional Net Loss and United's Net Investment......................... F-31

Statement of Divisional Cash Flows................................................... F-32

Notes to Financial Statements........................................................ F-33
</TABLE>

F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders

Healtheon Corporation

We have audited the accompanying consolidated balance sheets of Healtheon as
of December 31, 1996 and 1997, and the related consolidated statements of
operations, convertible redeemable preferred stock and stockholders' equity (net
capital deficiency), and cash flows for each of the two years in the period
ended December 31, 1997. 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. In May 1998, the Company acquired
ActaMed in a transaction that was accounted for as a pooling of interests. We
did not audit the financial statements of ActaMed for the year ended December
31, 1996, which statements reflect total assets constituting approximately 79%
of the related consolidated financial statement totals at December 31, 1996 and
revenues and a net loss constituting approximately 89% and 57%, respectively, of
the related consolidated financial statement totals for the year ended December
31, 1996. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included for
ActaMed, is based solely on the report of the other auditors.

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 and the report of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Healtheon Corporation at
December 31, 1996 and 1997, and the consolidated results of its operations and
its cash flows for each of the two years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Palo Alto, California

February 27, 1998,

except for Notes 1 and 2, as to which the date is July 24, 1998

F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors of ActaMed Corporation

We have audited the consolidated balance sheet of ActaMed Corporation and
subsidiary (the "Company") as of December 31, 1996 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
two years in the period ended December 31, 1996 (the consolidated financial
statements for 1996 are not presented herein.) These 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.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1996 and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia
June 20, 1997

F-3
<PAGE>
HEALTHEON CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 7,539 $ 16,504 $ 11,075
Short-term investments..................................................... -- 5,300 1,726
Accounts receivable, net of allowance for doubtful accounts of $41, $71 and
$135 in 1996, 1997 and 1998, respectively................................ 959 2,723 3,726
Due from related parties................................................... 1,742 1,533 1,916
Other current assets....................................................... 437 527 353
---------- ---------- -----------
Total current assets....................................................... 10,677 26,587 18,796
Property and equipment, net.................................................. 4,534 5,500 9,960
Intangible assets, net....................................................... 12,644 16,596 16,895
Other assets................................................................. 2,641 2,892 2,471
---------- ---------- -----------
$ 30,496 $ 51,575 $ 48,122
---------- ---------- -----------
---------- ---------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Borrowings under line of credit............................................ $ 30 $ 3,425 $ 3,473
Accounts payable........................................................... 1,359 2,225 3,133
Accrued compensation....................................................... 242 448 1,853
Other accrued liabilities.................................................. 1,097 1,265 2,765
Current portion of capital lease obligations............................... 763 1,038 1,555
Deferred revenue........................................................... 4,681 3,396 3,457
---------- ---------- -----------
Total current liabilities.................................................. 8,172 11,797 16,236
Capital lease obligations, net of current portion............................ 1,210 932 1,459
Commitments
Convertible redeemable preferred stock, $.016 par value, issuable in series:
16,488,860 shares authorized in 1996 and 1997, none in 1998; 14,170,947,
16,488,860 and no shares issued and outstanding in 1996, 1997 and 1998,
respectively; at amounts paid in........................................... 39,578 50,948 --
Stockholders' equity (net capital deficiency):
Convertible preferred stock, $.0001 par value, issuable in series:
48,020,000 shares authorized in 1996 and 1997, none in 1998; 13,285,000,
21,002,692 and no shares issued and outstanding in 1996, 1997 and 1998,
respectively; at amounts paid in......................................... 11,607 43,756 --
Common stock, $.0001 par value, 75,000,000 shares authorized; 8,652,422,
9,436,724 and 51,704,947 shares issued and outstanding in 1996, 1997 and
1998, respectively....................................................... 1 1 5
Additional paid-in capital................................................. 2,670 5,649 106,832
Note receivable from officer............................................... -- (349) --
Deferred stock compensation................................................ -- (2,151) (3,411 )
Accumulated deficit........................................................ (32,742) (59,008) (72,999 )
---------- ---------- -----------
Total stockholders' equity (net capital deficiency)........................ (18,464) (12,102) 30,427
---------- ---------- -----------
$ 30,496 $ 51,575 $ 48,122
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

SEE ACCOMPANYING NOTES.

F-4
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS(1)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
HEALTHEON CORPORATION
ACTAMED ----------------------------------------------
CORPORATION
------------ YEARS ENDED SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ---------------------- ----------------------
1995 1996 1997 1997 1998
------------ ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.............................................. $ 2,175 $ 11,013 $ 13,390 $ 4,286 $ 20,653
Operating costs and expenses:
Cost of revenue.................................... 1,916 5,423 8,808 2,857 17,217
Development and engineering........................ 2,446 8,596 12,986 6,409 8,332
Sales, general and administrative.................. 1,749 9,042 11,031 4,723 12,123
Amortization of intangible assets.................. -- 3,189 4,249 2,124 3,924
Write-off of acquired in-process research and
development costs................................ -- 5,215 -- -- --
------------ ---------- ---------- ---------- ----------
Total operating costs and expenses................. 6,111 31,465 37,074 16,113 41,596
------------ ---------- ---------- ---------- ----------
Loss from operations................................. (3,936) (20,452) (23,684) (11,827) (20,943)
Interest income...................................... 208 539 611 254 637
Interest expense..................................... (6) (56) (323) (128) (251)
Dividends on ActaMed's convertible redeemable
preferred stock.................................... (724) (2,548) (2,870) (1,606) (890)
------------ ---------- ---------- ---------- ----------
Net loss............................................. $ (4,458) $ (22,517) $ (26,266) $ (13,307) $ (21,447)
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
Basic and diluted net loss per common share.......... $ (3.42) $ (3.64) $ (1.85) $ (1.22)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted-average shares outstanding used in computing
basic and diluted net loss per common share........ 6,583 7,223 7,193 17,632
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Pro forma basic and diluted net loss per common share
(unaudited)........................................ $ (.59) $ (.46)
---------- ----------
---------- ----------
Shares used in computing pro forma basic and diluted
net loss per common share (unaudited).............. 44,715 46,631
---------- ----------
---------- ----------
Revenue from related parties included above.......... $ -- $ 4,237 $ 7,309 $ 3,240 $ 9,370
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
</TABLE>

- ---------

(1) Because Healtheon did not commence operations until January 1996, the
ActaMed statement of operations presented for the year ended December 31,
1995 represents the statement of operations of Healtheon for that period on
a pooled basis.

SEE ACCOMPANYING NOTES.

F-5
<PAGE>
CONSOLIDATED STATEMENT OF CONVERTIBLE REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)(1)

(IN THOUSANDS, EXCEPT SHARE DATA)

ACTAMED CORPORATION
<TABLE>
<CAPTION>
CONVERTIBLE REDEEMABLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
-------------------------- -------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------------- ---------- -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1994.................. 8,800,880 $ 8,343 -- $ -- 8,250,000 $ 200
Net loss....................................... -- -- -- -- -- --
Issuance of common stock pursuant to option
exercises by employees....................... -- -- -- -- 1,071,250 21
Issuance of Series B convertible redeemable
preferred stock for cash (less issuance costs
of $36)...................................... 3,448,276 6,963 -- -- -- --
Dividends accrued on convertible redeemable
preferred stock.............................. -- 724 -- -- -- --
-------------- ---------- -------------- ---------- ------------ -----
BALANCES AT DECEMBER 31, 1995.................. 12,249,156 $ 16,030 -- $ -- 9,321,250 $ 221
-------------- ---------- -------------- ---------- ------------ -----
-------------- ---------- -------------- ---------- ------------ -----

HEALTHEON CORPORATION
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995
(REFLECTING THE CONVERSION RATIO
OF .6272)........................ 7,682,671 $ 16,030 -- $ -- 5,846,288 $ 1 $ 2,526 $ --
Net loss........................... -- -- -- -- -- -- -- --
Issuance of common stock to
founders and employees for
cash............................. -- -- -- -- 2,806,134 -- 140 --
Issuance of Series A convertible
preferred stock for cash (less
issuance costs of $27)........... -- -- 10,285,000 5,115 -- -- -- --
Issuance of Series B convertible
preferred stock for cash (less
issuance costs of $8)............ -- -- 3,000,000 5,992 -- -- -- --
Issuance of Series B convertible
preferred stock warrant to
investor for services............ -- -- -- 500 -- -- -- --
Issuance of Series C convertible
redeemable preferred stock for
acquisition...................... 6,488,276 21,000 -- -- -- -- -- --
Issuance of common stock
warrants......................... -- -- -- -- -- -- 4 --
Dividends accrued on convertible
redeemable preferred stock....... -- 2,548 -- -- -- -- -- --
---------- --------- ---------- --------- --------- ----- --------- -----
BALANCES AT DECEMBER 31, 1996...... 14,170,947 39,578 13,285,000 11,607 8,652,422 1 2,670 --

<CAPTION>
BALANCES AT DECEMBER 31, 1995
OF .6272)........................ $ -- $ (10,225) $ (7,698)
Net loss........................... -- (22,517) (22,517)
Issuance of common stock to
founders and employees for
cash............................. -- -- 140
Issuance of Series A convertible
preferred stock for cash (less
issuance costs of $27)........... -- -- 5,115
Issuance of Series B convertible
preferred stock for cash (less
issuance costs of $8)............ -- -- 5,992
Issuance of Series B convertible
preferred stock warrant to
investor for services............ -- -- 500
Issuance of Series C convertible
redeemable preferred stock for
acquisition...................... -- -- --
Issuance of common stock
warrants......................... -- -- 4
Dividends accrued on convertible
redeemable preferred stock....... -- -- --
----------- ----------- -----------
BALANCES AT DECEMBER 31, 1996...... -- (32,742) (18,464)

<CAPTION>
(REFLECTING THE CONVERSION RATIO
</TABLE>

- ------------
(1) Because Healtheon did not commence operations until January 1996, the
ActaMed statement of stockholders' equity presented for the year ended
December 31, 1995 represents the statement of stockholders' equity of
Healtheon for that period on a pooled basis.

SEE ACCOMPANYING NOTES.

F-6
<PAGE>
CONSOLIDATED STATEMENT OF CONVERTIBLE REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)(1) (CONTINUED)

(IN THOUSANDS, EXCEPT SHARE DATA)

HEALTHEON CORPORATION
<TABLE>
<CAPTION>
CONVERTIBLE REDEEMABLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
-------------------------- -------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------------- ---------- -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1996 (CONT.).......... 14,170,947 39,578 13,285,000 11,607 8,652,422 1
Net loss....................................... -- -- -- -- -- --
Issuance of common stock pursuant to option and
restricted stock exercises by employees...... -- -- -- -- 1,397,844 --
Repurchase of employee common stock............ -- -- -- -- (613,542) --
Issuance of Series A and Series B convertible
preferred stock for services................. -- -- 45,000 55 -- --
Issuance of Series B convertible preferred
stock for cash............................... -- -- 15,000 30 -- --
Issuance of Series B convertible preferred
stock to officer for note receivable......... -- -- 250,000 500 -- --
Issuance of Series B convertible preferred
stock warrants in connection with bridge
financing.................................... -- -- -- 64 -- --
Issuance of Series C convertible preferred
stock for cash and conversion of bridge
note......................................... -- -- 2,600,000 6,500 -- --
Issuance of Series D convertible preferred
stock for cash............................... -- -- 4,807,692 25,000 -- --
Issuance of Series D convertible redeemable
preferred stock for asset purchase........... 2,317,913 8,500 -- -- -- --
Repayment of note receivable from officer...... -- -- -- -- -- --
Dividends accrued on convertible redeemable
preferred stock.............................. -- 2,870 -- -- -- --
Deferred stock compensation.................... -- -- -- -- -- --
Amortization of deferred stock compensation.... -- -- -- -- -- --
-------------- ---------- -------------- ---------- ------------ -----
BALANCES AT DECEMBER 31, 1997.................. 16,488,860 50,948 21,002,692 43,756 9,436,724 1
Net loss (unaudited)........................... -- -- -- -- -- --
Issuance of common stock pursuant to option
exercises by employees (unaudited)........... -- -- -- -- 1,659,685 --
Issuance of Series B convertible preferred
stock pursuant to warrant exercises
(unaudited).................................. -- -- 1,017,229 2,034 -- --
Issuance of Series D convertible redeemable
preferred stock for asset purchase
(unaudited).................................. 763,548 2,800 -- -- -- --
Dividends accrued on convertible redeemable
preferred stock (unaudited).................. -- 890 -- -- -- --
Conversion of redeemable preferred and
preferred stock to common stock
(unaudited).................................. (17,252,408) (54,638) (22,019,921) (45,790) 39,272,329 4
Issuance of common stock for asset purchase
(unaudited).................................. -- -- -- -- 1,336,209 --
Repayment of note receivable from officer
(unaudited).................................. -- -- -- -- -- --
Deferred stock compensation (unaudited)........ -- -- -- -- -- --
Amortization of deferred stock compensation
(unaudited).................................. -- -- -- -- -- --
-------------- ---------- -------------- ---------- ------------ -----
BALANCES, JUNE 30, 1998 (UNAUDITED)............ -- $ -- -- $ -- 51,704,947 $ 5
-------------- ---------- -------------- ---------- ------------ -----
-------------- ---------- -------------- ---------- ------------ -----

<CAPTION>
TOTAL
NOTE STOCKHOLDERS'
ADDITIONAL RECEIVABLE EQUITY (NET
PAID-IN FROM DEFERRED STOCK ACCUMULATED CAPITAL
CAPITAL OFFICER COMPENSATION DEFICIT DEFICIENCY)
---------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1996 (CONT.).......... 2,670 -- -- (32,742) (18,464)
Net loss....................................... -- -- -- (26,266) (26,266)
Issuance of common stock pursuant to option and
restricted stock exercises by employees...... 297 -- -- -- 297
Repurchase of employee common stock............ (31) -- -- -- (31)
Issuance of Series A and Series B convertible
preferred stock for services................. -- -- -- -- 55
Issuance of Series B convertible preferred
stock for cash............................... -- -- -- -- 30
Issuance of Series B convertible preferred
stock to officer for note receivable......... -- (500) -- -- --
Issuance of Series B convertible preferred
stock warrants in connection with bridge
financing.................................... -- -- -- -- 64
Issuance of Series C convertible preferred
stock for cash and conversion of bridge
note......................................... -- -- -- -- 6,500
Issuance of Series D convertible preferred
stock for cash............................... -- -- -- -- 25,000
Issuance of Series D convertible redeemable
preferred stock for asset purchase........... -- -- -- -- --
Repayment of note receivable from officer...... -- 151 -- -- 151
Dividends accrued on convertible redeemable
preferred stock.............................. -- -- -- -- --
Deferred stock compensation.................... 2,713 -- (2,713) -- --
Amortization of deferred stock compensation.... -- -- 562 -- 562
---------- ----- ------- ------------- -------------
BALANCES AT DECEMBER 31, 1997.................. 5,649 (349) (2,151) (59,008) (12,102)
Net loss (unaudited)........................... -- -- -- (21,447) (21,447)
Issuance of common stock pursuant to option
exercises by employees (unaudited)........... 913 -- -- -- 913
Issuance of Series B convertible preferred
stock pursuant to warrant exercises
(unaudited).................................. -- -- -- -- 2,034
Issuance of Series D convertible redeemable
preferred stock for asset purchase
(unaudited).................................. -- -- -- -- --
Dividends accrued on convertible redeemable
preferred stock (unaudited).................. -- -- -- -- --
Conversion of redeemable preferred and
preferred stock to common stock
(unaudited).................................. 92,968 -- -- 7,456 54,638
Issuance of common stock for asset purchase
(unaudited).................................. 4,900 -- -- -- 4,900
Repayment of note receivable from officer
(unaudited).................................. -- 349 -- -- 349
Deferred stock compensation (unaudited)........ 2,402 -- (2,402) -- --
Amortization of deferred stock compensation
(unaudited).................................. -- -- 1,142 -- 1,142
---------- ----- ------- ------------- -------------
BALANCES, JUNE 30, 1998 (UNAUDITED)............ $ 106,832 $ -- $ (3,411) $ (72,999) $ 30,427
---------- ----- ------- ------------- -------------
---------- ----- ------- ------------- -------------
</TABLE>

SEE ACCOMPANYING NOTES.

F-7
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS(1)

(IN THOUSANDS)

<TABLE>
<CAPTION>
HEALTHEON CORPORATION
ACTAMED ------------------------------------------
CORPORATION
------------- YEARS ENDED DECEMBER SIX MONTHS ENDED
YEAR ENDED 31, JUNE 30,
DECEMBER 31, -------------------- --------------------
1995 1996 1997 1997 1998
------------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $ (4,458) $ (22,517) $ (26,266) $ (13,307) $ (21,447)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................ 359 5,062 8,142 3,739 8,351
Warrants and preferred stock issued for services............. -- 500 119 56 --
Writeoff of acquired in-process research and development, net
of acquisition costs....................................... -- 4,899 -- -- --
Dividends on ActaMed's convertible redeemable preferred
stock...................................................... 724 2,548 2,870 1,606 890
Changes in operating assets and liabilities:
Accounts receivable........................................ (36) (5,066) (806) 132 (988)
Other assets............................................... (77) (325) (224) (242) 197
Accounts payable........................................... 49 1,139 751 (263) 908
Accrued compensation and other liabilities................. 515 800 346 572 2,905
Deferred revenue........................................... 1,603 3,078 (1,285) (205) 61
------------- --------- --------- --------- ---------
Net cash used in operating activities.......................... (1,321) (9,882) (16,353) (7,912) (9,123)
------------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchase of short-term investments............................. -- -- (5,300) -- (3,483)
Maturities of short-term investments........................... -- -- -- -- 7,057
Increase in restricted cash.................................... -- -- (867) -- --
Purchases of property and equipment............................ (464) (2,027) (2,817) (293) (2,664)
Internally developed software.................................. -- (1,001) (291) (165) --
------------- --------- --------- --------- ---------
Net cash from (used in) investing activities................... (464) (3,028) (9,275) (458) 910
------------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from line of credit borrowings and bridge note........ -- 30 5,395 2,765 48
Proceeds from line of credit borrowings from related party..... -- -- -- -- 1,000
Payments of line of credit borrowings from related party....... -- -- -- -- (1,000)
Proceeds from issuance of preferred stock...................... 6,963 11,107 29,530 96 2,034
Proceeds from issuance of common stock, net of repurchases..... 22 144 265 (10) 913
Payments on note receivable from officer....................... -- -- 151 -- 349
Principal payments of capital lease obligations................ -- (218) (748) (363) (560)
------------- --------- --------- --------- ---------
Net cash from financing activities............................. 6,985 11,063 34,593 2,488 2,784
------------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents........... 5,200 (1,847) 8,965 (5,882) (5,429)
Cash and cash equivalents at beginning of period............... 4,186 9,386 7,539 7,539 16,504
------------- --------- --------- --------- ---------
Cash and cash equivalents at end of period..................... $ 9,386 $ 7,539 $ 16,504 $ 1,657 $ 11,075
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
Supplemental disclosure of cash flow information:
Interest paid.................................................. $ 5 $ 56 $ 252 $ 128 $ 269
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
Supplemental schedule of noncash investing and financing
activities:
Equipment acquired under capital lease obligations............. $ -- $ 2,083 $ 774 $ 356 $ 1,604
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
Issuance of note receivable from officer for preferred stock... $ -- $ -- $ 500 $ -- $ --
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
Conversion of bridge notes to preferred stock.................. $ -- $ -- $ 2,000 $ -- $ --
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
Issuance of convertible redeemable preferred stock for assets
purchased.................................................... $ -- $ -- $ 8,500 $ -- $ 2,800
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
Issuance of common stock for assets purchased.................. $ -- $ -- $ -- $ -- $ 4,900
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
Deferred stock compensation related to options granted......... $ -- $ -- $ 2,713 $ -- $ 2,402
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
Conversion of convertible redeemable preferred and convertible
preferred stock to common stock.............................. $ -- $ -- $ -- $ -- $ 92,972
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
</TABLE>

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

(1) Because Healtheon did not commence operations until January 1996, the
statement of cash flows presented for the year ended December 31, 1995
represents the statements of cash flows of Healtheon for that period on a
pooled basis.

SEE ACCOMPANYING NOTES.

F-8
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

In May 1998, Healtheon Corporation ("Healtheon") acquired ActaMed
Corporation ("ActaMed") in a merger transaction accounted for as a pooling of
interests (see Note 2). ActaMed was incorporated in 1992. Healtheon was
incorporated on December 26, 1995 and was considered to be in the development
stage through late 1997. All financial information has been restated to reflect
the combined operations of Healtheon and ActaMed. All 1995 financial statement
information represents that of ActaMed. Because Healtheon did not commence
operations until January 1996, the financial statements of ActaMed for the year
ended December 31, 1995 also represent the financial statements of Healtheon on
a pooled basis for that period. As used herein, the "Company" refers to the
combined companies and "Healtheon" or "ActaMed" is used to refer to the
individual pre-merger companies where required for clarity of presentation.

SNATURE OF OPERATIONS

The Company is pioneering the use of the Internet to simplify workflows,
decrease costs and improve the quality of patient care throughout the healthcare
industry. The Company has designed and developed an Internet-based information
and transaction platform to facilitate and streamline interactions among the
myriad participants in the healthcare industry. The Company's VHN solution
includes a suite of services delivered through applications operating on its
Internet-based platform. The Company's solution enables the secure exchange of
information among disparate healthcare information systems and supports a broad
range of healthcare transactions, including enrollment, eligibility
determination, referrals and authorization, laboratory and diagnostic test
ordering, clinical data retrieval and claims processing.

The Company has incurred operating losses to date and had an accumulated
deficit of $72,999,000 at June 30, 1998. Company activities have been primarily
financed through private placements of equity securities. The Company had cash,
cash equivalents and short-term investments totaling approximately $12,801,000
at June 30, 1998. As noted above and as further discussed in Note 2, Healtheon
merged with ActaMed in May 1998. This merger may significantly affect the
Company's operating cash needs. The Company may need to raise additional capital
through the issuance of debt or equity securities. There can be no assurance
that the Company will be able to raise additional financing, or that such
financing will be available on terms satisfactory to the Company, if at all.

INTERIM FINANCIAL INFORMATION

The financial information as of June 30, 1998 and for the six months ended
June 30, 1997 and 1998 is unaudited but includes all adjustments, consisting
only of normal recurring adjustments, that the Company considers necessary for a
fair presentation of the Company's operating results and cash flows for such
periods. Results for the six months ended June 30, 1998 are not necessarily
indicative of results to be expected for the full fiscal year of 1998 or for any
future period.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.

F-9
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ materially from these estimates.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

All highly liquid investments with an original maturity from date of
purchase of three months or less are considered to be cash equivalents. The
Company's cash, cash equivalents and short-term investments are invested in
various investment-grade commercial paper, money market accounts and
certificates of deposit. All of the Company's short-term investments mature
within six months. The fair value of the Company's cash equivalents and
short-term investments is as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- --------- JUNE 30,
-----------
1998
-----------
(UNAUDITED)
<S> <C> <C> <C>
Cash equivalents:
Corporate and other nongovernment debt securities......... $ -- $ 12,704 $ 10,380
Money market funds........................................ 5,603 3,429 864
--------- --------- -----------
5,603 16,133 11,244
Short-term investments:
Corporate and other nongovernment debt securities......... -- 5,300 --
U.S. government securities................................ -- -- 1,726
--------- --------- -----------
$ 5,603 $ 21,433 $ 12,970
--------- --------- -----------
--------- --------- -----------
</TABLE>

Net unrealized gains (losses) were immaterial at December 31, 1996 and 1997
and June 30, 1998.

Management determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Marketable debt and equity securities are classified as
available-for-sale, and are carried at their fair value, with the unrealized
gains and losses, when material, reported net-of-tax in a separate component of
stockholders' equity. Realized gains and losses and declines in value judged to
be other-than-temporary on available-for-sale securities are included in
interest income. The cost of securities sold is based on specific
identification. Interest and dividends on securities classified as
available-for-sale are included in investment income.

Additionally, at December 31, 1997 and June 30, 1998, the Company had
restricted cash of $867,000, related to a letter of credit invested in a
certificate of deposit at a financial institution as a security deposit for its
office facilities. Such amount is included in other assets in the accompanying
consolidated balance sheets (see Note 6).

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, net of accumulated amortization
and depreciation. Depreciation is computed using the straight-line method over
the estimated useful life of the related

F-10
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assets, generally three to seven years. Leasehold improvements and equipment
acquired under capital lease obligations are amortized over the shorter of the
lease term or the estimated useful lives of the related assets.

INTANGIBLE ASSETS

All intangible assets, which consist primarily of software licenses,
intangibles related to services agreements and goodwill, are amortized on a
straight-line basis over three years.

SOFTWARE DEVELOPMENT COSTS

Software development costs are incurred in the development or enhancement of
software utilized in providing the Company's business management systems and
services. Software development costs incurred after the establishment of
technological feasibilty for each product or process are capitalized and
capitalization ceases when the product or process is available for general
release to customers or is put into service. Internally developed software costs
were approximately $1,001,000, $291,000 and $165,000 for the years ended
December 31, 1996 and 1997 and the six months ended June 30, 1997, respectively.
There were no internally developed software costs capitalized for the year ended
December 31, 1995 or for the six months ended June 30, 1998. Internally
developed software costs are amortized based on the greater of the amount
determined using the straight line method over the estimated economic useful
life of the software or the ratio of remaining unamortized costs to current and
expected future revenue from the software. Amortization expense related to the
Company's internally developed software costs included in cost of revenue were
approximately $134,000, $376,000, $173,000 and $782,000 for the years ended
December 31, 1996 and 1997 and the six months ended June 30, 1997 and 1998,
respectively. There was no amortization expense related to ActaMed's internally
developed software costs for the year ended December 31, 1995.

LONG-LIVED ASSETS

The Company continually monitors events and changes in circumstances that
could indicate carrying amounts of long-lived assets, including intangible
assets, may not be recoverable. When such events or changes in circumstances are
present, the Company assesses the recoverability of long-lived assets by
determining whether the carrying value of such assets will be recovered through
undiscounted expected future cash flows. In June 1998, the Company evaluated the
carrying value of the internally developed software in light of the changes in
operations resulting from the acquisition of ActaMed by Healtheon. The Company
determined that it expected no future cash flows to be generated by this
software and, accordingly, wrote off the remaining unamortized balance of
$603,000 related to internally developed software. Such amount is included in
the $782,000 amortization expense for the six months ended June 30, 1998 noted
above. No impairment losses were recorded for the years ended December 31, 1995,
1996 and 1997 or for the six months ended June 30, 1997.

REVENUE RECOGNITION

F-11
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recognized ratably over the term of the applicable agreement, or revenue from
arrangements that are priced on a per-transaction or per-user basis, which is
recognized as the services are performed. Revenue from development projects is
recognized on a percentage-of-completion basis or as such services are
performed, depending on the terms of the contract. Revenue from consulting
services is recognized as such services are performed. Cash received in excess
of revenue recognized relating to such services has been recorded as deferred
revenue in the accompanying consolidated balance sheet.

During the year ended December 31, 1997, the Company entered into agreements
with two customers to manage and operate their current and expanding information
technology ("IT") operations, to develop a suite of specific Internet-based
commercial software applications and to assist the customers in migrating from
their current IT operating environment to these new applications. The Company
utilizes its own personnel, certain outside contractors, certain personnel and
facilities of the customers that are leased under contract terms to the Company
for these services. The cost of these leased customer employees and facilities
is included as part of the total costs of the IT and development services billed
to the customers by the Company. For the year ended December 31, 1997 and the
six months ended June 30, 1998, the Company recognized revenue of approximately
$2,100,000 and $7,304,000, respectively, for the IT services and approximately
$200,000 and $2,497,000, respectively, for the development services. Included in
the revenue recognized for IT services for the year ended December 31, 1997 and
the six months ended June 30, 1998 are amounts related to leased personnel and
facilities of $1,909,000 and $6,088,000, respectively, which amounts are also
included in cost of revenue for the respective periods.

The Company recognizes revenue from license fees when a noncancelable
license agreement has been signed with a customer, the software product covered
by the license agreement has been delivered, there are no uncertainties
surrounding product acceptance, there are no significant future performance
obligations, the license fees are fixed and determinable and collection of the
license fees is considered probable. The Company's products do not require
significant customization. Revenue from software licensing fees was $1,717,000,
$4,981,000, $1,780,000, $390,000 and $390,000, respectively, for the years ended
December 31, 1995, 1996 and 1997 and the six months ended June 30, 1997 and
1998.

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 97-2, "Software Revenue Recognition." SOP
97-2 is effective January 1, 1998 and generally requires revenue earned on
software arrangements involving multiple elements such as software products,
upgrades, enhancements, postcontract customer support, installation and training
to be allocated to each element based on the relative fair values of the
elements. There was no material change to the Company's accounting for revenue
as a result of the adoption of SOP 97-2.

ActaMed entered into a national marketing and licensing agreement (the
"Agreement") with International Business Machines Corporation ("IBM") in 1995
that granted IBM a nonexclusive, nontransferable right to market ActaMed's
software and services for a total of $6,300,000. For the years ended December
31, 1995, 1996 and 1997, approximately $1,700,000, $3,400,000, $1,200,000,
respectively, of this amount was recognized as software license revenue upon
delivery of the software. No software license revenue was recognized under this
agreement for the six months ended June 30, 1997 or 1998.

In December 1996, the Company entered into a new agreement (the "License")
to license its newly granted patent to IBM. As part of the License, IBM agreed
to pay ActaMed $4,800,000 over a four-year

F-12
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
period. Additionally, in conjunction with the License, the Company issued IBM a
five-year warrant to purchase 282,522 shares of the Company's common stock at a
price of $7.97 per share. Because of the extended payment terms, the Company
concluded that the license fee was not fixed and determinable and, accordingly,
is recognizing this revenue as the proceeds are collected. For the years ended
December 31, 1996 and 1997 and the six months ended June 30, 1997 and 1998, the
Company recognized revenue from the License of $995,000, $780,000, $390,000 and
$390,000, respectively. At December 31, 1997, amounts due from IBM of $738,000
and $1,715,000 were included in accounts receivable and other assets,
respectively. At June 30, 1998, amounts due from IBM of $776,000 and $1,318,000
were included in accounts receivable and other assets, respectively. Deferred
revenue at December 31, 1996 and 1997 and June 30, 1998 included $3,121,000,
$2,341,000 and $1,951,000, respectively, related to the License.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value for marketable debt securities is based on quoted market
prices. The carrying value of these securities approximates their fair value.

The fair value of notes is estimated by discounting the future cash flows
using the current interest rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities. The
carrying value of the note receivable from an officer approximated its fair
value.

The fair value of short-term and long-term capital lease obligations is
estimated based on current interest rates available to the Company for debt
instruments with similar terms, degrees of risk and remaining maturities. The
carrying value of these obligations approximates their respective fair values.

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

The Company currently derives a substantial portion of its consolidated
revenue from a few large customers. Two customers represented 35% and 17% of the
total balance of trade accounts receivable and amounts due from related parties
at December 31, 1997, and three customers represented 31%, 19% and 15% of the
total balance of trade accounts receivable and amounts due from related parties
at June 30, 1998. The Company believes that the concentration of credit risk in
its trade receivables, with respect to its limited customer base, is
substantially mitigated by the Company's credit evaluation process. The Company
does not require collateral. To date, the Company's bad debt write-offs have not
been significant. During the years ended December 31, 1996 and 1997 and the six
months ended June 30, 1998, respectively, the Company added approximately
$41,000, $35,000 and $66,000 to its bad debt reserves. Total write-offs of
uncollectible amounts were zero, $5,000 and $2,000 in these periods,
respectively.

For the year ended December 31, 1995, one customer accounted for 85% of
consolidated revenue. For the year ended December 31, 1996, two customers
accounted for 46% and 38% of consolidated revenue. For the year ended December
31, 1997, two customers accounted for 55% and 15% of consolidated revenue. For
the six months ended June 30, 1998, four customers accounted for 28%, 23%, 22%
and 20% of consolidated revenue.

The Company operates solely within one business segment, the development and
marketing healthcare transaction and information services delivered over the
Internet, private intranets or other networks. Through June 30, 1998, the
Company has had no export sales.

F-13
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair market value of the shares at the date
of grant. As permitted under Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," the Company
accounts for stock option grants to employees and directors in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25").

NET LOSS PER SHARE

Basic earnings (loss) per share and diluted earnings (loss) per share are
presented in conformity with SFAS No. 128, "Earnings Per Share," for all periods
presented. Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, common stock and convertible preferred stock issued or granted
for nominal consideration prior to the anticipated effective date of the
Company's initial public offering must be included in the calculation of basic
and diluted net loss per share as if they had been outstanding for all periods
presented. To date, the Company has not had any issuances or grants for nominal
consideration.

In accordance with SFAS No. 128, basic net loss per share has been computed
using the weighted-average number of shares of common stock outstanding during
the period, less shares subject to repurchase. Basic pro forma net loss per
share, as presented in the statement of operations, has been computed as
described above and also gives effect, under Securities and Exchange Commission
guidance, to the conversion of the convertible and convertible redeemable
preferred stock (using the if-converted method) from the original date of
issuance. On May 19, 1998, in connection with Healtheon's acquisition of
ActaMed, all outstanding shares of Healtheon's convertible preferred stock and
ActaMed's convertible redeemable preferred stock were converted into an
aggregate of 39,272,329 shares of common stock. There were no shares of
convertible or convertible redeemable preferred stock outstanding at June 30,
1998.

F-14
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following table presents the calculation of basic and diluted and pro
forma net loss per share follows (in thousands, except per share data):

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED JUNE
DECEMBER 31, 30,
---------------------- ----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss............................................................ $ (22,517) $ (26,266) $ (13,307) $ (21,447)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic and diluted:
Weighted-average shares of common stock outstanding............... 7,398 8,621 8,469 18,999
Less: Weighted-average shares subject to repurchase............... (815) (1,398) (1,276) (1,367)
---------- ---------- ---------- ----------
Weighted-average shares used in computing basic and diluted net loss
per common share.................................................. 6,583 7,223 7,193 17,632
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic and diluted net loss per common share......................... $ (3.42) $ (3.64) $ (1.85) $ (1.22)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Pro forma:
Shares used above................................................... 7,223 17,632
Pro forma adjustment to reflect weighted effect of assumed
conversion of convertible preferred stock......................... 37,492 28,999
---------- ----------
Shares used in computing pro forma basic and diluted net loss per
common share...................................................... 44,715 46,631
---------- ----------
---------- ----------
Pro forma basic and diluted net loss per common share (unaudited)... $ (.59) $ (.46)
---------- ----------
---------- ----------
</TABLE>

The Company has excluded all convertible redeemable preferred stock,
convertible preferred stock, warrants and outstanding stock options from the
calculation of basic and dilutive loss per common share because all such
securities are anti-dilutive for all periods presented. See Notes 9, 10 and 11
for further information on these securities.

COMPREHENSIVE LOSS

The Company has no material components of other comprehensive loss.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
The Company is required to adopt SFAS No. 131 for the year ending December 31,
1998. SFAS No. 131 requires disclosure of certain information regarding
operating segments, products and services, geographic areas of operation and
major customers. Adoption of SFAS No. 131 is expected to have no material impact
on the Company's financial position, results of operations or cash flows.

F-15
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Company is required to adopt SFAS No.
133 for the year ending December 31, 2000. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. Because the Company
currently holds no derivative financial instruments and does not currently
engage in hedging activities, adoption of SFAS No. 133 is expected to have no
material impact on the Company's financial position, results of operations or
cash flows.

2. BUSINESS COMBINATIONS

ACQUISITION OF EDI SERVICES, INC.

Effective March 31, 1996, ActaMed acquired EDI Services Inc. ("EDI"), a
wholly-owned subsidiary of United HealthCare Corporation ("United HealthCare")
in a transaction pursuant to which EDI became a wholly-owned subsidiary of
ActaMed. ActaMed issued 6,488,276 shares of Series C convertible redeemable
preferred stock with a fair value of $21,000,000 and incurred
acquisition-related costs of approximately $316,000 in connection with the
acquisition. EDI is a provider of electronic data interchange services to health
care providers and has marketed its health care network products, ProviderLink,
to providers of United HealthCare's local health plans since 1992.

In connection with the acquisition, United HealthCare and ActaMed entered
into a five-year Services and License Agreement pursuant to which the Company
earns transaction fee revenue by providing certain health care information
services to United HealthCare and its provider network and ProviderLink
subscribers.

The acquisition was accounted for as a purchase. Accordingly, the operations
of EDI are included in the Company's consolidated statements of operations only
after March 31, 1996. Assets and liabilities acquired in connection with this
acquisition were recorded at their estimated fair market values. Approximately
$359,000 of the purchase price was allocated to certain equipment and the
remaining approximately $20,957,000 of the purchase price was allocated to
intangible assets, consisting principally of in-process research and
development, software, the Services and License Agreement, and goodwill.
Purchased in-process research and development costs of approximately $5,215,000
were written off by the Company at the time the acquisition was consummated.
Consistent with the Company's tests for internally developed software, the
Company determined the amounts to be allocated to developed software and in-
process research and development based on whether technological feasibility had
been achieved and whether there was any alternative future use for the
technology. At the date of the acquisition of EDI, the Company concluded that
the in-process research and development had no alternative future use after
taking into consideration the potential for usage of the software in different
products, resale of the software and internal usage, and accordingly charged
such amounts to the Company's operations.

F-16
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

2. BUSINESS COMBINATIONS (CONTINUED)
Intangible assets arising from the acquisition of EDI at March 31, 1996 is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Goodwill........................................................................... $ 8,012
Software........................................................................... 3,118
Other intangibles (primarily Service and License Agreement and trademarks)......... 4,612
---------
$ 15,742
---------
---------
</TABLE>

The following pro forma information gives effect to the acquisition of EDI
as if such transaction had occurred as of the beginning of each respective year
(in thousands, except per share data):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net revenues.......................................................... $ 6,330 $ 12,031
---------- ----------
---------- ----------
Net loss applicable to common stockholders............................ $ (12,199) $ (21,736)
---------- ----------
---------- ----------
Basic and diluted net loss per share.................................. $ (3.30)
----------
----------
</TABLE>

The pro forma net loss information excludes the $5,215,000 write-off of
acquired in-process research and development as it represents a nonrecurring
charge.

ACQUISITION OF ACTAMED CORPORATION

On May 19, 1998, the Company completed its acquisition of ActaMed, a Georgia
corporation that develops and markets an integrated health care network, in a
transaction that has been accounted for as a pooling of interests. Accordingly,
the financial information presented reflects the combined financial position and
operations of the Company and ActaMed for all dates and periods presented. The
Company issued 23,271,355 shares of its common stock in exchange for all of the
outstanding shares of common and convertible redeemable preferred stock of
ActaMed. The Company also assumed all outstanding stock options and warrants to
acquire 3,383,011 shares of ActaMed capital stock, after giving effect to the
exchange ratio.

F-17
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

2. BUSINESS COMBINATIONS (CONTINUED)
Separate results of the combined entities for the years ended December 31,
1995, 1996 and 1997 and the four months ended April 30, 1998 (period ending
immediately prior to the acquisition) are as follows (in thousands, unaudited):

<TABLE>
<CAPTION>
FOUR MONTHS
YEARS ENDED DECEMBER 31, ENDED
--------------------------------- APRIL 30,
1995 1996 1997 1998
--------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Revenue:
Healtheon...................................................... $ -- $ 1,200 $ 3,199 $ 6,405
ActaMed........................................................ 2,175 9,813 10,191 6,690
--------- ---------- ---------- ------------
$ 2,175 $ 11,013 $ 13,390 $ 13,095
--------- ---------- ---------- ------------
--------- ---------- ---------- ------------
Net loss:
Healtheon...................................................... $ -- $ (8,543) $ (13,979) $ (6,664)
ActaMed........................................................ (4,458) (13,974) (12,287) (5,601)
--------- ---------- ---------- ------------
$ (4,458) $ (22,517) $ (26,266) $ (12,265)
--------- ---------- ---------- ------------
--------- ---------- ---------- ------------
</TABLE>

There were no significant intercompany transactions between the two
companies or significant conforming accounting adjustments.

3. PURCHASE OF SCAN ASSETS

Effective December 31, 1997, the Company entered into a series of agreements
with SmithKline Beecham Clinical Laboratories, Inc. ("SmithKline Labs") to
outsource the network connection between their customers and SmithKline Labs'
laboratories. As part of that transaction, the Company acquired a license to
SBCL SCAN software and computer workstations that reside in various medical
providers' offices. At December 31, 1997, the SCAN license and the assets from
one region of the country were transferred to the Company for $2,000,000 in cash
and 2,317,913 shares of Series D convertible redeemable preferred stock valued
at $8,500,000. In March and June 1998, the assets for the remaining regions of
the country were transferred to the Company and the Company paid the remaining
purchase price of $7,700,000 through the issuance of 763,548 shares of the
Company's Series D convertible redeemable preferred stock in March and 1,336,209
shares of the Company's common stock in June. The value of the SCAN software
license totaled $14,774,000 and the value of the computer workstations totaled
$3,426,000.

In connection with this transaction, SmithKline Labs and the Company entered
into a five-year Services Agreement pursuant to which the Company will earn
transaction fee revenue by providing certain health care information services to
SmithKline Labs and its provider customers.

F-18
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- --------- JUNE 30,
1998
-----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment........................................... $ 3,677 $ 6,238 $ 10,584
Office equipment, furniture and fixtures..................... 1,185 1,237 2,330
Purchased software for internal use.......................... 1,001 1,240 1,393
Leasehold improvements....................................... 303 328 1,255
--------- --------- -----------
6,166 9,043 15,562
Less accumulated depreciation and amortization............... (1,632) (3,543) (5,602)
--------- --------- -----------
Property and equipment, net.................................. $ 4,534 $ 5,500 $ 9,960
--------- --------- -----------
--------- --------- -----------
</TABLE>

Included in property and equipment at December 31, 1996 and 1997 and June
30, 1998 were assets acquired under capital lease obligations with a cost of
approximately $2,302,000, $3,075,000 and $4,603,000, respectively. Accumulated
depreciation related to the assets acquired under capital leases totaled
$319,000, $1,174,000, and $1,613,000 at December 31, 1996 and 1997 and June 30,
1998, respectively.

5. INTANGIBLE ASSETS

Intangible assets consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Services agreements........................................ $ 2,855 $ 2,855 $ 2,855
Software technology rights................................. 3,118 12,449 17,892
Internally developed software.............................. 1,001 1,292 --
Goodwill................................................... 8,012 8,012 8,012
Other...................................................... 1,777 1,777 1,777
--------- --------- -----------
16,763 26,385 30,536
Less accumulated amortization.............................. (4,119) (9,789) (13,641)
--------- --------- -----------
$ 12,644 $ 16,596 $ 16,895
--------- --------- -----------
--------- --------- -----------
</TABLE>

6. COMMITMENTS

The Company has entered into several lease lines of credit. Lease lines
totaling $3,500,000 and $2,000,000 were entered into during the years ended
December 31, 1996 and 1997, respectively. Approximately $2,900,000 and
$3,750,000 had been utilized under the lease lines through December 31,

F-19
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

6. COMMITMENTS (CONTINUED)
1997 and June 30, 1998, respectively. The arrangements are secured by the
property and equipment subject to the leases.

The Company leases its headquarters and other office facilities under
operating lease agreements that expire at various dates through 2008. Total rent
expense for all operating leases was approximately $391,000, $953,000,
$1,646,000, $756,000 and $1,052,000 for the years ended December 31, 1995, 1996
and 1997 and the six months ended June 30, 1997 and 1998, respectively, net of
sublease income from a related party of approximately $30,000, $68,000, $27,000,
$27,000 and $32,000, respectively. Future minimum lease commitments under
noncancelable lease agreements at December 31, 1997 were as follows (in
thousands):

<TABLE>
<CAPTION>
CAPITAL
OPERATING LEASES LEASES
---------------- -------------
<S> <C> <C>
Year ending December 31,
1998...................................................... $ 2,444 $ 1,167
1999...................................................... 2,423 858
2000...................................................... 2,077 164
2001...................................................... 1,506 --
2002...................................................... 963 --
Thereafter................................................ 4,978 --
------- -------------
Total minimum lease payments................................ $ 14,391 2,189
-------
-------
Amount representing interest................................ (219)
-------------
Present value of minimum lease payments under capital lease
obligations............................................... 1,970
Less current portion........................................ (1,038)
-------------
Non-current portion......................................... $ 932
-------------
-------------
</TABLE>

7. BRIDGE LOANS AND NOTE RECEIVABLE FROM OFFICER

In 1997, the Company borrowed $2,000,000 from certain stockholders in the
form of 6% convertible promissory notes (the "Notes") in contemplation of the
Series C convertible preferred stock offering. The Notes were converted into
800,000 shares of Series C convertible preferred stock upon the closing of that
offering. Warrants to purchase 61,947 shares of Series B convertible preferred
stock were issued in connection with the Notes (see Note 10).

In July 1997, in consideration of 250,000 shares of the Company's Series B
convertible preferred stock issued to an officer, the Company received a
one-year, full-recourse, noninterest-bearing promissory note for $500,000. At
December 31, 1997, $349,000 remained outstanding under the note. At June 30,
1998, the note had been paid in full.

In February 1998, the Company entered into a $2,000,000 line of credit
agreement with a stockholder. The Company borrowed $1,000,000 under the
agreement, which was repaid with interest at 10% per annum in May 1998.

F-20
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

8. LINES OF CREDIT

In September 1997, the Company entered into a line of credit agreement with
a bank that allows the Company to borrow up to $2,101,000. Amounts borrowed
under this agreement bear interest at the bank's prime rate (8.5% at December
31, 1997 and June 30, 1998). Interest is payable monthly with payments
commencing on September 30, 1997. The line of credit availability declines over
the term to $1,821,000, $1,215,000 and $547,000 at December 31, 1997, 1998 and
1999, respectively, and expires on September 5, 2000. The amount outstanding is
collateralized by certain assets. At December 31, 1997 and June 30, 1998,
$1,425,000 was outstanding under the agreement.

In December 1997, the Company entered into a loan agreement with a bank that
allows the Company to borrow up to $2,250,000. Amounts borrowed under this loan
agreement bear interest at the bank's prime rate (8.5%) at December 31, 1997.
The loan was personally guaranteed by one of the Company's stockholders until
the acquisition of ActaMed in May 1998. In May 1998, concurrent with the removal
of the stockholder guarantee, the interest rate was increased to the bank's
prime rate plus 1.5% (10% at June 30, 1998). Interest is payable monthly with
payments commencing on January 31, 1998. The principal balance of the loan is
due on December 31, 1998. At December 31, 1997 and June 30, 1998, $2,000,000 was
outstanding under the loan agreement.

9. CONVERTIBLE REDEEMABLE PREFERRED STOCK

A summary of ActaMed's 8% cumulative convertible redeemable preferred stock
is as follows.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1996 1997
--------------------------- ---------------------------
ISSUED ISSUED
SHARES AND LIQUIDATION AND LIQUIDATION
AUTHORIZED OUTSTANDING PREFERENCE OUTSTANDING PREFERENCE
------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Series A............. 5,519,912 5,519,912 $ 9,743,000 5,519,912 $ 10,377,000
Series B............. 2,162,759 2,162,759 7,578,000 2,162,759 8,135,000
Series C............. 6,488,276 6,488,276 22,257,000 6,488,276 23,936,000
Series D............. 2,317,913 -- -- 2,317,913 8,500,000
------------ ------------ ------------- ------------ -------------
16,488,860 14,170,947 $ 39,578,000 16,488,860 $ 50,948,000
------------ ------------ ------------- ------------ -------------
------------ ------------ ------------- ------------ -------------
</TABLE>

In March 1998, an additional 763,548 shares of Series D convertible
redeemable preferred stock were issued in connection with the asset acquisition
from SmithKline Labs (see Note 3).

Dividends on each Series were cumulative whether or not declared and are
shown as a charge against income in the accompanying financial statements. On
May 19, 1998, in connection with the acquisition of ActaMed by Healtheon, the
convertible redeemable preferred stockholders waived payment of all accrued and
unpaid dividends.

Preferred holders voted generally on an as-if converted basis. In addition a
majority approval of the four Series was required to approve certain
transactions.

The Series A, B, C and D cumulative convertible redeemable preferred
stockholders were entitled to receive, upon liquidation, an amount per share
equal to the issuance price, plus all accrued but unpaid

F-21
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

9. CONVERTIBLE REDEEMABLE PREFERRED STOCK (CONTINUED)
dividends. Common stockholders would then have received $5,000,000. Any
remaining proceeds would then be distributed pro rata to the stockholders,
subject only to the Series A holders' right to receive sufficient funds to
provide a 20% return on their original investment.

Each Series was redeemable at up to one-third of the originally issued
shares per year commencing in years six, seven and eight after the issue date at
a redemption price equal to the issue price plus all accrued but unpaid
dividends. On May 19, 1998, all outstanding shares of convertible redeemable
preferred stock were converted into 17,252,408 shares of common stock in
connection with the acquisition of ActaMed by the Company.

10. STOCKHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

The Company was authorized to issue 48,020,000 shares of convertible
preferred stock, designated in series. A summary of convertible preferred stock
was as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1996 1997
--------------------------- ---------------------------
ISSUED ISSUED
SHARES AND LIQUIDATION AND LIQUIDATION
DESIGNATED OUTSTANDING PREFERENCE OUTSTANDING PREFERENCE
------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Series A............. 10,305,000 10,285,000 $ 5,143,000 10,305,000 $ 5,153,000
Series B............. 6,105,000 3,000,000 6,000,000 3,290,000 6,580,000
Series C............. 2,600,000 -- -- 2,600,000 6,500,000
Series D............. 5,000,000 -- -- 4,807,692 25,000,000
------------ ------------ ------------- ------------ -------------
24,010,000 13,285,000 $ 11,143,000 21,002,692 $ 43,233,000
------------ ------------ ------------- ------------ -------------
------------ ------------ ------------- ------------ -------------
</TABLE>

Series A and Series B convertible preferred shares included 20,000 and
25,000 shares, respectively, that were issued for services rendered.

On May 19, 1998, all outstanding shares of convertible preferred stock were
converted into shares of common stock on a one-for-one basis at the election of
the holders in connection with the Company's acquisition of ActaMed.
Concurrently with the conversion, all outstanding warrants to purchase Series B
preferred stock were converted into warrants to purchase the same number of
shares of the Company's common stock. At June 30, 1998, the Company had no
preferred stock authorized.

Series A, B, C and D convertible preferred stockholders were entitled to
noncumulative dividends of $0.03375, $0.135, $0.16875 and $0.351, respectively,
per share per annum. No dividends were declared through the date of conversion.
The Series A, B, C and D convertible preferred stockholders were entitled to
receive, upon liquidation, an amount per share equal to the issuance price, plus
all declared but unpaid dividends. The Series A, B, C and D convertible
preferred stockholders had voting rights equal to the common shares issuable
upon conversion.

F-22
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

10. STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS

In July 1997, the Company issued warrants to purchase a total of 61,947
shares of Series B convertible preferred stock to certain investors in
connection with a bridge financing. The warrants expire four years from issuance
and are exercisable at $2.00 per share. The value of these warrants,
approximately $64,000, was expensed as a cost of financing. All of these
warrants were outstanding at December 31, 1997. In May 1998, warrants to
purchase 17,229 shares of Series B convertible preferred stock were exercised
and the remainder of the warrants, which were outstanding at June 30, 1998, were
converted to warrants to purchase 44,718 shares of common stock.

In November 1996, the Company issued a warrant to an investor to purchase
1,000,000 shares of Series B convertible preferred stock at an exercise price of
$2.00 per share for services rendered by the investor on behalf of the Company.
The warrant may be exercised at any time within three years from the date of
issuance. The Company has recorded a charge of $500,000 representing the fair
value of the warrant issued and services received. This warrant was outstanding
at December 31, 1997 and in May 1998 was converted to a warrant to purchase
common stock. It remained outstanding at June 30, 1998.

In November 1996, the Company granted a warrant to a director of the Company
to purchase 1,000,000 shares of Series B convertible preferred stock at an
exercise price of $2.00 per share, the fair value of Series B convertible
preferred stock at the date of issuance. The warrant vests over a period of 18
months from the date of issuance. The term of the warrant is three years. This
warrant was outstanding at December 31, 1997 and was exercised in full in May
1998.

In July 1997, the Company issued a warrant to an officer of the Company, in
connection with his employment, to purchase 750,000 shares of Series B preferred
stock at an exercise price of $2.00 per share, the fair value of Series B
convertible preferred stock at the date of issuance. The warrant expires three
years from issuance, and shares purchased under the warrant are subject to
repurchase by the Company upon termination of employment. Shares under the
warrant vest ratably over a period of two years from the date of grant. This
warrant was outstanding at December 31, 1997 and in May 1998 was converted to a
warrant to purchase common stock. It remained outstanding at June 30, 1998.

In December 1996, the Company issued a warrant to a customer to purchase
282,522 shares of the Company's common stock at a price of $7.97 per share. The
warrant expires in December 2001. This warrant was outstanding at June 30, 1998.

At December 31, 1997 the Company had reserved 2,811,947 and 282,522 shares
of its Series B preferred stock and common stock, respectively, for issuance
upon exercise of outstanding warrants. In conjunction with the acquisition of
ActaMed in May 1998, all outstanding warrants to purchase Series B preferred
stock were converted into warrants to purchase common stock. At June 30, 1998,
the Company had reserved 2,077,240 shares of its common stock for issuance upon
exercise of the outstanding warrants for common stock.

F-23
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

11. STOCK-BASED COMPENSATION

STOCK OPTION PLANS

Under the 1996 Stock Incentive Plan (the "Plan"), which was adopted in
February 1996, the Board of Directors may grant options to purchase common stock
or issue common stock subject to a restricted stock purchase agreement to
eligible participants. At December 31, 1997, a total of 9,000,000 shares had
been reserved under the Plan. In March 1998 and July 1998, the Board of
Directors and the stockholders approved increases in the reserve of 1,000,000
shares and 5,000,000 shares, respectively, to a total of 15,000,000 shares
reserved. Options granted may be either incentive stock options or nonstatutory
stock options and are exercisable within the times or upon the events determined
by the Board of Directors as specified in each option agreement. Options vest
over a period of time as determined by the Board of Directors, generally four
years. The term of the Plan is ten years. At December 31, 1997 and June 30,
1998, 274,166 and 22,523 shares, respectively, remain available for future grant
under the Plan.

In connection with the acquisition of ActaMed, the Company assumed all the
outstanding options issued under the ActaMed stock option plans, after the
application of the exchange ratio, and reserved 3,100,489 shares of the
Company's common stock for issuance upon exercise of the assumed options. No
further options can be granted under these plans. At the time of the
acquisition, options for 2,717,269 shares were fully vested. The remainder of
the shares vest based upon annual cliffs over a five-year period from the date
of grant.

During the years ended December 31, 1996 and 1997, the Company issued
approximately 1,806,000 and 850,000 shares, respectively, of common stock
subject to restricted stock purchase agreements to employees for cash. No such
shares were issued during the six months ended June 30, 1998. The common stock
is subject to repurchase at the original exercise price until vested, and
approximately 614,000 shares were repurchased from terminated employees during
the year ended December 31, 1997. The shares vest over a period of time as
determined by the Board of Directors for each individual purchase agreement,
generally four years. At December 31, 1996 and 1997 and June 30, 1998,
approximately 1,660,000, 1,430,000 and 1,304,000 shares, respectively, were
subject to repurchase.

F-24
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

11. STOCK-BASED COMPENSATION (CONTINUED)

The following table summarizes stock option activity:

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
----------- -----------------
<S> <C> <C>
ACTAMED CORPORATION
Outstanding at January 1, 1995.................................................... 4,223,214 $ .34
Granted......................................................................... 856,000 .91
Exercised....................................................................... (1,071,250) .02
Canceled........................................................................ (62,750) .83
-----------
Options outstanding at December 31, 1995.......................................... 3,945,214 $ .55
-----------
-----------
HEALTHEON CORPORATION (REFLECTING THE CONVERSION RATIO OF .6272)
Options outstanding at December 31, 1995.......................................... 2,474,438 $ .88
Granted......................................................................... 3,004,384 .54
Exercised....................................................................... (300) .05
Canceled........................................................................ (233,907) .78
-----------
Options outstanding at December 31, 1996.......................................... 5,244,615 .68
Granted......................................................................... 5,394,008 .73
Exercised....................................................................... (547,844) .16
Canceled........................................................................ (890,528) .49
-----------
Options outstanding at December 31, 1997.......................................... 9,200,251 .72
Granted (unaudited)............................................................. 1,917,806 2.76
Exercised (unaudited)........................................................... (1,659,684) .59
Canceled (unaudited)............................................................ (460,378) .86
-----------
Options outstanding at June 30, 1998 (unaudited).................................. 8,997,995 $ 1.17
-----------
-----------
</TABLE>

<TABLE>
<CAPTION>
HEALTHEON CORPORATION
ACTAMED -----------------------------------------
CORPORATION
--------------- YEARS ENDED SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------- -------------------
1995 1996 1997 1998
--------------- --------- --------- -------------------
<S> <C> <C> <C> <C>
Weighted-average fair value of options granted................ $ .28 $ .15 $ .18 $ .50
----- --------- --------- -----
----- --------- --------- -----
</TABLE>

F-25
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

11. STOCK-BASED COMPENSATION (CONTINUED)
The following table summarizes information regarding options outstanding and
exercisable at December 31, 1997.

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
WEIGHTED- REMAINING WEIGHTED-
NUMBER AVERAGE CONTRACTUAL NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING EXERCISE PRICE LIFE (IN YEARS) EXERCISABLE EXERCISE PRICE
- ------------------------------------------- ----------- --------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
$.03-$.08.................................. 2,490,007 $ .05 6.98 1,679,870 $ .04
$.20-$.25.................................. 3,693,879 .24 9.53 682,500 .20
$1.00-$1.45................................ 2,092,187 1.24 9.69 794,213 1.45
$3.24...................................... 924,178 3.24 7.94 76,644 3.24
----------- ----------
9,200,251 $ .72 8.63 3,233,227 $ .50
----------- ----------
----------- ----------
</TABLE>

The Company recorded deferred stock compensation of approximately $2,713,000
and $2,402,000 during the year ended December 31, 1997 and the six months ended
June 30, 1998, respectively. These amounts represented the difference between
the exercise price and the deemed fair value of the Company's common stock on
the date such stock options were granted. The Company recorded amortization of
deferred stock compensation of approximately $562,000 and $1,142,000,
respectively, during these periods. At June 30, 1998, the Company had a total of
approximately $3,411,000 remaining to be amortized over the corresponding
vesting period of each respective option, generally four years.

PRO FORMA INFORMATION

The Company has elected to follow APB No. 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS No. 123 requires use
of option valuation models that were not developed for use in valuing employee
stock options. Under APB No. 25, no compensation expense is recognized when the
exercise price of stock options granted to the Company's employees equals the
market price of the underlying stock on the date of grant.

Pro forma information regarding net loss is required by SFAS No. 123, and
has been determined as if its employee stock options granted subsequent to
December 31, 1994 were accounted for under the fair value method of SFAS No.
123. The fair value for these options was estimated at the date of grant using
the minimum value method with the following weighted-average assumptions for the
years ended December 31, 1995, 1996 and 1997 and the six months ended June 30,
1998: risk-free interest rate of

F-26
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

11. STOCK-BASED COMPENSATION (CONTINUED)
approximately 6.2%, 6.0%, 6.0% and 5.5%, respectively; a weighted-average
expected life of the option of 5.0 years, 4.3 years, 4.2 years and 3.6 years,
respectively, and a dividend yield of zero for all periods.

<TABLE>
<CAPTION>
HEALTHEON CORPORATION
ACTAMED -----------------------------------
CORPORATION SIX MONTHS
-------------- YEARS ENDED ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ---------------------- -----------
1995 1996 1997 1998
-------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net loss (in thousands):
As reported............................................... $ (4,458) $ (22,517) $ (26,266) $ (21,447)
------- ---------- ---------- -----------
------- ---------- ---------- -----------
Pro forma................................................. $ (4,488) $ (22,606) $ (26,434) $ (22,260)
------- ---------- ---------- -----------
------- ---------- ---------- -----------
Basic and diluted net loss per share:
As reported............................................... $ (3.42) $ (3.64) $ (1.22)
---------- ---------- -----------
---------- ---------- -----------
Pro forma................................................. $ (3.43) $ (3.66) $ (1.26)
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

12. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets (liabilities) were as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ---------- JUNE 30,
1998
-----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................................... $ 7,537 $ 14,263 $ 18,878
Intangible assets.......................................................... 3,067 4,564 5,944
Research and development tax credit........................................ 561 1,014 1,383
Reserves and accruals not currently deductible............................. 227 308 1,177
---------- ---------- -----------
Total deferred tax assets.................................................... 11,392 20,149 27,382
Valuation allowance.......................................................... (11,032) (19,807) (27,337)
---------- ---------- -----------
Net deferred tax assets...................................................... 360 342 45
---------- ---------- -----------
Deferred tax liabilities:
Depreciation............................................................... (31) (45) (45)
Capitalized software development costs..................................... (329) (297) --
---------- ---------- -----------
Total deferred tax liabilities............................................... (360) (342) (45)
---------- ---------- -----------
Net deferred tax assets and liabilities...................................... $ -- $ -- $ --
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

A valuation allowance equal to 100% of the net deferred tax assets has been
established because of the uncertainty of realization of the deferred tax assets
due to the Company's lack of earnings history. The

F-27
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

12. INCOME TAXES (CONTINUED)
valuation allowance for deferred tax assets increased by $4,477,000, $8,775,000
and $7,530,000 during the years ended December 31, 1996 and 1997 and the six
months ended June 30, 1998, respectively.

At December 31, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $37,575,000, which expire in 2009
through 2012, and federal tax credits of approximately $800,000, which expire in
2009 through 2012.

Approximately $16,675,000 of the net operating loss at December 31, 1997,
related to a consolidated subsidiary. This loss carryforward is only available
to offset future taxable income of that subsidiary.

Because of the "change of ownership" provisions of the Internal Revenue
Code, a portion of the Company's net operating loss carryforwards and tax credit
carryforwards may be subject to an annual limitation regarding their utilization
against taxable income in future periods. A portion of these carryforwards may
expire before becoming available to reduce future income tax liabilities.

13. RELATED PARTY TRANSACTIONS

The Company has two customers that are significant stockholders of the
Company.

The Company entered into a Development Agreement with a partnership
controlled by the former Chairman of the Board of Directors of ActaMed. Pursuant
to this agreement, the Company granted the partnership exclusive licenses to use
ActaMed's technology for industries other than the health care industry. Under
the agreement, the Company will receive a commercial royalty on the
partnership's gross receipts. If the Company desires in the future to expand to
other industries, the partnership must either develop that industry in a defined
time period or rights to that industry revert to the Company. The agreement
expires December 3, 1998 and to date no fees have been paid to the Company
thereunder.

The Company shares office space and provides administrative support and
network resources to a company controlled by a former member of the Board of
Directors of ActaMed. Amounts reimbursed for the shared facilities and
administrative support totaled approximately $45,000, $28,000, $59,000, $27,000
and $32,000 for the years ended December 31, 1995, 1996, and 1997 and the six
months ended June 30, 1997 and 1998, respectively. Approximately $211,000,
$187,000, $78,000 and $27,000 was reimbursed during the years ended December 31,
1995, 1996 and 1997 and the six months ended June 30, 1997, respectively, for
the use of the network maintained by the Company. No income for the use of the
network by the related party was recognized for the six months ended June 30,
1998. All such amounts are included as an offset to general and administrative
expenses in the accompanying consolidated statements of operations. Amounts due
from the related party of $33,000 and $72,000 at December 31, 1996 and 1997,
respectively, were included in other current assets in the accompanying
consolidated balance sheets. There were no amounts due from the related party at
June 30, 1998.

14. PENDING ACQUISITION (UNAUDITED)

On June 25, 1998, the Company entered into a definitive agreement to acquire
Metis LLC ("Metis"), a provider of Internet/intranet strategic consulting,
design and development of Internet-based applications and content for the
healthcare industry enabling clinical integration and managed care process
improvement. Under the terms of the agreement, the Company will exchange shares
of its common stock

F-28
<PAGE>
HEALTHEON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1997 AND 1998 IS UNAUDITED)

14. PENDING ACQUISITION (UNAUDITED) (CONTINUED)
for the assets of Metis. The acquisition is subject to certain conditions of
closing, including approvals of Metis stockholders and regulatory agencies.

15. SUBSEQUENT EVENTS (UNAUDITED)

In July 1998, the Company granted to employees options to purchase 2,390,200
shares of the Company's common stock. The Company estimates that it will record
deferred stock compensation with regard to these grants of approximately
$6,000,000.

In July 1998, the Board of Directors approved a resolution authorizing the
Company to issue up to 5,000,000 shares of preferred stock. To date, no
preferred shares have been issued. Also, in July 1998, the Board of Directors
approved a 5,000,000 increase in the common shares reserved for issuance under
the Company's 1996 Incentive Stock Plan.

F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors of United HealthCare Corporation:

We have audited the accompanying statements of divisional net loss and
United HealthCare Corporation's ("United's") net investment and of divisional
cash flows for the year ended December 31, 1995 of EDI Services Group ("EDI") (a
Division of United.) These statements of divisional net loss and United's net
investment and of divisional cash flows are the responsibility of United's
management. Our responsibility is to express an opinion on these statements of
divisional net loss and United's net investment and of divisional cash flows
based on our audit.

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

The accompanying statements of divisional net loss and United's net
investment and of divisional cash flows reflect a component of a business
enterprise that was derived from a consolidated group of companies rather than a
complete legal entity. See Note 1 to the statements of divisional net loss and
United's net investment and of divisional cash flows for a description of the
basis of presentation.

In our opinion, the statements of divisional net loss and United's net
investment and of divisional cash flows present fairly, in all material
respects, the results of its divisional net loss and United's net investment and
of divisional cash flows for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Minneapolis, Minnesota
April 4, 1996

F-30
<PAGE>
EDI SERVICES GROUP
(A DIVISION OF UNITED HEALTHCARE CORPORATION)

STATEMENT OF DIVISIONAL NET LOSS AND UNITED'S NET INVESTMENT
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
Revenue:
Related-party processing revenue.............................................. $2,900,448
Related-party site revenue.................................................... 1,155,300
Other processing revenue...................................................... 100,013
---------
Total revenue............................................................... 4,155,761

Operating costs and expenses:
Cost of revenues.............................................................. 1,646,039
Sales and marketing........................................................... 302,145
Research and development...................................................... 1,604,897
General and administrative.................................................... 642,980
---------
Total operating costs and expenses.......................................... 4,196,061
---------

Loss before income taxes........................................................ (40,300)

Income taxes.................................................................... 48,177
---------
Net loss.................................................................... (88,477)

United's net investment -- Beginning of period.................................. 124,393

Net cash flows to EDI division.................................................. 417,213
---------
United's net investment -- end of period........................................ $ 453,129
---------
---------
</TABLE>

See notes to financial statements.

F-31
<PAGE>
EDI SERVICES GROUP
(A DIVISION OF UNITED HEALTHCARE CORPORATION)

STATEMENT OF DIVISIONAL CASH FLOWS
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
Operating activities:
Net loss....................................................................... $ (88,477)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization................................................ 285,613
Increase in deferred income taxes............................................ 48,177
Changes in assets and liabilities:
Accounts receivable........................................................ (13,347)
Accounts payable........................................................... (58,612)
Accrued expenses........................................................... (46,083)
---------
Net cash provided by operating activities................................ 127,271

Investing activities:
Purchase of property........................................................... (190,375)
Software development costs..................................................... (354,109)
---------
Net cash used in investing activities.................................... (544,484)
---------
Net cash flows of division which were provided by United......................... $(417,213)
---------
---------
</TABLE>

See notes to financial statements.

F-32
<PAGE>
EDI SERVICES GROUP
(A DIVISION OF UNITED HEALTHCARE CORPORATION)

NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS -- EDI Services Group ("EDI") is an operating division of
United HealthCare Corporation ("United"). EDI was established to develop and
market software to control a network that facilitates the exchange of health
care information among managed care organizations, insurance carriers,
hospitals, physicians, and other health care industry participants. On December
15, 1995, United transferred EDI and its ProviderLink operations to a holding
company, UHC Green Acquisition Inc. ("UHC Green") (a wholly owned subsidiary of
United).

BASIS OF PRESENTATION -- The accompanying statements of divisional net loss
and United's net investment and divisional cash flows have been prepared from
the books and records maintained by EDI and United. The statement of divisional
net loss may not necessarily be indicative of the results of operations that
would have been obtained if EDI had been operated as an independent entity. The
statement of divisional net loss includes allocation of certain expenses that
are material in amount. Such expenses are allocations for corporate services and
overhead.

Intercompany revenue results from network services provided to health plans
owned or managed by United.

The accompanying financial statements have been prepared on a going-concern
basis, which contemplates the realization of assets and liabilities in the
normal course of business. As shown in the financial statements, during the year
ended December 31, 1995, EDI incurred a net loss of approximately $88,000 and a
cash flow deficit of approximately $417,000.

As discussed in Note 5, EDI was acquired by ActaMed Corporation ("ActaMed")
effective March 31, 1996. EDI's continued existence is dependent on funding of
its cash flow deficit by ActaMed and on its relationship and service agreement
with United. The service agreement states that the combined entities will be the
primary provider of electronic data interchange services for United for a period
of five years.

The nature of EDI's operations exposes EDI to certain business risks. Such
business risks include EDI's concentration of sales transactions with United,
which accounted for 98% of EDI's 1995 revenues (see Note 4). The market for
health care information services is highly competitive and subject to rapid
technological change, evolving industry standards, and regulatory developments
and influences that may affect both the operations of EDI and its customers. In
addition, significant demands may be placed on EDI's management as a result of
EDI's merger with ActaMed (see Note 5). Other significant business risks faced
by EDI include a dependence on key employees and the risk of liability
associated with unforeseen software product errors.

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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.

SIGNIFICANT ACCOUNTING POLICIES

INCOME TAXES -- United provides for income taxes under the provisions of
SFAS No. 109, "Accounting for Income Taxes," which requires deferred income tax
balances to be computed annually for differences between financial statement and
tax bases of assets and liabilities based on enacted tax rates. An income tax
provision has been allocated to EDI as if EDI filed on a separate return basis;
however, under the

F-33
<PAGE>
EDI SERVICES GROUP
(A DIVISION OF UNITED HEALTHCARE CORPORATION)

NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income tax allocation agreement policy with United, no benefit is allocated for
losses incurred which are utilized in the consolidated income tax return (see
Note 2).

UNITED'S NET INVESTMENT -- United's net investment, as shown in the
accompanying statement of divisional net loss and United's net investment,
represents losses incurred by EDI since inception and the intercompany account
with United that consists of transactions with United and the net cash flows of
EDI, which have been funded by United.

REVENUE RECOGNITION -- EDI earns revenue from providing access to its
network services, including fixed fee and transaction-based services. EDI
recognizes revenue from network services over the period the services are
provided.

2. INCOME TAXES

Components of income tax expense for the year ended December 31, 1995 were:

<TABLE>
<CAPTION>
<S> <C>
Deferred:
State...................................................................................... $ 11,666
Federal.................................................................................... 36,511
---------
$ 48,177
---------
---------
</TABLE>

Differences between the provision for income taxes at the federal statutory
rate and the recorded provision for the year ended December 31, 1995 are
summarized as follows:

<TABLE>
<S> <C>
Benefit at statutory rate............................................... $ (13,610)
State income taxes...................................................... (2,590)
Net operating loss carryforward for which no benefit could be recognized
under United's tax allocation policy.................................. 60,368
Other................................................................... 4,009
-----------
$ 48,177
-----------
-----------
</TABLE>

As of December 31, 1995, EDI had no federal and state tax loss
carryforwards. Under a tax sharing agreement, tax loss carryforwards are not
available to EDI because United has already realized these tax benefits in its
prior years, consolidated federal and state returns.

3. EMPLOYEE STOCK OWNERSHIP PLAN

EDI employees participate in United's unleveraged Employee Stock Ownership
Plan ("ESOP") maintained for the benefit of all eligible employees. United
contributions are made at the discretion of the Board of Directors.
Contributions totaling $3,700 for the year ended December 31, 1995, have been
made to the ESOP for EDI employees.

F-34
<PAGE>
EDI SERVICES GROUP
(A DIVISION OF UNITED HEALTHCARE CORPORATION)

NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 (CONTINUED)

4. RELATED PARTIES

Revenue from processing transactions and site licensing for United and its
affiliates comprises approximately 98% of total revenue for the year ended
December 31, 1995, and was approximately $4,056,000 for the year then ended.

EDI utilizes various common corporate systems and support maintained by
United. The related costs are charged to EDI based on specific allocation
methods, if applicable, and are based on employee headcount. These functions
include human resources, accounting, legal, other processing and administrative
services, and building rent. The total amounts allocated to EDI were
approximately $438,000 for the year ended December 31, 1995. United's management
believes that these allocations are reasonable; however, these allocations would
not necessarily represent the amounts that would have been incurred on a
separate company basis.

5. SUBSEQUENT EVENTS

On March 1, 1996, United and UHC Green (renamed "EDI Services, Inc.")
entered into an agreement with ActaMed and EDI Acquisition, Inc. (a
subcorporation of ActaMed). This agreement allows for the acquisition of EDI
Services, Inc. by ActaMed pursuant to the merger of EDI Acquisition, Inc. with
and into EDI Services, Inc. effective March 31, 1996. The outstanding shares of
capital stock of EDI Services, Inc. were converted into 10,344,828 shares of
ActaMed's Series C Convertible Redeemable Preferred Stock.

F-35
<PAGE>
[LOGO]
<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 JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)

ISSUED , 1998

[LOGO]

COMMON STOCK

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

OF THE SHARES OF COMMON STOCK OFFERED HEREBY, SHARES ARE BEING
OFFERED INITIALLY OUTSIDE OF THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS AND SHARES ARE BEING OFFERED INITIALLY
IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE
"UNDERWRITERS." ALL OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY
ARE BEING SOLD BY THE COMPANY. PRIOR TO THIS OFFERING, THERE HAS
BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS
CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL
BE BETWEEN $ AND $ PER SHARE. SEE "UNDERWRITERS" FOR A
DISCUSSION OF THE FACTORS TO BE CONSIDERED IN DETERMINING
THE INITIAL PUBLIC OFFERING PRICE. APPLICATION HAS BEEN
MADE TO LIST THE COMMON STOCK FOR QUOTATION ON THE
NASDAQ NATIONAL MARKET UNDER THE SYMBOL "HEON."

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

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5 HEREOF.

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

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

PRICE $ A SHARE

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

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
--------------------- ----------------------- -----------------------
<S> <C> <C> <C>
PER SHARE.................................... $ $ $
TOTAL (3).................................... $ $ $
</TABLE>

- -------------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITERS."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $ .
(3) THE COMPANY HAS GRANTED THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
ADDITIONAL SHARES AT THE PRICE TO PUBLIC, LESS UNDERWRITING DISCOUNTS
AND COMMISSIONS FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF ANY. IF
THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL PRICE TO
PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO COMPANY
WILL BE $ , $ AND $ , RESPECTIVELY. SEE "UNDERWRITERS."

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

THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS NAMED HEREIN AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY FENWICK & WEST LLP, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED
THAT DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT , 1998 AT THE OFFICE
OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR
IN IMMEDIATELY AVAILABLE FUNDS.

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

MORGAN STANLEY DEAN WITTER GOLDMAN SACHS INTERNATIONAL

HAMBRECHT & QUIST VOLPE BROWN WHELAN & COMPANY

, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of Common Stock being registered. All amounts are estimates except
the Securities and Exchange Commission registration fee, the NASD filing fee and
the Nasdaq National Market listing fee.

<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
-------------
<S> <C>
Securities and Exchange Commission registration fee............................ $ 22,125
NASD filing fee................................................................ 8,000
Nasdaq National Market listing fee............................................. 50,000
Printing and engraving expenses................................................ *
Legal fees and expenses........................................................ *
Accounting fees and expenses................................................... *
Blue Sky fees and expenses..................................................... *
Transfer agent fees............................................................ *
Miscellaneous.................................................................. *
-------------
Total...................................................................... $ *
-------------
-------------
</TABLE>

- ---------

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.

Article V of the Registrant's Restated Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permissible under
Delaware law.

Article VI of the Registrant's Bylaws provides for the indemnification of
officers and directors (and allows the Registrant to indemnify other employees
and third parties) acting on behalf of the Registrant if such person acted in
good faith and in a manner reasonably believed to be in and not opposed to the
best interest of the Registrant, and, with respect to any criminal action or
proceeding, the indemnified party had no reason to believe his or her conduct
was unlawful.

The Registrant intends to enter into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.

The Registrant intends to obtain directors' and officers' insurance
providing indemnification for certain of the Registrant's directors, officers
and employees for certain liabilities.

Reference is also made to Section 7 of the Underwriting Agreement to be
filed as Exhibit 1.1 to the Registration Statement for information concerning
the Underwriters' obligation to indemnify the Registrant and its officers and
directors in certain circumstances.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Since its founding in December 1995, through July 31, 1998, the
Registrant has issued and sold the following unregistered securities:

(1) On January 26, 1996, the Registrant sold 10,305,000 shares of Series
A Preferred Stock to 22 investors at a purchase price of $.50 per share,
which was paid in cash.

(2) On January 26, 1996, the Registrant sold 1,000,000 shares of Common
Stock to four investors at a purchase price of $.05 per share, which was
paid in cash.

(3) On July 8, 1996, the Registrant sold 10,000 shares of Series A
Preferred Stock to a vendor in consideration for services rendered.

(4) On October 1, 1996, the Registrant sold 3,000,000 shares of Series B
Preferred Stock to five investors at a purchase price of $2.00 per share,
which was paid in cash.

(5) On November 1, 1996, the Registrant issued warrants to purchase
2,000,000 shares of Series B Preferred Stock with an exercise price of $2.00
per share to two entities, in consideration of services rendered and as an
incentive to continue to provide services.

(6) On July 1, 1997, the Registrant issued warrants to purchase a total
of 61,947 shares of Series B Preferred Stock with an exercise price of $2.00
per share to three entities pursuant to a bridge loan financing.

(7) Between July 1 and July 27, 1997, the Registrant sold an aggregate
of 2,600,000 shares of Series C Preferred Stock to nine investors at a
purchase price of $2.50 per share, in consideration of cash and cancellation
of indebtedness incurred in connection with a bridge loan financing.

(8) Between July 7 and July 16, 1997, the Registrant sold 25,000 shares
of Series B Preferred Stock to one entity at a purchase price of $2.00 per
share, in consideration of services rendered.

(9) On July 11, 1997, the Registrant sold 10,000 shares of Series A
Preferred Stock to the same vendor referred to in (3) above in consideration
of services rendered.

(10) On July 11, 1997, the Registrant sold 250,000 shares of Series B
Preferred Stock to an officer at a purchase price of $2.00 per share, paid
with an amount of cash equal to the par value of the purchased shares and
with a promissory note which has subsequently been paid in full.

(11) On July 11, 1997, the Registrant issued a warrant to purchase
750,000 shares of Series B Preferred Stock with an exercise price of $2.00
per share to an officer as an incentive to continue to provide services.

(12) On July 22, 1997, the Registrant sold 15,000 shares of Series B
Preferred Stock to one investor at a purchase price of $2.00 per share,
which was paid in cash.

(13) From October 17 through December 19, 1997, the Registrant sold an
aggregate of 4,807,692 shares of Series D Preferred Stock to 13 investors at
a purchase price of $5.20 per share, which was paid in cash.

(14) On May 1, 1998, the Registrant sold 1,017,229 shares of Series B
Preferred Stock to one investor upon the exercise of warrants with an
exercise price of $2.00 per share which was paid in cash.

(15) On May 19, 1998, 22,019,921 shares of the Registrant's Preferred
Stock of the Company were converted into Common Stock on a one-for-one
basis, in connection with the ActaMed acquisition.

II-2
<PAGE>
(16) On May 19, 1998, in connection with the ActaMed acquisition, the
Registrant assumed options to purchase ActaMed Common Stock which were held
by former ActaMed employees which are now exercisable for an aggregate of
3,497,007 shares of Registrant's Common Stock.

(17) On May 19, 1998, the Registrant issued 23,271,353 shares of its
Common Stock to former shareholders of ActaMed in connection with the
acquisition of ActaMed Corporation ("ActaMed") in exchange for all of the
issued and outstanding shares of capital stock of ActaMed.

(18) On May 19, 1998, in connection with the acquisition of ActaMed, the
Registrant assumed a warrant to purchase shares of ActaMed capital stock
which are now exercisable for an aggregate of 282,533 shares of Healtheon
Common Stock.

(19) On June 26, 1998, the Registrant sold 1,336,209 shares of Common
Stock to one entity in consideration for certain assets and licenses
relating to SmithKline Labs.

(20) Since January 1996, the Registrant has granted 11,611,084 options to
purchase shares of Registrant's Common Stock to employees pursuant to the
Company's 1996 Stock Plan.

(21) From July 6, 1996 through July 17, 1998, the Company issued an
aggregate of 4,739,920 shares of Common Stock for aggregate consideration,
in the form of cash and promissory notes, of $1.1 million.

(b) There were no underwriters, brokers or finders employed in connection
with any of the transactions set forth above.

(c) The transactions referred to in numbers 16-18 were exempt from
registration pursuant to the provisions of Section 3(a)(10) of the Securities
Act. The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or, with respect to
issuances to employees, Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions by an issuer not involving a public offering or
transactions pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients of securities in
each such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the instruments
representing such securities issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
2.0 Agreement and Plan of Reorganization, dated as of February 24, 1998, by and
among the Registrant, MedNet Acquisition Corp. and ActaMed Corporation.
2.1* Agreement and Plan of Merger, dated as of April 18, 1996, by and among
ActaMed Corporation, EDI Acquisition, Inc., UHC Green Acquisition, Inc.
and United HealthCare Corporation.
3.1 Amended and Restated Certificate of Incorporation of the Registrant, as
currently in effect.
3.2 Form of Amended and Restated Certificate of Incorporation, to be filed
prior to the closing of the offering made under this Registration
Statement.
3.3 Bylaws of the Registrant, as currently in effect.
3.4 Form of Bylaws of the Registrant, to be adopted prior to the closing of the
offering made under this Registration Statement.
</TABLE>

II-3
<PAGE>
<TABLE>
<S> <C>
4.1* Specimen Common Stock certificate.
5.1* Form of Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, regarding the legality of the securities being issued.
10.1* Form of Indemnification Agreement entered into by the Registrant with each
of its directors and executive officers.
10.2* 1996 Stock Plan and form of Stock Option Agreement thereunder.
10.3 ActaMed Corp. 1997 Stock Option Plan
10.4 ActaMed Corp. 1996 Stock Option Plan
10.5 ActaMed Corp. 1995 Stock Option Plan
10.6 ActaMed Corp. 1994 Stock Option Plan.
10.7 ActaMed Corp. 1993 Class B Common Stock Option Plan.
10.8 ActaMed Corp. 1992 Stock Option Plan.
10.9 ActaMed Corp. 1996 Director Stock Option Plan, as amended.
10.10 Amended and Restated Investors' Rights Agreement dated as of May 19, 1998
among the Registrant and certain of the Registrant's securityholders.
10.11 Lease Agreement, dated December 2, 1997, between Larvan Properties and
Registrant.
10.12 Lease Agreement, dated November 6, 1995, as amended, between ActaMed
Corporation and ZML-Central Park, L.L.C.
10.13*+ Services and License Agreement, dated as of April 4, 1996, between ActaMed
Corporation and United HealthCare Corporation.
10.14*+ Services Agreement, dated as of December 31, 1997, as amended, between
ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc.
10.15*+ Assets Purchase Agreement, dated as of December 31, 1997, as amended,
between ActaMed Corporation and SmithKline Beecham Clinical Laboratories,
Inc.
10.16*+ License Agreement, dated as of December 31, 1997, between ActaMed
Corporation and SmithKline Beecham Clinical Laboratories, Inc.
10.17*+ Development Agreement, dated as of October 31, 1997, between ActaMed
Corporation and SmithKline Beecham Clinical Laboratories, Inc.
10.18*+ Services, Development and License Agreement, dated as of December 15, 1997,
between the Registrant and Beech Street Corporation.
10.19*+ Services, Development and License Agreement, dated as of September 30,
1997, between the Registrant and Brown & Toland Physician Services
Organization.
10.20 Amended and Restated Securities Purchase Agreement, dated as of January 26,
1996, between the Registrant and investors.
10.21 Amended and Restated Series B Preferred Stock Purchase Agreement dated
October 31, 1996, between Registrant and investors.
10.22 Form of Series B Preferred Stock Purchase Warrant between the Registrant
and certain of the Registrant's investors.
10.23 Series C Preferred Stock Purchase Agreement dated July 25, 1997, between
the Registrant and investors.
10.24 Series D Preferred Stock Purchase Agreement dated October 13, 1997, between
the Registrant and investors.
10.25 Full Recourse Promissory Note dated as of July 11, 1997, between the
Registrant and W. Michael Long.
10.26 Form of Promissory Note for Bridge Financing
10.27* W. Michael Long Employment Agreement
10.28*+ Michael Hoover Employment Agreement
</TABLE>

II-4
<PAGE>
<TABLE>
<S> <C>
10.29*+ Memorandum to SmithKline Beecham, dated as of May 14, 1998, from the
Registrant.
21.1 Subsidiaries of the Registrant.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, independent auditors (see page II-7).
23.3 Consent of Deloitte & Touche LLP, independent auditors (see page II-8).
23.4 Consent of Deloitte & Touche LLP, independent auditors (see page II-9).
24.1 Power of Attorney (see page II-6).
27.1 Financial Data Schedule.
</TABLE>

- ---------

* To be supplied by amendment.

+ Confidential treatment requested as to portions of this exhibit.

(b) FINANCIAL STATEMENT SCHEDULES

All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.

ITEM 17. UNDERTAKINGS

(a) The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement 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 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 hereunder, 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 Act and will be governed by the final adjudication of such
issue.

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

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Santa Clara, State of California, on this 31st day of July, 1998.

<TABLE>
<S> <C> <C>
HEALTHEON CORPORATION

By: /s/ W. MICHAEL LONG
-----------------------------------------
W. Michael Long
CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints John L.
Westermann III, Jack Dennison, and Kallen Chan, and any two of them, as
attorneys-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendment to this Registration Statement (including
post-effective amendments and registration statements filed pursuant to Rule 462
and otherwise), 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 any two 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 two of them, or their 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.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ W. MICHAEL LONG Chief Executive Officer
- ------------------------------ and Director (Principal July 31, 1998
W. Michael Long Executive Officer)

/s/ JOHN L. WESTERMANN III Chief Financial Officer
- ------------------------------ (Principal Financial and July 31, 1998
John L. Westermann III Accounting Officer)

- ------------------------------ Chairman of the Board July 31, 1998
James Clark

/s/ L. JOHN DOERR
- ------------------------------ Director July 31, 1998
L. John Doerr

/s/ MICHAEL HOOVER
- ------------------------------ President and Director July 31, 1998
Michael Hoover

/s/ C. RICHARD KRAMLICH
- ------------------------------ Director July 31, 1998
C. Richard Kramlich

/s/ WILLIAM MCGUIRE, M.D.
- ------------------------------ Director July 31, 1998
William McGuire, M.D.

/s/ P. E. SADLER
- ------------------------------ Director July 31, 1998
P. E. Sadler

/s/ TADATAKA YAMADA
- ------------------------------ Director July 31, 1998
Tadataka Yamada
</TABLE>

II-6
<PAGE>
EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 27, 1998 (except Notes 1 and 2 as to which
the date is July 24, 1998) in the Registration Statement on Form S-1 and related
Prospectus of Healtheon Corporation for the registration of shares of its Common
Stock.

/s/ Ernst & Young LLP

Palo Alto, California

July 31, 1998

II-7
<PAGE>
EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Healtheon Corporation on
Form S-1 of our report dated June 20, 1997, relating to the consolidated
financial statements of ActaMed Corporation as of December 31, 1996 and for the
two years then ended (the consolidated financial statements for 1996 are not
presented herein) appearing in the Prospectus, which is part of this
Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia
July 31, 1998

II-8
<PAGE>
EXHIBIT 23.4

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Healtheon Corporation on
Form S-1 of our report dated April 4, 1996, relating to the statements of
divisional net loss and United's net investment and of divisional cash flows for
the year ended December 31, 1995 of EDI Services Group (a Division of United
HealthCare Corporation) appearing in the Prospectus, which is part of this
Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ DELOITTE & TOUCHE LLP

Minneapolis, Minnesota
July 31, 1998

II-9
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- --------- ------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
1.1* Form of Underwriting Agreement.

2.0 Agreement and Plan of Reorganization, dated as of February 24, 1998, by and among the
Registrant, MedNet Acquisition Corp. and ActaMed Corporation.

2.1* Agreement and Plan of Merger, dated as of April 18, 1996, by and among ActaMed Corporation,
EDI Acquisition, Inc., UHC Green Acquisition, Inc. and United HealthCare Corporation.

3.1 Amended and Restated Certificate of Incorporation of the Registrant, as currently in
effect.

3.2 Form of Amended and Restated Certificate of Incorporation, to be filed prior to the closing
of the offering made under this Registration Statement.

3.3 Bylaws of the Registrant, as currently in effect.

3.4 Form of Bylaws of the Registrant, to be adopted prior to the closing of the offering made
under this Registration Statement.

4.1* Specimen Common Stock certificate.

5.1* Form of Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, regarding
the legality of the securities being issued.

10.1* Form of Indemnification Agreement entered into by the Registrant with each of its directors
and executive officers.

10.2* 1996 Stock Plan and form of Stock Option Agreement thereunder.

10.3 ActaMed Corp. 1997 Stock Option Plan

10.4 ActaMed Corp. 1996 Stock Option Plan

10.5 ActaMed Corp. 1995 Stock Option Plan

10.6 ActaMed Corp. 1994 Stock Option Plan.

10.7 ActaMed Corp. 1993 Class B Common Stock Option Plan.

10.8 ActaMed Corp. 1992 Stock Option Plan.

10.9 ActaMed Corp. 1996 Director Stock Option Plan, as amended.

10.10 Amended and Restated Investors' Rights Agreement dated as of May 19, 1998 among the
Registrant and certain of the Registrant's securityholders.

10.11 Lease Agreement, dated December 2, 1997, between Larvan Properties and Registrant.

10.12 Lease Agreement, dated November 6, 1995, as amended, between ActaMed Corporation and
ZML-Central Park, L.L.C.

10.13*+ Services and License Agreement, dated as of April 4, 1996, between ActaMed Corporation and
United HealthCare Corporation.

10.14*+ Services Agreement, dated as of December 31, 1997, as amended, between ActaMed Corporation
and SmithKline Beecham Clinical Laboratories, Inc.

10.15*+ Assets Purchase Agreement, dated as of December 31, 1997, as amended, between ActaMed
Corporation and SmithKline Beecham Clinical Laboratories, Inc.

10.16*+ License Agreement, dated as of December 31, 1997, between ActaMed Corporation and
SmithKline Beecham Clinical Laboratories, Inc.

10.17*+ Development Agreement, dated as of October 31, 1997, between ActaMed Corporation and
SmithKline Beecham Clinical Laboratories, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
- --------- ------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
10.18*+ Services, Development and License Agreement, dated as of December 15, 1997, between the
Registrant and Beech Street Corporation.

10.19*+ Services, Development and License Agreement, dated as of September 30, 1997, between the
Registrant and Brown & Toland Physician Services Organization.

10.20 Amended and Restated Securities Purchase Agreement, dated as of January 26, 1996, between
the Registrant and investors.

10.21 Amended and Restated Series B Preferred Stock Purchase Agreement dated October 31, 1996,
between Registrant and investors.

10.22 Form of Series B Preferred Stock Purchase Warrant between the Registrant and certain of the
Registrant's investors.

10.23 Series C Preferred Stock Purchase Agreement dated July 25, 1997, between the Registrant and
investors.

10.24 Series D Preferred Stock Purchase Agreement dated October 13, 1997, between the Registrant
and investors.

10.25 Full Recourse Promissory Note dated as of July 11, 1997, between the Registrant and W.
Michael Long.

10.26 Form of Promissory Note for Bridge Financing

10.27* W. Michael Long Employment Agreement

10.28*+ Michael Hoover Employment Agreement

10.29*+ Memorandum to SmithKline Beecham, dated as of May 14, 1998, from the Registrant.

21.1 Subsidiaries of the Registrant.

23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit
5.1).

23.2 Consent of Ernst & Young LLP, independent auditors (see page II-7).

23.3 Consent of Deloitte & Touche LLP, independent auditors (see page II-8).

23.4 Consent of Deloitte & Touche LLP, independent auditors (see page II-9).

24.1 Power of Attorney (see page II-6).

27.1 Financial Data Schedule.
</TABLE>

- ---------

* To be supplied by amendment.

+ Confidential treatment requested as to portions of this exhibit.

<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION

BY AND AMONG

HEALTHEON CORPORATION,

MEDNET ACQUISITION CORP.

AND

ACTAMED CORPORATION

DATED AS OF FEBRUARY 24, 1998

<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Maximum Shares to Be Issued; Effect on Capital Stock. . . . . . . . . . . . . . 3
1.7 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.8 Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.9 No Further Ownership Rights in Company Common Stock . . . . . . . . . . . . . . 7
1.10 Lost, Stolen or Destroyed Certificates. . . . . . . . . . . . . . . . . . . . . 7
1.11 Tax and Accounting Consequences . . . . . . . . . . . . . . . . . . . . . . . . 7
1.12 Taking of Necessary Action; Further Action. . . . . . . . . . . . . . . . . . . 7

ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . . . . 8
2.1 Organization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Company Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.6 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.7 No Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.8 Tax and Other Returns and Reports . . . . . . . . . . . . . . . . . . . . . . .12
2.9 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . .14
2.10 Title to Properties; Absence of Liens and Encumbrances. . . . . . . . . . . . .14
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.12 Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . . . . .16
2.13 Interested Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . .18
2.14 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.15 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.17 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
2.19 Brokers' and Finders' Fees; Third Party Expenses. . . . . . . . . . . . . . . .19
2.20 Employee Matters and Benefit Plans. . . . . . . . . . . . . . . . . . . . . . .20
2.21 Accounting and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . .23
2.22 Representations Complete. . . . . . . . . . . . . . . . . . . . . . . . . . . .24

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB . . . . . . . . . .24
3.1 Organization of Parent and Merger Sub . . . . . . . . . . . . . . . . . . . . .24
3.2 Parent and Merger Sub Capital Structure . . . . . . . . . . . . . . . . . . . .24

i
<PAGE>

3.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
3.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
3.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
3.6 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . .27
3.7 No Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
3.8 Tax and Other Returns and Reports . . . . . . . . . . . . . . . . . . . . . . .29
3.9 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . .30
3.10 Title to Properties; Absence of Liens and Encumbrances. . . . . . . . . . . . .30
3.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
3.12 Agreements, Contracts and Commitments . . . . . . . . . . . . . . . . . . . . .32
3.13 Interested Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . .33
3.14 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
3.15 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
3.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
3.17 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
3.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
3.19 Brokers' and Finders' Fees; Third Party Expenses. . . . . . . . . . . . . . . .35
3.20 Employee Matters and Benefit Plans. . . . . . . . . . . . . . . . . . . . . . .35
3.21 Accounting and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . .39
3.22 Representations Complete. . . . . . . . . . . . . . . . . . . . . . . . . . . .39

ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME. . . . . . . . . . . . . . . . . . . . .39
4.1 Conduct of Business of the Company. . . . . . . . . . . . . . . . . . . . . . .39
4.2 No Company Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
4.3 No Parent or Merger Sub Solicitation. . . . . . . . . . . . . . . . . . . . . .45

ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
5.1 California Permit; Company Shareholder and Parent Stockholder Approvals . . . .46
5.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
5.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
5.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
5.5 Public Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
5.6 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
5.7 FIRPTA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
5.8 Reasonable Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
5.9 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . .48
5.10 Certain Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
5.11 Accounting and Tax Treatment. . . . . . . . . . . . . . . . . . . . . . . . . .48
5.12 Additional Documents and Further Assurances . . . . . . . . . . . . . . . . . .49
5.13 Company's Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
5.14 Parent's Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
5.15 Agreement of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
5.16 Amendment of Parent Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . .49
5.17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

ii
<PAGE>

ARTICLE VI CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . .50
6.1 Conditions to Obligations of Each Party to Effect the Merger. . . . . . . . . .50
6.2 Additional Conditions to Obligations of the Company . . . . . . . . . . . . . .52
6.3 Additional Conditions to the Obligations of Parent and Merger Sub . . . . . . .54

ARTICLE VII NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . .55
7.1 Non-Survival of Representations and Warranties. . . . . . . . . . . . . . . . .55

ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . . .55
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
9.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
9.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
9.4 Entire Agreement; Assignment. . . . . . . . . . . . . . . . . . . . . . . . . .58
9.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
9.6 Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
9.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
9.8 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
9.9 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
</TABLE>

iii
<PAGE>

INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
EXHIBIT A Company Schedules

EXHIBIT B Parent and Merger Sub Schedules

EXHIBIT C Form of Parent Affiliate Agreement

EXHIBIT D Form of Voting Agreement

EXHIBIT E Form of Company Affiliate Agreement

EXHIBIT F Merger Agreement Schedules
</TABLE>

iv
<PAGE>

INDEX OF SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- -----------
<S> <C>
4.1(a) Exceptions to Company Conduct

4.1(b) Exceptions to Parent Conduct

6.3(j) Company Required Consents
</TABLE>

v
<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION

This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made and
entered into as of February 24, 1998 among Healtheon Corporation, a Delaware
corporation ("PARENT"), MedNet Acquisition Corp., a Georgia corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), and ActaMed Corporation, a
Georgia corporation (the "COMPANY").

RECITALS

A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each Company and their respective
shareholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "MERGER") and, in furtherance
thereof, have approved the Merger.

B. Pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding
shares of capital stock of the Company ("COMPANY CAPITAL STOCK") and all
outstanding options, warrants or other rights to acquire or receive shares of
Company Capital Stock shall be converted into the right to receive shares of
voting Common Stock of Parent ("PARENT COMMON STOCK").

C. It is the intention of the parties to this Agreement that the
Merger for federal income tax purposes shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"), and for accounting purposes shall qualify for treatment
as a pooling of interests.

D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.

NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby the parties agree as
follows:

ARTICLE I

THE MERGER

1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("DELAWARE
LAW") and Georgia Business Corporation Code ("GEORGIA LAW"), Merger Sub shall
be merged with and into the Company, the separate corporate existence of
Merger Sub shall cease, and the Company shall continue as the surviving
corporation and as a wholly-owned subsidiary of Parent. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to
as the "SURVIVING CORPORATION." The Merger shall be consummated

<PAGE>

pursuant to the terms of this Agreement, which has been approved and adopted
by the respective Boards of Directors of the Company, Merger Sub and Parent,
and by Parent, as the sole shareholder of Merger Sub.

1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "CLOSING") will take
place as promptly as practicable, but no later than five (5) business days,
following satisfaction or waiver of the conditions set forth in Article VI,
at the offices of Wilson Sonsini Goodrich & Rosati ("WSGR"), 650 Page Mill
Road, Palo Alto, California, unless another place or time is agreed to by
Parent and the Company. The date upon which the Closing actually occurs is
herein referred to as the "CLOSING DATE." On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing the Articles of
Merger (or like instrument) with the Secretary of State of the State of
Georgia (the "CERTIFICATE OF MERGER"), in accordance with the relevant
provisions of applicable law (the time of acceptance by the Secretary of
State of Georgia of such filing being referred to herein as the "EFFECTIVE
TIME"). The parties currently intend that the Closing Date will occur on or
prior to May 15, 1998.

1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Georgia Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and Merger Sub shall become
the debts, liabilities and duties of the Surviving Corporation.

1.4 ARTICLES OF INCORPORATION; BYLAWS.

(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Articles of Incorporation of Merger Sub
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Articles of Incorporation;
provided, however, that Article I of the Articles of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is ActaMed Corporation."

(b) Unless otherwise determined by Parent, the Bylaws of the
Merger Sub, as in effect immediately prior to the Effective Time, shall be
the Bylaws of the Surviving Corporation until thereafter amended.

1.5 DIRECTORS AND OFFICERS. As promptly as practicable following the
Effective Time, unless otherwise unanimously agreed to by Parent's Board of
Directors, the board of directors of Merger Sub shall be comprised of an
equal number of representatives from each of the Company and of Parent, each
to hold office in accordance with the Articles of Incorporation and Bylaws of
the Surviving Corporation. The officers of Merger Sub immediately prior to
the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.

2
<PAGE>

1.6 MAXIMUM SHARES TO BE ISSUED; EFFECT ON CAPITAL STOCK. The maximum
number of shares of Parent Common Stock to be issued (including Parent Common
Stock to be reserved for issuance upon exercise of any of the Company's stock
options or other securities convertible into, exchangeable for or exercisable
for Company Capital Stock to be assumed by Parent) in exchange for the
acquisition by Parent of all outstanding Company Capital Stock and all
unexpired and unexercised options, warrants or other rights to acquire
Company Capital Stock shall be the Aggregate Share Number (as defined in
Section 1.6(g)(iii)). No adjustment shall be made in the number of shares of
Parent Common Stock issued in the Merger as a result of any cash proceeds
received by the Company from the date hereof to the Effective Time pursuant
to the exercise of options, warrants or other rights to acquire Company
Capital Stock. Subject to the terms and conditions of this Agreement, as of
the Effective Time, by virtue of the Merger and without any action on the
part of Merger Sub, the Company or the holder of any shares of the Company
Capital Stock, the following shall occur:

(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Company
Capital Stock (including any shares of Common Stock of the Company ("COMPANY
COMMON STOCK") issued upon conversion of Preferred Stock of the Company
("COMPANY PREFERRED STOCK") and upon exercise, conversion or exchange of all
other outstanding securities immediately prior to the Closing) issued and
outstanding immediately prior to the Effective Time (other than any shares of
Company Capital Stock to be canceled pursuant to Section 1.6(b) and any
Dissenting Shares (as defined and to the extent provided in Section 1.7(a))
will be canceled and extinguished and be converted automatically into the
right to receive that number of shares of Parent Common Stock equal to the
Exchange Ratio (as defined in Section 1.6(g)(iv) below), upon surrender of
the certificate representing such share of Company Common Stock in the manner
provided in Section 1.8.

(b) CANCELLATION OF PARENT-OWNED AND COMPANY-OWNED STOCK. Each
share of Company Capital Stock owned by Merger Sub, Parent, the Company or
any direct or indirect wholly-owned subsidiary of Parent or the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.

(c) STOCK OPTIONS. At the Effective Time, all options to purchase
Company Common Stock then outstanding under the Company's Option Plans or
otherwise shall be assumed by Parent in accordance with provisions described
below. "Option Plans" means collectively the Company's 1997 Stock Option
Plan, 1996 Stock Option Plan, 1996 Directors Stock Option Plan, 1995 Stock
Option Plan, 1994 Stock Option Plan, 1993 Stock Option Plan and 1992 Stock
Option Plan.

(i) At the Effective Time, each outstanding option and
warrant to purchase shares of Company Common Stock (each a "COMPANY OPTION")
under the Option Plans or otherwise, whether vested or unvested, shall be, in
connection with the Merger, assumed by Parent. Each Company Option so
assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Option Plans and/or as
provided in the

3
<PAGE>

respective option agreements governing such Company Option immediately prior
to the Effective Time, except that (A) such Company Option shall be
exercisable for that number of whole shares of Parent Common Stock equal to
the product of the number of shares of Company Common Stock that were
issuable upon exercise of such Company Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down (in the case of
Company Options granted under the Option Plan) to the nearest whole number of
shares of Parent Common Stock, (B) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such assumed Company
Option shall be equal to the quotient determined by dividing the exercise
price per share of Company Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent, and (C) Parent and its Board of
Directors shall be substituted for the Company and the Committee of the
Company's Board of Directors (including, if applicable, the entire Board of
Directors of the Company) administering such Company Stock Plan.

(ii) Promptly following the Effective Time, Parent will issue
to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by Parent. At or prior to the
Effective Time, Parent shall take all corporate action necessary to reserve
for issuance sufficient shares of Parent Common Stock for delivery upon
exercise of Company Options assumed by it in accordance with this Section 1.6.

(d) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.

(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
equitably adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Capital Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Capital Stock occurring after the date hereof and
prior to the Effective Time. Any such change for which a record date is
established shall be deemed for the purposes of this Section 1.6(e) to have
occurred on the record date.

(f) FRACTIONAL SHARES. No fraction of a share of Parent Common
Stock will be issued.

(g) DEFINITIONS.

(i) COMPANY FULLY DILUTED CAPITALIZATION NUMBER. The
"Company Fully-Diluted Capitalization Number" shall mean all of the issued
and outstanding shares of the Company Common Stock as of the Effective Time
calculated on a fully-diluted basis as if all outstanding convertible
securities had been fully converted and all outstanding warrants, options and
other rights

4
<PAGE>

for the purchase of shares of Company Common Stock or convertible securities
had been fully exercised immediately prior to such issuance (and the
resulting securities fully converted into Company Common Stock, if so
convertible) as of such date.

(ii) PARENT FULLY-DILUTED CAPITALIZATION NUMBER. The "Parent
Fully-Diluted Capitalization Number" shall mean all of the issued and
outstanding shares of Parent Common Stock as of the Effective Time calculated
on a fully-diluted basis as if all outstanding convertible securities had
been fully converted and all outstanding warrants, options and other rights
for the purchase of shares of Parent Common Stock or convertible securities
had been fully exercised immediately prior to such issuance (and the
resulting securities fully converted into Parent Common Stock, if so
convertible) as of such date.

(iii) AGGREGATE SHARE NUMBER. The "Aggregate Share Number"
shall mean the number of shares of Parent Common Stock equal to (a) the
Parent Fully Diluted Capitalization Number multiplied by (b) 44.68 divided by
(c) 55.32.

(iv) EXCHANGE RATIO. The "Exchange Ratio" shall mean the
quotient obtained by dividing (x) the Aggregate Share Number by (y) the
Company Fully Diluted Capitalization Number.

1.7 DISSENTING SHARES.

(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has
demanded and perfected dissenters' rights for such shares in accordance with
Georgia Law and who, as of the Effective Time, has not effectively withdrawn
or lost such dissenters' rights ("DISSENTING SHARES") shall not be converted
into or represent a right to receive Parent Common Stock pursuant to Section
1.6, but the holder thereof shall only be entitled to receive payment in cash
for the fair value of such holder's shares as determined pursuant to the
applicable provisions of Georgia Law; provided, that no such payment shall be
made to any dissenting shareholder unless and until such dissenting
shareholder has complied with the applicable provisions of Georgia Law and
surrendered to the Company the certificate or certificates representing the
Dissenting Shares.

(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who demands appraisal of such
shares under Georgia Law shall effectively withdraw or lose (through failure
to perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive
Parent Common Stock as provided in Section 1.6, without interest thereon,
upon surrender of the certificate representing such shares.

(c) The Company shall give Parent (i) prompt notice of any written
notice by any shareholder of intent to demand payment for such shareholder's
shares of Company Capital Stock,

5
<PAGE>

withdrawals of such demands, and any other instruments served pursuant to
Georgia Law and received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
dissenters' rights under Georgia Law. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for dissenters' rights or offer to settle or settle any such
demands.

1.8 SURRENDER OF CERTIFICATES.

(a) EXCHANGE AGENT. WSGR shall serve as the exchange agent (the
"EXCHANGE AGENT") in the Merger.

(b) PARENT TO PROVIDE COMMON STOCK. Immediately prior to the
Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I, certificates representing the
aggregate number of shares of Parent Common Stock issuable pursuant to
Section 1.6 in exchange for outstanding shares of Company Capital Stock.

(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "CERTIFICATES") which immediately prior to
the Effective Time represented outstanding shares of Company Capital Stock
and which shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock,
to which such holder is entitled pursuant to Section 1.6, and the Certificate
so surrendered shall forthwith be canceled and the holder thereof shall no
longer have any rights with respect to such Certificate. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Capital Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Capital Stock shall have been
so converted.

(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Parent Common Stock declared
or made after the Effective Time and with a record date after the Effective
Time will be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock represented thereby until the holder of
record of such Certificate shall surrender such Certificate. Subject to
applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole

6
<PAGE>

shares of Parent Common Stock issued in exchange therefor, without interest,
at the time of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore payable with respect
to such whole shares of Parent Common Stock.

(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name other
than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.

(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to a holder of shares of Parent Common Stock
or Company Capital Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.

1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital
Stock, and there shall be no further registration of transfers on the records
of the Surviving Corporation of shares of Company Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.

1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof, such shares of Parent Common Stock as may be
required pursuant to Section 1.6; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may
be made against Parent or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.

1.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the
meaning of Section 368 of the Code and (ii) qualify for accounting treatment
as a pooling of interests.

1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any such further action is necessary or desirable to
carry out the purposes of this Agreement and to

7
<PAGE>

vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company
and Merger Sub, the officers and directors of the Company and Merger Sub are
fully authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed in the disclosure
schedules (referencing the appropriate section number or subsection, as the
case may be) supplied by the Company to Parent attached hereto as EXHIBIT A
(the "COMPANY SCHEDULES") and dated as of the date hereof, as follows:

2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Georgia. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified
to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, assets (including intangible assets),
financial condition or results of operations of the Company (hereinafter
referred to as a "COMPANY MATERIAL ADVERSE EFFECT"). The Company has
delivered a true and correct copy of its Articles of Incorporation and
Bylaws, each as amended to date, to Parent.

2.2 COMPANY CAPITAL STRUCTURE.

(a) The authorized capital stock of the Company consists of
50,000,000 shares of authorized Common Stock, of which 9,384,200 shares are
issued and outstanding; 8,800,880 shares of authorized Series A Preferred
Stock, all of which are issued and outstanding; 3,448,276 shares of
authorized Series B Preferred Stock, all of which are issued and outstanding;
10,344,828 shares of authorized Series C Preferred Stock, all of which are
issued and outstanding; and 7,043,478 shares of authorized Series D Preferred
Stock, of which 3,695,652 are issued and outstanding and the balance of which
may be issued pursuant to the Asset Purchase Agreement between the Company
and SmithKline Beecham Clinical Laboratories, Inc. ("SBCL") dated as of
December 31, 1997 (the "SBCL ASSETS PURCHASE AGREEMENT"). The Company
Capital Stock is held of record by the persons, with the addresses of record
and in the amounts set forth on Schedule 2.2(a). All outstanding shares of
Company Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound.

(b) The Company has reserved 6,061,238 shares of Common Stock for
issuance to directors, employees and consultants pursuant to the Option
Plans, of which 5,173,615 shares are

8
<PAGE>

subject to outstanding, unexercised options and 887,623 shares remain
available for future grant. The Company has reserved 30,087,912 shares of
Common Stock for issuance upon the conversion, exercise or exchange of any
outstanding securities and 450,450 shares subject to a warrant issued to IBM
(each referred to herein as a "COMPANY CONVERTIBLE SECURITY"). All of the
Company Convertible Securities and Company Options have been duly authorized
and validly issued, as applicable, in accordance with the applicable terms of
the Option Plans and Blue Sky laws. Schedule 2.2(b) sets forth for each
outstanding Company Option or Company Convertible Security the name of the
holder of such option or Company Convertible Security, the domicile address
of such holder, the number of shares of Common Stock subject to such option
or Company Convertible Security, the exercise price of such option or Company
Convertible Security and the vesting schedule for such option or Company
Convertible Security, including the extent vested to date and whether the
exercisability of such option or Company Convertible Security will be
accelerated and become exercisable by reason of the transactions contemplated
by this Agreement. Except for the Company Options and Company Convertible
Securities described in Schedule 2.2(b), there are no options, warrants,
calls, rights, commitments or agreements of any character, written or oral,
to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
the Company or obligating the Company to grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement. The holders of
Company Options and Company Convertible Securities have been or will be
given, or shall have properly waived, any required notice prior to the
Merger, and all such rights will be terminated at or prior to the Effective
Time. As a result of the Merger, Parent will be the record and sole
beneficial owner of all capital stock of the Company and rights to acquire or
receive such capital stock.

2.3 SUBSIDIARIES. The Company does not have and has never had any
subsidiaries and does not otherwise own and has never otherwise owned any
shares of capital stock or any interest in, or control, directly or
indirectly, any other corporation, partnership, limited liability company,
association, joint venture or other business entity.

2.4 AUTHORITY. Subject only to the requisite approval of the Merger
and this Agreement by the Company's shareholders, the Company has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The vote required of the
Company's shareholders to duly approve the Merger and this Agreement is set
forth on Schedule 2.4. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company,
subject only to the approval of the Merger by the Company's shareholders.
The Company's Board of Directors has unanimously approved the Merger and this
Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or

9
<PAGE>

injunctive relief is subject to the discretion of the court before which any
proceeding may be brought). Except as set forth on Schedule 2.4, subject
only to the approval of the Merger and this Agreement by the Company's
shareholders, the execution and delivery of this Agreement by the Company
does not, and, as of the Effective Time, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of,
or default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under (any such event, a "COMPANY
CONFLICT") (i) any provision of the Articles of Incorporation or Bylaws of
the Company or (ii) any mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("GOVERNMENTAL ENTITY") or any third party (so as not to trigger any Company
Conflict) is required by or with respect to the Company in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Agreement
of Merger with the Georgia Secretary of State, (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws (iii) such
notices or filings with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation with respect to any employee benefit plans or under the
HSR Act, and (iv) such other consents, waivers, authorizations, filings,
approvals and registrations which are set forth on Schedule 2.4.

2.5 FINANCIAL STATEMENTS. Schedule 2.5 sets forth the Company's
unaudited balance sheet as of December 31, 1997, and the related unaudited
statement of operations for the twelve month period ended December 31, 1997
(the "COMPANY UNAUDITED FINANCIALS"), and the audited balance sheet as of
December 31, 1996, and the related audited statement of operations for the
twelve-month period ended December 31, 1996 (the "COMPANY AUDITED
FINANCIALS") (collectively, such financial statements are sometimes referred
to herein as "COMPANY FINANCIAL STATEMENTS"). The Company Unaudited
Financials and the Company Audited Financials have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except that the Company Unaudited
Financials do not contain all the notes that may be required by GAAP, and may
require subsequent reclassification for proper recording of the accounting
treatment of the acquisition of the SBCL SCAN business. As of the date
hereof, the final accounting treatment of that transaction has not been
determined). The Company Unaudited Financials and Company Audited Financials
present fairly the financial condition, operating results and, in the case of
Company Audited Financials only, the cash flows of the Company as of the
dates and during the periods indicated therein, subject in the case of the
Company Unaudited Financials, to normal year-end adjustments, which will not
be material in amount or significance except for the effects of
reclassification that may be required by the final accounting treatment of
the SBCL SCAN acquisition. The Company's unaudited balance sheet dated as of
December 31, 1997, shall be referred to as the "COMPANY CURRENT BALANCE
SHEET".

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<PAGE>

2.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 2.6,
the Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate, (i) has not
been reflected in the Company Current Balance Sheet, or (ii) has not arisen
in the ordinary course of the Company's business since the date of the
Company Current Balance Sheet, consistent with past practices.

2.7 NO CHANGES. Except as set forth in Schedule 2.7, since the date of
the Company Current Balance Sheet, there has not been, occurred or arisen any:

(a) transaction by the Company except in the ordinary course of
business as conducted as of the date of the Company Current Balance Sheet and
consistent with past practices;

(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;

(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);

(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;

(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;

(g) revaluation by the Company of any of its assets (other than as
may be required by the final accounting of the SBCL SCAN business);

(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct
or indirect redemption, purchase or other acquisition by the Company of any
of its capital stock;

(i) increase in the salary or other compensation payable or to
become payable to any of its officers, directors, employees or advisors, or
the declaration, payment or commitment or obligation of any kind for the
payment of a bonus or other additional salary or compensation to any such
person except as otherwise contemplated by this Agreement or in the ordinary
course of business and consistent with past practices and Schedule 2.7(i)
lists all salary increases in excess of 10% and any bonus or other
compensation arrangement exceeding $10,000;

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<PAGE>

(j) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business and
consistent with past practices;

(k) material amendment or termination of any material contract,
agreement or license to which the Company is a party or by which it is bound;

(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;

(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;

(n) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs;

(o) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property rights;

(p) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;

(q) change in pricing or royalties set or charged by the Company
to its customers or licensees or in pricing or royalties set or charged by
persons who have licensed Intellectual Property to the Company;

(r) event or condition of any character that has or could be
reasonably expected to have a Company Material Adverse Effect on the Company;
or

(s) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses
(a) through (r) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).

2.8 TAX AND OTHER RETURNS AND REPORTS.

(a) DEFINITIONS.

(i) "TAX" or, collectively, "TAXES", means any and all
federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation,

12
<PAGE>

and value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a
predecessor entity.

(ii) "KNOWLEDGE" as used herein shall mean the personal
knowledge (including references to such person being aware of a particular
matter), after reasonable inquiry, of, (a) in the case of the Company, P.E.
Sadler, Michael K. Hoover, Lew Belote, Nancy J. Ham, J. Philip Hardin, J.R.
Hughes and (to the extent not already identified in the foregoing list) all
directors of the Company on the date of this Agreement, and (b) in the case
of Parent, Jim Clark, W. Michael Long, Kallen Chan, Pavan Nigam, Dennis
Drislane, Chuck Saunders, Denise M. Shea, Ron Alvarez and (to the extent not
already identified in the foregoing list) all directors of Parent on the date
of this Agreement.

(b) TAX RETURNS AND AUDITS. Except as set forth in Schedule 2.8:

(i) The Company as of the Effective Time will have prepared
and filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") due on or before the Effective
Time relating to any and all Taxes concerning or attributable to the Company
or its operations and such Returns are or will be prior to filing true and
correct in all material respects and have been completed in accordance with
applicable law.

(ii) The Company as of the Effective Time: (A) will have
paid (if due on or before the Effective Time) or accrued on the Company
Current Balance Sheet all Taxes it is required to pay, or which are
attributable to the period ending December 31, 1997 and (B) will have
withheld with respect to its employees all federal and state income taxes,
FICA, FUTA and other Taxes required to be withheld.

(iii) The Company has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, assessed, or to its
Knowledge proposed against the Company, nor has the Company executed any
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.

(iv) No audit or other examination of any Return of the
Company is currently in progress, nor has the Company been notified of any
request for such an audit or other examination.

(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or
reserved for in accordance with GAAP on the Company Current Balance Sheet,
whether asserted or unasserted, contingent or otherwise, and the Company has
no Knowledge of any basis for the assertion of any such liability
attributable to the Company, its assets or operations.

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<PAGE>

(vi) The Company has provided to Parent or has made
available to representatives of Parent for inspection copies of all federal
and state income and all state sales and use Tax Returns for all periods
since the date of Company's incorporation.

(vii) There are (and as of immediately following the
Effective Date there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort on the assets ("LIENS") of the
Company relating to or attributable to Taxes.

(viii) The Company has no Knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the Company.

(ix) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.

(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162 of
the Code.

(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.

(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.

(xiii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.

(xiv) Since December 31, 1997 no taxes have been incurred
except in the ordinary course of business.

2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree
to which the Company is a party or otherwise binding upon the Company which
has or reasonably could be expected to have the effect of prohibiting or
impairing any business practice of the Company, any acquisition of property
(tangible or intangible) by the Company or the conduct of business by the
Company. Without limiting the foregoing, the Company has not entered into
any agreement under which the Company is restricted from developing, selling,
licensing, marketing, promoting or otherwise distributing any products,
services or technology to any class of customers, or entering into any
strategic alliances, in any geographic area, during any period of time or in
any segment of the market.

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<PAGE>

2.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.

(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property
currently leased by the Company, the name of the lessor, the date of the
lease and each amendment thereto and the aggregate annual rental and/or other
fees payable under any such lease and any security interest in the Company's
assets created by such lease. All such leases are in full force and effect,
are valid and effective in accordance with their respective terms, and there
is not, under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default).

(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for
use in its business, free and clear of any Liens, except as reflected in the
Company Financial Statements or in Schedule 2.10(b) and except for liens for
taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent,
and which do not materially detract from the value, or materially interfere
with the present use, of the property subject thereto or affected thereby.

2.11 INTELLECTUAL PROPERTY.

(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor, maskworks, net
lists, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material that are used in the business
of the Company as currently conducted or as proposed to be conducted by the
Company (the "COMPANY INTELLECTUAL PROPERTY RIGHT(S)"). Schedule 2.11(a)
sets forth a complete list of all patents, registered and material
unregistered trademarks, registered copyrights, trade names and service
marks, and any applications therefor, included in the Company Intellectual
Property Rights, and specifies, where applicable, the jurisdictions in which
each such Company Intellectual Property Right has been issued or registered
or in which an application for such issuance and registration has been filed,
including the respective registration or application numbers and the names of
all registered owners.

(b) Schedule 2.11(b) sets forth a complete list of all licenses,
sublicenses and other agreements to which the Company is a party and pursuant
to which the Company or any other person is authorized to use any Company
Intellectual Property Right (excluding object code end-user licenses granted
to end-users in the ordinary course of business that permit use of software
products without a right to modify, distribute or sublicense the same
("END-USER LICENSES")) or trade secret of the Company, and includes the
identity of all parties thereto, a description of the nature and subject
matter thereof, the applicable royalty or other fees and the term thereof.
The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will neither cause the
Company to be in violation or default under any such license, sublicense or
agreement, nor entitle any other party to any such license, sublicense or
agreement to terminate or

15
<PAGE>

modify such license, sublicense or agreement. Except as set forth in
Schedules 2.11(a) or 2.11(b), the Company is the sole and exclusive owner or
licensee of, with all right, title and interest in and to (free and clear of
any liens or encumbrances), the Company Intellectual Property Rights, and has
sole and exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof or the
material covered thereby in connection with the services or products in
respect of which the Company Intellectual Property Rights are being used.

(c) No claims with respect to the Company Intellectual Property
Rights have been asserted or are, to the Company's Knowledge, threatened by
any person, nor are there any valid grounds for any claims (i) to the effect
that the manufacture, sale, licensing or use of any of the products of the
Company infringes on any copyright, patent, trade mark, service mark, trade
secret or other proprietary right, (ii) against the use by the Company of any
trademarks, service marks, trade names, trade secrets, copyrights, maskworks,
patents, technology, know-how or computer software programs and applications
used in the Company's business as currently conducted or as proposed to be
conducted by the Company, or (iii) challenging the ownership by the Company,
validity or effectiveness of any of the Company Intellectual Property Rights.
All registered trademarks, service marks and copyrights held by the Company
are valid and subsisting. The Company has not infringed, and the business of
the Company as currently conducted or as proposed to be conducted does not
infringe, any copyright, patent, trademark, service mark, trade secret or
other proprietary right of any third party. There is no material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company. No Company Intellectual Property Right or
product of the Company or any of its subsidiaries is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by the Company. Each employee, consultant or contractor
of the Company has executed a proprietary information and confidentiality
agreement substantially in the Company's standard forms. Except for software
licensed to the Company, all software included in the Company Intellectual
Property Rights (i) is original with the Company and has been either created
by employees of the Company on a work-for-hire basis or by consultants or
contractors who have created such software themselves and have assigned all
rights they may have had in such software to the Company, or (ii) was
acquired by the Company and the seller of such software made representations
substantially similar to those contained in (i) in connection with the
acquisition of such software.

2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 2.12(a), the Company does not have, is not a party to nor is it
bound by:

(i) any collective bargaining agreements,

(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,

(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,

16
<PAGE>

(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to the Company,

(v) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement,

(vi) any fidelity or surety bond or completion bond,

(vii) any lease of personal property having a value
individually in excess of $25,000,

(viii) any agreement of indemnification or guaranty,

(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person,

(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $25,000,

(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business,

(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,

(xiii) any purchase order or contract for the purchase of raw
materials involving $25,000 or more,

(xiv) any construction contracts,

(xv) any distribution, joint marketing or development
agreement,

17
<PAGE>

(xvi) any agreement pursuant to which the Company has granted
or may be required to grant in the future, to any party, a source-code
license or option or other right to use or acquire source-code, or

(xvii) any other agreement, contract or commitment that
involves $25,000 or more or is not cancelable without penalty within thirty
(30) days.

Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, as are noted in Schedule 2.12(b), the Company has
not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule
2.12(a) or Schedule 2.11(b) (any such agreement, contract or commitment, a
"COMPANY CONTRACT"). Each Company Contract is in full force and effect and,
except as otherwise disclosed in Schedule 2.12(b), is not subject to any
default thereunder of which the Company has Knowledge by any party obligated
to the Company pursuant thereto.

2.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on Schedule
2.13, (i) no officer, director or, to the Knowledge of the Company (without
any duty to investigate), any shareholder of the Company has, directly or
indirectly, an economic interest in any entity which furnished or sold, or
furnishes or sells, services or products that the Company furnishes or sells,
or proposes to furnish or sell, (ii) no officer or director, or to the
Knowledge of the Company (without any duty to investigate), any shareholder
of the Company has, directly or indirectly, an economic interest in any
entity that purchases from or sells or furnishes to, the Company, any goods
or services or (iii) no officer, director or shareholder of the Company has,
directly or indirectly, a beneficial interest in any contract or agreement
set forth in Schedule 2.12(a) or Schedule 2.11(b); provided, that ownership
of no more than one percent (1%) of the outstanding voting stock of a
publicly traded corporation shall not be deemed an "economic interest in any
entity" for purposes of this Section 2.13. For the purposes of this
subsection, "officer" and "director" shall include any parent, child, sibling
or spouse of any of such persons, or any trust, partnership or corporation in
which such officer or director has a controlling interest.

2.14 COMPLIANCE WITH LAWS. The Company has complied in all material
respects with, is not in material violation of, and has not received any
notices of violation with respect to, any foreign, federal, state or local
statute, law or regulation.

2.15 LITIGATION. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to the Company's
Knowledge threatened against the Company, its properties or any of its
officers or directors in their respective capacities as such. Except as set
forth in schedule 2.15, to the Company's Knowledge, there is no investigation
pending or threatened against the Company, its properties or any of its
officers or directors (in their respective capacities as such) by or before
any governmental entity. Schedule 2.15 sets forth, with respect to any
pending or threatened action, suit, proceeding or investigation, the forum,
the parties thereto, the subject matter thereof and the amount of damages
claimed or other remedy requested. No Governmental Entity has

<PAGE>

at any time challenged or questioned the legal right of the Company to
manufacture, offer or sell any of its products in the present manner or style
thereof.

2.16 INSURANCE. Set forth on Schedule 2.16 is a list of all of the
Company's insurance policies and fidelity bonds. With respect to the
insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company, there is no claim by the Company pending under any of such policies
or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under
all such policies and bonds have been paid or will be paid when due and the
Company is otherwise in material compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no Knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.

2.17 MINUTE BOOKS. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees
thereof) and shareholders or actions by written consent since the time of
incorporation of the Company.

2.18 ENVIRONMENTAL MATTERS.

(a) HAZARDOUS MATERIAL. The Company has not operated any
underground storage tanks, and has no Knowledge of the existence, at any
time, of any underground storage tank (or related piping or pumps), at any
property that the Company has at any time owned, operated, occupied or
leased. The Company has not released any amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment, including, without limitation, PCBs, asbestos, oil and
petroleum products, urea-formaldehyde and all substances listed as a
"hazardous substance," "hazardous waste," "hazardous material" or "toxic
substance" or words of similar import, under any law, including but not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended; the Resource Conservation and Recovery Act
of 1976, as amended; the Federal Water Pollution Control Act, as amended; the
Clean Air Act, as amended, and the regulations promulgated pursuant to said
laws, (a "HAZARDOUS MATERIAL"). No Hazardous Materials are present as a
result of the actions or omissions of the Company, or, to the Company's
Knowledge, as a result of any actions of any third party or otherwise, in, on
or under any property, including the land and the improvements, ground water
and surface water thereof, that the Company has at any time owned, operated,
occupied or leased.

(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect
on or before the Effective Time, nor has the Company disposed of,
transported, sold, or manufactured any product containing a Hazardous
Material (any or all of the foregoing being collectively referred to as
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule,

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regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.

(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and
businesses are currently being conducted.

(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment, procedure, writ, injunction or claim is pending, or to
the Company's Knowledge, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company. The
Company is not aware of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.

2.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth on Schedule 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees,
investment banking fees, consulting fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby. Schedule 2.19 sets forth the principal terms and
conditions of any agreement, written or oral, with respect to such fees.
Schedule 2.19 also sets forth the Company's current reasonable estimate of
all Company Third Party Expenses (as defined in Section 5.4) expected to be
incurred by the Company in connection with the negotiation and effectuation
of the terms and conditions of this Agreement and the transactions
contemplated hereby.

2.20 EMPLOYEE MATTERS AND BENEFIT PLANS.

(a) DEFINITIONS. For purposes of this Section 2.20 and Section
3.20 of this Agreement, the following terms shall have the meanings set forth
below:

(i) "COMPANY AFFILIATE" shall mean any other person or
entity under common control with the Company within the meaning of Section
414(b) or (c) and the regulations thereunder. In addition, for any Company
Employee Plan subject to Section 412(n), the term Company Affiliate shall
mean any other person or entity under common control with the Company within
the meaning of Section 414(b), (c), (m) or (o) of the Code;

(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;

(iii) "COMPANY EMPLOYEE PLAN" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded and

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whether or not legally binding, including without limitation, each "employee
benefit plan", within the meaning of Section 3(3) of ERISA which is or has
been maintained, contributed to, or required to be contributed to, by the
Company or any Company Affiliate for the benefit of any "Company Employee"
(as defined below), and any Company Employee Plan which has been maintained,
contributed to, or required to have been contributed to by the Company or any
Company Affiliate pursuant to which the Company or any Company Affiliate has
or may have any material liability contingent or otherwise;

(iv) "COMPANY EMPLOYEE" shall mean any current, former, or
retired employee, officer, or director of the Company or any Company
Affiliate;

(v) "COMPANY EMPLOYEE AGREEMENT" shall refer to each
written management, employment, severance, consulting, relocation,
repatriation, expatriation, visas, work permit or similar agreement or
contract between the Company or any Company Affiliate and any Employee or
consultant. Except as set forth on Schedule 2.20(a)(v), the Company
represents and warrants that there are no oral agreements between the Company
or any Affiliate and any Employee or consultant pertaining to management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar matters or arrangements;

(vi) "IRS" shall mean the Internal Revenue Service;

(vii) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan", as defined in Section 3(37)
of ERISA; and

(viii) "COMPANY PENSION PLAN" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within the meaning
of Section 3(2) of ERISA.

(ix) "COMPANY DEFINED BENEFIT PLAN" shall mean any Pension
Plan that is a "defined benefit plan," as defined in ERISA Section 3(35).

(b) SCHEDULE. Schedule 2.20(b) contains an accurate and complete
list of each Company Employee Plan and each Company Employee Agreement. The
Company does not have any plan or commitment, whether legally binding or not,
to establish any new Company Employee Plan or Company Employee Agreement, to
modify any Company Employee Plan or Company Employee Agreement (except to the
extent required by law or to conform any such Company Employee Plan or
Company Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Company Employee Plan or Company Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.

(c) DOCUMENTS. The Company has provided to Parent (i) correct and
complete copies of all nonprivileged documents embodying or materially
affecting the interpretation or application of each Company Employee Plan and
each Company Employee Agreement including all amendments thereto, and, to the
Knowledge of the Company, there are no privileged documents

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<PAGE>

pertaining to such matters; (ii) the most recent annual actuarial valuations,
if any, prepared for each Company Defined Benefit Plan; (iii) the three most
recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Company Employee
Plan or related trust; (iv) if the Company Employee Plan is funded, the most
recent annual and periodic accounting of Company Employee Plan assets; (v)
the most recent summary plan description together with the most recent
summary of material modifications, if any, required under ERISA with respect
to each Company Employee Plan which has a material adverse effect on such
Company Employee Plan; (vi) the most recent IRS determination, opinion,
notification or advisory letters as applicable, and rulings relating to
Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the Department of Labor ("DOL") with respect to any
Company Employee Plan; (vii) all communications material to any Company
Employee or Company Employees relating to any Company Employee Plan and any
proposed Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would
result in any material liability to the Company; and (viii) all registration
statements and prospectuses prepared in connection with each Company Employee
Plan not otherwise publicly available on the SEC website.

(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all
obligations required to be performed by it under each Company Employee Plan,
and each Company Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) no "prohibited transaction", within the
meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred
with respect to any Company Employee Plan for which an exemption is not
applicable; (iii) there are no actions, suits or claims pending, or, to the
Knowledge of the Company, threatened or anticipated (other than routine
claims for benefits) against any Company Employee Plan or against the assets
of any Company Employee Plan; and (iv) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without material liability to the Company, Parent
or any of its Affiliates (other than ordinary administration expenses
typically incurred in a termination event); (v) there are no inquiries or
proceedings pending or, to the Knowledge of the Company or any Affiliates,
threatened by the IRS or DOL with respect to any Company Employee Plan; and
(vi) neither the Company nor any Company Affiliate is subject to any material
penalty or tax with respect to any Company Employee Plan under Section 502(i)
of ERISA or Section 4975 through 4980 of the Code.

(e) PENSION PLANS. Except as set forth on Schedule 2.20(e), the
Company does not now, nor has it ever, maintained, established, sponsored,
participated in, or contributed to, any Pension Plan which is subject to Part
3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the
Code.

(f) MULTIEMPLOYER PLANS. At no time has the Company contributed
to or been requested to contribute to any Multiemployer Plan.

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<PAGE>

(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee welfare benefits to any
Company Employee upon his or her retirement or termination of employment for
any reason, except as may be required by statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Company Employee (either individually or to Company Employees as a group)
that such Company Employee(s) would be provided with life insurance, medical
or other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by statute. The term "other
employee welfare benefits" means those benefits traditionally provided under
an "employee benefit welfare plan" as defined in ERISA Section 3(1).

(h) COBRA. Neither the Company nor any Company Affiliate has,
prior to the Effective Time and in any material respect, violated any of the
health care continuation requirements of COBRA, the requirements of the FMLA
or any similar provisions of state law applicable to its Company Employees.

(i) EFFECT OF TRANSACTION.

(i) Except as set forth on Schedule 2.20(i)(i), the execution
of this Agreement and the consummation of the transactions contemplated
hereby will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any Company Employee Plan,
Company Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Company Employee.

(ii) Except as set forth on Schedule 2.20(i)(ii), no payment
or benefit which will or may be made by the Company or Parent or any of their
respective affiliates with respect to any Employee will be characterized as
an "excess parachute payment" within the meaning of Section 280G(b)(1) of the
Code.

(j) EMPLOYMENT MATTERS. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Company Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Company Employees; (iii) is not liable for any arrears of wages, other than
arrears normally included in its payroll schedule and system, or any taxes or
any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Company Employees (other
than routine payments to be made in the normal course of business and
consistent with past practice).

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<PAGE>

(k) LABOR. To the Knowledge of the Company, no work stoppage or
labor strike against the Company is pending or threatened. Except as set
forth in Schedule 2.20(k), the Company is not involved in or, to the
Knowledge of the Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Company Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in a material liability to
the Company. To the Knowledge of the Company, neither the Company nor any of
its subsidiaries has engaged in any unfair labor practices within the meaning
of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in a liability to the Company.
Except as set forth in Schedule 2.20(k), the Company is not presently, nor
has it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Company Employees and no
collective bargaining agreement is being negotiated by the Company.

2.21 ACCOUNTING AND REGULATORY MATTERS. The Company has no Knowledge of
any action taken or agreed to be taken by the Company or any affiliate of the
Company or has any Knowledge of any fact or circumstance that is reasonably
likely to (a) prevent the Merger from qualifying for pooling-of-interests
accounting treatment, or (b) materially impede or delay receipt of any
consents of regulatory authorities referred to in Section 6.1(c), Section
6.1(e) and Section 6.1(h) or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section. An
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 5% or greater equity
or voting interest of such Person; or (iii) any other Persons for which a
Person described in clause (ii) acts in any such capacity.

2.22 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor
any statement made in any schedule or certificate furnished by the Company
pursuant to this Agreement, or furnished in or in connection with documents
mailed or delivered to the shareholders of the Company in connection with
soliciting their consent to this Agreement and the Merger, contains or will
contain at the Effective Time, any untrue statement of a material fact, or
omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub hereby represent and warrant to the Company,
subject to such exceptions as are specifically disclosed in the disclosure
schedule (referencing the appropriate section number or subsection, as the
case may be) supplied by the Parent and Merger Sub to the

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<PAGE>

Company attached hereto as EXHIBIT B (the "PARENT AND MERGER SUB SCHEDULES")
and dated as of the date hereof, as follows:

3.1 ORGANIZATION OF PARENT AND MERGER SUB. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Parent has the corporate power to own its properties and to carry on their
business as now being conducted. Parent is duly qualified to do business and
in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on the
business, assets (including intangible assets), financial condition or
results of operations of Parent (hereinafter referred to as a "PARENT
MATERIAL ADVERSE EFFECT"). Parent has delivered a true and correct copy of
its Certificate of Incorporation and Bylaws, each as amended to date, to the
Company. Merger Sub has delivered a true and correct copy of its Certificate
of Incorporation and Bylaws, each as amended to date, to the Company.

3.2 PARENT AND MERGER SUB CAPITAL STRUCTURE.

(a) The authorized capital stock of Parent consists of 37,000,000
shares of authorized Common Stock, of which 3,571,480 shares are issued and
outstanding, 10,305,000 shares of authorized Series A Preferred Stock, of
which 10,305,000 shares are issued and outstanding, 10,305,000 shares of
authorized Series A-1 Preferred Stock, none of which is issued and
outstanding, 6,105,000 shares of authorized Series B Preferred Stock, of
which 3,290,000 shares are issued and outstanding, 6,105,000 shares of
authorized Series B-1 Preferred Stock, none of which is issued and
outstanding, 2,600,000 shares of authorized Series C Preferred Stock, of
which 2,600,000 shares are issued and outstanding, 2,600,000 shares of
authorized Series C-1 Preferred Stock, none of which is issued and
outstanding, 5,000,000 shares of authorized Series D Preferred Stock, of
which 4,807,692 shares are issued and outstanding, 5,000,000 shares of
authorized Series D-1 Preferred Stock, none of which is issued and
outstanding. The shares of the capital stock of Parent are held of record by
the persons, with the addresses of record and in the amounts set forth on
Schedule 3.2(a). All outstanding shares of Parent Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Certificate of Incorporation or
Bylaws of Parent or any agreement to which Parent is a party or by which it
is bound.

(b) The authorized capital stock of Merger Sub consists of 100
shares of authorized Common Stock, all of which are issued and outstanding
and held of record by Parent. All outstanding shares of the capital stock of
Merger Sub are duly authorized, validly issued, fully paid and non-assessable
and not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Merger Sub or any agreement to which the Merger
Sub is a party or by which it is bound.

(c) Parent has reserved (i) 9,000,000 shares of Common Stock for
issuance to directors, employees and consultants pursuant to Parent's 1996
Stock Plan ("PARENT STOCK PLAN"), of which 6,441,520 shares are subject to
outstanding, unexercised options ("PARENT OPTIONS") and

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<PAGE>

2,558,480 shares remain available for future grant, (ii) 500,000 shares of
Common Stock for issuance pursuant to an outstanding warrant ("COMMON
WARRANT") and (iii) 2,811,947 shares of Series B Preferred Stock for issuance
pursuant to outstanding warrants ("PREFERRED WARRANTS"). The Parent Options,
the Common Warrant and the Preferred Warrants are collectively referred to
herein as "PARENT CONVERTIBLE SECURITIES." Schedule 3.2(b) sets forth for
each outstanding Parent Convertible Security, the name of the holder of such
Parent Convertible Security, the domicile address of such holder, the number
of shares of Common Stock subject to such Parent Convertible Security, the
exercise price of such Parent Convertible Security and the vesting schedule
for such Parent Convertible Security, including the extent vested to date and
whether the exercisability of such Parent Convertible Security will be
accelerated and become exercisable by reason of the transactions contemplated
by this Agreement. Except for the Parent Convertible Securities described in
Schedule 3.2(b), there are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which Parent is a party
or by which it is bound obligating Parent to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed,
any shares of the capital stock of Parent or obligating Parent to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or
enter into any such option, warrant, call, right, commitment or agreement.

3.3 SUBSIDIARIES. Other than Merger Sub, Parent does not have any
subsidiaries and does not otherwise own and has never otherwise owned any
shares of capital stock or any interest in, or control, directly or
indirectly, any other corporation, partnership, limited liability company,
association, joint venture or other business entity.

3.4 AUTHORITY. Subject only to the requisite approval of the Merger and
this Agreement by Parent's stockholders and Merger Sub's shareholder, each of
Parent and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. A
majority vote is required of the holders of Parent's Common Stock and the
holders of Parent's Preferred Stock, each voting as a separate class, to duly
approve the Merger and this Agreement. A majority vote is required of the
holders of Merger Sub's Common Stock to duly approve the Merger and this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and Merger Sub, subject only to the
approval of the Merger by Parent's stockholders and Merger Sub's shareholder.
Each of Parent's Board of Directors and Merger Sub's Board of Directors have
unanimously approved the Merger and this Agreement. This Agreement has been
duly executed and delivered by Parent and Merger Sub and constitutes the valid
and binding obligation of Parent and Merger Sub, enforceable in accordance with
its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought). Except as set forth
on Schedule 3.4, subject only to the approval of the Merger and this Agreement
by Parent's stockholders and Merger Sub's shareholders, the execution and
delivery of this Agreement by Parent and Merger Sub does not, and, as of the
Effective Time,

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<PAGE>

the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without notice
or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under
(any such event, a "PARENT CONFLICT") (i) any provision of the Certificate of
Incorporation or Bylaws of Parent, (ii) any provision of the Articles of
Incorporation or Bylaws of Merger Sub, or (iii) any mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or its properties or assets. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity or any third party (so as not to trigger
any Parent Conflict) is required by or with respect to Parent or Merger Sub
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the
filing of the Articles of Merger with the Georgia Secretary of State, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and
state securities laws, (iii) such notices or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to
any employee benefit plans or under the HSR Act and (iv) such other consents,
waivers, authorizations, filings, approvals and registrations which are set
forth on Schedule 3.4. Parent, as the sole shareholder of Merger Sub, has
voted prior to the Effective Time the shares of Merger Sub's Common Stock in
favor of approval of this Agreement, as and to the extent required by
applicable law.

3.5 FINANCIAL STATEMENTS. Schedule 3.5 sets forth the Parent's
unaudited balance sheet as of December 31, 1997, and the related unaudited
statement of income and cash flow for the twelve month period ended December
31, 1997 (the "PARENT UNAUDITED FINANCIALS"), and the audited balance sheet
as of December 31, 1996, and the related audited statement of income and cash
flow for the twelve-month period ended December 31, 1996 (the "PARENT AUDITED
FINANCIALS") (collectively, such financial statements are sometimes referred
to herein as "PARENT FINANCIAL STATEMENTS"). The Parent Unaudited Financials
and the Parent Audited Financials have been prepared in accordance with GAAP
applied on a basis consistent throughout the periods indicated and consistent
with each other (except that the Parent Unaudited Financials do not contain
all the notes that may be required by GAAP). The Parent Unaudited Financials
and Parent Audited Financials present fairly the financial condition,
operating results and cash flows of the Parent as of the dates and during the
periods indicated therein, subject in the case of the Parent Unaudited
Financials, to normal year-end adjustments, which will not be material in
amount or significance. Parent's unaudited balance sheet dated as of
December 31, 1997, shall be referred to as the "PARENT CURRENT BALANCE SHEET".

3.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 3.6,
Parent does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate, (i) has not
been reflected in the Parent Current Balance Sheet, or (ii) has not arisen in
the ordinary course of Parent's business since the date of the Parent Current
Balance Sheet, consistent with past practices.

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<PAGE>

3.7 NO CHANGES. Except as set forth in Schedule 3.7, since the date of
the Parent Current Balance Sheet, there has not been, occurred or arisen any:

(a) transaction by Parent except in the ordinary course of
business as conducted as of the date of the Parent Current Balance Sheet and
consistent with past practices;

(b) amendments or changes to the Certificate of Incorporation or
Bylaws of Parent;

(d) destruction of, damage to or loss of any material assets,
business or customer of Parent (whether or not covered by insurance);

(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;

(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Parent;

(g) revaluation by Parent of any of its assets;

(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of Parent, or any direct or
indirect redemption, purchase or other acquisition by Parent of any of its
capital stock;

(i) increase in the salary or other compensation payable or to
become payable to any of Parent's officers, directors, employees or advisors,
or the declaration, payment or commitment or obligation of any kind for the
payment of a bonus or other additional salary or compensation to any such
person except as otherwise contemplated by this Agreement or in the ordinary
course of business and consistent with past practices and Schedule 3.7(i)
lists all salary increases in excess of 10% and any bonus or other
compensation arrangement exceeding $10,000;

(j) sale, lease, license or other disposition of any of the assets
or properties of Parent, except in the ordinary course of business as
conducted on that date and consistent with past practices;

(k) material amendment or termination of any material contract,
agreement or license to which Parent is a party or by which it is bound;

(l) loan by Parent to any person or entity, incurring by Parent of
any indebtedness, guaranteeing by Parent of any indebtedness, issuance or
sale of any debt securities of

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<PAGE>

Parent or guaranteeing of any debt securities of others, except for advances
to employees for travel and business expenses in the ordinary course of
business, consistent with past practices;

(m) waiver or release of any right or claim of Parent, including
any write-off or other compromise of any account receivable of Parent;

(n) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of Parent or its affairs;

(o) notice of any claim of ownership by a third party of Parent's
Intellectual Property (as defined in Section 3.11 below) or of infringement
by Parent's of any third party's Intellectual Property rights;

(p) issuance or sale by Parent of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;

(q) change in pricing or royalties set or charged by Parent to its
customers or licensees or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to Parent;

(r) event or condition of any character that has or could be
reasonably expected to have a Parent Material Adverse Effect on Parent; or

(s) negotiation or agreement by Parent or any officer or employees
thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with the Company and its representatives
regarding the transactions contemplated by this Agreement).

3.8 TAX AND OTHER RETURNS AND REPORTS.

(a) TAX RETURNS AND AUDITS. Except as set forth in Schedule 3.8:

(i) Parent as of the Effective Time will have prepared and
filed all required Returns relating to any and all Taxes concerning or
attributable to Parent or its operations and such Returns are true and
correct in all material respects and have been completed in accordance with
applicable law.

(ii) Parent as of the Effective Time: (A) will have paid
or accrued on the Parent Unaudited Financials all Taxes it is required to pay
or which are attributable to the period ending December 31, 1997 and (B) will
have withheld with respect to its employees all federal and state income
taxes, FICA, FUTA and other Taxes required to be withheld.

(iii) Parent has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, assessed, or to its
Knowledge proposed against Parent, nor has

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<PAGE>

Parent executed any waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax.

(iv) No audit or other examination of any Return of Parent
is currently in progress, nor has Parent been notified of any request for
such an audit or other examination.

(v) Parent does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or
reserved against in accordance with GAAP on the Parent Current Balance Sheet,
whether asserted or unasserted, contingent or otherwise, and Parent has no
Knowledge of any basis for the assertion of any such liability attributable
to the Company, its assets or operations.

(vi) Parent has provided to the Company copies of all
federal and state income and all state sales and use Tax Returns for all
periods since the date of Parent's incorporation.

(vii) There are (and as of immediately following the
Effective Date there will be) no Liens on the assets of Parent relating to or
attributable to Taxes.

(viii) Parent has no Knowledge of any basis for the assertion
of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of Parent.

(ix) None of Parent's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.

(x) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of
Parent that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162 of
the Code.

(xi) Parent has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by Parent.

(xii) Parent is not a party to a tax sharing or allocation
agreement nor does Parent owe any amount under any such agreement.

(xiii) Parent is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.

(xiv) Since December 31, 1997 no Taxes have been incurred
except in the ordinary course of business.

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Parent's tax basis in its assets for purposes of determining its future
amortization, depreciation and other federal income tax deductions is
accurately reflected on the Parent's tax books and records.

3.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree
to which Parent is a party or otherwise binding upon Parent which has or
reasonably could be expected to have the effect of prohibiting or impairing
any business practice of Parent, any acquisition of property (tangible or
intangible) by Parent or the conduct of business by Parent. Without limiting
the foregoing, Parent has not entered into any agreement under which Parent
is restricted from developing, selling, licensing, marketing, promoting or
otherwise distributing any products, services or technology to any class of
customers, or entering into any strategic alliances, in any geographic area,
during any period of time or in any segment of the market.

3.10 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.

(a) Parent owns no real property, nor has it ever owned any real
property. Schedule 3.10(a) sets forth a list of all real property currently
leased by Parent, the name of the lessor, the date of the lease and each
amendment thereto and the aggregate annual rental and/or other fees payable
under any such lease and any security interest in Parent's assets created by
such lease. All such leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default).

(b) Parent has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Parent
Financial Statements or in Schedule 3.10(b) and except for liens for taxes
not yet due and payable and such imperfections of title and encumbrances, if
any, which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present
use, of the property subject thereto or affected thereby.

3.11 INTELLECTUAL PROPERTY.

(a) Parent owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, computer software programs or applications
(in both source code and object code form), and tangible or intangible
proprietary information or material that are used in the business of Parent
as currently conducted or as proposed to be conducted by Parent (the "PARENT
INTELLECTUAL PROPERTY RIGHT(S)"). Schedule 3.11(a) sets forth a complete
list of all patents, registered and material unregistered trademarks,
registered copyrights, trade names and service marks, and any applications
therefor, included in the Parent Intellectual Property Rights, and specifies,
where applicable, the jurisdictions in which each such Parent Intellectual
Property Right has been issued or registered or in which an application for
such issuance

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and registration has been filed, including the respective registration or
application numbers and the names of all registered owners.

(b) Schedule 3.11(b) sets forth a complete list of all licenses,
sublicenses and other agreements to which Parent is a party and pursuant to
which Parent or any other person is authorized to use any Parent Intellectual
Property Right (excluding End-User Licenses) or trade secret of Parent, and
includes the identity of all parties thereto, a description of the nature and
subject matter thereof, the applicable royalty or other fees and the term
thereof. The execution and delivery of this Agreement by Parent, and the
consummation of the transactions contemplated hereby, will neither cause
Parent to be in violation or default under any such license, sublicense or
agreement, nor entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement.
Except as set forth in Schedules 3.11(a) or 3.11(b), Parent is the sole and
exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any liens or encumbrances), the Parent Intellectual
Property Rights, and has sole and exclusive rights (and is not contractually
obligated to pay any compensation to any third party in respect thereof) to
the use thereof or the material covered thereby in connection with the
services or products in respect of which the Parent Intellectual Property
Rights are being used.

(c) No claims with respect to the Parent Intellectual Property
Rights have been asserted or are, to Parent's Knowledge, threatened by any
person, nor are there any valid grounds for any claims, (i) to the effect
that the manufacture, sale, licensing or use of any of the products of Parent
infringes on any copyright, patent, trade mark, service mark, trade secret or
other proprietary right, (ii) against the use by Parent of any trademarks,
service marks, trade names, trade secrets, copyrights, maskworks, patents,
technology, know-how or computer software programs and applications used in
Parent's business as currently conducted or as proposed to be conducted by
Parent, or (iii) challenging the ownership by Parent, validity or
effectiveness of any of the Parent Intellectual Property Rights. All
registered trademarks, service marks and copyrights held by Parent are valid
and subsisting. Parent has not infringed, and the business of Parent as
currently conducted or as proposed to be conducted does not infringe, any
copyright, patent, trademark, service mark, trade secret or other
proprietary right of any third party. There is no material unauthorized use,
infringement or misappropriation of any of the Parent Intellectual Property
Rights by any third party, including any employee or former employee of
Parent. No Parent Intellectual Property Right or product of Parent or any of
its subsidiaries is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by Parent. Each
employee, consultant or contractor of Parent has executed a proprietary
information and confidentiality agreement substantially in the Parent's
standard forms. All software included in the Parent Intellectual Property
Rights is original with Parent and has been either created by employees of
Parent on a work-for-hire basis or by consultants or contractors who have
created such software themselves and have assigned all rights they may have
had in such software to Parent.

3.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth on
Schedule 3.12(a), Parent does not have, is not a party to nor is it bound by:

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(i) any collective bargaining agreements,

(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,

(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,

(vi) any fidelity or surety bond or completion bond,

(vii) any lease of personal property having a value
individually in excess of $25,000,

(viii) any agreement of indemnification or guaranty,

(ix) any agreement, contract or commitment containing any
covenant limiting the freedom of Parent to engage in any line of business or
to compete with any person,

(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $25,000,

(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Parent's business,

(xiii) any purchase order or contract for the purchase of raw
materials involving $25,000 or more,

(xiv) any construction contracts,

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(xv) any distribution, joint marketing or development
agreement,

(xvi) any agreement pursuant to which Parent has granted or
may grant in the future, to any party, a source-code license or option or
other right to use or acquire source-code, or

(xvii) any other agreement, contract or commitment that
involves $25,000 or more or is not cancelable without penalty within thirty
(30) days.

Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time,
giving of notice, or both, as are all noted in Schedule 3.12(b), Parent has
not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule
3.12(a) or Schedule 3.11(b) (any such agreement, contract or commitment, a
"PARENT CONTRACT"). Each Parent Contract is in full force and effect and,
except as otherwise disclosed in Schedule 3.12(b), is not subject to any
default thereunder of which Parent has Knowledge by any party obligated to
Parent pursuant thereto.

3.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on Schedule
3.13, (i) no officer, director or, to the Knowledge of Parent (without any
duty to investigate), any shareholder of Parent has, directly or indirectly,
an economic interest in any entity which furnished or sold, or furnishes or
sells, services or products that Parent furnishes or sells, or proposes to
furnish or sell, (ii) no officer, director or, to the Knowledge of Parent
(without any duty to investigate), any stockholder of Parent has, directly or
indirectly, an economic interest in any entity that purchases from or sells
or furnishes to, Parent, any goods or services or (iii) no officer, director
or shareholder of Parent has, directly or indirectly, a beneficial interest
in any contract or agreement set forth in Schedule 3.12(a) or Schedule
3.11(b); provided, that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed
an "economic interest in any entity" for purposes of this Section 3.13. For
the purposes of this subsection, "officer" and "director" shall include any
parent, child, sibling or spouse of any of such persons, or any trust,
partnership or corporation in which such officer or director has a
controlling interest.

3.14 COMPLIANCE WITH LAWS. Parent has complied in all material respects
with, is not in material violation of, and has not received any notices of
violation with respect to, any foreign, federal, state or local statute, law
or regulation.

3.15 LITIGATION. Except as set forth in Schedule 3.15, there is no
action, suit or proceeding of any nature pending or to Parent's Knowledge
threatened against Parent, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 3.15, to the Parent's Knowledge, there is no investigation pending
or threatened against Parent, its properties or any of its officers or
directors (in their respective capacities as such) by or before any
governmental entity. Schedule 3.15 sets forth, with respect to any pending
or threatened action, suit,

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proceeding or investigation, the forum, the parties thereto, the subject
matter thereof and the amount of damages claimed or other remedy requested.
No Governmental Entity has at any time challenged or questioned the legal
right of Parent to manufacture, offer or sell any of its products in the
present manner or style thereof.

3.16 INSURANCE. Set forth on Schedule 3.16 is a list of all of Parent's
insurance policies and fidelity bonds. With respect to the insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of Parent, there is
no claim by Parent pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and Parent is otherwise in material compliance with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Parent has no Knowledge of any
threatened termination of, or material premium increase with respect to, any
of such policies.

3.17 MINUTE BOOKS. The minute books of Parent made available to counsel
for the Company are the only minute books of Parent and contain a reasonably
accurate summary of all meetings of directors (or committees thereof) and
stockholders or actions by written consent since the time of incorporation of
Parent.

3.18 ENVIRONMENTAL MATTERS.

(a) HAZARDOUS MATERIAL. Parent has not operated any underground
storage tanks, and has no Knowledge of the existence, at any time, of any
underground storage tank (or related piping or pumps), at any property that
Parent has at any time owned, operated, occupied or leased. Parent has not
released any amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be a
Hazardous Material. No Hazardous Materials are present as a result of the
actions or omissions of Parent, or, to Parent's Knowledge, as a result of any
actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water
thereof, that Parent has at any time owned, operated, occupied or leased.

(b) HAZARDOUS MATERIALS ACTIVITIES. Parent has not engaged in any
Hazardous Materials Activities in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.

(c) PERMITS. The Company currently holds all Environmental
Permits necessary for the conduct of Parent's Hazardous Material Activities
and other businesses of Parent as such activities and businesses are
currently being conducted.

(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment, procedure, writ, injunction or claim is pending, or to
Parent's Knowledge, threatened

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concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of Parent. Parent is not aware of any fact or circumstance
which could involve Parent in any environmental litigation or impose upon
Parent any environmental liability.

3.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth on Schedule 3.19, Parent has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees, investment
banking fees, consulting fees or agents' commissions or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
Schedule 3.19 sets forth the principal terms and conditions of any agreement,
written or oral, with respect to such fees. Schedule 3.19 also sets forth
Parent's current reasonable estimate of all Third Party Expenses (as defined
in Section 5.4) expected to be incurred by Parent in connection with the
negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby.

3.20 EMPLOYEE MATTERS AND BENEFIT PLANS.

(a) DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings set forth below:

(i) "PARENT AFFILIATE" shall mean any other person or
entity under common control with Parent within the meaning of Section 414(b)
or (c) and the regulations thereunder. In addition, for any Parent Employee
Plan subject to Section 412(n), the term Parent Affiliate shall mean any
other person or entity under common control with Parent within the meaning of
Section 414(b), (c), (m) or (o) of the Code;

(ii) "PARENT EMPLOYEE PLAN" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded and
whether or not legally binding, including without limitation, each "employee
benefit plan", within the meaning of Section 3(3) of ERISA which is or has
been maintained, contributed to, or required to be contributed to, by the
Company or any Parent Affiliate for the benefit of any "Parent Employee" (as
defined below), and any Parent Employee Plan which has been maintained,
contributed to, or required to have been contributed to by Parent or any
Parent Affiliate pursuant to which Parent or any Parent Affiliate has or may
have any material liability contingent or otherwise;

(iii) "PARENT EMPLOYEE" shall mean any current, former, or
retired employee, officer, or director of Parent or any Parent Affiliate;

(iv) "PARENT EMPLOYEE AGREEMENT" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract between
Parent or any Parent Affiliate and any Parent Employee or consultant;

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(v) "PARENT PENSION PLAN" shall refer to each Parent
Employee Plan which is an "employee pension benefit plan", within the meaning
of Section 3(2) of ERISA.

(vi) "PARENT DEFINED BENEFIT PLAN" shall mean any Pension
Plan that is a "defined benefit plan," as defined in ERISA Section 3(35).

(b) SCHEDULE. Schedule 3.20(b) contains an accurate and complete
list of each Parent Employee Plan and each Parent Employee Agreement together
with a schedule of all liabilities, whether or not accrued, under each such
Parent Employee Plan or Parent Employee Agreement only to the extent not
reflected on the Parent Current Balance Sheet. Parent does not have any plan
or commitment, whether legally binding or not, to establish any new Parent
Employee Plan or Parent Employee Agreement, to modify any Parent Employee
Plan or Parent Employee Agreement (except to the extent required by law or to
conform any such Parent Employee Plan or Parent Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement), or to enter into any
Parent Employee Plan or Parent Employee Agreement, nor does it have any
intention or commitment to do any of the foregoing.

(c) DOCUMENTS. Parent has provided to Company (i) correct and
complete copies of all nonprivileged documents embodying or materially
affecting the interpretation or application of each Parent Employee Plan and
each Parent Employee Agreement including all amendments thereto, and, to the
Knowledge of the Company, there are no privileged documents pertaining to
such matters; (ii) the most recent annual actuarial valuations, if any,
prepared for each Parent Defined Benefit Plan; (iii) the three most recent
annual reports (Series 5500 and all schedules thereto), if any, required
under ERISA or the Code in connection with each Parent Employee Plan or
related trust; (iv) if the Parent Employee Plan is funded, the most recent
annual and periodic accounting of Parent Employee Plan assets; (v) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Parent Employee Plan which has a material adverse effect on such Parent
Employee Plan; (vi) the most recent IRS determination, opinion, notification
or advisory letters as applicable, and rulings relating to Parent Employee
Plans and copies of all applications and correspondence to or from the IRS or
the DOL with respect to any Parent Employee Plan; (vii) all communications
material to any Parent Employee or Parent Employees relating to any Parent
Employee Plan and any proposed Parent Employee Plans, in each case, relating
to any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to Parent; and (viii) all registration
statements and prospectuses prepared in connection with each Parent Employee
Plan not otherwise publicly available on the SEC website.

(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on Schedule
3.20(d), (i) Parent has performed in all material respects all obligations
required to be performed by it under each Parent Employee Plan, and each
Parent Employee Plan has been established and maintained in

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all material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) no "prohibited transaction", within the
meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred
with respect to any Parent Employee Plan for which an exemption is not
applicable; (iii) there are no actions, suits or claims pending, or, to the
Knowledge of Parent, threatened or anticipated (other than routine claims for
benefits) against any Parent Employee Plan or against the assets of any
Parent Employee Plan; and (iv) each Parent Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance
with its terms, without material liability to the Company, Parent or any
Parent Affiliates (other than ordinary administration expenses typically
incurred in a termination event); (v) there are no inquiries or proceedings
pending or, to the Knowledge of Parent or any Affiliates, threatened by the
IRS or DOL with respect to any Parent Employee Plan; and (vi) neither Parent
nor any Parent Affiliate is subject to any material penalty or tax with
respect to any Parent Employee Plan under Section 502(i) of ERISA or Section
4975 through 4980 of the Code.

(e) PENSION PLANS. Parent does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA or Section 412 of the Code.

(f) MULTIEMPLOYER PLANS. At no time has Parent contributed to or
been requested to contribute to any Multiemployer Plan.

(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
Schedule 3.20(g), no Parent Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee welfare benefits to any
Parent Employee upon his or her retirement or termination of employment for
any reason, except as may be required by statute, and Parent has never
represented, promised or contracted (whether in oral or written form) to any
Parent Employee (either individually or to Employees as a group) that such
Parent Employee(s) would be provided with life insurance, medical or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by statute. The term "other employee welfare
benefits" means those benefits traditionally provided under an "employee
benefit welfare plan" as defined in ERISA Section 3(1).

(h) COBRA. Neither Parent nor any Parent Affiliate has, prior to
the Effective Time and in any material respect, violated any of the health
care continuation requirements of COBRA, the requirements of the FMLA or any
similar provisions of state law applicable to its Parent Employees.

(i) EFFECT OF TRANSACTION.

(i) Except as set forth on Schedule 3.20(i)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Parent

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Employee Plan, Parent Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Parent Employee.

(ii) Except as set forth on Schedule 3.20(i)(ii), no
payment or benefit which will or may be made by Parent or Company or any of
their respective affiliates with respect to any Employee will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.

(j) EMPLOYMENT MATTERS. Parent (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Parent Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Parent Employees; (iii) is not liable for any arrears of wages, other than
arrears normally included in its payroll schedule and system, or any taxes or
any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Parent Employees (other
than routine payments to be made in the normal course of business and
consistent with past practice).

(k) LABOR. To the Knowledge of Parent, no work stoppage or labor
strike against Parent is pending or threatened. Except as set forth in
Schedule 3.20(k), Parent is not involved in or, to the Knowledge of Parent,
threatened with, any labor dispute, grievance, or litigation relating to
labor, safety or discrimination matters involving any Parent Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in liability to Parent. To the
Knowledge of Parent, neither Parent nor any of its subsidiaries has engaged
in any unfair labor practices within the meaning of the National Labor
Relations Act which would, individually or in the aggregate, directly or
indirectly result in a material liability to Parent. Except as set forth in
Schedule 3.20(k), Parent is not presently, nor has it been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Parent Employees and no collective bargaining agreement is
being negotiated by Parent.

3.21 ACCOUNTING AND REGULATORY MATTERS. Parent has no Knowledge of any
action taken by Parent or any Affiliate of Parent or agreed to be taken nor
has any Knowledge of any fact or circumstance that is reasonably likely to
(a) prevent the Merger from qualifying for pooling-of-interests accounting
treatment, or (b) materially impede or delay receipt of any consents of
regulatory authorities referred to in Section 6.1(c), Section 6.1(e) and
Section 6.1(h) or result in the imposition of a condition or restriction of
the type referred to in the last sentence of such Section.

3.22 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Parent or Merger Sub (as modified by the Parent and Merger
Sub Schedules), nor any statement made in

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<PAGE>

any schedule or certificate furnished by Parent or Merger Sub pursuant to
this Agreement, or furnished in or in connection with documents mailed or
delivered to the stockholders of Parent or Merger Sub in connection with
soliciting their consent to this Agreement and the Merger, contains or will
contain at the Effective Time, any untrue statement of a material fact, or
omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading.

ARTICLE IV

CONDUCT PRIOR TO THE EFFECTIVE TIME

4.1 CONDUCT OF BUSINESS OF THE COMPANY AND PARENT.

(a) COMPANY CONDUCT. During the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent
that Parent shall otherwise consent in writing or as expressly contemplated
herein) to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay its debts and
Taxes when due, to pay or perform other obligations when due, and, to the
extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers
and key employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
it, all with the goal of preserving unimpaired its goodwill and ongoing
businesses at the Effective Time. The Company shall promptly notify Parent
of any material event or occurrence or emergency not in the ordinary course
of its business, and any material event involving or adversely affecting the
Company or its business. Except as expressly contemplated by this Agreement
and except as set forth on Schedule 4.1(a), the Company shall not, without
the prior written consent of Parent:

(i) Except as set forth in the following subparagraph,
enter into any commitment, activity or transaction not in the ordinary course
of business;

(ii) Except for ProviderLink Valve-Added Reseller
Agreements, transfer to any person or entity any rights to any Company
Intellectual Property Rights (other than pursuant to End-User Licenses in the
ordinary course of business);

(iii) Enter into or amend any agreements pursuant to which
any other party is granted manufacturing, marketing, distribution or similar
rights of any type or scope with respect to any products of the Company;

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(iv) Amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any of the
agreements set forth or described in the Company Schedules;

(v) Commence any litigation;

(vi) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of the Company, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares
of its capital stock (or options, warrants or other rights exercisable
therefor);

(vii) Except as may be required by the SBCL Assets Purchase
Agreement, for the issuance of shares of Company Capital Stock upon exercise
or conversion of presently outstanding Company Options or Company Convertible
Securities and except pursuant to agreements previously entered into and
agreements that the Company will enter into in connection with the employment
of non-officer employees, issue, grant, deliver or sell or authorize or
propose the issuance, grant, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue any such shares or
other convertible securities;

(viii) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;

(ix) Except as may be required by the SBCL Assets Purchase
Agreement, acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
business of the Company;

(x) Sell, lease, license or otherwise dispose of any of
its properties or assets, except in the ordinary course of business and
consistent with past practice;

(xi) Incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities of the Company or
guarantee any debt securities of others;

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(which such agreements are disclosed on Schedule 4.1(a)(xii)), or (ii)
pursuant to Company policy in effect on the date hereof;

(xiii) Adopt or amend any employee benefit plan, program,
policy or arrangement, or enter into any employment contract, extend any
employment offer, pay or agree to pay any special bonus or special
remuneration to any director, employee or consultant, or increase the
salaries or wage rates of its employees other than in the ordinary course of
business and consistent with past practice;

(xiv) Except as required by the acquisition of assets
pursuant to the SBCL Assets Purchase Agreement, revalue any of its assets,
including without limitation writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course of
business and consistent with past practice;

(xv) Take any action, including the acceleration of vesting
of any options, warrants, restricted stock or other rights to acquire shares
of the capital stock of the Company which would be reasonably likely to
interfere with Parent's ability to account for the Merger as a pooling of
interests or any other action that could jeopardize the tax-free
reorganization hereunder;

(xvi) Pay, discharge or satisfy, in an amount in excess of
$15,000, in any one case, or $50,000, in the aggregate, any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the
Company Financial Statements or incurred in the ordinary course of business
since December 31, 1997;

(xvii) Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;

(xviii) Enter into any strategic alliance, joint development
or joint marketing arrangement or agreement;

(xix) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;

(xx) Waive or commit to waive any rights with a value in
excess of $10,000, in any one case, or $25,000, in the aggregate;

(xxi) Cancel, materially amend or renew any insurance policy
other than in the ordinary course of business;

42
<PAGE>

(xxii) Alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or
business entity in which the Company directly or indirectly holds any
interest on the date hereof; or

(xxiii) Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(i) through (xxii) above, or any other
action that would prevent the Company from performing or cause the Company
not to perform its covenants hereunder.

(b) PARENT CONDUCT. During the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, Parent agrees (except to the extent that
Company shall otherwise consent in writing or as expressly contemplated
herein) to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay its debts and
Taxes when due, to pay or perform other obligations when due, and, to the
extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers
and key employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
it, all with the goal of preserving unimpaired its goodwill and ongoing
businesses at the Effective Time. Parent shall promptly notify the Company of
any material event or occurrence or emergency not in the ordinary course of
its business, and any material event involving or adversely affecting Parent
or its business. Except as expressly contemplated by this Agreement and
except as set forth on Schedule 4.1(b), Parent shall not, without the prior
written consent of the Company:

(i) Enter into any commitment, activity or transaction not
in the ordinary course of business.

(ii) Transfer to any person or entity any rights to any
Parent Intellectual Property Rights (other than pursuant to End-User Licenses
in the ordinary course of business);

(iv) Amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any of the
agreements set forth or described in the Parent and Merger Sub Schedules;

(v) Commence any litigation;

<PAGE>

or otherwise acquire, directly or indirectly, any shares of its capital stock
(or options, warrants or other rights exercisable therefor);

(vii) Except for the issuance of shares of Parent capital
stock upon exercise or conversion of presently outstanding Parent Convertible
Securities and except pursuant to agreements previously entered into and
agreements that Parent will enter into in connection with the employment of
non-officer employees, issue, grant, deliver or sell or authorize or propose
the issuance, grant, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;

(viii) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;

(ix) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to
the business of Parent;

(x) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and
consistent with past practice;

(xi) Incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities of Parent or
guarantee any debt securities of others;

(xii) Grant any severance or termination pay to any director,
officer, employee or consultant, except payments (a) required by law or, (b)
with respect to non-officer employees and consultants (i) made pursuant to
written agreements outstanding on the date hereof (which such agreements are
disclosed on Schedule 4.1(b)(xii)), or (ii) pursuant to Parent policy in
effect on the date hereof;

(xiv) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and consistent with
past practice;

<PAGE>

(xv) Take any action, including the acceleration of vesting
of any options, warrants, restricted stock or other rights to acquire shares
of the capital stock of Parent which would be reasonably likely to interfere
with Parent's ability to account for the Merger as a pooling of interests or
any other action that could jeopardize the tax-free reorganization hereunder;

(xvi) Pay, discharge or satisfy, in an amount in excess of
$15,000, in any one case, or $50,000, in the aggregate, any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the Parent
Financial Statements or incurred in the ordinary course of business since
December 31, 1997;

(xviii) Enter into any strategic alliance, joint development
or joint marketing arrangement or agreement;

(xix) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;

(xx) Waive or commit to waive any rights with a value in
excess of $10,000, in any one case, or $25,000, in the aggregate;

(xxi) Cancel, materially amend or renew any insurance policy
other than in the ordinary course of business;

(xxii) Alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or
business entity in which Parent directly or indirectly holds any interest on
the date hereof; or

(xxiii) Take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(i) through (xxii) above, or any other
action that would prevent Parent from performing or cause Parent not to
perform its covenants hereunder.

4.2 NO COMPANY SOLICITATION. Until the earlier of the Effective Time and
the date of termination of this Agreement pursuant to the provisions of Section
8.1 hereof, the Company will not (nor will the Company permit any of the
Company's officers, directors, shareholders, agents, representatives or
Affiliates to) directly or indirectly, take any of the following actions with
any party other than Parent and its designees: (a) solicit, initiate,
entertain, or encourage any proposals or offers from, or conduct discussions
with or engage in negotiations with, any person relating to any possible
acquisition of the Company or any of its subsidiaries (whether by way of merger,
purchase

<PAGE>

of capital stock, purchase of assets or otherwise), any material portion of
its or their capital stock or assets or any equity interest in the Company or
any of its subsidiaries, (b) provide information with respect to it to any
person, other than Parent, relating to, or otherwise cooperate with,
facilitate or encourage any effort or attempt by any such person with regard
to, any possible acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise), any material
portion of its or their capital stock or assets or any equity interest in the
Company or any of its subsidiaries, (c) enter into an agreement with any
person, other than Parent, providing for the acquisition of the Company
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), any material portion of its or their capital stock or assets or
any equity interest in the Company or any of its subsidiaries, or (d) make or
authorize any statement, recommendation or solicitation in support of any
possible acquisition of the Company or any of its subsidiaries (whether by
way of merger, purchase of capital stock, purchase of assets or otherwise),
any material portion of its or their capital stock or assets or any equity
interest in the Company or any of its subsidiaries by any person, other than
by Parent. The Company shall immediately cease and cause to be terminated
any such contacts or negotiations with third parties relating to any such
transaction or proposed transaction. In addition to the foregoing, if the
Company receives prior to the Effective Time or the termination of this
Agreement any offer or proposal relating to any of the above, the Company
shall immediately notify Parent thereof, including information as to the
identity of the offeror or the party making any such offer or proposal and
the specific terms of such offer or proposal, as the case may be, and such
other information related thereto as Parent may reasonably request. Except as
contemplated by this Agreement, disclosure by the Company of the terms hereof
(other than the prohibition of this section) shall be deemed to be a
violation of this Section 4.2.

4.3 NO PARENT OR MERGER SUB SOLICITATION. Until the earlier of the
Effective Time and the date of termination of this Agreement pursuant to the
provisions of Section 8.1 hereof, Parent and Merger Sub will not (nor will
Parent or Merger Sub permit any of their officers, directors, stockholders,
agents, representatives or Affiliates to) directly or indirectly, take any of
the following actions with any party other than the Company and its
designees: (a) solicit, initiate, entertain, or encourage any proposals or
offers from, or conduct discussions with or engage in negotiations with, any
person relating to any possible acquisition of Parent or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase
of assets or otherwise), any material portion of its or their capital stock
or assets or any equity interest in Parent or any of its subsidiaries, (b)
provide information with respect to it to any person, other than the Company,
relating to, or otherwise cooperate with, facilitate or encourage any effort
or attempt by any such person with regard to, any possible acquisition of
Parent (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any material portion of its or their capital stock or
assets or any equity interest in Parent or any of its subsidiaries, (c) enter
into an agreement with any person providing for the acquisition of Parent
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), any material portion of its or their capital stock or assets or
any equity interest in Parent or any of its subsidiaries, or (d) make or
authorize any statement, recommendation or solicitation in support of any
possible acquisition of Parent or any of its subsidiaries (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its or their capital stock or assets or any equity
interest in Parent or any of its subsidiaries by any person. Parent shall

<PAGE>

immediately cease and cause to be terminated any such contacts or
negotiations with third parties relating to any such transaction or proposed
transaction. In addition to the foregoing, if Parent receives prior to the
Effective Time or the termination of this Agreement any offer or proposal
relating to any of the above, Parent shall immediately notify the Company
thereof, including information as to the identity of the offeror or the party
making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be, and such other information related thereto as
the Company may reasonably request. Except as contemplated by this
Agreement, disclosure by Parent of the terms hereof (other than the
prohibition of this section) shall be deemed to be a violation of this
Section 4.3.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1 CALIFORNIA PERMIT; COMPANY SHAREHOLDER AND PARENT STOCKHOLDER
APPROVALS.

(a) As soon as reasonably practical following the execution of
this Agreement, Parent and the Company will prepare the necessary
documentation to obtain a permit (a "CALIFORNIA PERMIT") from the
Commissioner of Corporations of the State of California (after a hearing
before such Department) pursuant to Section 25121 of the California Corporate
Securities Law of 1968, so that the issuance of Parent Common Stock in the
Merger shall be exempt from registration under Section 3(a)(10) of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). The Company and
Parent will respond to any comments from the California Department of
Corporations and use their commercially reasonable efforts to have the
California Permit granted as soon as practical after such filing. As
promptly as practical after the date of this Agreement, Parent and the
Company shall prepare and make such filings as are required under applicable
Blue Sky laws relating to the transactions contemplated by this Agreement.

(b) As promptly as practicable after the receipt of a California
Permit, the Company shall submit this Agreement and the transactions
contemplated hereby, including without limitation the Merger, to the
Company's shareholders for approval as provided by Georgia Law and the
Company's Articles of Incorporation and Bylaws. The materials submitted to
the Company's shareholders shall be subject to review and approval by Parent
and include information regarding Parent and the Company, the terms of the
Merger and this Agreement and the unanimous recommendation of the Board of
Directors of the Company in favor of the Merger, this Agreement and the
transactions contemplated hereby.

(c) As promptly as practicable after receipt of a California
Permit, Parent shall submit this Agreement and the transactions contemplated
hereby, including without limitation the Merger, to Parent's stockholders for
approval and adoption as provided by Delaware law, California law and
Parent's Certificate of Incorporation and Bylaws. The materials submitted to
Parent's

<PAGE>

stockholders shall include the unanimous recommendation of the Board of
Directors of Parent in favor of the Merger, this Agreement and the
transactions contemplated hereby.

5.2 ACCESS TO INFORMATION. Each party shall afford the others and its
accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time to (a)
all of its properties, books, contracts, commitments and records, and (b) all
other information concerning the business, properties and personnel (subject
to restrictions imposed by applicable law) of it as the others may reasonably
request, subject, in the case of Parent, to reasonable limits on access to
its technical and other nonpublic information. No information or knowledge
obtained in any investigation pursuant to this Section 5.2 shall affect or be
deemed to modify any representation or warranty contained herein.

5.3 CONFIDENTIALITY. Each of the parties hereto hereby agrees to keep
the terms of this Agreement (except to the extent contemplated hereby) and
such information or knowledge obtained in any investigation pursuant to
Section 5.2, or pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential;
provided, however, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is
generally known to the public and did not become so known through any
violation of law, (c) became known to the public through no fault of such
party, (d) is later lawfully acquired by such party without confidentiality
restrictions from other sources, (e) is required to be disclosed by order of
court or government agency with subpoena powers (provided that such party
shall have provided the other party with prior notice of such order or
subpoena and an opportunity to object or take other available action) or (f)
which is disclosed in the course of any litigation between any of the parties
hereto.

5.4 EXPENSES. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without
limitation, all legal, accounting, financial advisory, consulting and all
other fees and expenses of third parties ("THIRD PARTY EXPENSES") incurred by
a party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby, shall
be the obligation of the respective party incurring such fees and expenses.

5.5 PUBLIC DISCLOSURE. Unless otherwise required by law (including,
without limitation, federal and state securities laws) prior to the Effective
Time, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
Parent and the Company prior to release, provided that such approval shall
not be unreasonably withheld.

5.6 CONSENTS. Parent and the Company shall use commercially reasonable
efforts to obtain the consents, waivers and approvals under any of the Parent
Contracts and Company Contracts as may be required in connection with the
Merger (all of such consents, waivers and

<PAGE>

approvals are set forth in the Company Schedules and Parent and Merger Sub
Schedules) so as to preserve all rights of and benefits to the Parent and
Company thereunder.

5.7 FIRPTA COMPLIANCE. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).

5.8 REASONABLE EFFORTS. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use its reasonable
efforts to ensure that its representations and warranties remain true and
correct in all material respects, and to take promptly, or cause to be taken,
all actions, and to do promptly, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated hereby, to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings, and to remove any injunctions or other impediments or delays, legal
or otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties
hereto the benefits contemplated by this Agreement; provided that Parent
shall not be required to agree to any divestiture by Parent or the Company or
any of Parent's subsidiaries or affiliates of shares of capital stock or of
any business, assets or property of Parent or its subsidiaries or affiliates
or the Company or its affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to
own or exercise control of such assets, properties and stock.

5.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i)
the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which is likely to cause any representation or warranty of
the Company, Parent or Merger Sub, respectively, contained in this Agreement
to be untrue or inaccurate at or prior to the Effective Time and (ii) any
failure of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant
to this Section 5.9 shall not limit or otherwise affect any remedies
available to the party receiving such notice.

5.10 CERTAIN BENEFIT PLANS. Subject to compliance with
pooling-of-interest accounting treatment of the Merger, Parent shall take
such reasonable actions as are necessary to allow eligible employees of the
Company to participate in the benefit programs of Parent, or alternative
benefits programs substantially comparable to those applicable to employees
of Parent on similar terms, as soon as practicable after the Effective Time.
For purposes of participation, vesting and benefit accrual under Parent's
employee benefit plans, the service of the employees of the Company prior to
the Effective Time shall be treated as service with Parent. Parent shall
cause the Surviving Corporation to honor in accordance with their terms all
employment, severance, consulting and other compensation Contracts disclosed
in the Company Schedules between the Company and any current or former
director, officer or employee thereof, and all provisions for vested benefits
or other vested amounts earned or accrued through the Effective Time under
the Company Benefit Plans.

<PAGE>

5.11 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and
agrees to use its reasonable efforts to cause the Merger, and to take no
action which would cause the Merger not, to qualify for treatment as a
pooling of interests for accounting purposes and each of the Parties agrees
to take no action which would cause the Merger not to qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes.

5.12 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary
or desirable for effecting completely the consummation of this Agreement and
the transactions contemplated hereby.

5.13 COMPANY'S AUDITORS. The Company will use its commercially
reasonable efforts to cause its management and its independent auditors to
facilitate on a timely basis (i) the review of any Company audit or review
work papers for up to the past three years, including the examination of
selected interim financial statements and data and (ii) the delivery of such
representations from the Company's independent accountants as may be
reasonably requested by Parent or its accountants in order for Parent's
accountants to render the opinion called for by Section 6.1(l) hereof.

5.14 PARENT'S AUDITORS. Parent will use its commercially reasonable
efforts to cause its management and its independent auditors to facilitate on
a timely basis (i) the review of any Parent audit or review work papers for
up to the past three years, including the examination of selected interim
financial statements and data and (ii) the delivery of such representations
from Parent's independent accountants as may be reasonably requested by the
Company or its accountants in order for Company's accountants to render the
opinion called for by Section 6.1(l) hereof.

5.15 AGREEMENT OF AFFILIATES. Each Party has disclosed in Schedule 5.15
of its Schedules all Persons whom it reasonably believes is an Affiliate. If
the Merger is accounted for using the pooling-of-interests method of
accounting, shares of Parent Common Stock held by such Persons shall not be
transferable until such time as financial results covering at least 30 days
of combined operations of Parent and the Company have been published within
the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies, regardless of whether each such Affiliate has provided
the Voting Agreement (and Parent shall be entitled to place restrictive
legends upon certificates for shares of Parent Common Stock issued to
Affiliates of the Company pursuant to this Agreement to enforce the
provisions of this Section 5.14).

5.16 AMENDMENT OF PARENT BYLAWS. Parent shall take all necessary
corporate actions, including without limitation soliciting stockholder
approval (including the unanimous recommendation of Parent's Board of
Directors in favor thereof), to increase the authorized number of directors
to eight.

5.17 INDEMNIFICATION.

<PAGE>

(a) For a period of three years after the Effective Time, Parent
shall, and shall cause the Surviving Corporation to, indemnify, defend and
hold harmless the present and former directors, officers, employees and
agents of the Company (each, an "INDEMNIFIED PARTY") against all liabilities
arising out of actions or omissions arising out of the Indemnified Party's
service or services as directors, officers, employees or agents of the
Company, ShareNet, EDI Services, Inc. or as a trustee of the Company's 401(K)
plans(s) occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the fullest extent permitted
under Delaware law (or, in the event Georgia law is more restrictive with
respect to indemnification, then under Georgia law) and by the Company's
Articles of Incorporation and Bylaws as in effect on the date hereof,
including provisions relating to advances of expenses incurred in the defense
of any litigation and whether or not Parent is insured against any such
matter. Without limiting the foregoing, in any case in which approval by the
Surviving Corporation is required to effectuate any indemnification, the
Surviving Corporation shall direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by independent
counsel mutually and reasonably agreed upon between Parent and the
Indemnified Party.

(b) This Section 5.17 shall survive the Effective Time and is
intended to benefit the Company, the Surviving Corporation and each of the
Indemnified Parties and his or her heirs and representatives (each of whom
shall be entitled to enforce this Section 5.17 against Parent or the
Surviving Corporation, as the case may be) and shall be binding upon all
successors and assigns (whether by operation of law or by contract) of Parent
and the Surviving Corporation.

ARTICLE VI

CONDITIONS TO THE MERGER

6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the
following conditions:

(a) COMPANY SHAREHOLDER APPROVAL. This Agreement and the Merger
shall have been approved by the shareholders of the Company by the requisite
vote under applicable law and the Company's Articles of Incorporation and
Bylaws.

(b) PARENT STOCKHOLDER APPROVAL. This Agreement and the Merger
(including any amendments to Parent's Certificate of Incorporation reasonably
necessary to consummate the transactions contemplated by this Agreement)
shall have been approved and adopted by the stockholders of Parent by the
requisite vote under applicable law and Parent's Certificate of Incorporation
and Bylaws.

(c) CALIFORNIA PERMIT. The Commissioner of Corporations for the
State of California shall have approved the terms and conditions of the
transactions contemplated by this

<PAGE>

Agreement, and the fairness of such terms and conditions pursuant to Section
25142 of the California Corporations Code ("CALIFORNIA CODE") following a
hearing for such purpose, and shall have issued a Permit under Section 25121
of the California Code.

(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
or prohibition preventing the consummation of the Merger shall be in effect.

(e) HSR ACT CLEARANCE. All approvals shall have been received
and the expiration or early termination under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, (the "HSR ACT"), and other applicable
antitrust laws ("HSR CLEARANCE"); provided that, neither party may rely on
the condition set forth in this Section 6.1(e) if the failure to obtain HSR
Clearance for the Merger is a result of such party's failure to take
commercially reasonable efforts to obtain HSR Clearance.

(f) TAX OPINIONS. Parent shall have received a written opinion
from its counsel, Wilson Sonsini Goodrich & Rosati, Professional Corporation,
and the Company shall have received a written opinion from its counsel,
Alston & Bird LLP (substantially identical to the opinion received by
Parent), to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code; provided, however, that if
Company counsel does not render such opinion, this condition shall
nonetheless be deemed to be satisfied if Parent's counsel renders its opinion
to the Company as well as to Parent. The parties to this Agreement agree to
make reasonable representations (and to cause their Affiliates to make
reasonable representations) as requested by counsel for the purpose of
rendering the opinions discussed herein.

(g) INVESTORS' RIGHTS AGREEMENT. The Investors' Rights Agreement,
dated as of October 14, 1997, as amended (the "INVESTORS' RIGHTS AGREEMENT"),
by and between Parent and certain holders of Parent's securities shall have
been amended and executed by Parent, the shareholders of the Company who
possess registration rights pursuant to written agreements existing on the
date hereof with respect to certain securities of the Company, and a
sufficient number of the existing holders of registration rights with respect
to Parent's securities in order to permit the granting of such rights under
the Investors' Rights Agreement.

(h) OTHER GOVERNMENTAL APPROVALS. All approvals from government
authorities, including without limitation any requisite Blue Sky approvals,
which are appropriate or necessary for the consummation of the Merger, shall
have been obtained.

(i) LITIGATION. There shall be no BONA FIDE action, suit, claim
or proceeding of any nature pending, or overtly threatened, against Parent or
the Company, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the Merger or other
transactions contemplated by the terms of this Agreement.

<PAGE>

(j) CONSENTS AND APPROVALS. Each Party shall have obtained any
and all consents required for consummation of the Merger or for the
preventing of any Default under any Contract or Permit of such Party which,
if not obtained or made, is reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect or a Parent Material Adverse
Effect, as applicable. No consent so obtained which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable judgment of the Board of
Directors of either party would so materially adversely impact the economic
or business benefits of the transactions contemplated by this Agreement that,
had such condition or requirement been known, such party would not, in its
reasonable judgment, have entered into this Agreement.

(k) AGREEMENT WITH SBCL. Sections 1.5 through 1.8 of the SBCL
Assets Purchase Agreement shall be amended to provide for payment of the
Purchase Price (as that term is defined therein) with Parent Common Stock for
any payment due on any Transfer Date (as that term is defined therein) which
occurs following the Effective Time, and the parties shall obtain such other
amendments and waivers to such agreement as may be reasonably necessary to
accomplish the objectives of the Merger.

(l) POOLING LETTERS. Each of Parent and Company shall have
received letters, dated as of the Effective Time, from Ernst & Young LLP
regarding such firm's concurrence with Parent's managements' and Company's
managements' conclusions as to the appropriateness of pooling-of-interests
accounting for the Merger under Accounting Principles Board Opinion No. 16 if
the Merger is consummated in accordance with this Agreement.

(m) VOTING AGREEMENTS. Each of the persons and entities listed on
Exhibit A and Exhibit B to the Voting Agreement set forth in EXHIBIT D
hereto, shall have executed and delivered such Voting Agreements in
substantially the form set forth in EXHIBIT D.

(n) AFFILIATE AGREEMENTS. Each of the persons and entities listed
as Affiliates of Parent on Schedule 5.14 shall have executed and delivered
Affiliate Agreements in substantially the form of EXHIBIT C, and each of the
persons and entities listed as Affiliates of the Company on Schedule 5.14
shall have executed and delivered Affiliate Agreements in substantially the
form of EXHIBIT E, and all such Affiliate Agreements shall be in full force
and effect.

6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by the Company:

(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except
for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), with the same
force and effect as if made on and as of the Closing

<PAGE>

Date, except for those representations and warranties that are qualified by
references to "material" or "Material Adverse Effect" which all shall be true
and correct in all respects, and except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties
which have neither had nor reasonably would be expected to have a Material
Adverse Effect on Parent; and the Company shall have received a certificate
to such effect signed on behalf of Parent by a duly authorized officer of
Parent.

(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
on or prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by a duly authorized officer of Parent.

(c) EXCHANGE AGENT CERTIFICATION. The Exchange Agent shall have
delivered to the Company a certificate, dated as of the Effective Time, to
the effect that the Exchange Agent has received from Parent appropriate
instructions and authorization for the Exchange Agent to issue a sufficient
number of shares of Parent Common Stock in exchange for outstanding shares of
Company Common Stock and that Parent has deposited with the Exchange Agent
sufficient funds to pay a reasonable estimate of the cash payments necessary
to make all fractional share payments as required by Section 1.6(f).

(d) LEGAL OPINION. The Company shall have received a legal
opinion from Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel to Parent, in form and substance reasonably acceptable to counsel of
Company.

(e) MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, assets (including intangible
assets), liabilities, financial condition or results of operations of Parent
since the date of the Parent Current Balance Sheet.

(f) CONVERSION OF PREFERRED STOCK. All shares of Parent Preferred
Stock, other than shares of Parent Series D Preferred Stock, shall have
converted into Parent Common Stock in accordance with the Parent's
Certificate of Incorporation; provided, however, if the Company so requests,
shares of Parent Series D Preferred Stock shall have also converted to Parent
Common Stock.

(g) BOARD OF DIRECTORS. Parent shall have amended its Bylaws so
as to increase the number of Directors on its Board of Directors from four to
eight. Parent shall have taken all corporate actions to ensure that
immediately upon the Closing, the Board of Directors of Parent consists of
Jim Clark, John Doerr, Richard Kramlich, W. Michael Long, P. E. Sadler,
Michael K. Hoover, Tadakata Yamada and one other person to be designated by
the Company prior to the Closing Date.

(h) INDEMNIFICATION. The Articles of Incorporation of Merger Sub
shall contain officer and director indemnification provisions that are
substantially similar to the officer and

<PAGE>

director indemnification provisions contained in the Company's Articles of
Incorporation in the form delivered to Parent on the date of this Agreement.

(i) DUE DILIGENCE INVESTIGATION. Company shall have completed its
due diligence investigation of Parent to Company's reasonable satisfaction,
provided that no information or knowledge obtained in such investigation
shall affect or be deemed to modify any representation or warranty of Parent
contained herein. In this regard, Company's due diligence investigation
shall be conclusively deemed to have been completed to Company's reasonable
satisfaction in the event that the preliminary Parent Schedules attached
hereto are not subsequently modified, or otherwise do not require subsequent
modification in order to make Parent's representations and warranties true
and correct in all material respects on and as of the Closing Date.

(j) PARENT 1997 FINANCIAL STATEMENTS. Parent shall have completed
and delivered to the Company a copy of its audited financial statements for
the year ended December 31, 1997.

6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by Parent:

(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations
and warranties which address matters only as of a particular date (which
shall remain true and correct as of such date), with the same force and
effect as if made on and as of the Closing Date, except for those
representations and warranties that are qualified by references to "material"
or "Material Adverse Effect" which all shall be true and correct in all
respects, and except, in all such cases, for such breaches, inaccuracies or
omissions of such representations and warranties which have neither had nor
reasonably would be expected to have a Material Adverse Effect on the Company
or Parent; and Parent and Merger Sub shall have received a certificate to
such effect signed on behalf of the Company by the chief executive officer
and chief financial officer of the Company.

(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate
to such effect signed by a duly authorized officer of the Company.

(c) LEGAL OPINION. Parent shall have received a legal opinion
from Alston & Bird LLP, legal counsel to the Company, in form and substance
reasonably acceptable to counsel of Parent.

<PAGE>

(d) MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, assets (including intangible assets)
financial condition or results of operations of the Company since the date of
the Company Current Balance Sheet.

(e) NO ELECTION TO TREAT AS LIQUIDATION. Prior to the Closing
Date, there shall have been no election made by the holders of a majority of
the Company's Preferred Stock, in accordance with Section 3.2 of the
Company's Articles of Incorporation, to treat the Merger as a liquidation,
dissolution or winding up of the Company in accordance with such Articles of
Incorporation.

(f) NO DISSENTERS. Holders of more than five (5%) of the
outstanding shares of Company Capital Stock shall not have exercised, nor
shall they have any continued right to exercise, dissenters' rights under
applicable law with respect to their shares by virtue of the Merger.

(g) THIRD-PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(j).

(h) DUE DILIGENCE INVESTIGATION. Parent shall have completed its
due diligence investigation of the Company to Parent's reasonable
satisfaction, provided that no information or knowledge obtained in such
investigation shall affect or be deemed to modify any representation or
warranty of the Company contained herein. In this regard, Parent's due
diligence investigation shall be conclusively deemed to have been completed
to Parent's reasonable satisfaction in the event that the preliminary Company
Schedules attached hereto are not subsequently modified, or otherwise do not
require subsequent modification, in order to make the Company's
representations and warranties true and correct in all material respects on
and as of the Closing Date.

(i) COMPANY 1997 FINANCIAL STATEMENTS. The Company shall have
completed and delivered to Parent a copy of its audited financial statements
for the year ended December 31, 1997.

ARTICLE VII

NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES

7.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Company, Parent and Merger Sub
contained in this Agreement or in any instrument delivered pursuant to this
Agreement (each as modified by the corresponding schedules thereto) shall
terminate at the Effective Time.

ARTICLE VIII

<PAGE>

TERMINATION, AMENDMENT AND WAIVER

8.1 TERMINATION. Except as provided in Section 8.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:

(a) by mutual consent of the Company and Parent;

(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on May 15, 1998 (provided that (A)
the right to terminate this Agreement under this clause 8.1(b)(i) shall not
be available to any party whose failure to use its commercially reasonable
efforts to fulfill any obligation hereunder has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such
date, and (B) such date shall be automatically extended where the failure to
Close is a result of not obtaining HSR Clearance and the parties are
continuing to pursue such clearance); (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any governmental entity that would make consummation of the
Merger illegal;

(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable
to the Merger, by any Governmental Entity, which would: (i) prohibit
Parent's or the Company's ownership or operation of all or any portion of the
business of the Company or (ii) compel Parent or the Company to dispose of or
hold separate all or a portion of the business or assets of the Company or
Parent as a result of the Merger;

(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
the Company and (i) such breach has not been cured within thirty (30) days
after written notice to the Company (provided that, no cure period shall be
required for a breach which by its nature cannot be cured), and (ii) as a
result of such breach the conditions set forth in Section 6.3(a) or 6.3(b),
as the case may be, would not then be satisfied; or

(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of Parent or Merger Sub and (i) such breach has not been cured
within thirty (30) days after written notice to Parent (provided that, no
cure period shall be required for a breach which by its nature cannot be
cured), and (ii) as a result of such breach the conditions set forth in
Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied.

Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.

<PAGE>

8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent,
Merger Sub or the Company, or their respective officers, directors or
shareholders, provided that each party shall remain liable for any breaches
of this Agreement prior to its termination; and provided further that, the
provisions of Sections 5.3 and 5.4 and Article VIII of this Agreement shall
remain in full force and effect and survive any termination of this Agreement.

8.3 AMENDMENT. Except as is otherwise required by applicable law after
the shareholders of the Company and the Stockholders of Parent approve this
Agreement, this Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed on behalf of each of the parties
hereto.

8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of
the agreements or conditions for the benefit of such party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party.

ARTICLE IX

GENERAL PROVISIONS

9.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):

(i) if to Parent or Merger Sub, to:

Healtheon Corporation
87 Encina
Palo Alto, CA 94301
Attention: W. Michael Long
Telephone No.: (650) 614-0200
Facsimile No.: (650) 614-3300

<PAGE>

with a copy to:

Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Steven E. Bochner, Esq.
Jeffrey A. Herbst, Esq.
Telephone No.: (415) 493-9300
Facsimile No.: (415) 493-6811

(ii) if to the Company, to:

ActaMed Corporation
7000 Central Parkway, Suite 600
Atlanta, Georgia 30328
Attention: Michael K. Hoover
Telephone No.: (770) 352-1600
Facsimile No.: (770) 352-1601

with a copy to:

Alston & Bird
1201 W. Peachtree Street
Atlanta, Georgia 30309
Attention: George M. Maxwell, Jr.
Telephone No.: (404) 881-7570
Facsimile No.: (404) 881-7777

9.2 INTERPRETATION. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.

9.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof; (b) are not intended to confer
upon any other person any rights

<PAGE>

or remedies hereunder (except with respect to Section 5.17); and (c) shall
not be assigned by operation of law or otherwise except as otherwise
specifically provided, except that Parent and Merger Sub may assign their
respective rights and delegate their respective obligations hereunder to
their respective Affiliates.

9.5 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.

9.6 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one remedy will
not preclude the exercise of any other remedy.

9.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.

9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.

9.9 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.

<PAGE>

IN WITNESS WHEREOF, Parent, Merger Sub, and the Company have caused this
Agreement to be signed by their duly authorized respective officers and
representatives, all as of the date first written above.

ACTAMED CORPORATION HEALTHEON CORPORATION

By /s/ Michael Hoover By /s/ W. Michael Long
--------------------------- -----------------------------
Name: Michael Hoover Name: W. Michael Long
Title: President and Chief Title: President and Chief
Executive Officer Executive Officer

MEDNET ACQUISITION CORP.

By /s/ W. Michael Long
-----------------------------
Name: W. Michael Long
Title: President

***REORGANIZATION AGREEMENT**

<PAGE>

EXHIBIT 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

HEALTHEON CORPORATION

(PURSUANT TO SECTIONS 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)

Healtheon Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "General Corporation
Law")

DOES HEREBY CERTIFY:

FIRST: That this corporation was originally incorporated on December
26, 1995 under the name Healthscape Corporation, pursuant to the General
Corporation Law. The corporation changed its name to "Healtheon Corporation"
on June 17, 1996.

SECOND: The Restated Certificate of Incorporation of Healtheon
Corporation, in the form set forth below, has been duly adopted in accordance
with the provisions of Sections 228, 242, and 245 of the General Corporation
Law by the directors and the stockholders of the corporation.

THIRD: The Restated Certificate of Incorporation, as so adopted, reads
in full as set forth below:

ARTICLE I

The name of this corporation is Healtheon Corporation.

ARTICLE II

The address of the registered office of this corporation in the State of
Delaware is 15 East North Street, Dover, County of Kent, Delaware 19901.
The name of its registered agent at such address is Incorporating Services,
Ltd.

ARTICLE III

The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.

<PAGE>

ARTICLE IV

This corporation is authorized to issue one class of stock to be
designated "Common Stock." The total number of shares that this corporation
is authorized to issue is 75,000,000 with a par value of $0.0001 per share.

ARTICLE V

To the fullest extent permitted by the General Corporation Law as the
same exists or as may hereafter be amended, a director of the corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach fiduciary duty as a director.

The corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the
fact that he, his testator or intestate is or was a director or officer of
the corporation or any predecessor or the corporation or serves or served at
any other enterprise as a director, officer or employee at the request of the
corporation or any predecessor to the corporation.

Neither any amendment nor repeal of this Article V, nor the adoption of
any provision of this Restated Certificate of Incorporation inconsistent with
this Article V, shall eliminate or reduce the effect of this Article V, in
respect of any matter occurring, or any cause of action, suit, claim or
proceeding that, but for this Article V, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.

ARTICLE VI

This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute or this Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.

ARTICLE VII

In furtherance and not in limitation of powers conferred by statute, the
Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the corporation.

ARTICLE VIII

The number of directors which constitute the whole Board of Directors of
the corporation shall be as specified in the Bylaws of the corporation.

ARTICLE IX

Elections of directors need not be by written ballot unless the Bylaws
of this corporation

<PAGE>

shall so provide.

ARTICLE X

Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be
kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of this corporation.

ARTICLE XI

This corporation is to have perpetual existence.

***

FOURTH: That said amendments were duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law.

I hereby further declare and certify under penalty of perjury under the
laws of the State of Delaware that the facts set forth in the foregoing
certificate are true and correct of my own knowledge and that this
certificate is my act and deed.

IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed by the President of this corporation this 19th day of May 1998.

Healtheon Corporation

By: /s/ W. Michael Long
---------------------------
W. Michael Long
President
Attest:

By: /s/ Denise M. Shea
-----------------------------
Denise M. Shea
Secretary

<PAGE>

EXHIBIT 3.2

HEALTHEON CORPORATION
a Delaware corporation

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

(PURSUANT TO SECTIONS 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)

Healtheon Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "General Corporation
Law")

DOES HEREBY CERTIFY:

THIRD: The Restated Certificate of Incorporation, as so adopted, reads
in full as set forth below:

ARTICLE I

The name of this corporation is Healtheon Corporation.

ARTICLE II

The address of the registered office of this corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, State of Delaware. The name of the
registered agent of the corporation at such location is The Corporation Trust
Company.
ARTICLE III

The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.

ARTICLE IV

<PAGE>

This corporation is authorized to issue one class of stock to be
designated "Common Stock" and another class of stock to be designated
"Preferred Stock," the rights, preferences and privileges of which may from
time to time be determined by the Board of Directors. The total number of
shares of Common Stock that this corporation is authorized to issue is
150,000,000 with a par value of $0.0001 per share. The total number of
shares of Preferred Stock that this corporation is authorized to issue is
5,000,000 with a par value of $0.0001 per share.

ARTICLE V

ARTICLE VI

ARTICLE VII

In furtherance and not in limitation of powers conferred by statute, the
Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the corporation.

ARTICLE VIII

Section 1. At any time following the closing of the first sale of
Common Stock of the Corporation pursuant to a registration statement declared
effective by the Securities and Exchange Corporation under the Securities Act
of 1933, as amended, stockholders of the Corporation may not take any action
by written consent in lieu of a meeting and any action contemplated by
stockholders after such time must be taken at a duly called annual or special
meeting of stockholders.

<PAGE>

Section 2. The number of directors which constitute the whole Board
of Directors of the Corporation shall be fixed exclusively by one or more
resolution adopted from time to time by the Board of Directors. The Board of
Directors shall be divided into three classes designated as Class I, Class
II, and Class III, respectively. Directors shall be assigned to each class
in accordance with a resolution or resolutions adopted by the Board of
Directors. At the first annual meeting of stockholders following the date
hereof, the term of office of the Class I directors shall expire and Class I
directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the date hereof, the term of office
of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the date hereof, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full
term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.

Section 3. Advance notice of new business and stockholder
nominations for the election of directors shall be given in the manner and to
the extent provided in the Bylaws of the Corporation.

ARTICLE IX

Elections of directors need not be by written ballot unless the Bylaws
of this corporation shall so provide.

ARTICLE X

ARTICLE XI

This corporation is to have perpetual existence.

***

FOURTH: That said amendments were duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law.

IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed by the President of this corporation this ___ day of _______ 1998.

Healtheon Corporation
<PAGE>

By: /s/ W. Michael Long
---------------------------------
W. Michael Long
Chief Executive Officer
Attest:

By: /s/ John L. Westermann III
--------------------------------
John L. Westermann III
Secretary

<PAGE>

EXHIBIT 3.3

BYLAWS

HEALTHSCAPE CORPORATION

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I - CORPORATE OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1.1 REGISTERED OFFICE. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 OTHER OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

ARTICLE II - MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . .1

2.1 PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.3 SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . .2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . .2
2.6 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.7 ADJOURNED MEETING; NOTICE. . . . . . . . . . . . . . . . . . . . . . . .2
2.8 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.9 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT
A MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS. . . . . . .4
2.12 PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE. . . . . . . . . . . . . . . . . .5

ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.2 NUMBER OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE
OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.4 RESIGNATION AND VACANCIES. . . . . . . . . . . . . . . . . . . . . . . .6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . .7
3.6 FIRST MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.7 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.8 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . . . . . . . . .8
3.9 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.10 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.11 ADJOURNED MEETING; NOTICE. . . . . . . . . . . . . . . . . . . . . . . .8
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING. . . . . . . . . . . .9
3.13 FEES AND COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . .9
3.14 APPROVAL OF LOANS TO OFFICERS. . . . . . . . . . . . . . . . . . . . . .9
3.15 REMOVAL OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . .9

ARTICLE IV - COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4.1 COMMITTEES OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 COMMITTEE MINUTES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 MEETINGS AND ACTION OF COMMITTEES. . . . . . . . . . . . . . . . . . . 11

<PAGE>

ARTICLE V - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

5.1 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 REMOVAL AND RESIGNATION OF OFFICERS. . . . . . . . . . . . . . . . . . 12
5.5 VACANCIES IN OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 VICE PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.9 SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.10 TREASURER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 ASSISTANT SECRETARY. . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.12 ASSISTANT TREASURER. . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.13 AUTHORITY AND DUTIES OF OFFICERS . . . . . . . . . . . . . . . . . . . 14

ARTICLE VI - INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . 15
6.2 INDEMNIFICATION OF OTHERS. . . . . . . . . . . . . . . . . . . . . . . 15
6.3 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE VII - RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . 16

7.1 MAINTENANCE AND INSPECTION OF RECORDS. . . . . . . . . . . . . . . . . 16
7.2 INSPECTION BY DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS . . . . . . . . . . . . . . . . . . . 17
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS . . . . . . . . . . . . 17

ARTICLE VIII - GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 17

8.1 CHECKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS . . . . . . . . . . . 18
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES . . . . . . . . . . . . . . . . 18
8.4 SPECIAL DESIGNATION ON CERTIFICATES. . . . . . . . . . . . . . . . . . 18
8.5 LOST CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.6 CONSTRUCTION; DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 19
8.7 DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.8 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.9 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.10 TRANSFER OF STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.11 STOCK TRANSFER AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 20
8.12 REGISTERED STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE IX - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE X - DISSOLUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE XI - CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES. . . . . . . . . . . . . . 22

<PAGE>

11.2 DUTIES OF CUSTODIAN. . . . . . . . . . . . . . . . . . . . . . . . . . 22

</TABLE>

<PAGE>

BYLAWS

HEALTHSCAPE CORPORATION

ARTICLE I

CORPORATE OFFICES

1.1 REGISTERED OFFICE

The registered office of the corporation shall be in the City of Dover,
County of Kent, State of Delaware. The name of the registered agent of the
corporation at such location is Incorporating Services, Ltd.

1.2 OTHER OFFICES

The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.

2.2 ANNUAL MEETING

The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Tuesday of April in each year at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected
and any other proper business may be transacted.

2.3 SPECIAL MEETING

A special meeting of the stockholders may be called, at any time for any
purpose or purposes, by the board of directors or by such person or persons as
may be authorized by the certificate of incorporation or the bylaws.

2.4 NOTICE OF STOCKHOLDERS' MEETINGS

<PAGE>

All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.

2.6 QUORUM

The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.

2.7 ADJOURNED MEETING; NOTICE

When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.

2.8 VOTING

The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).

Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.

2.9 WAIVER OF NOTICE

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meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of notice
unless so required by the certificate of incorporation or these bylaws.

2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.

Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.

2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS

In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.

If the board of directors does not so fix a record date:

(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.

(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.

(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.

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<PAGE>

2.12 PROXIES

Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of
Section 212(c) of the General Corporation Law of Delaware.

2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE

The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

ARTICLE III

DIRECTORS

3.1 POWERS

Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.

3.2 NUMBER OF DIRECTORS

The number of directors of the corporation shall be not less than three (3)
nor more than five (5). The exact number of directors shall be four (4). This
number may be changed, within the limits specified above, by a duly adopted
amendment to the certificate of incorporation or by an amendment to this bylaw
duly adopted by the vote or written consent of the holders of a majority of the
stock issued and outstanding and entitled to vote or by resolution of a majority
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation.

No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

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<PAGE>

Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.

Elections of directors need not be by written ballot.

3.4 RESIGNATION AND VACANCIES

Any director may resign at any time upon written notice to the corporation.
When one or more directors so resigns and the resignation is effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
section in the filling of other vacancies.

Unless otherwise provided in the certificate of incorporation or these
bylaws:

(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.

(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.

If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.

If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.

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<PAGE>

Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.

3.6 FIRST MEETINGS

The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.

3.7 REGULAR MEETINGS

Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.

3.8 SPECIAL MEETINGS; NOTICE

Special meetings of the board of directors may be called by the president
on three (3) days' notice to each director, either personally or by mail,
telegram, telex, or telephone; special meetings shall be called by the president
or secretary in like manner and on like notice on the written request of two (2)
directors unless the board consists of only one (1) director, in which case
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of the sole director.

3.9 QUORUM

At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.

3.10 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.

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3.11 ADJOURNED MEETING; NOTICE

If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.

3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.

3.13 FEES AND COMPENSATION OF DIRECTORS

Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.

3.14 APPROVAL OF LOANS TO OFFICERS

The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.

3.15 REMOVAL OF DIRECTORS

Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.

No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.

ARTICLE IV

COMMITTEES

4.1 COMMITTEES OF DIRECTORS

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<PAGE>

appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the board of directors or in the bylaws
of the corporation, shall have and may exercise all the powers and authority
of the board of directors in the management of the business and affairs of
the corporation, and may authorize the seal of the corporation to be affixed
to all papers that may require it; but no such committee shall have the power
or authority to (i) amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of
directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement
of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware, (iii) recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property
and assets, (iv) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (v) amend the bylaws of the
corporation; and, unless the board resolution establishing the committee, the
bylaws or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of Delaware.

4.2 COMMITTEE MINUTES

Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.

4.3 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may also be called by resolution of the board of
directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.

ARTICLE V

OFFICERS

5.1 OFFICERS

The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.

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<PAGE>

5.2 ELECTION OF OFFICERS

The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.

5.3 SUBORDINATE OFFICERS

The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.

Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.

5.5 VACANCIES IN OFFICES

Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.

5.6 CHAIRMAN OF THE BOARD

The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.

5.7 PRESIDENT

Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.

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<PAGE>

5.8 VICE PRESIDENT

In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.

5.9 SECRETARY

The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.

5.10 TREASURER

The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.

The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.

5.11 ASSISTANT SECRETARY

The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.

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<PAGE>

5.12 ASSISTANT TREASURER

The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.

5.13 AUTHORITY AND DUTIES OF OFFICERS

In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.

ARTICLE VI

INDEMNITY

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS

The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.

6.2 INDEMNIFICATION OF OTHERS

The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.

6.3 INSURANCE

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<PAGE>

such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under the provisions of the General Corporation Law of Delaware.

ARTICLE VII

RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF RECORDS

The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.

Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.

7.2 INSPECTION BY DIRECTORS

Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.

7.3 ANNUAL STATEMENT TO STOCKHOLDERS

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<PAGE>

The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.

7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.

ARTICLE VIII

GENERAL MATTERS

8.1 CHECKS

From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.

8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.

8.3 STOCK CERTIFICATES; PARTLY PAID SHARES

The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.

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<PAGE>

The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.

8.4 SPECIAL DESIGNATION ON CERTIFICATES

If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.

8.5 LOST CERTIFICATES

Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.

8.6 CONSTRUCTION; DEFINITIONS

Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.

8.7 DIVIDENDS

The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.

The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include
but not be limited to equalizing dividends, repairing or maintaining any
property of the corporation, and meeting contingencies.

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<PAGE>

8.8 FISCAL YEAR

The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.

8.9 SEAL

The seal of the corporation shall be such as from time to time may be
approved by the board of directors.

8.10 TRANSFER OF STOCK

Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.

8.11 STOCK TRANSFER AGREEMENTS

The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.

8.12 REGISTERED STOCKHOLDERS

The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.

ARTICLE IX

AMENDMENTS

The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.

ARTICLE X

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<PAGE>

DISSOLUTION

If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.

At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with
Section 103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.

Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall
have attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.

ARTICLE XI

CUSTODIAN

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES

The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:

(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or

(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or

(iii) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.

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11.2 DUTIES OF CUSTODIAN

The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.

<PAGE>

CERTIFICATE OF ADOPTION OF BYLAWS

HEALTHSCAPE CORPORATION

ADOPTION BY INCORPORATOR

The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of HealthScape Corporation hereby adopts the
foregoing bylaws, comprising twenty-two (22) pages, as the Bylaws of the
corporation.

Executed this 1st day of January 1996.

/s/ Ivan J. Brockman
------------------------------
Ivan J. Brockman, Incorporator

CERTIFICATE BY SECRETARY OF ADOPTION BY INCORPORATOR

The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of HealthScape Corporation and that the foregoing
Bylaws, comprising twenty-two (22) pages, were adopted as the Bylaws of the
corporation on January 1, 1996, by the person appointed in the Certificate of
Incorporation to act as the Incorporator of the corporation.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 1st day of January 1996.

/s/ Michael Curry
------------------------------
Michael Curry, Secretary

<PAGE>

CERTIFICATE OF AMENDMENT

OF BYLAWS OF

HEALTHEON CORPORATION

Section 2.3 of the Bylaws of this corporation was amended, effective
April 22, 1996, by the Board of Directors and a majority of the stockholders
to provide in its entirety as follows:

"ARTICLE II

MEETING OF STOCKHOLDERS

2.3 SPECIAL MEETING

A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or
by one or more stockholders holding shares in the aggregate entitled to cast
not less than ten percent (10%) of the votes at the meeting.

If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president, any vice
president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled
to vote, in accordance with the provisions of Section 2.4 and 2.5 of these
bylaws, that a meeting will be held at the time requested by the person or
persons calling the meeting, so long as that time is not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after receipt of
the request, then the person or persons requesting the meeting may give the
notice. Nothing contained in this paragraph of this Section 2.3 shall be
construed as limiting, fixing or affecting the time when a meeting of
stockholders called by action of the board of directors may be held."

Dated: April 22, 1996

/s/ Michael S. Curry
------------------------------
Michael S. Curry, Secretary

<PAGE>

CERTIFICATE OF AMENDMENT

OF BYLAWS OF

HEALTHEON CORPORATION

Section 3.2 of the Bylaws of this corporation was amended, effective May
19, 1998, by the Board of Directors and a majority of the stockholders to
provide in its entirety as follows:

"ARTICLE III

DIRECTORS

3.2 NUMBER OF DIRECTORS

The number of directors of the corporation shall be not less than six
(6) nor more than eight (8). The exact number of directors shall be eight
(8). This number may be changed, within the limits specified above, by a duly
adopted amendment to the certificate of incorporation or by an amendment to
this bylaw duly adopted by the vote or written consent of the holders of a
majority of the stock issued and outstanding and entitled to vote or by
resolution of a majority of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation.

No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires."

Dated: May 19, 1998

/s/ Kallen Chan
--------------------------------
Kallen Chan, Assistant Secretary

<PAGE>

EXHIBIT 3.4

AMENDED AND RESTATED BYLAWS

HEALTHEON CORPORATION
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
ARTICLE I

CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
1.1 REGISTERED OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-

ARTICLE II

MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
2.1 PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
2.2 ANNUAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
2.3 SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
2.4 NOTICE OF STOCKHOLDERS' MEETINGS. . . . . . . . . . . . . . . . . . . .-2-
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. . . . . . . . . . . . . .-2-
2.6 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-2-
2.7 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . .-2-
2.8 VOTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-2-
2.9 WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . .-3-
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . .-3-
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS . . . . . .-3-
2.12 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-4-
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE . . . . . . . . . . . . . . . . .-4-

ARTICLE III

DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-5-
3.1 POWERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-5-
3.2 NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . .-5-
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS . . . . . . . .-5-
3.4 RESIGNATION AND VACANCIES . . . . . . . . . . . . . . . . . . . . . . .-6-
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE. . . . . . . . . . . . . . . .-6-
3.6 FIRST MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-6-
3.7 REGULAR MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .-6-
3.8 SPECIAL MEETINGS; NOTICE. . . . . . . . . . . . . . . . . . . . . . . .-6-
3.9 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-6-
3.10 WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . .-7-
3.11 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . .-7-
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . .-7-
3.13 FEES AND COMPENSATION OF DIRECTORS. . . . . . . . . . . . . . . . . . .-7-
3.14 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . .-7-
3.15 REMOVAL OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . .-8-

ARTICLE IV

COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-8-
</TABLE>

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<PAGE>

TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
-----
<S> <C>
4.1 COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . .-8-
4.2 COMMITTEE MINUTES . . . . . . . . . . . . . . . . . . . . . . . . . . .-8-
4.3 MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . . . . . . . .-9-
4.4 ADVISORY COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . .-9-

ARTICLE V

OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-9-
5.1 OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-9-
5.2 ELECTION OF OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . .-9-
5.3 SUBORDINATE OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . .-9-
5.4 REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . . . . . . . -10-
5.5 VACANCIES IN OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . -10-
5.6 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . -10-
5.7 CHIEF EXECUTIVE OFFICER . . . . . . . . . . . . . . . . . . . . . . . -10-
5.8 PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
5.9 VICE PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
5.10 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
5.11 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . . . . . -11-
5.13 ASSISTANT SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . -12-
5.14 ASSISTANT TREASURER . . . . . . . . . . . . . . . . . . . . . . . . . -12-
5.15 AUTHORITY AND DUTIES OF OFFICERS. . . . . . . . . . . . . . . . . . . -12-

ARTICLE VI

INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . -12-
6.2 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . . . . . -12-
6.3 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-

ARTICLE VII

RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
7.1 MAINTENANCE AND INSPECTION OF RECORDS . . . . . . . . . . . . . . . . -13-
7.2 INSPECTION BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . -14-
7.3 ANNUAL STATEMENT TO STOCKHOLDERS. . . . . . . . . . . . . . . . . . . -14-
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. . . . . . . . . . . . -14-

ARTICLE VIII

GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
8.1 CHECKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS. . . . . . . . . . . -14-
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES. . . . . . . . . . . . . . . . -15-
8.4 SPECIAL DESIGNATION ON CERTIFICATES . . . . . . . . . . . . . . . . . -15-
</TABLE>

-ii-
<PAGE>

TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
-----
<S> <C>
8.5 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
8.6 CONSTRUCTION; DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . -16-
8.7 DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
8.8 FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
8.9 SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
8.10 TRANSFER OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
8.11 STOCK TRANSFER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . -16-
8.12 REGISTERED STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . -16-

ARTICLE IX

AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-

ARTICLE X

DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-

ARTICLE XI

CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES . . . . . . . . . . . . . -17-
11.2 DUTIES OF CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . -18-
</TABLE>

-iii-

<PAGE>

AMENDED AND RESTATED BYLAWS

HEALTHEON CORPORATION

ARTICLE I

CORPORATE OFFICES

1.1 REGISTERED OFFICE

The registered office of the corporation shall be at Corporation Trust
Center, 1209 Orange Street, in the City of Wilmington, County of New Castle,
State of Delaware. The name of the registered agent of the corporation at
such location is The Corporation Trust Company.

1.2 OTHER OFFICES

The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence
of any such designation, stockholders' meetings shall be held at the
principal office of the corporation.

2.2 ANNUAL MEETING

The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors.

2.3 SPECIAL MEETING

A special meeting of the stockholders may be called, at any time by the
board of directors, or by the president, or by one or more stockholders
holding shares in the aggregate entitled to cast not less than ten percent
(10%) of the votes at that meeting.

<PAGE>

chairman of the board, the president, any vice president or the secretary of
the corporation. The officer receiving the request shall cause notice to be
promptly given to the stockholders entitled to vote, in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be
held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five nor more than sixty (60) days
after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when
a meeting of stockholders called by action of the board of directors may be
held.

2.4 NOTICE OF STOCKHOLDERS' MEETINGS

All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.5 of these bylaws not
less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice
shall specify the place, date, and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
An affidavit of the secretary or an assistant secretary or of the transfer
agent of the corporation that the notice has been given shall, in the absence
of fraud, be prima facie evidence of the facts stated therein.

2.6 QUORUM

The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction
of business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting
at which a quorum is present or represented, any business may be transacted
that might have been transacted at the meeting as originally noticed.

2.7 ADJOURNED MEETING; NOTICE

When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.

2.8 VOTING

<PAGE>

The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these
bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).

Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.

2.9 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice unless so required by the certificate of
incorporation or these bylaws.

2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Section 2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING of
the Bylaws of this corporation was removed, in its entirety, effective as of
the initial public offering of the corporation, by the Board of Directors.

2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS

In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the board of directors may fix, in advance, a
record date, which shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to
any other action.

If the board of directors does not so fix a record date:

(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held.

(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.

(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.

<PAGE>

A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.

2.12 PROXIES

Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by a written proxy,
signed by the stockholder and filed with the secretary of the corporation,
but no such proxy shall be voted or acted upon after three (3) years from its
date, unless the proxy provides for a longer period. A proxy shall be deemed
signed if the stockholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a
proxy that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(c) of the General Corporation Law of Delaware.

2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE

The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.

2.14 NOMINATIONS AND PROPOSALS

Nominations of persons for election to the board of directors of the
corporation and the proposal of business to be considered by the stockholders
may be made at any meeting of stockholders only (a) pursuant to the
corporation's notice of meeting, (b) by or at the direction of the board of
directors or (c) by any stockholder of the corporation who was a stockholder
of record at the time of giving of notice provided for in these bylaws, who
is entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 2.14.

For nominations or other business to be properly brought before a
stockholders meeting by a stockholder pursuant to clause (c) of the preceding
sentence, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice
shall be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the meeting; provided,
however, that in the event that less than 65 days notice of the meeting is
given to stockholders, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the seventh (7th) day
following the day on which the notice of meeting was mailed. In no event
shall the public announcement of an adjournment of a stockholders meeting
commence a new time period for the giving of a stockholder's notice as
described above. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for

<PAGE>

election of directors in an election contest, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (or any successor thereto) and Rule 14a-11 thereunder (or
any successor thereto) (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting
and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such
beneficial owner, and (ii) the class and number of shares of the corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner. Notwithstanding any provision herein to the contrary, no
business shall be conducted at a stockholders meeting except in accordance
with the procedures set forth in this Section 2.14.

ARTICLE III

DIRECTORS

3.1 POWERS

Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.

3.2 NUMBER OF DIRECTORS

No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

The Board of Directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned
to each class in accordance with a resolution or resolutions adopted by the
Board of Directors. At the first annual meeting of stockholders following
the date hereof, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the
second annual meeting of stockholders following the date hereof, the term of
office of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the date hereof, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full
term of three years. At each succeeding annual meeting of stockholders,
directors shall be

<PAGE>

elected for a full term of three years to succeed the directors of the class
whose terms expire at such annual meeting.

Notwithstanding the foregoing provisions of this Section 3.3, each
director shall serve until his or her successor is duly elected and qualified
or until his or her death, resignation or removal. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of
any incumbent director.

3.4 RESIGNATION AND VACANCIES

Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other causes shall, unless the
Board of Directors determines by resolution that any such vacancies or newly
created directorships shall be filled by stockholders, except as otherwise
provided by law, be filled only by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
Board of Directors and not by the stockholders. Newly created directorships
resulting from any increase in the number of directors shall, unless the
Board of Directors determines by resolution that any such newly created
directorship shall be filled by the stockholders, be filled only by the
affirmative vote of the directors then in office, even though less than a
quorum of the Board of Directors and not by the stockholders. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.

3.6 FIRST MEETINGS

The first meeting of each newly elected board of directors shall be held
at such time and place as shall be determined by the directors.

3.7 REGULAR MEETINGS

Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.

3.8 SPECIAL MEETINGS; NOTICE

Special meetings of the board of directors may be called by the chief
executive officer on three (3) days' notice to each director, either
personally or by mail, telegram, telex, or telephone; special meetings shall
be called by the president or secretary in like manner and on like notice on
the written request of two (2) directors unless the board consists of only
one (1) director, in which case

<PAGE>

special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of the sole director.

3.9 QUORUM

At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the board of directors, except as may
be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present.

3.10 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.

3.11 ADJOURNED MEETING; NOTICE

If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.

3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the
board of directors, or of any committee thereof, may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.

3.13 FEES AND COMPENSATION OF DIRECTORS

Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the
compensation of directors.

3.14 APPROVAL OF LOANS TO OFFICERS

<PAGE>

such manner as the board of directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation. Nothing in this
section contained shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.

3.15 REMOVAL OF DIRECTORS

Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors.

No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.

ARTICLE IV

COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The board may designate
one or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent
or disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation,
shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers
that may require it; but no such committee shall have the power or authority
to (i) amend the certificate of incorporation (except that a committee may,
to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of Delaware.

4.2 COMMITTEE MINUTES

<PAGE>

Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.

4.3 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7
(regular meetings), Section 3.8 (special meetings and notice), Section 3.9
(quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and
notice of adjournment), and Section 3.12 (action without a meeting), with
such changes in the context of those bylaws as are necessary to substitute
the committee and its members for the board of directors and its members;
provided, however, that the time of regular meetings of committees may also
be called by resolution of the board of directors and that notice of special
meetings of committees shall also be given to all alternate members, who
shall have the right to attend all meetings of the committee. The board of
directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.

4.4 ADVISORY COMMITTEES

The board of directors may, by resolution passed by a majority of the
whole board, designate one or more advisory committees, with each committee to
consist of one or more of the directors of the corporation or any other such
persons as the board may appoint. The board may designate one or more
persons as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Members who are not
board members shall not have the responsibilities or obligations of board
members nor be deemed directors of the corporation for any other purpose.

ARTICLE V

OFFICERS

5.1 OFFICERS

The officers of the corporation shall be a chief executive officer
("CEO"), a president, one or more vice presidents, a secretary, a chief
financial officer ("CFO") and a treasurer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or
more assistant vice presidents, assistant secretaries, assistant treasurers,
and any such other officers as may be appointed in accordance with the
provisions of Section 5.3 of these bylaws. Any number of offices may be held
by the same person.

5.2 ELECTION OF OFFICERS

The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
bylaws, shall be chosen by the board of directors, subject to the rights, if
any, of an officer under any contract of employment.

5.3 SUBORDINATE OFFICERS

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The board of directors may appoint, or empower the CEO to appoint, such
other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and
perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or by any officer upon whom such power of
removal may be conferred by the board of directors.

Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice
to the rights, if any, of the corporation under any contract to which the
officer is a party.

5.5 VACANCIES IN OFFICES

Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.

5.6 CHAIRMAN OF THE BOARD

The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and
perform such other powers and duties as may from time to time be assigned to
him by the board of directors or as may be prescribed by these bylaws. If
there is no CEO, then the chairman of the board shall also be the CEO of the
corporation and shall have the powers and duties prescribed in Section 5.7 of
these bylaws.

5.7 CHIEF EXECUTIVE OFFICER

Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
CEO of the corporation shall, subject to the control of the board of
directors, have general supervision, direction, and control of the business
and the officers of the corporation. He shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board,
at all meetings of the board of directors. He shall have the general powers
and duties of management usually vested in the CEO of a corporation, and
shall have such other powers and duties as may be prescribed by the board of
directors or these bylaws.

5.8 PRESIDENT

The president may assume and perform the duties of the chief executive
officer in the absence or disability of the chief executive officer or
whenever the office of the chief executive officer is vacant. The president
of the corporation shall exercise and perform such powers and duties as may
from time to time be assigned to him by the board of directors, the CEO or as
may be prescribed by these bylaws. The president shall have authority to
execute in the name of the corporation bonds, contracts, deeds, leases and
other written instruments to be executed by the corporation. In the absence
or nonexistence of the chairman of the board and chief executive officer,

<PAGE>

he shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board and the chief executive officer, at
all meetings of the board of directors and shall perform such other duties as
the board of directors may from time to time determine.

5.9 VICE PRESIDENT

In the absence or disability of the CEO and the president, the vice
presidents, if any, in order of their rank as fixed by the board of directors
or, if not ranked, a vice president designated by the board of directors,
shall perform all the duties of the president and when so acting shall have
all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the board of directors, these bylaws, the president or the chairman of the
board.

5.10 SECRETARY

The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors,
committees of directors, and shareholders. The minutes shall show the time
and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented
at shareholders' meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names
of all shareholders and their addresses, the number and classes of shares
held by each, the number and date of certificates evidencing such shares, and
the number and date of cancellation of every certificate surrendered for
cancellation.

The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law
or by these bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these
bylaws.

5.11 CHIEF FINANCIAL OFFICER

The CFO shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings, and shares. The books of account shall at all reasonable times be
open to inspection by any director. The CFO shall have such other powers and
perform such other duties as may be prescribed by the board of directors or
these bylaws.

5.12 TREASURER

The treasurer shall deposit all money and other valuables in the name
and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the board of directors or these bylaws.

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5.13 ASSISTANT SECRETARY

The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of
the secretary and shall perform such other duties and have such other powers
as the board of directors or the stockholders may from time to time prescribe.

5.14 ASSISTANT TREASURER

The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of
the treasurer and shall perform such other duties and have such other powers
as the board of directors or the stockholders may from time to time prescribe.

5.15 AUTHORITY AND DUTIES OF OFFICERS

In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.

ARTICLE VI

INDEMNITY

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS

The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware, indemnify each of its directors
and officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was
an agent of the corporation. For purposes of this Section 6.1, a "director"
or "officer" of the corporation includes any person (i) who is or was a
director or officer of the corporation or any subsidiary of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was
a predecessor corporation of the corporation or any of its subsidiaries or of
another enterprise at the request of such predecessor corporation or
subsidiary.

6.2 INDEMNIFICATION OF OTHERS

<PAGE>

of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation
(other than a director or officer) includes any person (i) who is or was an
employee or agent of the corporation or any subsidiary of the corporation,
(ii) who is or was serving at the request of the corporation as an employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was an employee or agent of a corporation which was
a predecessor corporation of the corporation or any of its subsidiaries or of
another enterprise at the request of such predecessor corporation or
subsidiary.

6.3 INSURANCE

The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation or its
subsidiaries as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the provisions
of the General Corporation Law of Delaware.

ARTICLE VII

RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF RECORDS

The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record
of its shareholders listing their names and addresses and the number and
class of shares held by each shareholder, a copy of these bylaws as amended
to date, accounting books, and other records.

Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other
books and records and to make copies or extracts therefrom. A proper purpose
shall mean a purpose reasonably related to such person's interest as a
stockholder. In every instance where an attorney or other agent is the
person who seeks the right to inspection, the demand under oath shall be
accompanied by a power of attorney or such other writing that authorizes the
attorney or other agent to so act on behalf of the stockholder. The demand
under oath shall be directed to the corporation at its registered office in
Delaware or at its principal place of business.

The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.

<PAGE>

7.2 INSPECTION BY DIRECTORS

Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine
whether a director is entitled to the inspection sought. The Court may
summarily order the corporation to permit the director to inspect any and all
books and records, the stock ledger, and the stock list and to make copies or
extracts therefrom. The Court may, in its discretion, prescribe any
limitations or conditions with reference to the inspection, or award such
other and further relief as the Court may deem just and proper.

7.3 ANNUAL STATEMENT TO STOCKHOLDERS

The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.

7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

The chairman of the board, the CEO, the CFO or any other person
authorized by the board of directors or the CEO, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to
any and all shares of any other corporation or corporations standing in the
name of this corporation. The authority granted herein may be exercised
either by such person directly or by any other person authorized to do so by
proxy or power of attorney duly executed by such person having the authority.

ARTICLE VII

GENERAL MATTERS

8.1 CHECKS

From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.

8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the
agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.

<PAGE>

8.3 STOCK CERTIFICATES; PARTLY PAID SHARES

The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not
apply to shares represented by a certificate until such certificate is
surrendered to the corporation. Notwithstanding the adoption of such a
resolution by the board of directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation
by the chairman or vice-chairman of the board of directors, or the president
or vice-president, and by the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of such corporation representing the
number of shares registered in certificate form. Any or all of the signatures
on the certificate may be a facsimile. In case any officer, transfer agent
or registrar who has signed or whose facsimile signature has been placed upon
a certificate has ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or registrar at
the date of issue.

The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated. Upon the declaration of any dividend on fully paid shares,
the corporation shall declare a dividend upon partly paid shares of the same
class, but only upon the basis of the percentage of the consideration
actually paid thereon.

8.4 SPECIAL DESIGNATION ON CERTIFICATES

If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may
be set forth on the face or back of the certificate that the corporation
shall issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests
the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.

8.5 LOST CERTIFICATES

Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter
is surrendered to the corporation and cancelled at the same time. The
corporation may issue a new certificate of stock or uncertificated shares in
the place of any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may
be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate or
uncertificated shares.

<PAGE>

8.6 CONSTRUCTION; DEFINITIONS

8.7 DIVIDENDS

The directors of the corporation, subject to any restrictions contained
in the certificate of incorporation, may declare and pay dividends upon the
shares of its capital stock pursuant to the General Corporation Law of
Delaware. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.

8.8 FISCAL YEAR

The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.

8.9 SEAL

The seal of the corporation shall be such as from time to time may be
approved by the board of directors.

8.10 TRANSFER OF STOCK

Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate, and record the transaction in
its books.

8.11 STOCK TRANSFER AGREEMENTS

The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.

8.12 REGISTERED STOCKHOLDERS

The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of another person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.

<PAGE>
ARTICLE IX

AMENDMENTS

The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders or the board of directors.

ARTICLE X

DISSOLUTION

ARTICLE XI

CUSTODIAN

11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES

<PAGE>
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:

(i) at any meeting held for the election of directors the stockholders are
so divided that they have failed to elect successors to directors whose terms
have expired or would have expired upon qualification of their successors; or

(ii) the business of the corporation is suffering or is threatened with
irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or

(iii) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.

11.2 DUTIES OF CUSTODIAN

<PAGE>

ACTAMED CORPORATION

1997 STOCK OPTION PLAN

ARTICLE I

GENERAL

1.1 PURPOSE OF THE PLAN.

The purpose of the ActaMed Corporation 1997 Stock Option Plan (the "Plan")
is to assist ActaMed Corporation (the "Company") in securing and retaining Key
Employees and Consultants of outstanding ability by making it possible to offer
them an increased incentive to advise, join or continue in the service of the
Company and to increase their efforts for its welfare through participation or
increased participation in the ownership and growth of the Company.

1.2 DEFINITIONS.

(a) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of
the Company.

(b) "CODE" means the Internal Revenue Code of 1986, as amended.

(d) "COMMON STOCK" means the common stock of the Company.

(e) "CONSULTANT" means any person not employed by the Company
rendering consulting or advisory services to the Company who is expected or
determined by the Committee to contribute significantly to the management,
growth or direction of some part or all of the business of the Company or its
subsidiaries. The power to determine who is and who is not a Consultant for
purposes of this Plan is reserved solely for the Committee.

(f) "FAIR MARKET VALUE" means the closing price of the shares on a
national securities exchange on which the Common Stock is primarily traded on
the day on which such value is to be determined or, if no shares were traded on
such day, on the next preceding day on which shares were traded, as reported by
National Quotation Bureau, Inc. or other national quotation service. If the
shares of Common Stock are traded in the over-the-counter market, "fair market
value" means the closing "asked" price of the shares in the over-the-counter
market on the day on which such value is to be determined or, if such "asked"
price is not available, the last sales price on such day or, if no shares were
traded on such day, on the next preceding day on which the shares were traded,
as reported by the National Association of Securities Dealers Automatic
Quotation System (NASDAQ) or other national quotation service. Nevertheless, if
the Board of Directors determines that the fair market value of the Common Stock
cannot be accurately determined

<PAGE>

pursuant to the methodologies described above or if shares of Common Stock
are not traded on an exchange or in the over-the-counter market, Fair Market
Value shall be the value determined by the Board of Directors or Committee
administering the Plan, taking into consideration those factors affecting or
reflecting value which they deem appropriate.

(g) "INCENTIVE STOCK OPTION" means an option to purchase shares of
Common Stock which is intended to qualify as an incentive stock option as
defined in Section 422 of the Code and which may be granted solely to a Key
Employee.

(h) "KEY EMPLOYEE" means any person, including officers and directors
in the regular employment of the Company or its subsidiaries, who is designated
a Key Employee by the Committee and is or is expected to be primarily
responsible for or to contribute significantly to the management, growth, or
supervision of some part or all of the business of the Company or its
subsidiaries. The power to determine who is and who is not a Key Employee is
reserved solely for the Committee.

(i) "NONQUALIFIED STOCK OPTION" means an option to purchase shares of
Common Stock which is not intended to qualify as an incentive stock option as
defined in Section 422 of the Code and which may be granted to Key Employees and
Consultants.

(j) "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.

(k) "OPTIONEE" means a Key Employee or Consultant to whom an Option
is granted under the Plan.

(l) "PARENT" means any corporation which qualifies as a parent of a
corporation under the definition of "parent corporation" contained in Section
424(e) of the Code.

(m) "SUBSIDIARY" means any corporation which qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation
contained in Section 424(f) of the Code.

(n) "TERM" means the period during which a particular Option may be
exercised as determined by the Committee and as provided in the option
agreement.

1.3 ADMINISTRATION OF THE PLAN.

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<PAGE>
Option or a Nonqualified Stock Option. Determinations by the Committee under
the Plan (including, without limitation, determinations of the person to
receive Options, the form, amount and timing of such Options, and the terms
and provisions of such Options and the agreements evidencing same) need not
be uniform and may be made by it selectively among persons who receive, or
are eligible to receive, Options under the Plan, whether or not such persons
are similarly situated. In serving on the Committee, members thereof shall
be considered to be acting in their capacity as members of the Board of
Directors and shall be entitled to all rights of indemnification provided by
the Bylaws of the Company or otherwise to members of the Board of Directors.

1.4 SHARES SUBJECT TO THE PLAN.

The total number of shares that may be purchased pursuant to Options
under the Plan shall not exceed 500,000 shares of Common Stock. Shares subject
to the Options which terminate or expire prior to exercise shall be available
for future Options under the Plan without being charged against the limitation
of 500,000 shares set forth above. Shares issued pursuant to the Plan may be
either unissued shares of Common Stock or reacquired shares of Common Stock held
in treasury.

1.5 TERMS AND CONDITIONS OF OPTIONS.

All Options shall be evidenced by option agreements in such form as
the Committee shall approve from time to time subject to the provisions of
Article II and Article III, as appropriate, and the following provisions:

(a) EXERCISE PRICE. Except as provided in Section 3.1, the exercise
price of the Option shall not be less than the Fair Market Value (as determined
by the Committee) of the Common Stock at the time the Option is granted. In
making such determination, if the Board of Directors believes that the Company
will engage in an initial public offering within 90 days of the date an Option
is granted, the Board of Directors may designate the Fair Market Value as the
initial offering price in such public offering after finding that such initial
offering price will reflect an amount no less than the fair market value of the
Common Stock on the date of Option grant. If the anticipated public offering
does not occur within such 90 day period, the Board of Directors shall determine
the Fair Market Value as of the date of the grant in the manner set forth in
Section 1.2 hereof.

(b) EXERCISE. The Committee shall determine whether the Option shall
be exercisable in full at any time during the Term or in cumulative or
noncumulative installments during the Term.

(c) TERMINATION OF EMPLOYMENT. An Optionee's Option shall expire on
the expiration of the Term specified in Section 2.1 or 3.1, as the case may be,
or upon the occurrence of such events as are specified in the option agreement.
If the option agreement permits exercise of the Option after termination of
employment, the Optionee may exercise the Option only with respect to the shares
which could have been purchased by the Optionee at the date of termination of
employment. However, the Committee may, but is not required to, waive any
requirements made

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<PAGE>
pursuant to Section 1.5(b) so that some or all of the shares subject to the
Option may be exercised within the time limitation described in this
subsection. An Optionee's employment shall be deemed to terminate on the
last date for which he receives a regular wage or salary payment. Whether
military, government or other service or other leave of absence shall
constitute a termination of employment shall be determined in each case by
the Committee at its discretion, and any determination by the Committee shall
be final and conclusive. A termination of employment shall not occur where
the Optionee transfers from the Company to one of its Subsidiaries or
transfers from a Subsidiary to the Company or transfers between Subsidiaries.

(d) DEATH OR DISABILITY. Upon termination of an Optionee's
employment by reason of death or disability (as determined by the Committee
consistent with the definition of Section 422(c)(6) of the Code), the Option
shall expire on the earlier of the expiration of (i) the date specified in the
option agreement which in no event shall be later than 12 months after the date
of such termination, or (ii) the Term specified in Section 2.1 or 3.1, as the
case may be. The Optionee or his successor in interest, as the case may be, may
exercise the Option only as to the shares that could have been purchased by the
Optionee at the date of his termination of employment. However, the Committee
may, but is not required to, waive any requirements made pursuant to Section
1.5(b) so that some or all of the shares subject to the Option may be exercised
within the time limitation described in this subsection.

(e) PAYMENT. Payment for shares as to which an Option is exercised
shall be made in such manner and at such time or times as shall be provided in
the option agreement, including cash, Common Stock of the Company which was
previously acquired by the Optionee, or any combination thereof. The Fair
Market Value of the surrendered Common Stock as of the date of exercise shall be
determined in valuing Common Stock used in payment for Options.

(f) NONTRANSFERABILITY. No Option granted under the Plan shall be
transferable other than by will or by the laws of descent and distribution.
During the lifetime of the Optionee, an Option shall be exercisable only by the
Optionee.

(g) CHANGE IN CONTROL. In the discretion of the Committee, an option
agreement may contain provisions providing that in the event of a "change in
control" of the Company, such Option shall become immediately exercisable in
full notwithstanding any provisions in the option agreement to the contrary.
For the purposes of this paragraph (g), a "change in control" of the Company
shall be deemed to occur if (i) the Company is a party to a merger, share
exchange or other business combination pursuant to which the Company does not
survive or survives only as a subsidiary of another corporation; or (ii) all or
substantially all of the assets of the Company are sold or otherwise disposed
of.

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<PAGE>
directly or indirectly attributable to the exercise or acceleration of
exercise of an Option (including, without limitation, any tax under Code
Section 280G).

1.6 STOCK ADJUSTMENTS; MERGERS.

(a) GENERALLY. Notwithstanding Section 1.4, in the event the
outstanding shares of Common Stock are increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of any other corporation by reason of any merger, sale of stock,
consolidation, liquidation, recapitalization, reclassification, stock split up,
combination of shares, share exchange, stock dividend, or transaction having
similar effect, the total number of shares of Common Stock set forth in Section
1.4 shall be proportionately and appropriately adjusted by the Committee.

(b) OPTIONS. Following a transaction described in subsection (a)
above, if the Company continues in existence, the number and kind of shares that
are subject to any Option and the option price per share shall be
proportionately and appropriately adjusted without any change in the aggregate
price to be paid therefor upon exercise of the Option. If the Company will not
remain in existence or substantially all of its Common Stock will be purchased
by a single purchaser or group of purchasers acting together, then the Committee
may (i) declare that all Options shall terminate 30 days after the Committee
gives written notice to all Optionees of their immediate right to exercise all
Options then outstanding (without regard to limitations on exercise otherwise
contained in the Options), or (ii) notify all Optionees that all Options granted
under the Plan shall apply with appropriate adjustments as determined by the
Committee to the securities of the successor corporation to which holders of the
numbers of shares subject to such Options would have been entitled, or (iii)
take action that is some combination of aspects of (i) and (ii). Except as
provided in the last sentence of this paragraph (b), the determination by the
Committee as to the terms of any of the foregoing adjustments shall be
conclusive and binding. Any fractional shares resulting from any of the
foregoing adjustments under this paragraph shall be disregarded and eliminated.
Notwithstanding anything else contained in this Section 1.6(b), if an option
agreement permits the immediate exercise in full of an Option upon a change in
control as provided in Section 1.5(g) above, the provisions of such option
agreement may not be revised by the Committee pursuant to this Section 1.6(b)
without the consent of the Optionee.

1.7 NOTIFICATION OF EXERCISE.

Options shall be exercised by written notice directed to the Secretary
of the Company at the principal executive offices of the Company. Such written
notice shall be accompanied by any payment required pursuant to Section 1.5(e)
and shall be effective upon receipt by the Secretary of the Company received
during normal business hours or if not so received, such exercise shall be
effective on the next regular business day of the Company. Exercise by an
Optionee's heir or the representative of his estate shall be accompanied by
evidence of his authority to so act in form reasonably satisfactory to the
Company.

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<PAGE>
ARTICLE II

INCENTIVE STOCK OPTIONS

2.1 TERMS OF INCENTIVE STOCK OPTIONS.

Each Incentive Stock Option granted under the Plan to a Key Employee
shall be exercisable only during a Term fixed by the Committee; provided,
however, that the Term shall end no later than 10 years after the date the
Incentive Stock Option is granted.

2.2 LIMITATION ON OPTIONS.

The aggregate Fair Market Value of Common Stock (determined at the
time the Incentive Stock Option is granted) subject to Incentive Stock
Options granted to a Key Employee under all plans of the Key Employee's
employer corporation and its Parent or Subsidiary corporations and that
become exercisable for the first time by such Key Employee during any
calendar year may not exceed $100,000.

2.3 SPECIAL RULE FOR TEN PERCENT SHAREHOLDER.

If at the time an Incentive Stock Option is granted, an employee owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of his employer corporation or of its Parent or any of its
Subsidiaries, as determined using the attribution rules of Section 424(d) of the
Code, then the terms of the Incentive Stock Option shall specify that the option
price shall be at least 110% of the Fair Market Value of the stock subject to
the Incentive Stock Option, and such Incentive Stock Option shall not be
exercisable after the expiration of five years from the date such Incentive
Stock Option is granted.

2.4 INTERPRETATION.

In interpreting this Article II of the Plan and the provisions of
individual option agreements, the Committee shall be governed by the principles
and requirements of Sections 421, 422 and 424 of the Code, and applicable
Treasury Regulations.

ARTICLE III

NONQUALIFIED STOCK OPTIONS

3.1 TERMS AND CONDITIONS OF OPTIONS.

In addition to the requirements of Section 1.5, each Nonqualified
Stock Option granted under the Plan to a Key Employee or Consultant shall be
subject to the following provisions:

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<PAGE>
(a) TERM. Each Nonqualified Stock Option granted under the plan
shall be exercisable only during a term fixed by the Committee.

(b) EXERCISE PRICE. The Company may elect to grant Nonqualified
Stock Options at a price less than the Fair Market Value of the Common Stock at
the time the Option is granted.

3.2 SECTION 83(b) ELECTION.

The Company recognizes that certain persons who receive Nonqualified
Stock Options may be subject to restrictions regarding their right to trade
Common Stock under applicable securities laws. Such restrictions may cause
Optionees exercising such Options not to be taxable under the provisions of
Section 83(c) of the Code. Accordingly, Optionees exercising such Nonqualified
Stock Options may consider making an election to be taxed upon exercise of the
Option under Section 83(b) of the Code and to effect such election will file
such election with the Internal Revenue Service within thirty (30) days of
exercise of the Option and otherwise in accordance with applicable Treasury
Regulations.

ARTICLE IV

ADDITIONAL PROVISIONS

4.1 STOCKHOLDER APPROVAL.

The Plan shall be submitted for the approval of the stockholders of
the Company as soon as reasonably practicable following the adoption of the Plan
by the Board of Directors or the Compensation Committee and in all events within
one year of its approval by such Board or Committee. If the stockholders of the
Company do not approve the Plan as provided in this Section 4.1, the Plan shall
terminate.

4.2 COMPLIANCE WITH OTHER LAWS AND REGULATIONS.

The Plan, the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable Federal and state laws, rules, and regulations and
to such approvals by any government or regulatory agency as may be required.
The Company shall not be required to issue or deliver any certificates for
shares of Common Stock prior to (a) the listing of such shares on any stock
exchange on which the Common Stock may then be listed and (b) the completion of
any registration or qualification (or determination of the availability of an
exemption therefrom) of such shares under any Federal or state law, or any
ruling or regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.

-7-
<PAGE>
4.3 AMENDMENTS.

The Board of Directors may discontinue the Plan at any time, and may
amend it from time to time. However, except as permitted under Section 1.6, no
amendment, without approval by stockholders, may (a) increase the total number
of shares which may be issued under the Plan or to any individual under the
Plan, (b) extend the date on which the Plan will terminate, (c) reduce the
Option price for shares which may be purchased pursuant to Options under
Articles II or III of the Plan, (d) extend the period during which Options may
be granted, (e) change the class of eligible persons to whom Options may be
granted under the Plan, or (f) change the provisions of the Plan in such a
manner so as to increase materially the benefits accruing under the Plan. Other
than as expressly permitted under the Plan, no outstanding Option may be revoked
or altered in a manner unfavorable to the Optionee without the consent of the
Optionee.

4.4 NO RIGHTS AS SHAREHOLDER.

No Optionee shall have any rights as a shareholder with respect to any
share subject to his Option prior to the date of issuance to him of a
certificate or certificates for such shares.

4.5 WITHHOLDING.

Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right to
require the Optionee to remit to the Company an amount sufficient to satisfy any
Federal, state or local withholding tax liability in such form as the Company
may determine or accept in its sole discretion, including payment by surrender
or retention of shares of Common Stock prior to the delivery of any certificate
or certificates for such shares. Whenever under the Plan payments are to be
made in cash, such payments shall be made net of an amount sufficient to satisfy
any Federal, state, or local withholding tax liability.

4.6 CONTINUED EMPLOYMENT NOT PRESUMED.

This Plan and any document describing this Plan and the grant of any
Option hereunder shall not give any Optionee or other employee or Director a
right to continued employment by the Company or its Subsidiaries or affect the
right of the Company or its Subsidiaries to terminate the employment of any such
person with or without cause.

4.7 EFFECTIVE DATE; DURATION.

The Plan shall become effective as of February 9, 1997, subject to
stockholder approval pursuant to Section 4.1, and shall expire at midnight
(eastern standard time) on February 9, 2006. No Options may be granted under
the Plan after February 9, 2006, but Options granted on or before that date may
be exercised according to the terms of the related agreements and shall continue
to be governed by and interpreted consistent with the terms hereof.

* * *

-8-
<PAGE>
The foregoing Plan was approved and adopted by the Board of Directors of
the Company on December 31, 1997.

-9-

<PAGE>

ACTAMED CORPORATION

1996 STOCK OPTION PLAN

ARTICLE I

GENERAL

1.1 PURPOSE OF THE PLAN.

The purpose of the ActaMed Corporation 1996 Stock Option Plan (the
"Plan") is to assist ActaMed Corporation (the "Company") in securing and
retaining Key Employees and Consultants of outstanding ability by making it
possible to offer then an increased incentive to advise, join or continue in
the service of the Company and to increase their efforts for its welfare
through participation or increased participation in the ownership and growth
of the Company.

1.2 DEFINITIONS.

(a) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors
of the Company.

(b) "CODE" means the Internal Revenue Code of 1986, as amended.

(d) "COMMON STOCK" means the common stock of the Company.

(f) "FAIR MARKET VALUE" means the closing price of the shares on a
national securities exchange on which the Common Stock is primarily traded on
the day on which such value is to be determined or, if no shares were traded
on such day, on the next preceding day on which shares were traded, as
reported by National Quotation Bureau, Inc. or other national quotation
service. If the shares of Common Stock are traded in the over-the-counter
market, "fair market value" means the closing "asked" price of the shares in
the over-the-counter market on the day on which such value is to be
determined or, if such "asked" price is not available, the last sales price
on such day or, if no shares were traded on such day, on the next preceding
day on which the shares were traded, as reported by the National Association
of Securities Dealers Automatic Quotation System (NASDAQ) or other national
quotation service. Nevertheless, if the Board of Directors determines that
the fair market value of the Common Stock cannot be accurately determined

<PAGE>

(h) "KEY EMPLOYEE" means any person, including officers and
directors in the regular employment of the Company or its subsidiaries, who
is designated a Key Employee by the Committee and is or is expected to be
primarily responsible for or to contribute significantly to the management,
growth, or supervision of some part or all of the business of the Company or
its subsidiaries. The power to determine who is and who is not a Key
Employee is reserved solely for the Committee.

(i) "NONQUALIFIED STOCK OPTION" means an option to purchase shares
of Common Stock which is not intended to qualify as an incentive stock option
as defined in Section 422 of the Code and which may be granted to Key
Employees and Consultants.

(j) "OPTION" means an Incentive Stock Option or a Nonqualified
Stock Option.

(k) "OPTIONEE" means a Key Employee or Consultant to whom an
Option is granted under the Plan.

(l) "PARENT" means any corporation which qualifies as a parent of
a corporation under the definition of "parent corporation" contained in
Section 424(e) of the Code.

(m) "SUBSIDIARY" means any corporation which qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation"
contained in Section 424(f) of the Code.

(n) "TERM" means the period during which a particular Option may
be exercised as determined by the Committee and as provided in the option
agreement.

1.3 ADMINISTRATION OF THE PLAN.

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<PAGE>

Option or a Nonqualified Stock Option. Determinations by the Committee under
the Plan (including, without limitation, determinations of the person to
receive Options, the form, amount and timing of such Options, and the terms
and provisions of such Options and the agreements evidencing same) need not
be uniform and may be made by it selectively among persons who receive, or
are eligible to receive, Options under the Plan, whether or not such persons
are similarly situated. In serving on the Committee, members thereof shall
be considered to be acting in their capacity as members of the Board of
Directors and shall be entitled to all rights of indemnification provided by
the Bylaws of the Company or otherwise to members of the Board of Directors.

1.4 SHARES SUBJECT TO THE PLAN.

The total number of shares that may be purchased pursuant to Options
under the Plan shall not exceed 500,000 shares of Common Stock. Shares
subject to the Options which terminate or expire prior to exercise shall be
available for future Options under the Plan without being charged against the
limitation of 500,000 shares set forth above. Shares issued pursuant to the
Plan may be either unissued shares of Common Stock or reacquired shares of
Common Stock held in treasury.

1.5 TERMS AND CONDITIONS OF OPTIONS.

All Options shall be evidenced by option agreements in such form as the
Committee shall approve from time to time subject to the provisions of
Article II and Article III, as appropriate, and the following provisions:

(a) EXERCISE PRICE. Except as provided in Section 3.1, the
exercise price of the Option shall not be less than the Fair Market Value (as
determined by the Committee) of the Common Stock at the time the Option is
granted. In making such determination, if the Board of Directors believes
that the Company will engage in an initial public offering within 90 days of
the date an Option is granted, the Board of Directors may designate the Fair
Market Value as the initial offering price in such public offering after
finding that such initial offering price will reflect an amount no less than
the fair market value of the Common Stock on the date of Option grant. If
the anticipated public offering does not occur within such 90 day period, the
Board of Directors shall determine the Fair Market Value as of the date of
the grant in the manner set forth in Section 1.2 hereof.

(b) EXERCISE. The Committee shall determine whether the Option
shall be exercisable in full at any time during the Term or in cumulative or
noncumulative installments during the Term.

(c) TERMINATION OF EMPLOYMENT. An Optionee's Option shall expire
on the expiration of the Term specified in Section 2.1 or 3.1, as the case
may be, or upon the occurrence of such events as are specified in the option
agreement. If the option agreement permits exercise of the Option after
termination of employment, the Optionee may exercise the Option only with
respect to the Shares which could have been purchased by the Optionee at the
date of termination of employment. However, the Committee may, but is not
required to, waive any requirements made

-3-

<PAGE>

pursuant to Section 1.5(b) so that some or all of the shares subject to the
Option may be exercised within the time limitation described in this
subsection. An Optionee's employment shall be deemed to terminate on the
last date for which he receives a regular wage or salary payment. Whether
military, government or other service or other leave of absence shall
constitute a termination of employment shall be determined in each case by
the Committee at its discretion, and any determination by the Committee shall
be final and conclusive. A termination of employment shall not occur where
the Optionee transfers from the Company to one of its Subsidiaries or
transfers from a Subsidiary to the Company or transfers between Subsidiaries.

(d) DEATH OR DISABILITY. Upon termination of an Optionee's
employment by reason of death or disability (as determined by the Committee
consistent with the definition of Section 422(c)(6) of the Code), the Option
shall expire on the earlier of the expiration of (i) the date specified in
the option agreement which in no event shall be later than 12 months after
the date of such termination, or (ii) the Term specified in Section 2.1 or
3.1, as the case may be. The Optionee or his successor in interest, as the
case may be, may exercise the Option only as to the shares that could have
been purchased by the Optionee at the date of his termination of employment.
However, the Committee may, but is not required to, waive any requirements
made pursuant to Section 1.5(b) so that some or all of the shares subject to
the Option may be exercised within the time limitation described in this
subsection.

(e) PAYMENT. Payment for shares as to which an Option is
exercised shall be made in such manner and at such time or times as shall be
provided in the option agreement, including cash, Common Stock of the Company
which was previously acquired by the Optionee, or any combination thereof.
The Fair Market Value of the surrendered Common Stock as of the date of
exercise shall be determined in valuing Common Stock used in payment for
Options.

(g) CHANGE IN CONTROL. In the discretion of the Committee, an
option agreement may contain provisions providing that in the event of a
"change in control" of the Company, such Option shall become immediately
exercisable in full notwithstanding any provisions in the option agreement to
the contrary. For the purposes of this paragraph (g), a "change in control"
of the Company shall be deemed to occur if (i) the Company is a party to a
merger, share exchange or other business combination pursuant to which the
Company does not survive or survives only as a subsidiary of another
corporation; or (ii) all or substantially all of the assets of the Company
are sold or otherwise disposed of.

-4-

<PAGE>

directly or indirectly attributable to the exercise or acceleration of
exercise of an Option (including, without limitation, any tax under Code
Section 280G).

1.6 STOCK ADJUSTMENTS; MERGERS.

(a) GENERAL. Notwithstanding Section 1.4, in the event the
outstanding shares of Common Stock are increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of
the Company or of any other corporation by reason of any merger, sale of
stock, consolidation, liquidation, recapitalization, reclassification, stock
split up, combination of shares, share exchange, stock dividend, or
transaction having similar effect, the total number of shares of Common Stock
set forth in Section 1.4 shall be proportionately and appropriately adjusted
by the Committee.

(b) OPTIONS. Following a transaction described in subsection (a)
above, if the Company continues in existence, the number and kind of shares
that are subject to any Option and the option price per share shall be
proportionately and appropriately adjusted without any change in the
aggregate price to be paid therefor upon exercise of the Option. If the
Company will not remain in existence or substantially all of its Common Stock
will be purchased by a single purchaser or group of purchasers acting
together, then the Committee may (i) declare that all Options shall terminate
30 days after the Committee gives written notice to all Optionees of their
immediate right to exercise all Options then outstanding (without regard to
limitations on exercise otherwise contained in the Options), or (ii) notify
all Optionees that all Options granted under the Plan shall apply with
appropriate adjustments as determined by the Committee to the securities of
the successor corporation to which holders of the numbers of shares subject
to such Options would have been entitled, or (iii) take action that is some
combination of aspects of (i) and (ii). Except as provided in the last
sentence of this paragraph (b), the determination by the Committee as to the
terms of any of the foregoing adjustments shall be conclusive and binding.
Any fractional shares resulting from any of the foregoing adjustments under
this paragraph shall be disregarded and eliminated. Notwithstanding anything
else contained in this Section 1.6(b), if an option agreement permits the
immediate exercise in full of an Option upon a change in control as provided
in Section 1.5(g) above, the provisions of such option agreement may not be
revised by the Committee pursuant to this Section 1.6(b) without the consent
of the Optionee.

1.7 NOTIFICATION OF EXERCISE.

Options shall be exercised by written notice directed to the Secretary
of the Company at the principal executive offices of the Company. Such
written notice shall be accompanied by any payment required pursuant to
Section 1.5(e) and shall be effective upon receipt by the Secretary of the
Company received during normal business hours or if not so received, such
exercise shall be effective on the next regular business day of the Company.
Exercise by an Optionee's heir or the representative of his estate shall be
accompanied by evidence of his authority to so act in form reasonably
satisfactory to the Company.

-5-

<PAGE>

ARTICLE II

INCENTIVE STOCK OPTIONS

2.1 TERMS OF INCENTIVE STOCK OPTIONS.

2.2 LIMITATION ON OPTIONS.

The aggregate Fair Market Value of Common Stock (determined at the time
the Incentive Stock Option is granted) subject to Incentive Stock Options
granted to a Key Employee under all plans of the Key Employee's employer
corporation and its Parent or Subsidiary corporations and that become
exercisable for the first time by such Key Employee during any calendar year
may not exceed $100,000.

2.3 SPECIAL RULE FOR TEN PERCENT SHAREHOLDER.

If at the time an Incentive Stock Option is granted, an employee owns
stock possessing more than 10% of the total combined voting power of all
classes of stock of his employer corporation or of its Parent or any of its
Subsidiaries, as determined using the attribution rules of Section 424(d) of
the Code, then the terms of the Incentive Stock Option shall specify that the
option price shall be at least 110% of the Fair Market Value of the stock
subject to the Incentive Stock Option, and such Incentive Stock Option shall
not be exercisable after the expiration of five years from the date such
Incentive Stock Option is granted.

2.4 INTERPRETATION.

In interpreting this Article II of the Plan and the provisions of
individual option agreements, the Committee shall be governed by the
principles and requirements of Sections 421, 422 and 424 of the Code, and
applicable Treasury Regulations.

ARTICLE III

NONQUALIFIED STOCK OPTIONS

3.1 TERMS AND CONDITIONS OF OPTIONS.

In addition to the requirements of Section 1.5, each Nonqualified Stock
Option granted under the Plan to a Key Employee or Consultant shall be
subject to the following provisions:

-6-

<PAGE>

(a) TERM. Each Nonqualified Stock Option granted under the plan
shall be exercisable only during a term fixed by the Committee.

(b) EXERCISE PRICE. The Company may elect to grant Nonqualified
Stock Options at a price less than the Fair Market Value of the Common Stock
at the time the Option is granted.

3.2 SECTION 83(b) ELECTION.

The Company recognizes that certain persons who receive Nonqualified
Stock Options may be subject to restrictions regarding their right to trade
Common Stock under applicable securities laws. Such restrictions may cause
Optionees exercising such Options not to be taxable under the provisions of
Section 83(c) of the Code. Accordingly, Optionees exercising such
Nonqualified Stock Options may consider making an election to be taxed upon
exercise of the Option under Section 83(b) of the Code and to effect such
election will file such election with the Internal Revenue Service within
thirty (30) days of exercise of the Option and otherwise in accordance with
applicable Treasury Regulations.

ARTICLE IV

ADDITIONAL PROVISIONS

4.1 STOCKHOLDER APPROVAL.

The Plan shall be submitted for the approval of the stockholders of the
Company as soon as reasonably practicable following the adoption of the Plan
by the Board of Directors or the Compensation Committee and in all events
within one year of its approval by such Board or Committee. If the
stockholders of the Company do not approve the Plan as provided in this
Section 4.1, the Plan shall terminate.

4.2 COMPLIANCE WITH OTHER LAWS AND REGULATIONS.

The Plan, the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options,
shall be subject to all applicable Federal and state laws, rules, and
regulations and to such approvals by any government or regulatory agency as
may be required. The Company shall not be required to issue or deliver any
certificates for shares of Common Stock prior to (a) the listing of such
shares on any stock exchange on which the Common Stock may then be listed and
(b) the completion of any registration or qualification (or determination of
the availability of an exemption therefrom) of such shares under any Federal
or state law, or any ruling or regulation of any government body which the
Company shall, in its sole discretion, determine to be necessary or advisable.

-7-

<PAGE>

4.3 AMENDMENTS.

The Board of Directors may discontinue the Plan at any time, and may
amend it from time to time. However, except as permitted under Section 1.6,
no amendment, without approval by stockholders, may (a) increase the total
number of shares which may be issued under the Plan or to any individual
under the Plan, (b) extend the date on which the Plan will terminate, (c)
reduce the Option price for shares which may be purchased pursuant to Options
under Articles II or III of the Plan, (d) extend the period during which
Options may be granted, (e) change the class of eligible persons to whom
Options may be granted under the Plan, or (f) change the provisions of the
Plan in such a manner so as to increase materially the benefits accruing
under the Plan. Other than as expressly permitted under the Plan, no
outstanding Option may be revoked or altered in a manner unfavorable to the
Optionee without the consent of the Optionee.

4.4 NO RIGHTS AS SHAREHOLDER.

No Optionee shall have any rights as a shareholder with respect to any
share subject to his Option prior to the date of issuance to him of a
certificate or certificates for such shares.

4.5 WITHHOLDING.

Whenever the Company proposes or is required to issue or transfer shares
of Common Stock under the Plan, the Company shall have the right to require
the Optionee to remit to the Company an amount sufficient to satisfy any
Federal, state or local withholding tax liability in such form as the Company
may determine or accept in its sole discretion, including payment by
surrender or retention of shares of Common Stock prior to the delivery of any
certificate or certificates for such shares. Whenever under the Plan
payments are to be made in cash, such payments shall be made net of an amount
sufficient to satisfy any Federal, state, or local withholding tax liability.

4.6 CONTINUED EMPLOYMENT NOT PRESUMED.

This Plan and any document describing this Plan and the grant of any
Option hereunder shall not give any Optionee or other employee or Director a
right to continued employment by the Company or its Subsidiaries or affect
the right of the Company or its Subsidiaries to terminate the employment of
any such person with or without cause.

4.7 EFFECTIVE DATE; DURATION.

The Plan shall become effective as of February 9, 1996, subject to
stockholder approval pursuant to Section 4.1, and shall expire at midnight
(eastern standard time) on February 9, 2006. No Options may be granted under
the Plan after February 9, 2006, but Options granted on or before that date
may be exercised according to the terms of the related agreements and shall
continue to be governed by and interpreted consistent with the terms hereof.

* * *

-8-

<PAGE>

The foregoing Plan was approved and adopted by the Board of Directors of
the Company on February 9, 1996.

-9-

<PAGE>

ACTAMED CORPORATION

1995 STOCK OPTION PLAN

ARTICLE I

GENERAL

1.1 PURPOSE OF THE PLAN.

The purpose of the ActaMed Corporation 1995 Stock Option Plan (the
"Plan") is to assist ActaMed Corporation (the "Company") in securing and
retaining Key Employees and Consultants of outstanding ability by making it
possible to offer them an increased incentive to advise, join or continue in
the service of the Company and to increase their efforts for its welfare
through participation or increased participation in the ownership and growth
of the Company.

1.2 DEFINITIONS.

(a) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors
of the Company.

(b) "CODE" means the Internal Revenue Code of 1986, as amended.

(d) "COMMON STOCK" means the common stock of the Company.

(f) "FAIR MARKET VALUE" means the closing price of the shares on a
national securities exchange on which the Common Stock is primarily traded on
the day on which such value is to be determined or, if no shares were traded
on such day, on the next preceding day on which shares were traded, as
reported by National Quotation Bureau, Inc. or other national quotation
service. If the shares of Common Stock are traded in the over-the-counter
market, "fair market value" means the closing "asked" price of the shares in
the over-the-counter market on the day on which such value is to be
determined or, if such "asked" price is not available, the last sales price
on such day or, if no shares were traded on such day, on the next preceding
day on which the shares were traded, as reported by the National Association
of Securities Dealers Automatic Quotation System (NASDAQ) or other national
quotation service. Nevertheless, if the Board of Directors determines that
the fair market value of the Common Stock cannot be accurately determined

<PAGE>

(h) "KEY EMPLOYEE" means any person, including officers and
directors in the regular employment of the Company or its subsidiaries, who
is designated a Key Employee by the Committee and is or is expected to be
primarily responsible for or to contribute significantly to the management,
growth, or supervision of some part or all of the business of the Company or
its subsidiaries. The power to determine who is and who is not a Key
Employee is reserved solely for the Committee.

(i) "NONQUALIFIED STOCK OPTION" means an option to purchase shares
of Common Stock which is not intended to qualify as an incentive stock option
as defined in Section 422 of the Code and which may be granted to Key
Employees and Consultants.

(j) "OPTION" means an Incentive Stock Option or a Nonqualified
Stock Option.

(k) "OPTIONEE" means a Key Employee or Consultant to whom an
Option is granted under the Plan.

(l) "PARENT" means any corporation which qualifies as a parent of
a corporation under the definition of "parent corporation" contained in
Section 424(e) of the Code.

(m) "SUBSIDIARY" means any corporation which qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation"
contained in Section 424(f) of the Code.

(n) "TERM" means the period during which a particular Option may
be exercised as determined by the Committee and as provided in the option
agreement.

1.3 ADMINISTRATION OF THE PLAN.

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<PAGE>

1.4 SHARES SUBJECT TO THE PLAN.

The total number of shares that may be purchased pursuant to Options
under the Plan shall not exceed 975,000 shares of Common Stock. Shares
subject to the Options which terminate or expire prior to exercise shall be
available for future Options under the Plan without being charged against the
limitation of 975,000 shares set forth above. Shares issued pursuant to the
Plan may be either unissued shares of Common Stock or reacquired shares of
Common Stock held in treasury.

1.5 TERMS AND CONDITIONS OF OPTIONS.

All Options shall be evidenced by option agreements in such form as the
Committee shall approve from time to time subject to the provisions of
Article II and Article III, as appropriate, and the following provisions:

(a) EXERCISE PRICE. Except as provided in Section 3.1, the
exercise price of the Option shall not be less than the Fair Market Value (as
determined by the Committee) of the Common Stock at the time the Option is
granted. In making such determination, if the Board of Directors believes
that the Company will engage in an initial public offering within 90 days of
the date an Option is granted, the Board of Directors may designate the Fair
Market Value as the initial offering price in such public offering after
finding that such initial offering price will reflect an amount no less than
the fair market value of the Common Stock on the date of Option grant. If
the anticipated public offering does not occur within such 90 day period, the
Board of Directors shall determine the Fair Market Value as of the date of
the grant in the manner set forth in Section 1.2 hereof.

(b) EXERCISE. The Committee shall determine whether the Option
shall be exercisable in full at any time during the Term or in cumulative or
noncumulative installments during the Term.

(c) TERMINATION OF EMPLOYMENT. An Optionee's Option shall expire
on the expiration of the Term specified in Section 2.1 or 3.1, as the case
may be, or upon the occurrence of such events as are specified in the option
agreement. If the option agreement permits exercise of the Option after
termination of employment, the Optionee may exercise the Option only with
respect to the shares which could have been purchased by the Optionee at the
date of termination of employment. However, the Committee may, but is not
required to, waive any requirements made

-3-

<PAGE>

(d) DEATH OR DISABILITY. Upon termination of an Optionee's
employment by reason of death or disability (as determined by the Committee
consistent with the definition of Section 422(c)(6) of the Code), the Option
shall expire on the earlier of the expiration of (i) the date specified in
the option agreement which in no event shall be later than 12 months after
the date of such termination, or (ii) the Term specified in Section 2.1 or
3.1, as the case may be. The Optionee or his successor in interest, as the
case may be, may exercise the Option only as to the shares that could have
been purchased by the Optionee at the date of his termination of employment.
However, the Committee may, but is not required to, waive any requirements
made pursuant to Section 1.5(b) so that some or all of the shares subject to
the Option may be exercised within the time limitation described in this
subsection.

(e) PAYMENT. Payment for shares as to which an Option is
exercised shall be made in such manner and at such time or times as shall be
provided in the option agreement, including cash, Common Stock of the Company
which was previously acquired by the Optionee, or any combination thereof.
The Fair Market Value of the surrendered Common Stock as of the date of
exercise shall be determined in valuing Common Stock used in payment for
Options.

(g) CHANGE IN CONTROL. In the discretion of the Committee, an
option agreement may contain provisions providing that in the event of a
"change in control" of the Company, such Option shall become immediately
exercisable in full notwithstanding any provisions in the option agreement to
the contrary. For the purposes of this paragraph (g), a "change in control"
of the Company shall be deemed to occur if (i) the Company is a party to a
merger, share exchange or other business combination pursuant to which the
Company does not survive or survives only as a subsidiary of another
corporation; or (ii) all or substantially all of the assets of the Company
are sold or otherwise disposed of.

-4-

<PAGE>

directly or indirectly attributable to the exercise or acceleration of
exercise of an Option (including, without limitation, any tax under Code
Section 280G).

1.6 STOCK ADJUSTMENTS; MERGERS.

(b) OPTIONS. Following a transaction described in subsection (a)
above, if the Company continues in existence, the number and kind of shares
that are subject to any Option and the option price per share shall be
proportionately and appropriately adjusted without any change in the
aggregate price to be paid therefor upon exercise of the Option. If the
Company will not remain in existence or substantially all of its Common Stock
will be purchased by a single purchaser or group of purchasers acting
together, then the Committee may (i) declare that all Options shall terminate
30 days after the Committee gives written notice to all Optionees of their
immediate right to exercise all Options then outstanding (without regard to
limitations on exercise otherwise contained in the Options), or (ii) notify
all Optionees that all Options granted under the Plan shall apply with
appropriate adjustments as determined by the Committee to the securities of
the successor corporation to which holders of the numbers of shares subject
to such Options would have been entitled, or (iii) take action that is some
combination of aspects of (i) and (ii). Except as provided in the last
sentence of this paragraph (b), the determination by the Committee as to the
terms of any of the foregoing adjustments shall be conclusive and binding.
Any fractional shares resulting from any of the foregoing adjustments under
this paragraph shall be disregarded and eliminated. Notwithstanding anything
else contained in this Section 1.6(b), if an option agreement permits the
immediate exercise in full of an Option upon a change in control as provided
in Section 1.5(g) above, the provisions of such option agreement may not be
revised by the Committee pursuant to this Section 1.6(b) without the consent
of the Optionee.

1.7 NOTIFICATION OF EXERCISE.

Options shall be exercised by written notice directed to the Secretary
of the Company at the principal executive offices of the Company. Such
written notice shall be accompanied by any payment required pursuant to
Section 1.5(e) and shall be effective upon receipt by the Secretary of the
Company received during normal business hours or if not so received, such
exercise shall be effective on the next regular business day of the Company.
Exercise by an Optionee's heir or the representative of his estate shall be
accompanied by evidence of his authority to so act in form reasonably
satisfactory to the Company.

-5-

<PAGE>

ARTICLE II

INCENTIVE STOCK OPTIONS

2.1 TERMS OF INCENTIVE STOCK OPTIONS.

2.2 LIMITATION ON OPTIONS

The aggregate Fair Market Value of Common Stock (determined at the time
the Incentive Stock Option is granted) subject to Incentive Stock Options
granted to a Key Employee under all plans of the Key Employee's employer
corporation and its Parent or Subsidiary corporations and that become
exercisable for the first time by such Key Employee during any calendar year
may not exceed $100,000.

2.3 SPECIAL RULE FOR TEN PERCENT SHAREHOLDER.

If at the time an Incentive Stock Option is granted, an employee owns
stock possessing more than 10% of the total combined voting power of all
classes of stock of his employer corporation or of its Parent or any of its
Subsidiaries, as determined using the attribution rules of Section 424(d) of
the Code, then the terms of the Incentive Stock Option shall specify that the
option price shall be at least 110% of the Fair Market Value of the stock
subject to the Incentive Stock Option, and such Incentive Stock Option shall
not be exercisable after the expiration of five years from the date such
Incentive Stock Option is granted.

2.4 INTERPRETATION.

In interpreting this Article II of the Plan and the provisions of
individual option agreements, the Committee shall be governed by the
principles and requirements of Sections 421, 422 and 424 of the Code, and
applicable Treasury Regulations.

ARTICLE III

NONQUALIFIED STOCK OPTIONS

3.1 TERMS AND CONDITIONS OF OPTIONS.

In addition to the requirements of Section 1.5, each Nonqualified Stock
Option granted under the Plan to a Key Employee or Consultant shall be
subject to the following provisions:

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<PAGE>

(a) TERM. Each Nonqualified Stock Option granted under the plan
shall be exercisable only during a term fixed by the Committee.

(b) EXERCISE PRICE. The Company may elect to grant Nonqualified
Stock Options at a price less than the Fair Market Value of the Common Stock
at the time the Option is granted.

3.2 SECTION 83(b) ELECTION.

The Company recognizes that certain persons who receive Nonqualified
Stock Options may be subject to restrictions regarding their right to trade
Common Stock under applicable securities laws. Such restrictions may cause
Optionees exercising such Options not to be taxable under the provisions of
Section 83(c) of the Code. Accordingly, Optionees exercising such
Nonqualified Stock Options may consider making an election to be taxed upon
exercise of the Option under Section 83(b) of the Code and to effect such
election will file such election with the Internal Revenue Service within
thirty (30) days of exercise of the Option and otherwise in accordance with
applicable Treasury Regulations.

ARTICLE IV

ADDITIONAL PROVISIONS

4.1 STOCKHOLDER APPROVAL.

The Plan shall be submitted for the approval of the stockholders of the
Company as soon as reasonably practicable following the adoption of the Plan
by the Board of Directors or the Compensation Committee and in all events
within one year of its approval by such Board or Committee. If the
stockholders of the Company do not approve the Plan as provided in this
Section 4.1, the Plan shall terminate.

4.2 COMPLIANCE WITH OTHER LAWS AND REGULATIONS.

The Plan, the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options,
shall be subject to all applicable Federal and state laws, rules, and
regulations and to such approvals by any government or regulatory agency as
may be required. The Company shall not be required to issue or deliver any
certificates for shares of Common Stock prior to (a) the listing of such
share on any stock exchange on which the Common Stock may then be listed and
(b) the completion of any registration or qualification (or determination of
the availability of an exemption therefrom) of such shares under any Federal
or state law, or any ruling or regulation of any government body which the
Company shall, in its sole discretion, determine to be necessary or advisable.

-7-

<PAGE>

4.3 AMENDMENTS.

The Board of Directors may discontinue the Plan at any time, and
may amend it from time to time. However, except as permitted under Section
1.6, no amendment, without approval by stockholders, may (a) increase the
total number of shares which may be issued under the Plan or to any
individual under the Plan, (b) extend the date on which the Plan will
terminate, (c) reduce the Option price for shares which may be purchased
pursuant to Options under Articles II or III of the Plan, (d) extend the
period during which Options may be granted, (e) change the class of eligible
persons to whom Options may be granted under the Plan, or (f) change the
provisions of the Plan in such a manner so as to increase materially the
benefits accruing under the Plan. Other than as expressly permitted under
the Plan, no outstanding Option may be revoked or altered in a manner
unfavorable to the Optionee without the consent of the Optionee.

4.4 NO RIGHTS AS SHAREHOLDER.

No Optionee shall have any rights as a shareholder with respect to
any share subject to his Option prior to the date of issuance to him of a
certificate or certificates for such shares.

4.5 WITHHOLDING.

Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right to
require the Optionee to remit to the Company an amount sufficient to satisfy
any Federal, state or local withholding tax liability in such form as the
Company may determine or accept in its sole discretion, including payment by
surrender or retention of shares of Common Stock prior to the delivery of any
certificate or certificates for such shares. Whenever under the Plan
payments are to be made in cash, such payments shall be made net of an amount
sufficient to satisfy any Federal, state, or local withholding tax liability.

4.6 CONTINUED EMPLOYMENT NOT PRESUMED.

This Plan and any document describing this Plan and the grant of
any Option hereunder shall not give any Optionee or other employee or
Director a right to continued employment by the Company or its Subsidiaries
or affect the right of the Company or its Subsidiaries to terminate the
employment of any such person with or without cause.

4.7 EFFECTIVE DATE; DURATION.

The Plan shall become effective as of November 29, 2005 subject to
stockholder approval pursuant to Section 4.1, and shall expire at midnight
(eastern standard time) on November 29, 2005. No Options may be granted
under the Plan after November 29, 2005 but Options granted on or before that
date may be exercised according to the terms of the related agreements and
shall continue to be governed by and interpreted consistent with the terms
hereof.

* * *

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<PAGE>

The foregoing Plan was approved and adopted by the Board of Directors of
the Company on Novemver 29, 1995.

-9-

<PAGE>

ACTAMED CORPORATION

1994 STOCK OPTION PLAN

ARTICLE I

GENERAL

1.1 PURPOSE OF THE PLAN.

The purpose of the ActaMed Corporation 1994 Stock Option Plan (the "Plan")
is to assist ActaMed Corporation (the "Company") in securing and retaining Key
Employees and Consultants of outstanding ability by making it possible to offer
them an increased incentive to advise, join or continue in the service of the
Company and to increase their efforts for its welfare through participation or
increased participation in the ownership and growth of the Company.

1.2 DEFINITIONS.

(a) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of
the Company.

(b) "CODE" means the Internal Revenue Code of 1986, as amended.

(d) "COMMON STOCK" means the common stock of the Company.

<PAGE>

(j) "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.

(k) "OPTIONEE" means a Key Employee or Consultant to whom an Option
is granted under the Plan.

(l) "PARENT" means any corporation which qualifies as a parent of a
corporation under the definition of "parent corporation" contained in Section
424(e) of the Code.

(m) "SUBSIDIARY" means any corporation which qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation"
contained in Section 424(f) of the Code.

(n) "TERM" means the period during which a particular Option may be
exercised as determined by the Committee and as provided in the option
agreement.

1.3 ADMINISTRATION OF THE PLAN.

1.4 SHARES SUBJECT TO THE PLAN.

The total number of shares that may be purchased pursuant to Options under
the Plan shall not exceed 2,370,438 shares of Common Stock. Shares subject to
the Options which terminate or expire prior to exercise shall be available for
future Options under the Plan without being charged against the limitation of
2,370,438 shares set forth above. Shares issued pursuant to the Plan may be
either unissued shares of Common Stock or reacquired shares of Common Stock held
in treasury.

1.5 TERMS AND CONDITIONS OF OPTIONS.

All Options shall be evidenced by option agreements in such form as the
Committee shall approve from time to time subject to the provisions of Article
II and Article III, as appropriate, and the following provisions:

(b) EXERCISE. The Committee shall determine whether the Option shall
be exercisable in full at any time during the Term or in cumulative or
noncumulative installments during the Term.

(c) TERMINATION OF EMPLOYMENT. An Optionee's Option shall expire on
the expiration of the Term specified in Section 2.1 or 3.1, as the case may be,
or upon the occurrence of such events as are specified in the option agreement.
If the option agreement permits exercise of the Option after termination of
employment, the Optionee may exercise the Option only with respect to the Shares
which could have been purchased by the Optionee at the date of termination of
employment. However, the Committee may, but is not required to, waive any
requirements made

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<PAGE>
directly or indirectly attributable to the exercise or acceleration of
exercise of an Option (including, without limitation, any tax under Code
Section 280G).

1.6 STOCK ADJUSTMENTS; MERGERS.

(a) GENERAL. Notwithstanding Section 1.4, in the event the
outstanding shares of Common Stock are increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of any other corporation by reason of any merger, sale of stock,
consolidation, liquidation, recapitalization, reclassification, stock split up,
combination of shares, share exchange, stock dividend, or transaction having
similar effect, the total number of shares of Common Stock set forth in Section
1.4 shall be proportionately and appropriately adjusted by the Committee.

1.7 NOTIFICATION OF EXERCISE.

Options shall be exercised by written notice directed to the Secretary of
the Company at the principal executive offices of the Company. Such written
notice shall be accompanied by any payment required pursuant to Section 1.5(e)
and shall be effective upon receipt by the Secretary of the Company received
during normal business hours or if not so received, such exercise shall be
effective on the next regular business day of the Company. Exercise by an
Optionee's heir or the representative of his estate shall be accompanied by
evidence of his authority to so act in form reasonably satisfactory to the
Company.

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<PAGE>
ARTICLE II

INCENTIVE STOCK OPTIONS

2.1 TERMS OF INCENTIVE STOCK OPTIONS.

Each Incentive Stock Option granted under the Plan to a Key Employee shall
be exercisable only during a Term fixed by the Committee; provided, however,
that the Term shall end no later than 10 years after the date the Incentive
Stock Option is granted.

2.2 LIMITATION ON OPTIONS.

The aggregate Fair Market Value of Common Stock (determined at the time
the Incentive Stock Option is granted) subject to Incentive Stock Options
granted to a Key Employee under all plans of the Key Employee's employer
corporation and its Parent or Subsidiary corporations and that become
exercisable for the first time by such Key Employee during any calendar year
may not exceed $100,000.

2.3 SPECIAL RULE FOR TEN PERCENT SHAREHOLDER.

If at the time an Incentive Stock Option is granted, an employee owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of his employer corporation or of its Parent or any of its Subsidiaries,
as determined using the attribution rules of Section 424(d) of the Code, then
the terms of the Incentive Stock Option shall specify that the option price
shall be at least 110% of the Fair Market Value of the stock subject to the
Incentive Stock Option, and such Incentive Stock Option shall not be exercisable
after the expiration of five years from the date such Incentive Stock Option is
granted.

2.4 INTERPRETATION.

ARTICLE III

NONQUALIFIED STOCK OPTIONS

3.1 TERMS AND CONDITIONS OF OPTIONS.

In addition to the requirements of Section 1.5, each Nonqualified Stock
Option granted under the Plan to a Key Employee or Consultant shall be subject
to the following provisions:

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<PAGE>
(a) TERM. Each Nonqualified Stock Option granted under the plan
shall be exercisable only during a term fixed by the Committee.

(b) EXERCISE PRICE. The Company may elect to grant Nonqualified
Stock Options at a price less than the Fair Market Value of the Common Stock at
the time the Option is granted.

3.2 SECTION 83(b) ELECTION.

The Company recognizes that certain persons who receive Nonqualified Stock
Options may be subject to restrictions regarding their right to trade Common
Stock under applicable securities laws. Such restrictions may cause Optionees
exercising such Options not to be taxable under the provisions of Section 83(c)
of the Code. Accordingly, Optionees exercising such Nonqualified Stock Options
may consider making an election to be taxed upon exercise of the Option under
Section 83(b) of the Code and to effect such election will file such election
with the Internal Revenue Service within thirty (30) days of exercise of the
Option and otherwise in accordance with applicable Treasury Regulations.

ARTICLE IV

ADDITIONAL PROVISIONS

4.1 STOCKHOLDER APPROVAL.

The Plan shall be submitted for the approval of the stockholders of the
Company as soon as reasonably practicable following the adoption of the Plan by
the Board of Directors or the Compensation Committee and in all events within
one year of its approval by such Board or Committee. If the stockholders of the
Company do not approve the Plan as provided in this Section 4.1, the Plan shall
terminate.

4.2 COMPLIANCE WITH OTHER LAWS AND REGULATIONS.

The Plan, the grant and exercise of Options hereunder, and the obligation
of the Company to sell and deliver shares under such Options, shall be subject
to all applicable Federal and state laws, rules, and regulations and to such
approvals by any government or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for shares of
Common Stock prior to (a) the listing of such shares on any stock exchange on
which the Common Stock may then be listed and (b) the completion of any
registration or qualification (or determination of the availability of an
exemption therefrom) of such shares under any Federal or state law, or any
ruling or regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.

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<PAGE>
4.3 AMENDMENTS.

4.4 NO RIGHTS AS SHAREHOLDER.

No Optionee shall have any rights as a shareholder with respect to any
share subject to his Option prior to the date of issuance to him of a
certificate or certificates for such shares.

4.5 WITHHOLDING.

4.6 CONTINUED EMPLOYMENT NOT PRESUMED.

4.7 EFFECTIVE DATE; DURATION.

The Plan shall become effective as of February 9, 1996, subject to
stockholder approval pursuant to Section 4.1, and shall expire at midnight
(eastern standard time) on February 9, 2006. No Options may be granted under
the Plan after February 9, 2006, but Options granted on or before that date may
be exercised according to the terms of the related agreements and shall continue
to be governed by and interpreted consistent with the terms hereof.

* * *

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<PAGE>
The foregoing Plan was approved and adopted by the Board of Directors of
the Company on May 3, 1994.

-9-

<PAGE>

ACTAMED CORP.
1993 CLASS B COMMON STOCK OPTION PLAN

The 1993 Class B Common Stock Option Plan (the "Plan") is hereby
adopted as follows:

1. PURPOSE OF PLAN. The purpose of the Plan is to provide
corporate officers and key employees of Actamed Corp. ("Actamed"), and its
Subsidiaries (collectively the "Company"), as the Administrator hereinafter
referred to shall designate, with a strong incentive for individual
creativity and contribution to insure the future growth of the Company. The
Plan is designed to reward those whose ability and diligence permit such
persons to make important contributions to the success of the Company by
enabling such persons to acquire shares of Actamed Common Stock in the manner
contemplated by the Plan. Actamed believes that the Plan will also aid the
Company in attracting and retaining outstanding key employees and in
stimulating the efforts of such employees to work for the success of the
Company. This Plan covers the grant of options [including nonstatutory stock
options and options intended to qualify as incentive stock options under
Section 422 of the Code ("Incentive Options")] to acquire shares which may or
may not be subject to restrictions ("Option Stock").

2. DEFINITIONS. For purposes of this Plan, the following terms
where appearing with initial capitalization shall be applicable:

(a) "ADMINISTRATOR" means either the Board of Directors or
the Committee, whichever is so designated by the Board of Directors to
administer the Plan.

(b) "BOARD OF DIRECTORS" means the Board of Directors of
Actamed.

(d) "COMMITTEE" means a committee appointed by the Board of
Directors and which shall consist of not less than two persons, all of whom
shall be "disinterested persons" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended from time to time, or any law,
rule, regulation or other provisions that may hereafter replace such Rule.
If the Plan is administered by a Committee, the members of the Committee
shall serve at the pleasure of the Board of Directors. Sixty percent (60%)
of the Committee members shall constitute a quorum, and the action of a
majority of the members of the Committee present at any meeting at which a
quorum is present, or acts unanimously adopted in writing without holding a
meeting, shall be the acts of the Committee. The Committee shall report all
actions taken by it to the Board of Directors.

(e) "COMMON STOCK" means Actamed's Class B Common Stock.

<PAGE>

(f) "SUBSIDIARY" means any corporation (other than Actamed)
in an unbroken chain of corporations beginning with Actamed if, at the time
of the sale or award of any shares or the grant of any option under the Plan,
each of the corporations other than the last in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one or the other corporations in such chain.

3. ADMINISTRATION OF PLAN. This Plan shall be administered,
construed and interpreted by the Administrator. The Administrator shall have
full and final authority, in its discretion,

(a) to determine those corporate officers and key employees
who shall be eligible to participate in the Plan and the number of shares to
be covered by any options granted and the time or times at which such options
shall be granted to each participant or exercised by each optionee (it being
understood that more than one option may relate to the same participant),

(b) to determine the terms and provisions of any Stock
Option Agreement (the terms of which need not be identical) and the
restrictions, if any, to be placed upon the shares of Common Stock issued
under the Plan,

(c) to accelerate the date on which any option granted under
the Plan becomes exercisable and to waive (including in the event of a
change-in-control of Actamed) any restriction, term or provision imposed by
any Stock Option Agreement,

(d) to employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and rely upon any
opinions received from any such counsel or consultant and any computation
received from any such consultant or agent, and

(e) to make all other determinations and take all other
actions deemed necessary and advisable for the proper administration of the
Plan.

The Administrator may adopt, alter and repeal such rules and regulations for
the administration of the Plan as it from time to time deems advisable. The
Administrator may act by a meeting in person or by telephone or by written
determinations signed by all of the members of the Administrator. All
actions, interpretations and determinations with respect to the
administration of the Plan taken by the Administrator shall be conclusively
binding for all purposes and upon all persons.

Whether an authorized leave of absence, or absence in military
or government service, shall constitute termination of employment shall be
determined by the Administrator.

4. ELIGIBLE PARTICIPANTS. Employees, including but not limited to
officers and directors who are employees, of the Company as determined by the
Administrator shall be eligible for participation under the Plan. However,
with respect to Incentive Options, persons eligible to receive Incentive
Options shall be limited to key employees (including officers and directors
who are employees) of Actamed and its Subsidiaries.

-2-

<PAGE>

5. SHARES SUBJECT TO PLAN. An aggregate of 1,250,000 shares of
Common Stock shall be subject to this Plan either from authorized but
unissued shares or from issued shares reacquired by Actamed, including shares
purchased in the open market, and such number of shares subject to the Plan
shall be appropriately adjusted, in the discretion of the Administrator in
the event of any one or more stock dividends, stock splits or any other forms
of recapitalization, or spin-off, spin-out or other distribution of assets to
shareholders of Actamed. The Administrator in its sole discretion may
provide in any Stock Option Agreement or otherwise for adjustments to be made
with respect to options granted hereunder. If prior to the termination of
the Plan, shares issued pursuant hereto shall have been repurchased by or
redelivered to Actamed in connection with the restrictions imposed on such
shares pursuant to this Plan or any Stock Option Agreement under the Plan,
such repurchase or redelivered shares shall again become available for option
under the Plan. To the extent any options granted hereunder terminate, are
canceled or expire unexercised in whole or in part, the shares with respect
to which such options were not exercised shall again become available for
option under the Plan. Any shares that are reacquired or become available
due to termination, cancellation or expiration of options may be used to
replace options that are canceled by the Administrator (with the consent of
the optionee) due to the fact that the option exercise price is higher than
the then current market value of the Common Stock.

6. PRICE. The Administrator in its absolute discretion shall
determine the price at which any options granted to purchase shares of Option
Stock hereunder shall become exercisable (which price may be less than the
fair market value of a share of Common Stock), provided that such sale or
exercise price with respect to Incentive Options is not less than the fair
market value of a share of Common Stock at the time such option is granted,
except as otherwise provided in Section 8(b)(vii). For the purposes hereof,
fair market value shall be determined by the Administrator and the
Administrator may make such determination:

(a) in case the Common Stock is publicly traded but shall
not then be listed and traded upon a recognized national market system, upon
the basis of the mean between the bid and asked quotations for such stock on
the date of grant of such option as reported by the National Association of
Securities Dealers Automated Quotation system (NASDAQ) or, in the event that
there shall be no bid or asked quotations on the date of grant of such
option, then upon the basis of the mean between the bid and asked quotations
on the date nearest preceding such date of grant, and upon any other factors
which the Administrator shall deem appropriate, or

(b) in case the Common Stock is publicly traded and shall
then be listed and traded upon a recognized securities exchange or shall be
quoted on a recognized national market system, upon the basis of the mean
between the highest and lowest selling prices at which shares of Common Stock
were traded on such recognized securities exchange or national market system
on such date of grant or, if the Common Stock was not traded on said date,
upon the basis of the mean of such prices on the date nearest preceding such
date of grant, and upon any other factors which the Administrator shall deem
appropriate, or

-3-

<PAGE>

(c) in case the Common Stock is not listed or traded as
referred to in Sections 6(a) or 6(b) above, in good faith and taking into
consideration factors which the Administrator determines are applicable in
the determination of such fair market value.

7. PAYMENT.

(a) Payment for shares purchased under this Plan shall be
payable in cash, by check, by promissory note, or in addition to the above,
in shares of Common Stock as provided in 7(d) below, or in any combination
thereof, as shall be determined by the Administrator and provided in the
applicable Stock Option Agreement.

(b) If the payment is made in cash or by check, such payment
shall be made at the time the shares are sold.

(c) If the payment is made by promissory note, such note,
containing terms and conditions satisfactory to the Administrator and
Actamed, shall be delivered at the time the shares are sold and shall bear
interest, if any, at such rate and shall be payable upon such terms as the
Administrator shall determine. Certificates for the purchased shares shall
be registered in the name of the participant and may be delivered to the
purchaser or held by Actamed as security for payment of the promissory note
as determined in the discretion of the Administrator.

(d) In connection with any options granted pursuant to this
Plan, the Administrator, in its discretion, may accept as payment for all or
any portion of the option price of any Option Stock, shares of Common Stock
previously acquired by the participant (including shares received upon the
prior exercise of any options regardless of the amount of time such
previously acquired shares have been held by the participant) having a fair
market value equal to the required payment. The participant shall deliver to
Actamed a certificate or certificates representing such shares duly endorsed
to Actamed or accompanied by a separate stock power so endorsed.

(e) In addition to the foregoing, the exercise price of an
option also may be paid by delivery to Actamed of a written notice of
election to exercise, subject to the approval of the Administrator and in
accordance with the requirements of Regulation T as promulgated by the
Federal Reserve Board.

8. OPTION STOCK.

(a) All options granted pursuant to the Plan shall have such
terms and conditions as the Administrator shall determine, including the
period during which they may be exercised in whole or in part and the
conditions under which they may be terminated or canceled and such other
provisions as may be advisable to comply with the law or the rules of any
such stock exchange, and each option shall have the following additional
conditions:

(i) The options shall not be transferable other than
by will or the laws of descent and distribution and shall be exercisable
during the participant's lifetime only by him and,

-4-

<PAGE>

except as otherwise determined by the Administrator, shall only be
exercisable prior to termination of employment with the Company.

(ii) Actamed shall not issue any fractional shares
upon the exercise of options granted under the Plan.

(iii) No optionee will be deemed to be a holder of any
shares of Common Stock or shall have any rights of a shareholder of Actamed
with respect to the Common Stock until the issuance of certificates after the
exercise thereof. No adjustment shall be made for any dividends or
distributions or other rights for which the record date is prior to the date
of such stock certificates so issued except as provided in 8(a)(iv) below.

(iv) The number of shares subject to an option and the
price per share shall be appropriately adjusted by the Administrator to
reflect any stock splits, stock dividends or other form of recapitalization.

(v) The Administrator shall have sole discretion to
determine in the Stock Option Agreement whether shares of Option Stock
(including any shares received thereon as a result of stock dividends, stock
splits and any other forms of recapitalization) shall be free of any
restrictions (other than those advisable to comply with the law) or shall be
subject to any restrictions as may be determined by the Administrator, in its
sole discretion.

(vi) The granting of an option shall impose no
obligation upon the participant to exercise such option.

(b) All Incentive Options granted hereunder, in addition to
the conditions required by Section 8(a) and the other Sections of the Plan
applicable to Incentive Options, must meet the following additional
conditions where applicable:

(i) The Plan must be approved by the shareholders of
Actamed within 12 months after its adoption by the Board of Directors.

(ii) Any Incentive Option must be granted within 10
years from the date the Plan is adopted by the board of Directors.

(iii) Any Incentive Option must be exercised only
within 10 years of the date it is granted, except as otherwise provided in
8(b)(vii) below.

(iv) A maximum of 1,250,000 shares of Common Stock may
be issued under Incentive Options.

(v) The aggregate fair market value (determined at
the time the option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time

-5-

<PAGE>

by such individual during any calendar year (under all plans of Actamed and
its Subsidiaries) shall not exceed $100,000.

(vi) Any Incentive Option granted hereunder shall be
consistent with the provisions of Sections 421, 422 and 424 and related
Sections of the Code and applicable Treasury Regulations. The Stock Option
Agreements authorized under this Plan in connection with the grant of
Incentive Options may contain other provisions, not inconsistent with the
Plan and Section 422 of the Code, as the Administrator shall deem advisable.

(vii) If the participant owns (subject to applicable
ownership attribution rules of Section 424(d) of the Code and Treasury
Regulations promulgated thereunder) stock possessing more than 10 percent of
the total combined voting power of all classes of stock of Actamed or of
stock of any parent or subsidiary of Actamed at the time the Incentive Option
is granted, the option price shall be not less than 110 percent of the fair
market value of the stock subject to the Incentive Option and the Incentive
Option by its terms shall not be exercisable after the expiration of five
years from the date the Incentive Option is granted.

9. WITHHOLDING OF TAXES.

(a) Upon the grant or exercise of any option hereunder and
should Actamed determine that the participant will be considered to have
received income subject to withholding due to such event and the Company will
be required to withhold amounts for federal and state income tax purposes,
the distribution of any such shares to the participant may be deferred by
Actamed until the participant makes satisfactory arrangements to provide
Actamed with the funds to meet any such tax withholding obligation. If the
participant fails to provide such funds to Actamed the time required to pay
such withholding tax or should Actamed and the participant agree that such
tax withholding obligation may be paid with shares to be distributed to the
participant, Actamed may retain and sell a sufficient number of the
participant's shares which are otherwise to be distributed to the participant
as may be required to discharge, or reimburse Actamed for, the payment of
such withholding obligation and any interest and penalty which may have
accrued in connection therewith. Actamed shall have and retain a security
interest in such shares of the participant for the purpose of securing the
participant's obligation hereunder and the participant shall take such steps
and execute such documents to perfect such security interest as Actamed shall
reasonably request.

(b) In the event a participant makes an election to be taxed
under Section 83(b) of the Code and files such election with the Internal
Revenue Service, the participant shall be required to notify the Company in
writing within 10 days of making such election.

10. COMPLIANCE WITH SECURITIES LAW.

(a) Actamed shall be under no obligation to effect the
registration pursuant to any federal or state securities laws of any shares
of Common Stock to be issued hereunder. Notwithstanding anything herein to
the contrary, Actamed shall not be obligated to issue any shares pursuant to
this Plan unless the shares to be distributed are at that time effectively
registered or

-6-

<PAGE>

exempt from registration, in the opinion of Actamed, under the applicable
federal and state securities laws.

(b) Unless the shares covered by the Plan have been
registered under the applicable federal and state securities laws, or Actamed
has determined that such registration is unnecessary, each person receiving
shares under the Plan may be required by Actamed to give a representation in
writing that he is acquiring such shares for his own account for investment
and not with a view to, or for sale in connection with, the distribution of
any part thereof.

(c) The exercise of any option granted hereunder shall only
be effective at such time as Actamed shall have determined that the issuance
and delivery of shares of Common Stock pursuant to such exercise is in
compliance with all applicable federal and states securities laws. Actamed
may, in its sole discretion, defer the effectiveness of any exercise of an
option granted hereunder in order to allow the issuance of shares of Common
Stock pursuant thereto to be made pursuant to registration or an exemption
from registration or other methods for compliance available under federal or
state securities laws. Actamed shall inform the participant of its decision
to defer the effectiveness of the exercise of an option granted hereunder.
During the period that the effectiveness of the exercise of an option has
been deferred, the participant may, by written notice, withdraw such exercise
and obtain the refund of any amount paid or consideration tendered with
respect thereto.

11. INDEMNIFICATION. In addition to any other rights of
indemnification that they may have as directors of Actamed or as members of
the Committee, the directors of Actamed and members of the Committee shall be
indemnified by Actamed against the reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of action taken or failure
to act under or in connection with the Plan, or any securities sold or issued
hereunder, and against all amounts paid by them in settlement thereof
(provided the settlement is approved by Actamed) or paid by them in
satisfaction of a judgment in any action, suit or proceeding; provided that
within 20 days after the institution of any action, suit or proceeding, the
director or the Committee member shall in writing offer Actamed the
opportunity, at its own expense to handle and defend the same.

12. EXPENSES OF PLAN. The expenses of administering the Plan shall
be borne by Actamed.

13. NO EFFECT ON EMPLOYMENT. Nothing herein contained, including
the grant of any option, shall affect the right of the Company to terminate
any participant's employment at any time for any reason.

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<PAGE>

14. EXEMPTION FROM PENSION COMPUTATION AND NON-EXCLUSIVITY OF THE
PLAN.

(a) By acceptance of options granted under this Plan, each
participant shall be deemed to agree that it is special incentive
compensation and that it will not be taken into account as "wages" or
"salary" in retirement or deferred profit sharing plans, if any, of the
Company.

(b) In addition, each beneficiary of a deceased participant
shall be deemed to agree that such grant will not affect the amount of any
life insurance coverage available to such beneficiary under any life
insurance plan, if any, covering employees of the Company.

(c) Nothing contained in the Plan is intended to amend,
modify or rescind any previously approved compensation plans or programs
entered into by the Company. This Plan shall be construed to be an addition
to any and all such other plans or programs. Neither the adoption of the
Plan by Actamed nor the submission of the Plan to the shareholders of Actamed
for approval shall be construed as creating any limitations on the power of
authority of Actamed to adopt such additional or other compensation
arrangements as Actamed may deem desirable.

15. LEGEND. In order to enforce the restrictions imposed upon
shares sold or awarded hereunder the Administrator may cause a legend or
legends to be placed on any certificates representing shares sold or awarded
pursuant to this Plan, which legend or legends shall make appropriate
reference to the restrictions imposed hereunder.

16. AMENDMENTS. This Plan may be amended at any time by the Board
of Directors consistent with applicable laws and regulations, provided that
without the approval of the shareholders of Actamed, no such amendment shall
become effective if it would (a) extend the termination date of the Plan set
forth in Section 17, (b) materially increase the number of shares of Common
Stock which may be sold under the Plan, except as provided in Section 5, or
(c) materially modify the requirements as to eligibility for participation in
the Plan. Any amendment to the Plan shall not, without the written consent
of the participant, affect such participant's rights under any Stock Option
Agreement entered into prior to such amendment.

17. TERMINATION. This Plan shall terminate and no further shares
shall be sold or issued hereunder after September 1, 2002, or such earlier
date as may be determined by the Board of Directors. The termination of this
Plan, however, shall not affect any restrictions previously imposed on shares
of Option Stock issued pursuant to this Plan, or alter the rights of
participants with respect to options granted or shares of Option Stock issued
pursuant to this Plan.

18. RIGHTS OF PARTICIPANTS AS SHAREHOLDERS. Each participant
acquiring shares of Option Stock hereunder shall, upon the issuance of
certificates with respect to such shares, be the registered owner of such
shares and, except as otherwise provided herein, in any related Stock Option
Agreement or in the Articles of Incorporation of Actamed, shall be entitled
to full dividend and distribution rights like any other holder of Actamed
Common Stock as long as such participant remains the registered owner thereof.

-8-

<PAGE>

19. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of Georgia in all respects.

20. CONSTRUCTION. The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine and neuter genders, unless the
context clearly indicates to the contrary; the singular includes the plural,
and the plural shall include the singular.

21. VALIDITY AND LEGALITY. If any provision of this Plan for any
reason is declared invalid, illegal or unenforceable, in whole or in part,
such declaration shall not affect the validity, legality or enforceability of
any remaining provision or portion thereof, which remaining provisions or
portion thereof shall remain in force and effect as if this Plan had been
adopted with the invalid, illegal or, unenforceable provision or portion
thereof eliminated.

22. EFFECTIVE DATE. This Plan shall become effective upon its
adoption by the Board of Directors and approval by the shareholders of
Actamed and the filing of the Articles of Amendment to the Articles of
Incorporation authorizing the Common Stock.

-9-

<PAGE>

I. EXHIBIT A

AMENDMENT TO THE 1993 CLASS B COMMON STOCK OPTION PLAN

The Plan is hereby amended as follows:

1. Paragraph 5 is hereby amended by deleting the number
"1,250,000" from the first line of said paragraph and replacing it with the
number "1,500,000."

2. Paragraph 8(b)(iv) is hereby deleted in its entirety and
replaced with the following:

"A maximum of 1,500,000 shares of Common Stock may be
issued under Incentive Options."

3. All other provisions of the Plan shall remain in full force and
effect.

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<PAGE>

ACTAMED CORP.
1992 STOCK OPTION PLAN

The 1992 Stock Option Plan (the "Plan") is hereby adopted as follows:

2. DEFINITIONS. For purposes of this Plan, the following terms
where appearing with initial capitalization shall be applicable:

(a) "ADMINISTRATOR" means either the Board of Directors or
the Committee, whichever is so designated by the Board of Directors to
administer the Plan.

(b) "BOARD OF DIRECTORS" means the Board of Directors of
Actamed.

(e) "COMMON STOCK" means Actamed's Common Stock.

<PAGE>

owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one or the other corporations in such
chain.

3. ADMINISTRATION OF PLAN. This Plan shall be administered,
construed and interpreted by the Administrator. The Administrator shall have
full and final authority, in its discretion,

(e) to make all other determinations and take all other
actions deemed necessary and advisable for the proper administration of the
Plan.

Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Administrator.

5. SHARES SUBJECT TO PLAN. An aggregate of 25,000 shares of
Common Stock shall be subject to this Plan either from authorized but
unissued shares or from issued shares reacquired by Actamed, including shares
purchased in the open market, and such number of shares subject to the

<PAGE>

Plan shall be appropriately adjusted, in the discretion of the Administrator
in the event of any one or more stock dividends, stock splits or any other
forms of recapitalization, or spin-off, spin-out or other distribution of
assets to shareholders of Actamed. The Administrator in its sole discretion
may provide in any Stock Option Agreement or otherwise for adjustments to be
made with respect to options granted hereunder. If prior to the termination
of the Plan, shares issued pursuant hereto shall have been repurchased by or
redelivered to Actamed in connection with the restrictions imposed on such
shares pursuant to this Plan or any Stock Option Agreement under the Plan,
such repurchase or redelivered shares shall again become available for option
under the Plan. To the extent any options granted hereunder terminate, are
canceled or expire unexercised in whole or in part, the shares with respect
to which such options were not exercised shall again become available for
option under the Plan. Any shares that are reacquired or become available
due to termination, cancellation or expiration of options may be used to
replace options that are canceled by the Administrator (with the consent of
the optionee) due to the fact that the option exercise price is higher than
the then current market value of the Common Stock.

b) in case the Common Stock is publicly traded and shall
then be listed and traded upon a recognized securities exchange or shall be
quoted on a recognized national market system, upon the basis of the mean
between the highest and lowest selling prices at which shares of Common Stock
were traded on such recognized securities exchange or national market system
on such date of grant or, if the Common Stock was not traded on said date,
upon the basis of the mean of such prices on the date nearest preceding such
date of grant, and upon any other factors which the Administrator shall deem
appropriate, or

7. PAYMENT.

<PAGE>

(b) If the payment is made in cash or by check, such payment
shall be made at the time the shares are sold.

8. OPTION STOCK.

(i) The options shall not be transferable other than
by will or the laws of descent and distribution and shall be exercisable
during the participant's lifetime only by him and, except as otherwise
determined by the Administrator, shall only be exercisable prior to
termination of employment with the Company.

(ii) Actamed shall not issue any fractional shares
upon the exercise of options granted under the Plan.

<PAGE>

(iii) No optionee will be deemed to be a holder of any
shares of Common Stock or shall have any rights of a shareholder of Actamed
until the issuance of certificates after the exercise thereof. No adjustment
shall be made for any dividends or distributions or other rights for which
the record date is prior to the date of such stock certificates so issued
except as provided in 8(a)(iv) below.

(vi) The granting of an option shall impose no
obligation upon the participant to exercise such option.

(i) The Plan must be approved by the shareholders of
Actamed within 12 months after its adoption by the Board of Directors.

(ii) Any Incentive Option must be granted within 10
years from the date the Plan is adopted by the board of Directors.

(iii) Any Incentive Option must be exercised only
within 10 years of the date it is granted, except as otherwise provided in
8(b)(vii) below.

(iv) A maximum of 25,000 shares of Common Stock may be
issued under Incentive Options.

(v) The aggregate fair market value (determined at
the time the option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time by such individual during
any calendar year (under all plans of Actamed and its Subsidiaries) shall not
exceed $100,000.

<PAGE>

of Incentive Options may contain other provisions, not inconsistent with the
Plan and Section 422 of the Code, as the Administrator shall deem advisable.

9. WITHHOLDING OF TAXES.

10. COMPLIANCE WITH SECURITIES LAW.

<PAGE>

representation in writing that he is acquiring such shares for his own
account for investment and not with a view to, or for sale in connection
with, the distribution of any part thereof.

12. EXPENSES OF PLAN. The expenses of administering the Plan shall
be borne by Actamed.

13. NO EFFECT ON EMPLOYMENT. Nothing herein contained, including
the grant of any option, shall affect the right of the Company to terminate
any participant's employment at any time for any reason.

14. EXEMPTION FROM PENSION COMPUTATION AND NON-EXCLUSIVITY OF THE
PLAN.

<PAGE>

(c) Nothing contained in the Plan is intended to amend,
modify or rescind any previously approved compensation plans or programs
entered into by the Company. This Plan shall be construed to be an addition
to any and all such other plans or programs. Neither the adoption of the
Plan by Actamed not the submission of the Plan to the shareholders of Actamed
for approval shall be construed as creating any limitations on the power of
authority of Actamed to adopt such additional or other compensation
arrangements as Actamed may deem desirable.

18. RIGHTS OF PARTICIPANTS AS SHAREHOLDERS. Each participant
acquiring shares of Option Stock hereunder shall, upon the issuance of
certificates with respect to such shares, be the registered owner of such
shares and, except as otherwise provided herein or in any related Stock
Option Agreement, shall be entitled to full voting, dividend and distribution
rights like any other holder of Actamed Common Stock as long as such
participant remains the registered owner thereof.

19. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of Georgia in all respects.

<PAGE>

thereof, which remaining provisions or portion thereof shall remain in force
and effect as if this Plan had been adopted with the invalid, illegal or
unenforceable provision or portion thereof eliminated.

22. EFFECTIVE DATE. This Plan shall become effective upon its
adoption by the Board of Directors and approval by the shareholders of
Actamed.

<PAGE>

AMENDMENT TO ACTAMED CORP.
1992 STOCK OPTION PLAN

Pursuant to paragraph 16 of the 1992 Stock Option Plan, (the "Plan"),
the Plan is hereby amended as follows:

1. Paragraph 2(e) is deleted in its entirety and replaced with the
following:

'"COMMON STOCK" means Actamed's Class A Common Stock."'

2. Paragraph 5 is hereby amended by deleting the number "25,000" from
the first line of said paragraph and replacing it with the number
"1,250,000".

3. Paragraph 8(b)(iv) is hereby deleted in it entirety and replaced
with the following:

"A maximum of 1,250,000 shares of Common Stock may be
issued under Incentive Options."

4. All other provisions of the Plan shall remain in full force and
effect.

<PAGE>
ACTAMED CORPORATION

1996 DIRECTOR STOCK OPTION PLAN

(AMENDED AND RESTATED DECEMBER __, 1997)

ARTICLE I

GENERAL

1.1 PURPOSE OF THE PLAN.

The purpose of the ActaMed Corporation 1996 Director Stock Option Plan (the
"Plan") is to assist ActaMed Corporation (the "Company") in securing and
retaining non-employee directors of outstanding ability by making it possible to
offer them an increased incentive to advise, join or continue in the service of
the Company and to increase their efforts for its welfare through participation
or increased participation in the ownership and growth of the Company by
granting non-employee directors, and Non-Employee Director's Designees (as
defined below), Options under this Plan.

1.2 DEFINITIONS.

(a) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of
the Company.

(b) "CODE" means the Internal Revenue Code of 1986, as amended.

(d) "COMMON STOCK" means the common stock of the Company.

(e) "FAIR MARKET VALUE" means the closing price of the shares on a
national securities exchange on which the Common Stock is primarily traded on
the day on which such value is to be determined or, if no shares were traded
on such day, on the next preceding day on which shares were traded, as
reported by National Quotation Bureau, Inc. or other national quotation
service. If the shares of Common Stock are traded in the over-the-counter
market, "fair market value" means the closing "asked" price of the shares in
the over-the-counter market on the day on which such value is to be
determined or, if such "asked" price is not available, the last sales price
on such day or, if no shares were traded on such day, on the next preceding
day on which the shares were traded, as reported by the National Association
of Securities Dealers Automatic Quotation System (NASDAQ) or other national
quotation service. Nevertheless, if the Board of Directors determines that
the fair market value of the Common Stock cannot be accurately determined
pursuant to the methodologies described above or if shares of Common Stock
are not traded on an exchange or in the over-the-counter market, Fair Market
Value shall be the value determined by the

<PAGE>
Board of Directors or Committee administering the Plan, taking into
consideration those factors affecting or reflecting value which they deem
appropriate.

(f) "NON-EMPLOYEE DIRECTOR'S DESIGNEE" means the corporation,
partnership, proprietorship or other entity (including an investment fund) by
whom the non-employee director is employed or with whom the non-employee
director is affiliated as an officer, partner, director, manager, principal, or
associate, at the time the non-employee director is a director of the
Corporation and is determined by the Committee to receive options under the
Plan.

(g) "NONQUALIFIED STOCK OPTION" means an option to purchase shares of
Common Stock which is not intended to qualify as an incentive stock option as
defined in Section 422 of the Code and which may be granted to non-employee
directors and a Non-Employee Director's Designees.

(h) "OPTION" means a Nonqualified Stock Option.

(i) "OPTIONEE" means a non-employee director or a Non-Employee
Director's Designee to whom an Option is granted under the Plan.

(j) "PARENT" means any corporation which qualifies as a parent of a
corporation under the definition of "parent corporation" contained in Section
424(e) of the Code.

(k) "SUBSIDIARY" means any corporation which qualifies as a
subsidiary of a corporation under the definition of "subsidiary corporation
contained in Section 424(f) of the Code.

(l) "TERM" means the period during which a particular Option may be
exercised as determined by the Committee and as provided in the option
agreement.

1.3 ADMINISTRATION OF THE PLAN.

The Plan shall be administered by the Compensation Committee (the
"Committee") appointed by the Board of Directors consisting of at least three
members from the Board of Directors. In the absence of such an express
appointment of a Committee, the Board shall serve as the Committee. Subject to
the control of the Board, and without limiting the control over decisions
described in Section 1.7, the Committee shall have the power to interpret and
apply the Plan and to make regulations for carrying out its purpose. More
particularly, the Committee shall determine which non-employee directors shall
be granted Options and the terms of such Options. All Options granted under the
Plan shall be Nonqualified Stock Options. Determinations by the Committee under
the Plan (including, without limitation, determinations of the person to receive
Options, the form, amount and timing of such Options, and the terms and
provisions of such Options and the agreements evidencing same) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, Options under the Plan, whether or not such persons are
similarly situated. In serving on the Committee, members thereof shall be
considered to be acting in their capacity as members of the Board of Directors
and shall be entitled to all rights of

-2-
<PAGE>
indemnification provided by the Bylaws of the Company or otherwise to members
of the Board of Directors. At the time that the Committee determines that a
non-employee director shall be granted Options under the Plan, the
non-employee director may promptly notify the Committee of the Non-Employee
Director's Designee who shall be granted all or a portion of the Options in
place of the non-employee director. The Committee shall retain at all times,
before the Options are granted, the discretion as to whether or not to grant
the Options to the Non-Employee Director's Designee.

1.4 SHARES SUBJECT TO THE PLAN.

The total number of shares that may be purchased pursuant to Options under
the Plan shall not exceed 100,000 shares of Common Stock. Shares subject to the
Options which terminate or expire prior to exercise shall be available for
future Options under the Plan without being charged against the limitation of
100,000 shares set forth above. Shares issued pursuant to the Plan may be
either unissued shares of Common Stock or reacquired shares of Common Stock held
in treasury.

1.5 TERMS AND CONDITIONS OF OPTIONS.

All Options shall be evidenced by option agreements in such form as the
Committee shall approve from time to time subject to the provisions of Article
II and the following provisions:

(a) EXERCISE PRICE. The exercise price of an Option shall be
determined by the Committee; provided, however, such exercise price shall not be
less than the Fair Market Value (as determined by the Board of Directors) of the
Common Stock at the time the Option is granted without the unanimous approval of
all members of the Board of Directors.

(b) EXERCISE. The Committee shall determine whether the Option shall
be exercisable in full at any time during the Term or in cumulative or
noncumulative installments during the Term.

(c) TERMINATION OF DIRECTORSHIP. An Optionee's Option shall
expire on the expiration of the Term specified in Section 2.1 or upon the
occurrence of such events as are specified in the option agreement. If the
option agreement permits exercise of the Option after termination of
directorship (or after the termination of the directorship of the
non-employee director on whose behalf the Non-Employee Director's Designee
has been granted the Option), the Optionee may exercise the Option only with
respect to the shares which could have been purchased by the Optionee at the
date of termination of such directorship. However, the Committee may, but is
not required to, waive any requirements made pursuant to Section 1.5(b) so
that some or all of the shares subject to the Option may be exercised within
the time limitation described in this subsection. An Optionee's directorship
(or the directorship of the non-employee director on whose behalf the
Non-Employee Director's Designee has been granted the Option) shall be deemed
to terminate on the effective date of his or her resignation or removal or,
in the alternative, on the date determined by the Committee to constitute the
date of the termination of directorship of the Optionee (or the non-employee
director on whose behalf the Non-Employee Director's Designee has been
granted the Option). Whether military, government or other service or other
leave of absence shall constitute a termination of

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<PAGE>
directorship shall be determined in each case by the Committee at its
discretion, and any determination by the Committee shall be final and
conclusive.

(d) DEATH OR DISABILITY. Upon termination of the directorship of the
Optionee (or the non-employee director on whose behalf the Non-Employee
Director's Designee has been granted the Option) by reason of death or
disability (as determined by the Committee consistent with the definition of
Section 422(c)(6) of the Code), the Option shall expire on the earlier of the
expiration of (i) the date specified in the option agreement which in no event
shall be later than 12 months after the date of such termination, or (ii) the
Term specified in Section 2.1. The Optionee or his successor in interest, as
the case may be, may exercise the Option only as to the shares that could have
been purchased by the Optionee at the date of the termination of directorship of
the Optionee (or the non-employee director on whose behalf the Non-Employee
Director's Designee has been granted the Option). However, the Committee may,
but is not required to, waive any requirements made pursuant to Section 1.5(b)
so that some or all of the shares subject to the Option may be exercised within
the time limitation described in this subsection.

(f) NONTRANSFERABILITY. No Option granted under the Plan shall be
transferable other than by will or by the laws of descent and distribution;
provided, however, a non-employee director may designate that his or her
Options be granted to the Non-Employee Director's Designee subject to the
approval by the Committee. During the lifetime of the Optionee (or the
lifetime of the non-employee director on whose behalf the Non-Employee
Director's Designee has been granted the Option), an Option shall be
exercisable only by the Optionee.

(h) ADDITIONAL PROVISIONS. Each option agreement may contain such
other terms and conditions not inconsistent with the provisions of the Plan as
the Committee may deem appropriate from time to time, including cash awards for
such purposes as the Committee may determine, including but not limited to cash
awards for the payment of any income or excise tax directly or indirectly
attributable to the exercise or acceleration of exercise of an Option
(including, without limitation, any tax under Code Section 280G).

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<PAGE>
1.6 STOCK ADJUSTMENTS; MERGERS.

(a) GENERAL. Notwithstanding Section 1.4, in the event the
outstanding shares of Common Stock are increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of any other corporation by reason of any merger, sale of stock,
consolidation, liquidation, recapitalization, reclassification, stock split up,
combination of shares, share exchange, stock dividend, or transaction having
similar effect, the total number of shares of Common Stock set forth in Section
1.4 shall be proportionately and appropriately adjusted by the Committee.

1.7 NOTIFICATION OF EXERCISE.

Options shall be exercised by written notice directed to the Secretary of
the Company at the principal executive offices of the Company. Such written
notice shall be accompanied by any payment required pursuant to Section 1.5(e)
and shall be effective upon receipt by the Secretary of the Company received
during normal business hours or if not so received, such exercise shall be
effective on the next regular business day of the Company. Exercise by an
Optionee which is a corporation, partnership or other entity, or by an
Optionee's heir or the representative of his estate shall be accompanied by
evidence of its or his authority to so act in form reasonably satisfactory to
the Company.

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<PAGE>
ARTICLE II

NONQUALIFIED STOCK OPTIONS

2.1 TERMS AND CONDITIONS OF OPTIONS.

In addition to the requirements of Section 1.5, each Option granted under
the Plan to a non-employee director or a Non-Employee Director's Designee shall
be a Nonqualified Stock Option and subject to the following provisions:

(a) TERM. Each Nonqualified Stock Option granted under the plan
shall be exercisable only during a term fixed by the Committee.

(b) EXERCISE PRICE. Subject to the terms of Section 1.5(a), the
Company may elect to grant Nonqualified Stock Options at a price less than the
Fair Market Value of the Common Stock at the time the Option is granted.

2.2 SECTION 83(b) ELECTION.

The Company recognizes that certain persons who receive Nonqualified Stock
Options may be subject to restrictions regarding their right to trade Common
Stock under Applicable securities laws. Such may cause Optionee's exercising
such Options not to be taxable under the provisions of Section 83(c) of the
Code. Accordingly, Optionees exercising such Nonqualified Stock Options may
consider making an election to be taxed upon exercise of the Option under
Section 83(b) of the Code and to effect such election will file such election
with the Internal Revenue Service within (30) days of exercise of the Option and
otherwise in accordance with applicable Treasury Regulations.

ARTICLE III

ADDITIONAL PROVISIONS

3.1 SHAREHOLDER APPROVAL.

The Plan shall be submitted for the approval of the shareholders of the
Company as soon as reasonably practicable following the adoption of the Plan by
the Board of Directors or the Committee and in all events within one year of its
approval by such Board or Committee. If the shareholders of the Company do not
approve the Plan as provided in this Section 3.1, the Plan shall terminate.

3.2 COMPLIANCE WITH OTHER LAWS AND REGULATIONS.

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<PAGE>
Common Stock prior to (a) the listing of such share on any stock exchange on
which the Common Stock may then be listed and (b) the completion of any
registration or qualification (or determination of the availability of an
exemption therefrom) of such shares under any Federal or state law, or any
ruling or regulation of any government body which the Company shall, in its sole
discretion, determine to be necessary or advisable.

3.3 AMENDMENTS.

The Board of Directors may discontinue the Plan at any time, and may amend
it from time to time. However, except as permitted under Section 1.6, no
amendment, without approval by stockholders, may (a) increase the total number
of shares which may be issued under the Plan or to any individual under the
Plan, (b) extend the date on which the Plan will terminate, (c) reduce the
Option price for shares which may be purchased pursuant to Options under
Articles II of the Plan, (d) extend the period during which Options may be
granted, (e) change the class of eligible persons to whom Options may be granted
under the Plan, or (f) change the provisions of the Plan in such a manner so as
to increase materially the benefits accruing under the Plan. Other than as
expressly permitted under the Plan, no outstanding Option may be revoked or
altered in a manner unfavorable to the Optionee without the consent of the
Optionee.

3.4 NO RIGHTS AS SHAREHOLDER.

No Optionee shall have any rights as a shareholder with respect to any
share subject to his or her Option prior to the date of issuance to him or her
of a certificate or certificates for such shares.

3.5 WITHHOLDING.

Whenever the Company proposes or is required to issue or transfer shares of
Common Stock under the Plan the Company shall have the right to require the
Optionee to remit to the Company an amount sufficient to satisfy any Federal,
state or local withholding tax liability in such form as the Company may
determine or accept in its sole discretion, including payment by surrender or
retention of shares of Common Stock prior to the delivery of any certificate or
certificates for such shares. Whenever under the Plan payments are to be made
in cash, such payments shall be made net of an amount sufficient to satisfy any
Federal, state, or local withholding tax liability.

3.6 CONTINUED SERVICE AS A DIRECTOR NOT PRESUMED.

This Plan and any document describing this Plan and the grant of any Option
hereunder shall not give any Optionee a right to continued service as a director
of the Company or its Subsidiaries.

3.7 EFFECTIVE DATE; DURATION.

The Plan shall become effective as of February 9, 1996, subject to
shareholder approval pursuant to Section 3.1, and shall expire at midnight on
February 9, 2006. No Options may be granted under the Plan after February 9,
2006, but Options granted on or before that date may be

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<PAGE>
exercised according to the terms of the related agreements and shall continue
to be governed by and interpreted consistent with the terms hereof.

The foregoing Plan was approved and adopted by the Board of Directors and
the Shareholders of the Company on February 9, 1996 and the Plan was amended and
restated by the Board of Directors of the Company on December __, 1997.

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<PAGE>

AMENDED AND RESTATED

INVESTORS' RIGHTS AGREEMENT

This Amended and Restated Investors' Rights Agreement (the
"Agreement") is entered into as of May 19, 1998, by and between Healtheon
Corporation, a Delaware corporation (the "Company") and the persons and
entities listed on Schedules A and B hereto.

WHEREAS, the Company and certain of the persons and entities listed on
Schedules A and B hereto entered into certain Securities Purchase Agreements
during the period from January 26, 1996 through December __, 1997 (the
"Securities Purchase Agreements") pursuant to which the Company sold and
issued to such persons and entities (the "Healtheon Investors") shares of its
Common Stock and Series A, Series B, Series C and Series D Preferred Stock
and issued certain warrants with respect thereto; and

WHEREAS, in order to induce the Healtheon Investors to invest funds in
the Company pursuant to the Securities Purchase Agreements, the Company and
the Healtheon Investors entered into certain Investors' Rights Agreements
pursuant to which the Company granted certain rights to the Healtheon
Investors; and

WHEREAS, the Company entered into an Agreement and Plan of
Reorganization (the "Merger Agreement") with ActaMed Corporation ("ActaMed")
dated February 24, 1998, in connection with the acquisition of ActaMed by the
Company (the "Merger"), pursuant to which the Company will issue and exchange
0.6272 shares of Company Common Stock for each share of ActaMed Capital Stock
outstanding at the time the Merger is consummated; and

WHEREAS, as a condition to closing of the Merger, the Healtheon
Investors have agreed to convert all of their shares of Original Preferred
Stock and warrants to acquire Original Preferred Stock into Common Stock and
warrants to acquire Common Stock; and

WHEREAS, certain shareholders of ActaMed Capital Stock listed on
Schedules A and B hereto possess certain registration and other rights with
respect to their shares of ActaMed Capital Stock, and desire to maintain
certain rights following the Merger with respect to their shares of Company
Common Stock (the "ActaMed Holders"); and

WHEREAS, pursuant to the Merger Agreement, in order to induce the
ActaMed Holders to approve the Merger, the Company and the ActaMed Holders
have entered into this Agreement.

NOW, THEREFORE, in consideration of the premises, covenants, and
conditions set forth herein, the parties agree as follows:

1. REGISTRATION RIGHTS. The parties covenant and agree as follows:

1.1 DEFINITIONS. For purposes of this Agreement:

(a) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933,
as amended (the "Act"), and the declaration or ordering of effectiveness of
such registration statement or document.

<PAGE>

(b) The term "Registrable Securities" means (i) the
Company's Common Stock issued pursuant to the Securities Purchase Agreements,
(ii) the Company's Common Stock issued upon conversion of the Original
Preferred Stock and issued upon the exercise of the warrants issued in
substitution for the Series B Preferred Stock Warrants (together, the
"Conversion Stock"), (iii) the Company's Common Stock issued to the ActaMed
Holders pursuant to the Merger Agreement (the "Merger Stock"), and (iv) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such Common Stock, Conversion Stock and Merger Stock
described in (i), (ii) and (iii), excluding in all cases, however, (A) any
Registrable Securities sold by a person in a transaction in which such
person's rights under this Section 1 are not assigned or (B) shares of any
Registrable Securities that have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction.

(c) The number of shares of "Registrable Securities then
outstanding" shall be equal to the sum of (i) the number of shares of Common
Stock outstanding that are Registrable Securities and (ii) the number of
shares of Common Stock issuable pursuant to then exercisable or convertible
securities that are exercisable or convertible into Registrable Securities.

(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any transferee or assignee thereof
in accordance with Section 1.14 hereof.

(e) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") that permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.

(f) The term "Initial Public Offering" means the first sale
of Common Stock of the Company to the public effected pursuant to a
registration statement (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
plan, stock purchase or similar plan or a SEC Rule 145 transaction) filed
with, and declared effective by, the SEC under the Act on Form S-1 (or any
subsequently adopted similar form).

(g) The term "Original Preferred Stock" shall mean the
Series A Preferred Stock and the Series A-1 Preferred Stock (including Series
A-2, Series A-3, etc.); the Series B Preferred Stock and the Series B-1
Preferred Stock (including Series B-2, Series B-3, etc.); the Series C
Preferred Stock and the Series C-1 Preferred Stock (including Series C-2,
Series C-3, etc.), and the Series D Preferred Stock and the Series D-1
Preferred Stock (including Series D-2, Series D-3, etc.) of the Company
issued and sold to pursuant to the Securities Purchase Agreements or upon the
exercise of the Series B Preferred Stock Warrants.

(h) The term "Principal Holder" shall mean each Holder
which, together with its affiliated entities, holds at least two hundred and
fifty thousand (250,000) shares of Registrable Securities.

1.2 REQUEST FOR REGISTRATION.

(a) If the Company shall receive at any time after the
earlier of (i) January 26, 2001, or (ii) twelve (12) months after
consummation of the Company's Initial Public Offering, a written request from
the Holders of forty percent (40%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of Registrable Securities with an aggregate gross
offering price of at least ten million dollars ($10,000,000), then the
Company shall, within ten (10) days of the receipt thereof, give written
notice of such request to all Holders and shall, subject to the limitations
of subsection 1.2(b), effect as soon as practicable, and in any event shall
use its best efforts to effect within one hundred twenty (120) days of the
receipt of such request, the registration under the Act of all Registrable
Securities that the Holders request

<PAGE>

to be registered within twenty (20) days of the mailing of such notice by the
Company.

(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall
so advise the Company as a part of their request made pursuant to this
Section 1.2 and the Company shall include such information in the written
notice referred to in subsection 1.2(a). The underwriter or underwriters will
be selected by the Company and shall be reasonably acceptable to a majority
in interest of the Initiating Holders. In such event, the right of any Holder
to include his Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with
the Company as provided in subsection 1.4(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting. Notwithstanding any other provision of this Section 1.2,
if the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders of Registrable
Securities requesting to be included in the underwriting, and the number of
shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders requesting to be included in the
underwriting, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder at the time of
filing the registration statement; provided, however, that the number of
shares of Registrable Securities to be included in such underwriting shall
not be reduced unless all other securities, including, without limitation,
any shares offered by the Company, are first entirely excluded from the
underwriting. No Registrable Securities excluded from the underwriting by
reason of the managing underwriters' marketing limitation shall be included
in such registration. To facilitate the allocation of Shares in accordance
with the above provisions, the Company or the underwriters may round the
number of shares allocated to any Holder to the nearest one hundred (100)
Shares.

(c) The Company is obligated to effect only one (1)
registration pursuant to this Section 1.2 (counting for this purpose only
registrations that have been declared or ordered effective and pursuant to
which Registrable Securities have been sold).

(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the President of the Company stating
that in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its stockholders for such
registration statement to be filed and that it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Initiating Holders; provided,
however, that the Company may defer its obligations for this reason only once
in any twelve (12) month period.

(e) Notwithstanding anything to the contrary in this Section
1.2, the Company shall not be obligated to take an action to effect such
registration pursuant to this Section 1.2 for a period of six (6) months
following the effective date of a registration statement previously filed by
the Company (other than a registration of securities in a SEC Rule 145
transaction or with respect to an employee benefit plan).

(f) If any registration statement prepared pursuant to this
Section 1.2 is not filed or does not become effective or fails to close as a
result of the decision of the Initiating Holders or any underwriter
designated by them, the obligation of the Company to prepare and file a
registration statement at the request of such Initiating Holders shall
nevertheless have been satisfied unless such Initiating Holders shall
reimburse the Company for its registration expenses set forth in Section 1.6
herein incurred in connection with the preparation and filing of such
registration statement. If the registration statement otherwise fails to
become effective or fails to close, the registration rights of the Holders
provided in Section 1.2 shall remain fully available as if the registration
had not been requested by the Initiating Holders.

<PAGE>

1.3 COMPANY REGISTRATION. If (but without any obligation to do so)
(i) the Company proposes to register any of its Common Stock or other
securities under the Act in connection with a public offering of such
securities solely for cash (including a registration effected by the Company
for stockholders other than the Holders, but not including a registration
relating solely to the Company's employee benefit plans, or a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities), and (ii) the Company has consummated its Initial
Public Offering, the Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given within twenty (20) days after mailing of such notice by the Company,
the Company shall, subject to the provisions of Section 1.8, cause to be
registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered.

1.4 OBLIGATIONS OF THE COMPANY. Whenever required pursuant to this
Section 1 to effect the registration of any Registrable Securities, the
Company shall perform the following obligations as expeditiously as
reasonably possible:

(a) The Company shall prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use
its best efforts to cause such registration statement to become effective
and, upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, to keep such registration statement
effective for up to one hundred twenty (120) days.

(b) The Company shall prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.

(c) If requested by a selling Holder which holds at least
five percent (5%) of the Registrable Securities then outstanding, the Company
shall provide the underwriters (which term, for purposes of this Agreement,
shall include a person deemed to be an underwriter within the meaning of
Section 2(11) of the Securities Act), if any, of the shares being sold and
counsel for such underwriters and not more than one counsel for all of such
selling Holders (which counsel shall be subject to approval by the Company,
such approval not to be unreasonably withheld) the opportunity to participate
in the preparation of the registration statement, each prospectus included
therein or filed with the Commission, and each amendment or supplement
thereto; and make available for inspection by such underwriters and the
applicable counsel such financial and other information, books and records of
the Company and cause the officers, directors and employees of the Company
and counsel and independent certified public accountants of the Company to
respond to such inquiries as shall be reasonably necessary, in the opinion of
respective counsel to such selling Holders and such underwriters, to conduct
a reasonable investigation within the meaning of the Securities Act.

(d) The Company shall promptly notify (in writing, if so
requested) the selling Holders and the underwriters, if any, (i) when the
registration statement, the prospectus or any prospectus supplement or
post-effective amendment has been filed, and with respect to the registration
statement or any post-effective amendment, when the same has become
effective, (ii) request by the Commission for amendments or supplements to
the registration statement or the prospectus, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose, (iv) of the
receipt of the Company of any notification with respect to the suspension of
the qualification of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose.

(e) The Company shall, if requested by the managing
underwriter or underwriters or by selling Holders, promptly incorporate in a
prospectus, prospectus supplement or post-effective amendment such

<PAGE>

information or such managing underwriter or underwriters as such selling
Holders specify should be included therein relating to the sale of the
Registrable Securities, including, without limitation, information with
respect to the number or amount of Registrable Securities being sold to such
underwriters, the purchase price being paid therefor by such underwriters and
with respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus, prospectus
supplement or post-effective amendment promptly after notification of the
matters to be incorporated in such prospectus, prospectus supplement or
post-effective amendment, provided that the Company and its counsel are
reasonably satisfied that such additional information does not constitute an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.

(f) The Company shall furnish to the Holders such numbers of
copies of the prospectus, including a prospectus subject to completion, in
conformity with the requirements of the Act, and such other documents as they
may reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

(g) The Company shall use its best efforts to register and
qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions.

(h) The Company shall prepare and file with the applicable
exchange or securities market an appropriate listing application with respect
to the Registered Securities.

(i) In the event of any underwritten public offering, the
Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement.

(j) The Company shall notify each Holder of Registrable
Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the circumstances then existing.

(k) Notwithstanding the foregoing, the Company shall have no
obligation with respect to any registration requested pursuant to Sections
1.2 or 1.13 if the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does
not equal or exceed the number of shares or the anticipated aggregate
offering price required to trigger the Company's obligation to initiate such
registration as specified in subsection 1.2(a) or subsection 1.13(b)(ii), as
applicable.

1.5 OBLIGATIONS OF THE HOLDERS.

(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder's Registrable
Securities.

(b) In the event of any underwritten public offering, each
Holder participating in such

<PAGE>

underwriting shall enter into and perform its obligations under an
underwriting agreement in customary form with the managing underwriter of
such offering.

1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the
selling Holders not to exceed twenty five thousand dollars ($25,000), shall
be borne by the Company. Notwithstanding the foregoing, the Company shall not
be required to pay for expenses of any registration proceeding begun under
Section 1.2, the request for which has been subsequently withdrawn by the
Holders of a majority of the Registrable Securities or is not completed due
to failure to meet the gross offering price requirement set forth in such
section unless Holders representing a majority of Registrable Securities
agree to forfeit their right to a registration under Section 1.2, provided
however, that if at the time of such withdrawal by the Holders of a majority
of the Registrable Securities, the Holders have learned of a material adverse
change in the operating results, financial condition or business of the
Company from that known to the Holders at the time of the request and have
withdrawn the request with promptness following disclosure by the Company of
such material adverse change.

1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as
provided in Section 1.14), including (without limitation) all registration,
filing, and qualification fees, fees and disbursements of Company counsel,
printers' and accounting fees relating or apportionable thereto and the
reasonable fees and disbursements of one counsel for the selling Holders not
to exceed twenty five thousand dollars ($25,000), but excluding underwriting
discounts and commissions relating to Registrable Securities.

1.8 UNDERWRITING REQUIREMENTS.

(a) In connection with any offering involving an
underwriting of shares of the Company's Common Stock, the Company shall not
be required under Section 1.3 to include any of the Holders' securities in
such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity
as the managing underwriter determines in its sole discretion will not, due
to marketing factors, jeopardize the success of the offering by the Company.

(b) If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such offering
(excluding an offering effected pursuant to Section 1.2) exceeds the amount
of securities sold other than by the Company that the underwriters determine
in their sole discretion is compatible with the success of the offering, then
the Company shall be required to include in the offering only that number of
such securities, including Registrable Securities, which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering (the securities so included to be apportioned pro rata among the
Holders requesting inclusion in such registration according to the total
amount of securities entitled to be included therein owned by each such
Holder on a pro rata basis); provided, however, that any such limitation or
"cut-back" shall be first applied to all shares proposed to be sold in such
offering, other than for the account of the Company, which are not
Registrable Securities. In no event shall any securities of the Company be
excluded from such registration prior to the cut back of all shares proposed
to be sold in such offering by the stockholders of the Company.

1.9 WITHDRAWAL RIGHTS AND REALLOCATION. If any Holder disapproves
of the terms of any such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the underwriters. If such
Holder's shares are withdrawn from registration, or if the number of shares
of Registrable

<PAGE>

Securities was previously reduced due to marketing factors, the Company shall
offer to all Holders retaining the right to include securities in the
registration the right to include additional Registrable Securities in the
registration, with such shares being allocated on a pro rata basis among the
Holders of Registrable Securities.

1.10 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.

1.11 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:

(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors and general
partners of each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, including any of
the foregoing incurred in settlement of any litigation, commenced or
threatened, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (each of which is referred to
herein as a "Violation"):

(i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement, including any
prospectus subject to completion or final prospectus contained therein or any
amendments or supplements thereto;

(ii) 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; or

(iii) any violation or alleged violation by the Company
of the Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities laws. In
addition, the Company will promptly reimburse each such Holder, officer,
director or general partner, underwriter or controlling person for any legal
or other expenses reasonably incurred by them, on an as-incurred basis, in
connection with investigating or defending any such loss, claim, damage,
liability, or action.

Notwithstanding the foregoing, the indemnity provisions contained in
this Section 1.11(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the written consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for
any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation that results from reliance upon
written information furnished expressly for use in connection with such
registration by any such Holder, officer, director, general partner,
underwriter or controlling person.

(b) To the extent permitted by law, each selling Holder
shall indemnify and hold harmless the Company, each of its directors, each of
its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter and
any Holder selling securities in such registration statement or any of its
directors, officers or general partners or each person, if any, who controls
such Holder, against any losses, claims, damages, or liabilities (joint or
several) to which the Company (or any director, officer, controlling person),
or underwriter (or controlling person), or Holder (or director, officer,
general partner or controlling person thereof) may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or action in respect thereto) arise out of
or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation results from reliance upon written information
furnished by such Holder expressly for use in connection with such

<PAGE>

registration.

Each such Holder will promptly reimburse any legal or other expenses
reasonably incurred, on an as-incurred basis, by the Company (or any
director, officer, controlling person), underwriter (or controlling person),
Holder (or any director, officer, general partner, or controlling person
thereof) in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 1.11(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the written consent of the Holder, which
consent shall not be unreasonably withheld.

Notwithstanding the foregoing, the liability of each Holder under this
Section 1.11(b) shall be limited to an amount equal to the aggregate proceeds
of the shares sold by such Holder in the offering pursuant to which the
Violation is claimed to have occurred, unless such liability arises out of or
is based on willful misconduct of such Holder.

(c) Within a reasonable time after receipt by an indemnified
party of notice of the commencement of any action (including any governmental
action) under this Section 1.11, such indemnified party shall, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 1.11, deliver to the indemnifying party a written notice of the
commencement thereof. Such indemnifying party shall have the right to
participate in and subject to the consent of the indemnified party, which
consent shall not be unreasonably withheld, the indemnifying party shall have
the right to enter into settlement of such action, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense of such action with counsel approved
by the indemnified party (whose approval shall not be unreasonably withheld);
provided, however, that the indemnified party shall cooperate with the
indemnifying party, and that if representation of an indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding, such
indemnified party shall have the right to retain its own counsel, with the
reasonable fees and reasonable expenses to be paid by the indemnifying party.

The failure of an indemnified party to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if such failure is prejudicial to the indemnifying party, shall
relieve such indemnifying party of any liability to the indemnified party
under this Section 1.11 to the extent such party is prejudiced. However, the
omission of the indemnified party to deliver such written notice to the
indemnifying party will not relieve such indemnifying party of any liability
that it may have to any indemnified party otherwise than under this Section
1.11.

(d) If the indemnification provided for in this Section 1.11
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, liability, or
action referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage, liability or action in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, claim, damage, liability or action as well as any
other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the violation of law or the untrue
or alleged untrue statement of a material fact or the omission to state a
material fact relates to acts of or information supplied by the indemnifying
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.

The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 1.11(d) were determined by
pro rata allocation (even if the selling Holders or any underwriters or all
of them were treated as one entity for such purpose) or by any other method
of allocation which does not take

<PAGE>

account of the equitable considerations referred to in the immediately
preceding paragraph. In no event shall the contribution obligations of each
selling Holder exceed the amount of proceeds received by such selling Holder
from the date of his, her or its Registrable Securities covered by the
registration statement. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.

(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering
are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.

(f) The obligations of the Company and of the Holders under
this Section 1.11 shall survive the conversion, if any, of the Series A
Preferred and the completion of any offering of Registrable Securities in a
registration statement under this Section 1 or otherwise.

1.12 REPORTS UNDER THE 1934 ACT. With a view to making available to
the Holders the benefits of Rule 144 promulgated under the Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration, the Company
agrees:

(a) to make and keep public information available, as those
terms are defined under SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;

(b) use its best efforts to file with the SEC all reports
and other documents required of the Company under the Act and the 1934 Act
(at any time after it has become subject to such reporting requirements) in a
timely manner; and

(c) to furnish to any Holder, so long as such Holder owns
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), (ii) a
copy of the Company's most recent annual or quarterly report and (iii) such
other information as may be reasonably requested by such Holder in order to
avail itself of any rule or regulation of the SEC that permits the selling of
any such securities without registration.

1.13 FORM S-3 REGISTRATION. At any time following the second
anniversary of the Company's Initial Public Offering, in case the Company
shall receive from any Holder or Holders holding a written request that the
Company effect a registration on Form S-3 or any successor form and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company shall
comply with the following obligations:

(a) The Company shall promptly give written notice of the
proposed registration, and any related qualification or compliance, to all
other Holders. In the event the registration is proposed to be part of a
firm commitment underwritten public offering, the substantive provisions of
paragraph (b) of Section 1.2 hereof shall be applicable to each such
registration initiated under this Section 1.13.

(b) As soon as practicable, the Company shall effect such
registration and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution of all
or such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any other Holder or Holders joining in such request
as are specified in a written request given within fifteen (15) days after
receipt of such written notice from the Company. Notwithstanding the
foregoing, the Company shall not be obligated to effect any such
registration, qualification

<PAGE>

or compliance, pursuant to this Section 1.13 if: (i) the Company has
previously effected three (3) registrations pursuant to this Section 1.13,
(ii) Form S-3 is not available for such offering by the Holders; (iii) the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than one million dollars ($1,000,000); (iv) the Company
furnishes to the Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form
S-3 registration statement for a period of not more than one hundred twenty
(120) days after receipt of the request of the Holder or Holders under this
Section 1.13, notwithstanding the foregoing, the Company shall not have the
right to exercise this right more than twice in any twelve (12) month period;
(v) the Company has, within the twelve (12) month period preceding the date
of such request, already effected a registration on Form S-3 for the Holders
pursuant to this Section 1.13; (vi) the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance in a particular
jurisdiction; or (vii) a registration statement respecting securities of the
Company has been declared effective within one hundred eighty (180) days of
such request.

(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Holders. All expenses incurred in connection with the registrations
requested pursuant to this Section 1.13, including (without limitation) all
registration, filing, qualification, printers' and accounting fees, fees and
disbursements of counsel for the selling Holder or Holders and any
underwriters' discounts or commissions associated with Registrable
Securities, shall be borne by the selling Holder or Holders. Registrations
effected pursuant to this Section 1.13 shall not be counted as demands for
registration effected pursuant to Section 1.2.

1.14 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities granted under this Section 1 may
be assigned by a Holder to a transferee or assignee who acquires two hundred
fifty thousand (250,000) shares (as adjusted for stock splits, combinations,
dividends and the like) of the Registrable Securities held by such Holder,
provided the Company is, within a reasonable time prior to such transfer,
furnished with written notice of the name and address of such proposed
transferee or assignee and the securities with respect to which such
registration rights are being assigned; provided further that such assignment
shall be effective only if the transferee enters into a written agreement
providing that such transferee shall be bound by the provisions of Section 1
of this Agreement. Notwithstanding the foregoing or any other provision
contained herein to the contrary, the right to cause the Company to register
Registrable Securities may be assigned by a Holder to any constituent partner
of a partnership Holder and any affiliate, subsidiary or parent of a
corporate Holder provided that such transferee agrees in writing to be bound
by the terms and conditions of this Agreement.

1.15 "MARKET STAND-OFF" AGREEMENT.

Each Holder hereby agrees that it shall not, to the extent specified
by the Company and an underwriter of Common Stock (or other securities) of
the Company, sell, offer to sell, contract to sell (including without
limitation any short sale), grant any option to purchase or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company (other than securities already registered)
during a reasonable and customary period of time not to exceed one hundred
and eighty (180) days, as agreed to by the Company and the underwriters,
following the effective date of the Company's Initial Public Offering;
provided, however, that all officers and directors of the Company enter into
similar agreements.

In order to enforce the foregoing covenant, the Company may impose
stop transfer instructions with respect to the securities of each Holder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such one hundred and eighty (180) day period.

<PAGE>

1.16 TERMINATION OF THE COMPANY'S OBLIGATIONS. The rights to cause
the Company to register securities granted to Holders pursuant to Sections
1.2 and 1.3 shall terminate as to any Holder at such time as the Holder has
the ability to sell all of the Registrable Securities owned by such
stockholder under SEC Rule 144 within a three (3) month period.

1.17 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder
of any securities of the Company which would grant rights to have securities
other than Registrable Securities registered under the Act that are PARI
PASSU or senior to the registration rights granted herein.

2. COVENANTS.

2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall, as soon
as practicable, but in any event within ninety (90) days after the end of
each fiscal year of the Company, furnish to each Principal Holder a
consolidated profit and loss statement for such fiscal year, a consolidated
balance sheet of the Company and a consolidated statement of stockholders'
equity as of the end of such year, and a consolidated statement of cash flows
for such year, such year-end financial reports to be prepared in accordance
with generally accepted accounting principles and audited and certified by
independent public accountants of nationally recognized standing selected by
the Company. In the event that the Company is involved in a material
corporate transaction which is likely to have an effect on the Company's
financial reports, the Company shall have an additional thirty (30) days in
order to fulfill its obligations hereunder.

2.2 DELIVERY OF QUARTERLY FINANCIAL STATEMENTS. The Company shall,
as soon as practicable, but in no event within forty-five (45) days after the
end of each fiscal quarter of the Company (except for the fiscal quarter
ending December 31 of each year) furnish to each Principal Holder a
consolidated profit and loss statement for such quarter and year-to-date, a
consolidated balance sheet of the Company and a consolidated statement of
cash flows for such quarter and year-to-date prepared in accordance with
generally accepted accounting principles consistently applied. In the event
that the Company is involved in a material corporate transaction which is
likely to have an effect on the Company's financial reports, the Company
shall have an additional thirty (30) days in order to fulfill its obligations
hereunder.

2.3 DELIVERY OF MONTHLY FINANCIAL STATEMENTS. The Company shall
furnish each Principal Holder upon request (commencing with the month ending
July 31, 1998), within thirty (30) days of the end of each month, an
unaudited consolidated profit and loss statement, consolidated statement of
cash flows and consolidated balance sheet for and as of the end of such
month, and comparison to year-end results (if any). In the event that the
Company is involved in a material corporate transaction which is likely to
have an effect on the Company's financial reports, the Company shall have an
additional thirty (30) days in order to fulfill its obligations hereunder.

2.4 LIMITATION ON INFORMATION RIGHTS. The rights to receive
financial information set forth in Sections 2.1, 2.2 and 2.3 above may be
assigned by each Principal Holder to a subsequent transferee or assignee of
at least two hundred fifty thousand (250,000) shares (as adjusted for stock
splits, combinations, dividends and the like) of such Principal Holder's
Registrable Securities, provided that the transferee or assignee of such
rights is not deemed by the Board of Directors, in its reasonable judgment,
to be a current or potential competitor of the Company. Notwithstanding the
foregoing or any other provision contained herein to the contrary, the
information rights contained in Section 2.1, 2.2 and 2.3 above may be
assigned by a Holder to any constituent partner of a partnership Holder or
any affiliate, subsidiary or parent of a corporate Holder provided that such
transferee agrees in writing to be bound by the terms and conditions of this
Agreement.

<PAGE>

2.5 RIGHT OF FIRST REFUSAL. The Company hereby grants to each
Principal Holder, the right of first refusal to purchase a pro rata share of
New Securities (as defined in this Section 2.5) which the Company may, from
time to time, propose to sell and issue after the date hereof. A Principal
Holder's pro rata share, for purposes of this right of first refusal, is the
ratio of (i) the number of shares of Registrable Securities held by such
Principal Holder; and (ii) the total number of shares of Registrable
Securities then outstanding. This right of first refusal shall be subject to
the following provisions:

(a) "New Securities" shall mean any capital stock (including
Common Stock and/or preferred stock) of the Company whether now authorized or
not, and rights, options or warrants to purchase such capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock; provided that the term "New Securities" does not include (i)
securities issued upon conversion of the any preferred stock; (ii) securities
issued pursuant to the acquisition of another business entity or business
segment of any such entity by the Company by merger, purchase of
substantially all the assets or other reorganization whereby the Company will
own not less than fifty-one percent (51%) of the voting power of such
business entity or business segment of any such entity; (iii) any borrowing,
direct or indirect, from financial institutions or other persons by the
Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided that such
borrowing does not have any equity features including warrants, options or
other rights to purchase capital stock and are not convertible into capital
stock of the Company; (iv) securities issued to employees, consultants,
officers or directors of the Company pursuant to any stock option, stock
purchase or stock bonus plan, agreement or arrangement approved by the Board
of Directors; (v) securities issued in connection with obtaining lease
financing, whether issued to a lessor, guarantor or other person and is for
purposes other than equity financing of the Company; (vi) securities issued
in connection with one or more strategic development, licensing or technology
transactions, up to an aggregate of three million (3,000,000) shares of
Company capital stock or rights to purchase Company capital stock pursuant to
all transactions pursuant to this subsection (vi); (vii) up to one million
three hundred thirty-six thousand four hundred twenty-two (1,336,422) shares
of Company common stock to be issued to SmithKline Beechham Clinical
Laboratories, Inc.(SBLC), issued pursuant to the First Amendment to the Asset
Purchase Agreement dated December 31, 1997 between SBLC and ActaMed; (viii)
securities issued in a firm commitment underwritten public offering pursuant
to a registration under the Act; (ix) securities issued in connection with
any stock split, stock dividend or recapitalization of the Company so long as
such issuance results in adjustments to the conversion rate under the
Restated Certificate of Incorporation of the Company with respect to any
preferred stock; and (x) any right, option or warrant to acquire any security
convertible into the securities excluded from the definition of New
Securities pursuant to subsections (i) through (ix) above.

(b) In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Principal Holder written
notice of its intention, describing the type of New Securities, and their
price and the general terms upon which the Company proposes to issue the
same. Each Principal Holder shall have fifteen (15) days after any such
notice is effective to agree to purchase up to such Principal Holder's pro
rata share, as the case may be, of such New Securities for the price and upon
the terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.

(c) In the event the Principal Holders fail to exercise the
right of first refusal, in full or in part, within said fifteen (15)-day
period, the Company shall have sixty (60) days thereafter to sell or enter
into an agreement (pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within sixty (60) days from the date of
said agreement) to sell the New Securities respecting which the Principal
Holders' right of first refusal option set forth in this Section 2.4 was not
exercised, at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice to Principal Holders pursuant
to Section 2.5(b). In the event the Company has not sold within said 60-day
period or entered into an agreement to sell the New Securities within said
60-day period (or sold and issued New Securities in accordance with the
foregoing within sixty (60) days from the date of said agreement), the
Company shall not thereafter issue or sell any New Securities, without first
again offering such securities to the Principal Holders in the manner
provided in

<PAGE>

Section 2.5(b) above.

(d) The right of first refusal set forth in this Section 2.5
may be assigned by a Principal Holder to a transferee or assignee who
acquires two hundred and fifty thousand (250,000) shares (as adjusted for
stock splits, combinations, dividends and the like) of such Principal
Holder's Conversion Stock or such Principal Holder's Merger Stock, as the
case may be, provided, the Company is, within a reasonable time prior to such
transfer, furnished with written notice of the name and address of such
proposed transferee or assignee and the securities with respect to which such
rights of first refusal are being assigned; provided further that such
assignment shall be effective only if the transferee enters into a written
agreement providing that such transferee shall be bound by the provisions of
Section 2.5 of this Agreement. Notwithstanding the foregoing or any other
provision contained herein to the contrary, the right of first refusal may be
assigned by a Principal Holder to any constituent partner of a partnership
Principal Holder and any affiliate, subsidiary or parent of a corporate
Principal Holder provided that such transferee agrees in writing to be bound
by the terms and conditions of this Agreement.

2.6 TERMINATION OF COVENANTS. Unless terminated earlier, the
covenants set forth in these Sections 2.1, 2.2, 2.3 and 2.5 shall terminate
and be of no further force or effect upon the consummation of the Company's
Initial Public Offering.

3. MISCELLANEOUS.

3.1 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the
State of California.

3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto (including transferees of any shares of Registrable Securities
sold under their respective stock purchase agreements).

3.3 ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the
subject matter hereof, and no party shall be liable or bound to any other
party in any manner by any representations, warranties, covenants, or
agreements except as specifically set forth herein. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto and their respective successors and assigns, any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided herein.

3.4 SEVERABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Holder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason
of the law of any such Holder's domicile or otherwise, shall in no way affect
or impair the validity, legality, or enforceability of this Agreement with
respect to any other Holder. In case any provision of this Agreement shall
be invalid, illegal, or unenforceable, it shall, to the extent practicable,
be modified so as to make it valid, legal and enforceable and to retain as
nearly as practicable the intent of the parties, and the validity, legality,
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

3.5 AMENDMENT AND WAIVER. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the Holders
of a majority of the Registrable Securities then outstanding, provided that
the effect of such amendment or waiver is to treat all Holders equally. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each Holder of Registrable Securities at the time outstanding
(including securities exercisable for or convertible into Registrable

<PAGE>

Securities), each future holder of all such securities, and the Company.

3.6 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power, or remedy accruing to any Holder or any permitted transferee
upon any breach, default or noncompliance of the Company under this Agreement
shall impair any such right, power, or remedy, nor shall it be construed to
be a waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or
approval of any kind or character on the Holders' part of any breach, default
or noncompliance of this Agreement or any waiver on the Holders' part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing, and that
all remedies, either under this Agreement, by law, or otherwise afforded to
each Holder, shall be cumulative and not alternative.

3.7 NOTICES, ETC. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given to the party to be so
notified in writing and shall be deemed effective upon personal delivery,
upon delivery by confirmed facsimile or electronic transmission (with
duplicate original sent by United States mail), or three business days after
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on Schedule A hereto (or, if to the Company, at the
address of its principal executive offices), or at such other address as such
party may designate by ten (10) days' advance written notice to the other
parties.

3.8 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

3.9 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, expenses and necessary
disbursements in addition to any other relief to which such party may be
entitled.

3.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

3.11 AGGREGATION OF STOCK. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated
together for the purposes of determining the availability of any right under
this Agreement.

3.12 SPECIFIC PERFORMANCE. The parties hereto agree that
limitations on the purchase and sale of the Registrable Securities of the
Company exist and that, for that reasons, among others, the Holders of the
Registrable Securities may be irreparably damaged in the event of a breach or
prospective breach of the terms and provisions of this Agreement and,
therefore, the parties hereto consent to the application of equitable
remedies, including, without limitation, specific performance, to enforce the
terms and provisions of this Agreement. The rights granted in this Section
3.12 shall be cumulative and not exclusive, and shall be in addition to any
and all other rights which the parties hereto may have hereunder, at law or
in equity.

IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Investors' Rights Agreement as of the date first above written.

HEALTHEON CORPORATION

14
<PAGE>

By: /s/ Michael Long
-------------------------------------
Michael Long
President and Chief Executive Officer

Address: 4600 Patrick Henry Drive
Santa Clara, CA 95054

<PAGE>

HEALTHEON CORPORATION

SIGNATURE PAGE

AMENDED AND RESTATED

INVESTORS' RIGHTS AGREEMENT

The undersigned amends the Amended and Restated Investors' Rights
Agreement dated October 13, 1997 and hereby executes and delivers this
Amended and Restated Investors' Rights Agreement dated May ___, 1998 (the
"Agreement") to which this Signature Page is attached, effective as of the
date of the Agreement, which Agreement and Signature Page, together with all
counterparts of said Agreement and Signature Pages of the other parties named
in said Agreement, shall constitute one and the same document in accordance
with the terms of said Agreement.

_____________________________________________________
Name of Stockholder

By:__________________________________________________

Print Name:__________________________________________

Title:_______________________________________________

<PAGE>

LEASE

DATED: DECEMBER 2, 1997

BY AND BETWEEN

LARVAN PROPERTIES, A CALIFORNIA GENERAL PARTNERSHIP

AS LANDLORD

AND

HEALTHEON CORPORATION, A DELAWARE CORPORATION

AS TENANT

AFFECTING PREMISES COMMONLY KNOWN AS

4600 PATRICK HENRY DRIVE

SANTA CLARA, CALIFORNIA

[1/15/97 TRIPLE NET INDUSTRIAL/COMMERCIAL LEASE]

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE 1 - DEFINITIONS PAGE:
- ----------------------- -----
<S> <C>
1.1 General 1
1.2 Additional Rent 1
1.3 Address for Notices 1
1.4 Agents 1
1.5 Agreed Interest Rate 1
1.6 Base Monthly Rate 1
1.7 Building 1
1.8 Commencement Date 1
1.9 Common Area 1
1.10 Common Operating Expense 1
1.11 Consumer Price Index 1
1.12 Effective Date 1
1.13 Event of Tenant's Default 1
1.14 Hazardous Materials 1
1.15 Insured and Uninsured Peril 1
1.16 Law 1
1.17 Lease 1
1.18 Lease Term 1
1.19 Lender 1
1.20 Permitted Use 2
1.21 Premises 2
1.22 Project 2
1.23 Private Restrictions 2
1.24 Real Property Taxes 2
1.25 Scheduled Commencement Date 2
1.26 Security Instrument 2
1.27 Summary 2
1.28 Tenant's Alterations 2
1.29 Tenant's Share 2
1.30 Trade Fixtures 2

<CAPTION>
ARTICLE 2 - DEMISE, CONSTRUCTION, AND ACCEPTANCE 2
- ------------------------------------------------
<S> <C>
2.1 Demise of Premises 2
2.2 Commencement Date 2
2.3 Construction of Improvements 2
2.4 Delivery and Acceptance of Possession 2
2.5 Early Occupancy 3

<CAPTION>
ARTICLE 3 - RENT 3
- ----------------
<S> <C>
3.1 Base Monthly Rent 3
3.2 Additional Rent 3
3.3 Payment of Rent 3
3.4 Late Charge and Interest on Rent in Default 3
3.5 Security Deposit 3

<CAPTION>
ARTICLE 4 - USE OF PREMISES 3
- ---------------------------
<S> <C>
4.1 Limitation on Use 3
4.2 Compliance with Regulations 4
4.3 Outside Areas 4
4.4 Signs 4
4.5 Parking 4
4.6 Rules and Regulations 4
</TABLE>

<PAGE>

TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE:
-----
<S> <C> <C>
ARTICLE 5 - TRADE FIXTURES AND ALTERATIONS 4

5.1 Trade Fixtures 4
5.2 Tenant's Alterations 4
5.3 Alterations Required by Law 5
5.4 Amortization of Certain Capital Improvements 5
5.5 Mechanic's Liens 5
5.6 Taxes on Tenant's Property 5

ARTICLE 6 - REPAIR AND MAINTENANCE 6

6.1 Tenant's Obligation to Maintain 6
6.2 Landlord's Obligation to Maintain 6
6.3 Control of Common Area 6

ARTICLE 7 - WASTE DISPOSAL AND UTILITIES 7

7.1 Waste Disposal 7
7.2 Hazardous Materials 7
7.3 Utilities 8
7.4 Compliance with Governmental Regulations 8

ARTICLE 8 - COMMON OPERATING EXPENSES 8

8.1 Tenant's Obligation to Reimburse 8
8.2 Common Operating Expenses Defined 8
8.3 Real Property Taxes Defined 9

ARTICLE 9 - INSURANCE 9

9.1 Tenant's Insurance 9
9.2 Landlord's Insurance 10
9.3 Tenant's Obligation to Reimburse 10
9.4 Release and Waiver of Subrogation 10

ARTICLE 10 - LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY 10

10.1 Limitation on Landlord's Liability 10
10.2 Limitation on Tenant's Recourse 11
10.3 Indemnification of Landlord 11

ARTICLE 11 - DAMAGE TO PREMISES 11

11.1 Landlord's Duty to Restore 11
11.2 Landlord's Right to Terminate 11
11.3 Tenant's Right to Terminate 12
11.4 Abatement of Rent 12

ARTICLE 12 - CONDEMNATION 12

12.1 Landlord's Termination Right 12
12.2 Tenant's Termination Right 12
12.3 Restoration and Abatement of Rent 12
12.4 Temporary Taking 12
12.5 Division of Condemnation Award 12

iii

<PAGE>

TABLE OF CONTENTS
(CONTINUED)

PAGE:
-----
<S> <C> <C>
ARTICLE 13 - DEFAULT AND REMEDIES 13

13.1 Events of Tenant's Default 13
13.2 Landlord's Remedies 13
13.3 Waiver 14
13.4 Limitation on Exercise of Rights 14
13.5 Waiver by Tenant of Certain Remedies 14

ARTICLE 14 - ASSIGNMENT AND SUBLETTING 14

14.1 Transfer by Tenant 14
14.2 Transfer by Landlord 16

ARTICLE 15 - GENERAL PROVISIONS 16

15.1 Landlord's Right to Enter 16
15.2 Surrender of the Premises 17
15.3 Holding Over 17
15.4 Subordination 17
15.5 Mortgagee Protection and Attornment 17
15.6 Estoppel Certificates and Financial Statements 17
15.7 Reasonable Consent 18
15.8 Notices 18
15.9 Attorney's Fees 18
15.10 Corporate Authority 18
15.11 Miscellaneous 18
15.12 Termination by Exercise of Right 18
15.13 Brokerage Commissions 19
15.14 Force Majeure 19
15.15 Entire Agreement 19
</TABLE>

EXHIBITS

<TABLE>
<S> <C>
Exhibit A - Site plan of the Project containing a description of the Premises

Exhibit B - Space Plan

Exhibit C - Intentionally Omitted

Exhibit D - Acceptance Agreement

Exhibit E - Intentionally Omitted

Exhibit F - Intentionally Omitted

Exhibit G - Form of Subordination Agreement

Exhibit H - Asbestos Disclosure
</TABLE>

<PAGE>

SUMMARY OF BASIC LEASE TERMS

SECTION TERMS
(LEASE REFERENCE)

A. LEASE REFERENCE DATE: December 3, 1997
(Introduction)

B. LANDLORD: LARVAN PROPERTIES, A CALIFORNIA GENERAL
(Introduction) PARTNERSHIP

C. TENANT: HEALTHEON CORPORATION, A DELAWARE CORPORATION
(Introduction)

D. PREMISES: That area consisting of 49,837 square feet
(Section 1.21) of gross leasable area the address of
which is 4600 PATRICK HENRY DRIVE, SANTA
CLARA, CALIFORNIA, comprising the Building
shown on EXHIBIT A.

E. PROJECT: The land and improvements shown on EXHIBIT
(Section 1.22) A consisting of 1 building the aggregate
gross leasable area of which is 49,837
square feet.

F. BUILDING: The building in which the Premises are
(Section 1.7) located known as 4600 Patrick Henry Drive,
Santa Clara, California containing 49,837
square feet of gross leasable area.

G. TENANT'S SHARE: 100%
(Section 1.29)

H. TENANT'S ALLOCATED PARKING STALLS: TENANT SHALL HAVE
(Section 4.5) THE RIGHT TO ALL
PARKING SPACES

I. SCHEDULED COMMENCEMENT DATE: FEBRUARY 1, 1998,
(Section 1.26) OR THE DATE ON WHICH
TENANT OCCUPIES THE
PREMISES FOR
BUSINESS, WHICHEVER
IS EARLIER.

J. LEASE TERM: 120 calendar months (plus the partial
(Section 1.18) month following the Commencement Date of
such date is not the first day of a
month).

K. BASE MONTHLY RENT:
(Section 3.1)

INCLUSIVE PERIOD BASE MONTHLY RENT

2/1/98 THROUGH 12/31/98 $72,263.69 PER MONTH NNN
1/1/99 THROUGH 12/31/99 $74,257.17 PER MONTH NNN
1/1/2000 THROUGH 12/31/2000 $76,250.65 PER MONTH NNN
1/1/2001 THROUGH 12/31/2001 $78,244.13 PER MONTH NNN
1/1/2002 THROUGH 12/31/2002 $80,237.61 PER MONTH NNN
1/1/2003 THROUGH 12/31/2003 $82,231.09 PER MONTH NNN
1/1/2004 THROUGH 12/31/2004 $84,224.57 PER MONTH NNN
1/1/2005 THROUGH 12/31/2005 $86,218.05 PER MONTH NNN
1/1/2006 THROUGH 12/31/2006 $88,211.53 PER MONTH NNN
1/1/2007 THROUGH 12/31/2008 $90,205.01 PER MONTH NNN

L. PREPAID RENT: $72,263.69
(Section 3.3)

<PAGE>

M. SECURITY DEPOSIT: $72,263.69 (THE "PERMANENT SECURITY
(Section 3.5) DEPOSIT") PLUS A LETTER OF CREDIT
AS SET FORTH IN THE FIRST ADDENDUM
TO LEASE, PARAGRAPH 1.

N. PERMITTED USE: RESEARCH AND DEVELOPMENT, SALES,
(Section 4.1) ADMINISTRATION, GENERAL OFFICE AND
STORAGE, AND OTHER DIRECTLY RELATED
USES AS WELL AS OTHER LEGAL USES IF
APPROVED IN WRITING BY LANDLORD,
APPROVAL NOT TO BE UNREASONABLY
WITHHELD.

O. PERMITTED TENANT'S ALTERATIONS LIMIT: $10,000
(Section 5.2)

P. TENANT'S LIABILITY INSURANCE MINIMUM: $5,000,000
(Section 9.1)

Q. LANDLORD'S ADDRESS: LARVAN PROPERTIES
(Section 1.3) ATTN: DONN BYRNE
1960 THE ALAMEDA
SAN JOSE, CALIFORNIA 95128

R. TENANT'S ADDRESS: HEALTHEON CORPORATION
(Section 1.3) ATTENTION: KALLEN CHEN
4600 PATRICK HENRY DRIVE
SANTA CLARA, CALIFORNIA 95054

S. RETAINED REAL ESTATE BROKERS: Cornish and Carey
(Section 15.13) Commercial (representing only Tenant and not
representing Landlord) shall receive 50% of the
commission, and Cooper-Brady and Colliers Parrish
International (representing only the Landlord and not
representing Tenant) shall receive 50% of the
commission.

T. LEASE: This Lease includes the summary of the Basic
(Section 1.17) Lease Terms, the Lease, and the following
exhibits and addenda: First Addendum to Lease,
EXHIBIT A (site plan of the Project), EXHIBIT
B (Space Plan), EXHIBIT C (intentionally
omitted), EXHIBIT D (acceptance agreement),
EXHIBIT E (intentionally omitted), EXHIBIT F
(intentionally omitted), EXHIBIT G (form of
subordination agreement), EXHIBIT H (asbestos
disclosure).

The foregoing Summary of Basic Lease Terms ("Summary") is incorporated into
and made a part of this Lease. Each initially capitalized word used in this
Lease or any Addendum or Amendment shall have the meaning ascribed to such
words in this Summary, unless the context clearly indicates another meaning.
In the event of any conflict between the Summary and the Lease, the provision
of this Summary shall control.

LANDLORD: TENANT:

LARVAN PROPERTIES, HEALTHEON CORPORATION, A DELAWARE
A CALIFORNIA GENERAL PARTNERSHIP CORPORATION

By: VANDERSON CONSTRUCTION, INC. a By: /s/ Kallen Chan
California corporation, its ---------------------------------
General Partner

KALLEN CHEN, Controller
---------------------------------
By: /s/ George F. Van Sickle [Typed or printed name and title]
----------------------------------

Dated: 12/5/97
------------------------------

George F. Van Sickle-President
----------------------------------
[Typed or printed name and title]

By: Larscom Incorporated, a Delaware
corporation
its General Partner

By: /s/ Bruce Horn
----------------------------------

Bruce Horn VP Finance
----------------------------------
[Typed or printed name and title]

By: /s/ Donn Byrne
----------------------------------
Donn Byrne, General Partner

Dated: 12/8/97
-------------------------------

<PAGE>

LEASE
- -------------------------------------------------------------------------------

This Lease is dated as of the lease reference date specified in SECTION
A of the Summary and is made by and between the party identified as Landlord
in SECTION B of the Summary and the party identified as Tenant in SECTION C
of the Summary.

ARTICLE 1

DEFINITIONS

1.1 GENERAL: Any initially capitalized term that is given a special meaning
by this Article 1, the Summary, or by any other provision of this Lease
(including the exhibits attached hereto) shall have such meaning when used in
this Lease or any addendum or amendment hereto unless otherwise clearly
indicated by the context.

1.2 ADDITIONAL RENT: The term "Additional Rent" is defined in PARA 3.2.

1.3 ADDRESS FOR NOTICES: THe term "Address for Notices" shall mean the
addresses set forth in the SECTIONS Q AND R of the Summary; provided,
however, that after the Commencement Date, Tenant's Address for Notices shall
be the address of the Premises.

1.4 AGENTS: The term "Agents" shall mean the following: (i) with respect
to Landlord or Tenant, the agents, employees, contractors, and invitees of
such party; and (ii) in addition with respect to Tenant, Tenant's subtenants
and their respective agents, employees, contractors, and invitees.

1.5 AGREED INTEREST RATE: The term "Agreed Interest Rate" shall mean that
interest rate determined as of the time it is to be applied that is equal to
the lesser of (i) 3% in excess of the discount rate established by the
Federal Reserve Bank of San Francisco as it may be adjusted from time to
time, or (ii) the maximum interest rate permitted by Law.

1.6 BASE MONTHLY RENT: The term "Base Monthly Rent" shall mean the fixed
monthly rent payable by Tenant pursuant to PARA 3.1 which is specified
in SECTION K of the Summary.

1.7 BUILDING: The term "Building" shall mean the building in which the
Premises are located which Building is identified in SECTION F of the
Summary, the gross leasable area of which is referred to herein as the
"Building Gross Leasable Area."

1.8 COMMENCEMENT DATE: The term "Commencement Date" is the date the Lease
Term commences, which term is defined in PARA 2.2.

1.9 COMMON AREA: The term "Common Area" means the area of the Project
outside the walls of the Building.

1.10 COMMON OPERATING EXPENSES: The term "Common Operating Expenses" is
defined in PARA 8.2.

1.11 INTENTIONALLY OMITTED.

1.12 EFFECTIVE DATE: The term "Effective Date" shall mean the date the last
signatory to this Lease whose execution is required to make it binding on the
parties hereto shall have executed this Lease.

1.13 EVENT OF TENANT'S DEFAULT: The term "Event of Tenant's Default" is
defined in PARA 13.1.

1.14 HAZARDOUS MATERIALS: The term "Hazardous Materials" and "Hazardous
Materials Laws" are defined in PARA 7.2E.

1.15 INSURED AND UNINSURED PERIL: The terms "Insured Peril" and "Uninsured
Peril" are defined in PARA 11.2E.

1.16 LAW: The term "Law" shall mean any judicial decision, statutes,
constitution, ordinance, resolution, regulation, rule, administrative order,
or other requirement of any municipal, county, state, federal or other
government agency or authority having jurisdiction over the parties to this
Lease or the Premises, or both, in effect either at the Effective Date or any
time during the Lease Term.

1.17 LEASE: The term "Lease" shall mean the Summary, this Lease which is
attached to the Summary and all elements of this Lease identified in SECTION I
of the Summary, all of which are attached hereto and incorporated herein by
this reference.

1.18 LEASE TERM: The term "Lease Term" shall mean the term of this Lease
which shall commence on the Commencement Date and continue for the period
specified in SECTION J of the Summary.

1.19 LENDER: The term "Lender" shall mean any beneficiary, mortgagee,
secured party, lessor, or other holder of any Security Instrument.

1.20 PERMITTED USE: The term "Permitted Use" shall mean the use specified
in SECTION N of the Summary.

1.21 PREMISES: The term "Premises" shall mean that building area described
in SECTION D of the Summary that is within the Building.

1.22 PROJECT" The term "Project" shall mean that real property and the
improvements thereon which are specified in SECTION E of the Summary the
aggregate gross leasable area of which is referred to herein as the "Project
Gross Leasable Area."

1.23 PRIVATE RESTRICTIONS: The term "Private Restrictions" shall mean all
recorded covenants, conditions and restrictions, private agreements,
reciprocal easement agreements, and any other recorded instruments affecting
the use of the Premises which (i) exists as of the Effective Date, or (ii) are
recorded after the Effective Date and are approved by Tenant.

1.24 REAL PROPERTY TAXES: The term "Real Property Taxes" is defined in
PARA 8.3.

1.25 SCHEDULED COMMENCEMENT DATE: The term "Scheduled Commencement Date"
shall mean the date specified in SECTION I of the Summary.

1.26 SECURITY INSTRUMENT: The term "Security Instrument" shall mean any
underlying lease, mortgage or deed of trust which now or hereafter affects the

<PAGE>

Project, and any renewal, modification, consolidation, replacement or
extension thereof.

1.27 SUMMARY: The term "Summary" shall mean the Summary of Basic Lease
Terms executed by Landlord and Tenant that is part of this Lease.

1.28 TENANT'S ALTERATIONS: The term "Tenant's Alterations" shall mean all
improvements, additions, alterations, and fixtures installed in the Premises
by Tenant at its expense which are not Trade Fixtures.

1.29 TENANT'S SHARE: The term "Tenant's Share" shall mean the percentage
obtained by dividing Tenant's Gross Leasable Area by the Building Gross
Leasable Area, which as of the Effective Date is the percentage identified in
SECTION G of the Summary.

1.30 TRADE FIXTURES: The term "Trade Fixtures" shall mean (i) Tenant's
inventory, furniture, signs, and business equipment, and (ii) anything
affixed to the Premises by Tenant at its expense for purposes of trade,
manufacture, ornament or domestic use (except replacement of similar work or
material originally installed by Landlord) which can be removed without
material injury to the Premises unless such thing has, by the manner in which
it is affixed, become an intregal part of the Premises.

ARTICLE 2

DEMISE, CONSTRUCTION, AND ACCEPTANCE

2.1 DEMISE OF PREMISES: Landlord hereby leases to Tenant, and Tenant
leases from Landlord, for the Lease Term upon the terms and conditions of
this Lease, the Premises for Tenant's own use in the conduct of Tenant's
business together with the right to use all of the Parking Stalls within the
Project (subject to the limitations set forth in PARA 4.5. Landlord reserves
the use of the exterior walls, the roof and the area beneath and above the
Premises, together with the right to install, maintain, use, and replace
ducts, wires, conduits and pipes leading through the Premises in locations
which will not materially interfere with Tenant's use of the Premises.

2.2 COMMENCEMENT DATE: On the Scheduled Commencement Date, the Lease Term
shall commence, and such date shall be referred to herein as the
"Commencement Date."

2.3 INTENTIONALLY OMITTED.

2.4 DELIVERY AND ACCEPTANCE OF POSSESSION: If this Lease provides that
Landlord must deliver possession of the Premises to Tenant on a certain date,
then if Landlord is unable to deliver possession of the Premises to Tenant on
or before such date for any reason whatsoever, this Lease shall not be
voidable for a period of 60 days thereafter, and Landlord shall not be liable
to Tenant for any loss or damage resulting therefrom. If Landlord has not
delivered possession within such 60 day period, Tenant may terminate this
Lease without further liability to Landlord by giving Landlord ten (10) days
written notice to deliver possession or have the Lease terminated. If
Landlord does not deliver possession within such ten (10) day period, then
the Lease shall be terminated, and Landlord shall forthwith return to Tenant
any Rent or Security Deposit which Tenant has paid or provided to Landlord.
Tenant shall accept possession and enter into good faith occupancy of the
entire Premises on the Commencement Date. Tenant acknowledges that it has had
an opportunity to conduct, and has conducted, such inspections of the
Premises as it deems necessary to evaluate its condition. Except as otherwise
specifically provided herein, Tenant agrees to accept possession of the
Premises in its then existing condition, "as-is", including all patent and
latent defects. Tenant's taking possession of any part of the Premises shall
be deemed to be an acceptance by Tenant of the improvements. At the time
Landlord delivers possession of the Premises to Tenant, Landlord and Tenant
shall together execute an Acceptance Agreement in the form attached as
EXHIBIT D, appropriately completed. Landlord shall have no obligation to
deliver possession, nor shall Tenant be entitled to take occupancy, of the
Premises until such Acceptance Agreement has been executed, but Tenant's
obligation to pay Base Monthly Rent and Additional Rent shall not be excused
or delayed because of Tenant's failure to execute such Acceptance Agreement.

2.5 EARLY OCCUPANCY: From the Effective Date to the Commencement Date,
Tenant shall have the right to enter and use the Premises for the purpose of
deliveries, interior renovation and installation of improvements, equipment,
and furniture, phone installation, and general setup (the "Early Occupancy
Period"). Occupancy during the Early Occupancy Period shall be subject to all
of the terms, covenants and conditions of the Lease (including but not limited
to provisions for insurance and indemnity; provided; however, that the rent
payable during the Early Occupancy Period shall be waived. During the Early
Occupancy Period, Tenant shall pay for all utility services for the Premises,
including but not limited to gas, electric, water, cleaning and janitorial,
and trash disposal, and shall have such services billed directly to Tenant
for payment. During the Early Occupancy Period, Tenant shall at all times
make the Project and the Premises available for Landlord's Agents to conduct
needed repair and construction work to carry out Landlord's responsibilities
under the Lease and the First Addendum to Lease, including but not limited to
Landlord's obligation to remove asbestos containing materials under
Paragraph 5 of the First Addendum to Lease, and otherwise to improve the
Building as needed. Neither time required for such matters nor any delays in
Landlord's completion of the improvements to building systems which are
contemplated hereby shall affect, delay, or extend the Commencement Date.
Tenant shall not be entitled to begin early occupancy until the Letter of
Credit required by Paragraph 1 of the First Addendum to Lease is posted as
required therein.

ARTICLE 3

RENT

3.1 BASE MONTHLY RENT: Commencing on the Commencement Date and continuing
throughout the Lease Term. Tenant shall pay to Landlord the Base Monthly
Rent set forth in SECTION K of the Summary.

3.2 ADDITIONAL RENT: Commencing on the Commencement Date and continuing
throughout the

<PAGE>

Lease Term, Tenant shall pay the following as additional rent (the
"Additional Rent"): (i) any late charges or interest due Landlord pursuant to
PARA 3.4; (ii) Tenant's Share of Common Operating Expenses as provided in
PARA 8.1; (iii) Landlord's share of any Subrent received by Tenant upon
certain assignments and sublettings as required by PARA 14.1 and any costs
and attorney's fees required by said Paragraph; (iv) any legal fees and costs
due Landlord pursuant to PARA 15.9; and (v) any other charges due Landlord
pursuant to this Lease.

3.3 PAYMENT OF RENT: On or before the Commencement Date, Tenant shall pay
to Landlord the amount set forth in SECTION L of the Summary as prepayment of
rent for credit against the first installment(s) of Base Monthly Rent. All
rent required to be paid in monthly installments shall be paid in advance on
the first day of each calendar month during the Lease Term. If Section K of
the Summary provides that the Base Monthly Rent is to be increased during the
Lease Term and if the date of such increase does not fall on the first day of
a calendar month, such increase shall become effective on the first day of
the next calendar month. All rent shall be paid in lawful money of the United
States, without any abatement, deduction or offset whatsoever (except as
specifically provided in PARA 11.4 and PARA 12.3), and without any prior
demand therefor. Rent shall be paid to Landlord at its address set forth in
Section P of the Summary, or at such other place as Landlord may designate
from time to time. Tenant's obligation to pay Base Monthly Rent and Tenant's
Share of Common Operating Expenses shall be prorated at the commencement and
expiration of the Lease Term.

3.4 LATE CHARGE AND INTEREST ON RENT IN DEFAULT. If any Base Monthly Rent
or Additional Rent is not received by Landlord from Tenant within five (5)
calendar days after the date on which Landlord gives Tenant written notice
that it is due and unpaid, then Tenant shall immediately pay to Landlord a
late charge equal to Six Percent (6%) of such delinquent rent as liquidated
damages for Tenant's failure to make timely payment (and not in lieu of
interest due thereon). If Landlord gives such a notice on two occasions
within any twenty four (24) month period, then the said late charge shall be
payable thereafter and for the remainder of this Lease without notice, in the
event that such Rent is not received by Landlord from Tenant within five (5)
calendar days after the date on which it is due. In no event shall this
provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rent or prevent Landlord from
exercising any right or remedy available to Landlord upon Tenant's failure to
pay any rent due under this Lease in a timely fashion, including any right to
terminate this Lease pursuant to PARA 13.2B. If any rent remains delinquent
for a period in excess of 30 days then, in addition to such late charge,
Tenant shall pay to Landlord interest on such rent at the Agreed Interest
Rate from the date on which such amount became due until fully paid.

3.5 SECURITY DEPOSIT: On the Effective Date, Tenant shall deposit with
Landlord the amount set forth in SECTION M of the Summary as security for the
performance by Tenant of its obligation under this Lease, and not as
prepayment of rent, as well as any further Security Deposit required pursuant
to the First Addendum to Lease (collectively the "Security Deposit"); subject
to the provisions of Paragraph 1 of the First Addendum to Lease in regard to
delayed provision of the further Security Deposit required by the First
Addendum to Lease. Landlord may from time to time apply such portion of the
Security Deposit as is reasonably necessary for the following purposes:(i) to
remedy any default by Tenant in the payment of rent; (ii) to repair damage to
the Premises caused by Tenant (provided, that any such application occurring
prior to the expiration or earlier termination of this Lease shall be done
only to remedy an Event of Tenant's default); (iii) to clean, repair, and
restore the Premises upon termination of the Lease to the condition required
hereby; and (iv) to remedy any other default of Tenant to the extent
permitted by Law and, in this regard, Tenant hereby waives any restriction on
the uses to which the Security Deposit may be put contained in California
Civil Code Section 1950.7. In the event the Security Deposit or any portion
thereof is so used, Tenant agrees to pay to Landlord promptly upon demand an
amount in cash sufficient to restore the Security Deposit to the full
original amount. Landlord shall not be deemed a trustee of the Security
Deposit, may use the Security Deposit in business, and shall not be required
to segregate it from its general accounts. Tenant shall not be entitled to
any interest on the Security Deposit. If Landlord transfers the Premises
during the Lease Term, Landlord may pay the Security Deposit to any
transferee of Landlord's interest in conformity with the provisions of
California Civil Code Section 1950.7 and/or any successor statute, in which
event the transferring Landlord will be released from all liability for the
return of the Security Deposit. Upon expiration or sooner termination of the
Lease, Landlord shall return to Tenant the balance of the Security Deposit
held by Landlord on such date of expiration or termination, less any amounts
used by Landlord in accordance with this Lease, within a commercially
reasonable time (and Tenant waives the specific time requirements in regard
to return of the Security Deposit which are contained in Civil Code Section
1950.7). As used in this Paragraph, a "commercially reasonable time" for
return of the Security Deposit shall mean within thirty (30) days after
Landlord recovers possession of the Premises, except that if Landlord in good
faith claims or is investigating a claim to all or any portion of the
Security Deposit by reason of the application thereof to defaults other than
non-payment of Base Monthly Rent or Common Operating Expenses, then Landlord
shall return any remaining portion of the Security Deposit within forty five
(45) days after Landlord recovers possession of the Premises.

ARTICLE 4

USE OF PREMISES

4.1 LIMITATION ON USE: Tenant shall use the Premises solely for the
Permitted Use specified in SECTION N of the Summary. Tenant shall not do
anything in or about the Premises which will (i) cause structural injury to
the Building, or (ii) cause damage to any part of the Building except to the
extent reasonably necessary for the installation of Tenant's Trade Fixtures
and Tenant's Alterations, and then only in a manner which has been first
approved by Landlord in writing. Tenant shall not operate any equipment
within the

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Premises which will (i) materially damage the Building or the Common Area,
(ii) overload existing electrical systems or other mechanical equipment
servicing the Building, (iii) impair the efficient operation of the sprinkler
system or the heating, ventilating or air conditioning ("HVAC") equipment
within or servicing the Building, or (iv) damage, overload or corrode the
sanitary sewer system. Tenant shall not attach, hang or suspend anything from
the ceiling, roof, walls or columns of the Building or set any load on the
floor in excess of the load limits for which such items are designed nor
operate hard wheel forklifts within the Premises. Any dust, fumes, or waste
products generated by Tenant's use of the Premises shall be contained and
disposed so that they do not (i) create an unreasonable fire or health
hazard, (ii) damage the Premises, or (iii) result in the violation of any
Law. Except as approved by Landlord, Tenant shall not change the exterior of
the Building or install any equipment or antennas on or make any penetrations
of the exterior or roof of the Building. Tenant shall not commit any waste in
or about the Premises, and Tenant shall keep the Premises in a neat, clean,
attractive and orderly condition, free of any nuisances. If Landlord
designates a standard window covering for use throughout the Building, Tenant
shall use this standard window covering to cover all windows in the Premises.
Tenant shall not conduct on any portion of the Premises or the Project any
sale of any kind, including any public or private auction, fire sale,
going-out-of-business sale, distress sale or other liquidation sale.

4.2 COMPLIANCE WITH REGULATIONS: Tenant shall not use the Premises in
any manner which violates any Laws or Private Restrictions which affect the
Premises. Tenant shall abide by and promptly observe and comply with all Laws
and Private Restrictions. Tenant shall not use the Premises in any manner
which will cause a cancellation of any insurance policy covering Tenant's
Alterations or any improvements installed by Landlord at its expense or which
poses an unreasonable risk of damage or injury to the Premises. Tenant shall
not sell, or permit to be kept, used, or sold in or about the Premises any
article which may be prohibited by the standard form of fire insurance
policy. Tenant shall comply with all reasonable requirements of any insurance
company, insurance underwriter, or Board of Fire Underwriters which are
necessary to maintain the insurance coverage carried by either Landlord or
Tenant pursuant to this Lease.

4.3 OUTSIDE AREAS: No materials, supplies, tanks or containers,
equipment, finished products or semi-finished products, raw materials,
inoperable vehicles or articles of any nature shall be stored upon or
permitted to remain outside of the Premises except in fully fenced and
screened areas outside the Building which have been designed for such purpose
and have been approved in writing by Landlord for such use by Tenant.

4.4 SIGNS: Tenant shall not place on any portion of the Premises any sign,
placard, lettering in or on windows, banner, displays or other advertising or
communicative material which is visible from the exterior of the Building
without the prior written approval of Landlord. All such approved signs shall
strictly conform to all Laws and shall be installed at the expense of Tenant.
Tenant shall maintain such signs in good condition and repair.

4.5 PARKING: Tenant is allocated and shall have the exclusive right to
use all of the parking stalls contained within the Project for its use and
the use of Tenant's Agents. Tenant shall not at any time park its vehicles or
the vehicles of others in any portion of the Project not designated by
Landlord as a parking area. All trucks and delivery vehicles shall be (i)
parked at the rear of the Building, (ii) loaded and unloaded in a manner
which does not interfere with the businesses of other occupants of the
Project, and (iii) permitted to remain on the Project only so long as is
reasonably necessary to complete loading and unloading, and in no cases
overnight. In the event Landlord elects or is required by any Law to limit or
control parking in the Project or automobile commuting by Tenant's employees,
by whatever method, Tenant agrees to participate in such program under such
reasonable rules and regulations as are from time to time established by
Landlord, and in whatever what is required for Landlord to comply with its
legal obligations.

ARTICLE 5

TRADE FIXTURES AND ALTERATIONS

5.1 TRADE FIXTURES: Throughout the Lease Term, Tenant may provide and
install, and shall maintain in good condition, any Trade Fixtures required in
the conduct of its business in the Premises. All Trade Fixtures shall remain
Tenant's property.

5.2 TENANT'S ALTERATIONS: Construction by Tenant of Tenant's Alterations
shall be governed by the following:

A. Tenant shall not construct any Tenant's Alterations or otherwise
alter the Premises without Landlord's prior written approval, to make
Tenant's Alterations (i) which do not affect the structural or exterior parts
or water tight character of the Building, and (ii) the reasonable estimated
cost of which, plus the original cost of any part of the Premises removed or
materially altered in connection with such Tenant's Alterations, together do
not exceed the Permitted Tenant Alterations Limit specified in SECTION O of
the Summary per work of improvement. In the event that Tenant makes Tenant's
Alterations which do not require Landlord's approval pursuant to the
preceding sentence, Tenant shall supply Landlord with notice of the work which
has been done, and "as-built" drawings which show the work that has been
done. In the event Landlord's approval for any Tenant's Alterations is
required, Tenant shall not construct the Tenant's Alterations until Landlord
has approved in writing the plans and specifications therefor, and such
Tenant's Alterations shall be constructed substantially in compliance with
such approved plans and specifications by a licensed contractor first
approved by Landlord. All Tenant's Alterations constructed by Tenant shall be
constructed by a licensed contractor in accordance with all Laws using new
materials of good quality.

B. Tenant shall not commence

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construction of any Tenant's Alterations until (i) all required governmental
approvals and permits have been obtained, (ii) all requirements regarding
insurance imposed by this Lease have been satisfied, (iii) Tenant has given
Landlord at least five days' prior written notice of its intention to commence
such construction, and (iv) if reasonably requested by Landlord, Tenant has
obtained contingent liability and broad form builders' risk insurance in an
amount reasonably satisfactory to Landlord if there are any perils relating
to the proposed construction not covered by insurance carried pursuant to
Article 9.

C. All Tenant's Alterations shall remain the property of Tenant during
the Lease Term and may be altered or removed from the Premises, during the
Lease Term provided that, in so doing, Tenant complies with all provisions of
this Article 5 in doing so, and provided further that Tenant repairs any
damage to the Premises or the Project caused by such alteration or removal,
restoring the Premises and the Project to their condition prior to the
installation of the removed Tenant's Alterations. At the expiration or sooner
termination of the Lease Term, all Tenant's Alterations shall be surrendered
to Landlord as part of the realty and shall then become Landlord's property,
and Landlord shall have no obligation to reimburse Tenant for all or any
portion of the value or cost thereof, provided, however, that if Landlord
requires Tenant to remove any Tenant's Alterations, Tenant shall so remove
such Tenant's Alterations prior to the expiration or sooner termination of
the Lease Term. Notwithstanding the foregoing, Tenant shall not be obligated
to remove any Tenant's Alterations with respect to which the following is
true: (i) Tenant was required, or elected, to obtain the approval of Landlord
to the installation of the Tenant's Alterations in question; (ii) at the time
Tenant requested Landlord's approval, Tenant requested of Landlord in writing
that Landlord inform Tenant of whether or not Landlord would require Tenant
to remove such Tenant's Alterations at the expiration of the Lease Term; and
(iii) at the time Landlord granted its approval, it did not inform Tenant
that it would require Tenant to remove such Tenant's Alterations at the
expiration of the Lease Term.

5.3 ALTERATIONS REQUIRED BY LAW: Tenant shall make any alteration,
addition or change of any sort to the Premises that is required by any Law
because of (i) Tenant's particular use or change of use of the Premises; (ii)
Tenant's application for any permit or governmental approval; or (iii)
Tenant's construction or installation of any Tenant's Alterations or Trade
Fixtures. Any other alteration, addition, or change required by Law which is
not the responsibility of Tenant pursuant to the foregoing shall be made by
Landlord (subject to Landlord's right to reimbursement from Tenant specified
in this Lease).

5.4 AMORTIZATION OF CERTAIN CAPITAL IMPROVEMENTS: Tenant shall pay
Additional Rent in the event Landlord reasonably elects or is required to
make any of the following kinds of capital improvements to the Project and
the cost thereof is not reimbursable as a Common Operating Expense: (i)
capital improvements required to be constructed in order to comply with any
Law (excluding any Hazardous Materials Law) not in effect or applicable to
the Project as of the Effective Date; (ii) modification of existing or
construction of additional capital improvements or building service equipment
for the purpose of reducing the consumption of utility services or Common
Operating Expenses of the Project; (iii) replacement of capital improvements
or building service equipment existing as of the Effective Date when required
because of normal wear and tear; and (iv) restoration of any part of the
Project that has been damaged by any peril to the extent the cost thereof is
not covered by insurance proceeds (which shall include, for the purposes of
this Paragraph 5.4 only, the amount of any "deductible" (allowed hereby) on
the applicable policy(ies) of insurance) actually recovered by Landlord up to
a maximum amount per occurrence of 10% of the then replacement cost of the
Project. The amount of Additional Rent Tenant is to pay with respect to each
such capital improvement shall be determined as follows:

A. All costs paid by Landlord to construct such improvements (including
commercially reasonable financing costs) shall be amortized over the useful
life of such improvement (as reasonably determined by Landlord in accordance
with generally accepted accounting principles) with interest on the
unamortized balance at the then prevailing market rate Landlord would pay if
it borrowed funds to construct such improvements from an institutional
lender, and Landlord shall inform Tenant of the monthly amortization payment
required to so amortize such costs, and shall also provide Tenant with the
information upon which such determination is made

B. As Additional Rent, Tenant shall pay at the same time the Base
Monthly Rent is due an amount equal to Tenant's Share of that portion of such
monthly amortization payment fairly allocable to the Building (as reasonably
determined by Landlord) for each month after such improvements are completed
until the first to occur of (i) the expiration of the Lease Term (as it may
be extended), or (ii) the end of the term over which such costs were amortized.

5.5 MECHANIC'S LIENS: Tenant shall keep the Project free from any liens
and shall pay when due all bills arising out of any work performed, materials
furnished, or obligations incurred by Tenant or Tenant's Agents relating to
the Project. If any claim of lien is recorded (except those caused by
Landlord or Landlord's Agents), Tenant shall bond against or discharge the
same within 10 days after Tenant has notice that the same has been recorded
against the Project. Should any lien be filed against the Project or any
action be commenced affecting title to the Project, the party receiving
notice of such lien or action shall immediately give the other party written
notice thereof.

5.6 TAXES ON TENANT'S PROPERTY: Tenant shall pay before delinquency any
and all taxes, assessments, license fees and public charges levied, assessed
or imposed against Tenant or Tenant's estate in this Lease or the property of
Tenant situated within the Premises which become due during the Lease Term.
If any tax or other charge is assessed by any governmental agency because of
the execution of this Lease, such tax shall be paid by Tenant. On demand by
Landlord, Tenant shall furnish Landlord with satisfactory evidence of these
payments.

<PAGE>

ARTICLE 6

REPAIR AND MAINTENANCE

6.1 TENANT'S OBLIGATION TO MAINTAIN: Except as otherwise provided in PARA
6.2, PARA 11.1, and PARA 12.3, Tenant shall be responsible for the following
during the Lease Term:

A. Except as to those items which are Landlord's responsibility under
Paragraph 6.2, Tenant shall clean and maintain in good order, condition, and
repair when necessary the Premises and the Building and every part thereof,
through regular inspections and servicing, including, but not limited to: (i)
all plumbing and sewage facilities (including all sinks, toilets, faucets and
drains), and all ducts, pipes, vents or other parts of the HVAC or plumbing
system; (ii) all fixtures, interior and exterior walls, floors, carpets and
ceilings; (iii) all windows, doors, entrances, plate glass, showcases and
skylights (including cleaning both interior and exterior surfaces); (iv) all
electrical facilities and all equipment (including all lighting fixtures,
lamps, bulbs, tubes, fans, vents, exhaust equipment and systems); (vi) any
automatic fire extinguisher equipment on the Project; (vii)the exterior
surfaces (including painting) of the Building, (ix) utility facilities and
other building service equipment; (x) the parking area, including cleaning,
painting, restriping and resurfacing; (xi) the landscaping and other exterior
facilities of the Project, including replacement or installation of lighting
fixtures, directional or other signs and signals, irrigation systems, trees,
shrubs, ground cover and other plant materials; and

B. With respect to utility facilities servicing the Premises (including
electrical wiring and conduits, gas lines, water pipes, and plumbing and
sewage fixtures and pipes), Tenant shall be responsible for the maintenance
and repair of all such facilities, including all such facilities that are
within the walls or floor, or on the roof of the Premises, and any part of
such facility that is within the Project. Tenant shall replace any damaged or
broken glass in the Premises (including all interior and exterior doors and
windows) with glass of the same kind, size and quality. Tenant shall repair
any damage to the Premises or the Project (including exterior doors, walls,
windows, parking areas, trash areas, and landscaping) caused by vandalism or
any unauthorized entry, provided, that if and only to the extent that Tenant
is not covered by insurance for the losses described in this sentence,
Landlord will, at no cost or expense to itself, make a claim against any
applicable policy of insurance carried by the Landlord and covering such
damages from vandalism or unauthorized entry, and provide Tenant with the
benefit of any recovery or payment received in that regard. Landlord shall
have no duty to make any claim unless, in Landlord's reasonable judgment, the
claim is meritorious. In the event that the claim is wholly or partially
denied, Landlord shall not have further responsibility for prosecuting the
claim, but on Tenant's written request, Landlord will assign the claim,
without warranty, to Tenant, which may prosecute the claim (provided further,
that Tenant shall at all times meet any of its own expenses of prosecuting
any assigned claim against any insurance carrier, and hold Landlord harmless
and indemnify Landlord against any damage to Landlord resulting from the
making or prosecution of such a claim).

C. Tenant shall (i) maintain and repair all HVAC equipment for the
Building, and shall keep the same in good condition through regular
inspection and servicing, and (ii) maintain continuously throughout the Lease
Term a service contract for the maintenance of all such HVAC equipment with a
licensed HVAC repair and maintenance contractor approved by Landlord, which
contract provides for the periodic inspection and servicing of the HVAC
equipment at least once every 60 days during the Lease Term. Notwithstanding
the foregoing, Landlord may elect at any time to assume responsibility for
the maintenance, repair and replacement of such HVAC equipment. Tenant shall
furnish Landlord with copies of all such service contracts, which shall
provide that they may not be canceled or changed without at least 30 days'
prior written notice to Landlord.

D. All repairs and replacements required of Tenant shall be promptly
made with new materials of like kind and quality. If the work affects the
structural parts of the Building or if the estimated cost of any item of
repair or replacement is in excess of the Permitted Tenant's Alterations
Limit, then Tenant shall first obtain Landlord's written approval of the
scope of the work, plans therefor materials to be used and the contractor

Notwithstanding anything to the contrary in Paragraph 6.1, Landlord
shall perform and construct, and Tenant shall have no responsibility to
perform or construct, any repair, maintenance or improvement to the Premises
(i) necessitated by the acts or omissions of Landlord, or its Agents, (ii)
required under Landlord's Corrective Responsibility (as defined herein), or
(iii) for which Landlord has a right of reimbursement from others.
Restoration of damage which is covered by Articles 11 or 12 shall be
determined as set forth in such Articles. Whenever the proper repair and
maintenance required of Tenant rises to the level of replacement of the roof,
building systems, HVAC systems, or other matters which are otherwise Tenant's
responsibility, Landlord shall have the responsibility to conduct such
replacement, which shall be (i) treated as a "capital expenditure" if it is a
capital expenditure under generally accepted accounting principles, in which
case the costs thereof shall be amortized and paid by Tenant in accordance
with the provisions of Paragraph 5.4; or (ii) treated as an item of Common
Operating Expenses if it is not a capital expenditure under generally
accepted accounting principles Determination of whether such an item is a
capital expense or not under generally accepted accounting principles shall
be conclusively made by Landlord's certified public accountant.

To the extent that any of Tenant's repair and maintenance
responsibilities involve matters which are wholly or partially covered under
any warranty by a third party to Landlord, Landlord will, at no cost or
expense to itself, make a claim against any applicable warranty available to
Landlord and covering such damages and provide Tenant with the benefit of any
recovery or payment received in that regard. Landlord shall have no duty to
make any claim unless, in Landlord's reasonable judgment, the claim is
meritorious. In the event that the claim is wholly or

<PAGE>

partially denied, Landlord shall not have further responsibility for
prosecuting the claim, but on Tenant's written request, Landlord will assign
the claim, without warranty, to Tenant, which may prosecute the claim
(provided further, that Tenant shall at all times meet any expenses of
prosecuting any assigned claim against any warrantor, and hold Landlord
harmless and indemnify Landlord against any damage to Landlord resulting from
the making or prosecution of such a claim).

6.2 LANDLORD'S OBLIGATION TO MAINTAIN: Landlord shall repair and maintain
in good order and replace when necessary (i) the structural parts of the
Building, including, without limitation, the foundation, load-bearing walls,
the structural members of the roof, and the floor slab, (ii) the plumbing
lines, pipes, and conduits serving the Premises, including the fire
protection loop, to the point of entry into the Building; and (iii) the roof
membrane, so that the same are kept in good order and repair. Landlord shall
further be responsible for the correction of defects in design and
construction of the Project existing as of the Commencement Date (unless
caused by the acts or omissions of Tenant or Tenant's Agents, and in the case
of the roofing system and membrane and the HVAC system, only to the extent
provided in the First Addendum to Lease) and corrections of violations of any
Laws relating to the Premises which were in existence as of the Commencement
Date (except as otherwise provided in this Lease, including, but not limited
to, those provisions which assign responsibility for compliance with the
Americans with Disabilities Act to Tenant as regards the interior of the
Premises). The responsibility for correction of defects and legal violations
set forth in the preceding sentence is referred to herein as "Landlord's
Corrective Responsibility". Landlord shall not be responsible for repairs
required by an accident, fire or other peril or for damage caused to any part
of the Project by any act or omission of Tenant or Tenant's Agents except as
otherwise required by Article 11. Landlord may engage contractors of its
choice to perform the obligations required of it by this Article, and the
necessity of any expenditure to perform such obligations shall be at the
sole, but reasonable, discretion of Landlord. Landlord's expenses in
complying with this Paragraph shall be reimbursed by Tenant according to the
following provisions: (i) such expense shall be treated as a "capital
expenditure" if it is a capital expenditure under generally accepted
accounting principles, in which case the costs thereof shall be amortized and
paid by Tenant in accordance with the provisions of Paragraph 5.4; or (ii)
such expense shall be treated as an item of Common Operating Expenses if it
is not a capital expenditure under generally accepted accounting principles.
Determination of whether such an item is a capital expense or not under
generally accepted accounting principles shall be conclusively made by
Landlord's certified public accountant. Landlord shall be solely responsible
for the expense of complying with Landlord's Corrective Responsibility, and
shall not be entitled to any reimbursement from Tenant with respect to such
matters.

6.3 CONTROL OF EXTERIOR AREA: Landlord shall have the right, without the
same constituting an actual or constructive eviction and without entitling
Tenant to any abatement of rent, to: (i) close any part of the exterior area
of the Project to whatever extent required in the opinion of Landlord's
counsel to prevent a dedication thereof or the accrual of any prescriptive
rights therein so long as the same does not unreasonably and adversely affect
Tenant's access to and use of the Premises and Tenant's parking rights; (ii)
temporarily close all or part of the exterior area of the Project for any
reason deemed sufficient by Landlord so long as the same does not
unreasonably and adversely affect Tenant's access to and use of the Premises
and Tenant's parking rights; (iii) make changes to the exterior area of the
Project, including, without limitation, changes in the location of driveways,
entrances, exits, parking spaces, parking areas, sidewalks or the direction
of the flow of traffic in any reasonable way, so long as same does not
unreasonably and adversely affect Tenant's use and enjoyment of the Premises;
and/or (iv) remove unauthorized persons from the Project. Tenant shall keep
the exterior area of the Project clear of all obstructions created or
permitted by Tenant. If in the opinion of Landlord unauthorized persons are
using any of the exterior area of the Project by reason of the presence of
Tenant in the Building, Tenant, upon demand of Landlord, shall restrain such
unauthorized use by appropriate proceedings. In exercising any such rights
regarding the exterior area of the Project, (i) Landlord shall make a
reasonable effort to minimize any disruption to Tenant's business, and (ii)
Landlord shall not exercise its rights in a manner that would materially
interfere with Tenant's use of the Premises without first obtaining Tenant's
consent. Landlord shall have no obligation to provide guard services or other
security measures for the benefit of the Project or the safety of Tenant,
Tenant's Agents, or others. Tenant assumes all responsibility for the
protection of Tenant and Tenant's Agents, and others on the Project, from
acts of third parties; provided, however, that nothing contained herein shall
prevent Landlord, at its sole option, from providing security measures for
the Project.

ARTICLE 7

WASTE DISPOSAL AND UTILITIES

7.1 WASTE DISPOSAL: Tenant shall store its waste either inside the
Premises or within outside trash enclosures that are fully fenced and
screened in compliance with all Private Restrictions, and designed for such
purpose. All entrances to such outside trash enclosures shall be kept closed,
and waste shall be stored in such manner as not to be visible from the
exterior of such outside enclosures. Tenant shall cause all of its waste to
be regularly removed from the Premises at Tenant's sole cost. Tenant shall
keep all fire corridors and mechanical equipment rooms in the Premises free
and clear of all obstructions at all times.

7.2 HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect
to the existence or use of Hazardous Materials on the Project:

A. Any handling, transportation, storage, treatment, disposal or use of
Hazardous Materials by Tenant and Tenant's Agents after the Effective Date in
or about the Project shall strictly comply with all applicable Hazardous
Materials Laws. Tenant shall indemnify, defend upon demand with counsel
reasonably acceptable to Landlord, and hold harmless Landlord from and
against any liabilities,

<PAGE>

losses, claims, damages, lost profits, consequential damages, interest,
penalties, fines, monetary sanctions, attorneys' fees, experts' fees, court
costs, remediation costs, investigation costs, and other expenses to the
extent the same arise in any manner whatsoever out of the use, storage,
treatment, transportation, release or disposal of Hazardous Materials on or
about the Project by Tenant or Tenant's Agents after the Effective Date.

B. If the presence of Hazardous Materials on the Project caused or
knowingly or actively negligently permitted by Tenant or Tenant's Agents
after the Effective Date results in contamination or deterioration of water
or soil resulting in a level of contamination greater than the levels
established as acceptable by any governmental agency having jurisdiction over
such contamination, then Tenant shall promptly take any and all action
necessary to investigate and remediate such contamination if required by Law
or as a condition to the issuance or continuing effectiveness of any
governmental approval which relates to the use of the Project or any part
thereof. Tenant shall further be solely responsible for, and shall defend,
indemnify and hold Landlord and its agents harmless from and against, all
claims, costs and liabilities, including attorneys' fees and costs, to the
extent the same arise out of or in connection with any investigation and
remediation required hereunder to return the Project to its condition existing
prior to the appearance of such Hazardous Materials.

C. Landlord and Tenant shall each give written notice to the other as
soon as reasonably practicable of (i) any communication received from any
governmental authority concerning Hazardous Materials which relates to the
Project, and (ii) any contamination of the Project by Hazardous Materials
which constitutes a violation of any Hazardous Materials Law. Tenant may use
small quantities of household chemicals such as adhesives, lubricants, and
cleaning fluids in order to conduct its business at the Premises and such
other Hazardous Materials as are necessary for the operation of Tenant's
business of which Landlord receives notice prior to such Hazardous Materials
being brought onto the Premises and which Landlord consents in writing may be
brought onto the Premises. At any time during the Lease Term, Tenant shall,
within ten (10) business days after written request therefor received from
Landlord, disclose in writing all Hazardous Materials that are being used by
Tenant on the Project, the nature of such use, and the manner of storage and
disposal.

D. Landlord, at its sole cost and expense except as set forth below in
this Subparagraph D, may cause testing wells to be installed on the Project,
and may cause the ground water to be tested to detect the presence of
Hazardous Material by the use of such tests as are then customarily used for
such purposes. If Tenant so requests, Landlord shall supply Tenant with copies
of such test results. The cost of such tests and of the installation,
maintenance, repair and replacement of such wells shall be paid by Tenant if
such tests disclose the existence of facts which give rise to liability of
Tenant pursuant to its indemnity given in PARA 7.2A and/or PARA 7.2B.

E. As used herein, the term "Hazardous Material," means any hazardous or
toxic substance, material or waste which is or becomes regulated by any local
governmental authority, the State of California or the United States
Government. The term "Hazardous Material," includes, without limitation,
petroleum products, asbestos, PCB's, and any material or substance which is
(i) listed under Article 9 or defined as hazardous or extremely hazardous
pursuant to Article 11 of Title 22 of the California Administrative Code,
Division 4, Chapter 20, (ii) defined as a "hazardous waste" pursuant to
Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C.
6901 et seq. (42 U.S.C. 6903), or (iii) defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response;
Compensation and Liability Act, 42 U.S.C. 9601 et seq. (42 U.S.C. 9601). As
used herein, the term "Hazardous Material Law" shall mean any statute, law,
ordinance, or regulation of any governmental body or agency (including the
U.S. Environmental Protection Agency, the California Regional Water Quality
Control Board, and the California Department of Health Services) which
regulates the use, storage, release or disposal of any Hazardous Material.

F. LANDLORD'S INDEMNITY REGARDING HAZARDOUS MATERIALS: Landlord shall
indemnify Tenant from its actual out of pocket cost of complying with any
administrative order (a "Compliance Order") issued by any governmental agency
pursuant to the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. 9601 et seq. or the Carpenter/Presley/Tanner
Hazardous Substances Account Act, California Health and Safety Code Section
25300, et seq., which is issued against Tenant and with which Tenant is
obligated to comply solely because of Tenant's status as an "owner" or
"operator" of the Premises, if such Compliance Order results from the
presence on the Premises of Hazardous Materials which is not caused,
exacerbated, or contributed to by Tenant or Tenant's Agents, provided that
one of the following conditions is met:

1. Tenant proves by clear and convincing evidence that the Compliance
Order arises solely from a release of Hazardous Materials which took place
before the first date on which Tenant occupied the Premises; or

2. Tenant proves by clear and convincing evidence (1) that such
Compliance Order does not result from the presence on the Premises of
Hazardous Materials which was caused, exacerbated, or contributed to by
Tenant or Tenant's Agents, and (2) that such Compliance Order does not result
from a release of Hazardous Materials which was caused, exacerbated, or
contributed to by Tenant or Tenant's Agents.

Landlord's obligation under this indemnity is limited to Tenant's
actual, out of pocket costs incurred in complying with a Compliance Order and
attorney's fees incurred in defending against a proposed Compliance Order,
provided that one of the preceding conditions is met, so long as Landlord may
select the attorney to defend Tenant and have sole authority to make all
settlement and decisions in regard to the proceedings, including the decision
whether to challenge administrative orders by appeal or court challenge.
Landlord shall have no liability under this

<PAGE>

Paragraph for any other claims, costs, damages, or losses incurred by Tenant,
including without limitation personal injury, property damage, punitive damages,
damage to business, lost profits, or other consequential damages incurred by
Tenant or any third party.

G. Except as otherwise disclosed to Tenant in writing prior to the
Effective Date, to the best of Landlord's knowledge (i) no underground storage
tanks are present on the Premises or Project; and (ii) no action or proceeding
is pending or threatened regarding the Premises or Project concerning any
Hazardous Material.

H. The obligations of Landlord and Tenant under this PARA 7.2 shall
survive the expiration or earlier termination of the Lease Term. The rights and
obligations of Landlord and Tenant with respect to issues relating to Hazardous
Materials are exclusively established by this PARA 7.2. In the event of any
inconsistency between any other part of this Lease and this PARA 7.2, the terms
of this PARA 7.2 shall control.

7.3 UTILITIES: Tenant shall promptly pay, as the same become due, all
charges for water, gas, electricity, telephone, sewer service, janitorial and
cleaning services, waste pick-up and any other utilities, materials or
services furnished directly to or used by the Tenant on or about the Premises
during the Lease Term, including, without limitation, (i) meter, use and/or
connection fees, hook-up fees, or standby fee (excluding any connection fees
or hook-up fees which relate to making the existing electrical, gas, and
water service accessible to the Premises as of the Commencement Date), and
(ii) penalties for discontinued to interrupted service. Landlord shall not
have any duty to provide or pay for janitorial, cleaning, or maintenance of
the Premises.

7.4 COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Landlord and Tenant shall
comply with all rules, regulations and requirements promulgated by national,
state or local governmental agencies or utility suppliers concerning the use of
utility services, including any rationing limitation or other control. Tenant
shall not be entitled to terminate this Lease not to any abatement in rent by
reason of such compliance.

ARTICLE 8

COMMON OPERATING EXPENSES

8.1 TENANT'S OBLIGATION TO REIMBURSE: As Additional Rent, Tenant shall pay
Tenant's Share (specified in SECTION G of the Summary) of all Common
Operating Expenses. Tenant shall pay such share of the actual Common
Operating Expenses incurred or paid by Landlord but not theretofore billed to
Tenant within 30 days after receipt of a written bill therefor from Landlord,
on such periodic basis as Landlord shall designate, but in no event more
frequently than once a month. Alternatively, Landlord may from time to time
require that Tenant pay Tenant's Share of Common Operating Expenses in
advance in estimated monthly installments, in accordance with the following:
(i) Landlord shall deliver to Tenant Landlord's reasonable estimate of the
Common Operating expenses it anticipates will be paid on incurred for the
Landlord's fiscal year in question; (ii) during such Landlord's fiscal year
Tenant shall pay such share of the estimated Common Operating Expenses in
advance in monthly installments as required by Landlord due with the
installments of Base Monthly Rent; and (iii) within 90 days after the end of
each Landlord's fiscal year, Landlord shall furnish to Tenant a statement in
reasonable detail of the actual Common Operating Expenses paid or incurred by
Landlord during the just ended Landlord's fiscal year and thereupon there
shall be an adjustment between Landlord and Tenant, with payment to Landlord
or credit by Landlord against the next installment of Base Monthly Rent (or
payment to Tenant by Landlord if the Lease has terminated or expired and
there are no other or further amounts due from Tenant to Landlord against
which such amounts can be credited),as the case may require, within 10 days
after delivery by Landlord to Tenant of said statement, so that Landlord
shall receive the entire amount of Tenant's Share of all Common Operating
Expenses for such Landlord's Fiscal year and no more. Tenant shall have the
right at its expense, exercisable upon reasonable prior written notice to
Landlord, to inspect the Landlord's office during normal books and records as
they relate to Common Operating Expenses. Such inspection must be within 30
days of Tenant's receipt of Landlord's annual statement for the same (and is
waived as to any year where such an inspection is not timely conducted), and
shall be limited to verification of the charges contained in such statement.
Tenant may not withhold payment of such bill pending completion of such
inspection.

8.2 COMMON OPERATION EXPENSES DEFINED: The term "Common Operating Expenses"
shall mean the following:

A. Except as otherwise provided herein, all costs and expenses paid or
incurred by Landlord in doing the following (including payments to
independent contractors providing services related to the performance of the
following): (i) performing all maintenance required of Landlord under this
Lease and performing any other maintenance which is necessitated by Tenant's
failure to maintain as obliged hereunder;(ii) maintenance of the liability,
fire and property damage insurance covering the Project carried by Landlord
pursuant to PARA 9.2 (including the prepayment of premiums for coverage of up
to one year); (iii) complying with all applicable Laws; and (iv) providing
security to the extent that Landlord may see fit in its sole discretion, to
do so.

B. The following costs, (i) Real Property Taxes as defined in PARA
8.3; (ii) the amount of any "deductible" paid by Landlord with respect to
damage caused by any insured Peril (unless the damage causes termination of
the Lease under the provisions of Article 11 hereof); (iii) the cost to
repair damage caused by an Uninsured Peril up to a maximum amount in any 12
month period equal to 2% of the replacement cost of the buildings or other
improvements damaged; and (iv) that portion of all compensation (including
benefits and premiums for workers' compensation and other insurance) paid to
or on behalf of employees of Landlord but only to the extent they are
involved in the performance of the work described by PARA 8.2A that is fairly
allocable to the Project (and not including compensation of executive
personnel of Landlord).

9
<PAGE>

C. Fees for management services rendered by either Landlord or a third
party manager engaged by Landlord (which may be a party affiliated with
Landlord), except that the total amount charged for management services and
included in Tenant's Share of Common Operating Expenses shall not exceed the
monthly rate of Two Percent (2%) of the Base Monthly Rent.

D. All additional costs and expenses incurred by Landlord with respect
to the operation, protection, maintenance, repair and replacement of the Project
which are not specified in the preceding Subparagraphs of this Paragraph 8.2 and
which are current expenses, not capital expenses, according to generally
accepted accounting principles as determined conclusively by Landlord's
independent certified public accountant; provided, however, that Common
Operating Expenses shall not include any of the following: (i) payments on any
loans or ground leases affecting the Project; (ii) depreciation of any buildings
or any major systems of building service equipment within the Project; (iii) any
cost incurred in complying with Hazardous Materials Laws, which subject is
governed exclusively by PARA 7.2, (iv) costs (a) for which Landlord has a right
of reimbursement from others, or (b) which Tenant reimburses Landlord directly
or which Tenant pays directly to a third person, or (v) costs to comply with
Landlord's Corrective Responsibility (as defined in Paragraph 6.2).

8.3 REAL PROPERTY TAXES DEFINED; The term "Real Property Taxes" shall mean
all taxes, assessments, levies, and other charges of any kind or nature
whatsoever, general and special, foreseen and unforseen (including all
installments of principal and interest required to pay any existing or future
general or special assessments for public improvements, services or benefits,
and any increases resulting from reassessments resulting from a change in
ownership, new construction, or any other cause and including any interest
and/or penalties accruing thereon, except as set forth below), now or
hereafter imposed by any governmental or quasi-governmental authority or
special district having the direct of indirect power to tax or levy
assessments, which are levied or assessed against, or with respect to the
value, occupancy or use of all or any portion of the Project (as now
constructed or as may at any time hereafter be constructed, altered, or
otherwise changed) or Landlord's interest therein, the fixtures, equipment
and other property of Landlord, real or personal, that are an integral part
of and located on the Project, the gross receipts, income, or rentals from
the Project, or the use of parking areas, public utilities, or energy within
the Project, or Landlord's business of leasing the Project. If at any time
during the Lease Term the method of taxation or assessment of the Project
prevailing as of the Effective Date shall be altered so that in lieu of or in
addition to any Real Property Tax described above there shall be levied,
assessed or imposed (whether by reason of change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate
or additional tax or charge (i) on the value, use or occupancy of the Project
of Landlord's interest therein, or (ii) on or measured by the gross receipts,
income or rentals from the Project, on Landlord's business of leasing the
Project, or computed in any manner with respect to the operation of the
Project, then any such tax or charge, however designated, shall be included
within the meaning of the term "Real Property Taxes" for purposes of this
Lease. If any Real Property Tax is based upon property or rents unrelated to
the Project, then only that part of such Real Property Tax that is fairly
allocable to the Project shall be included within the meaning of the term
"Real Property Taxes". Notwithstanding the foregoing, the term "Real Property
Taxes" shall not include (i) estate, inheritance, transfer, gift or franchise
taxes of Landlord (ii) the federal or state net income tax imposed on
Landlord's income from all sources, or (iii) taxes, assessments or any other
governmental levies, or any increases in the foregoing occasioned by or
relating to (a) land and improvements not reserved for Tenant's exclusive or
nonexclusive use, (b) assessments and other fees for improvement and services
which do not benefit the Project, or (c) Hazardous Materials except to the
extent caused by Tenant's storage, use or disposal of Hazardous Materials or
(iv) interest or penalties caused by Landlord's late payment of non-payment
of Real Property Taxes, provided, that on the occasion when such were due to
be paid, Tenant had paid all of its Rent obligations to Landlord.

Notwithstanding any provision to contrary contained herein, if Landlord
elects to pay any tax, assessment or levy in total which Landlord could have
elected to pay in installments without incurring any additional expense, but
Landlord does not make such election, Tenant shall be required to pay only
Tenant's Share of each installment payable with respect to the period of time
covered by the Lease Term, as each such installment would have become due.

Additionally, Tenant shall have the right, by appropriate proceedings, to
protest or contest any assessment, reassessment or allocation of property taxes
or any change therein. Landlord shall notify Tenant in writing of any change in
property taxes within sufficient time to allow Tenant to review and, if it so
desires, to contest or protest such change. In the contest or proceedings,
Tenant may act in its own name and/or the name of the Landlord and Landlord
will, at Tenant's request and expense cooperate with Tenant in any way Tenant
may reasonably require in connection with such contest, provided that Landlord
shall not be required to incur any expense (unless Tenant agrees to reimburse
Landlord for such expense) or to incur any risks (unless Tenant agrees to
indemnify against such risks). If Tenant does not pay the property taxes when
due which are the subject of such protest or contest, Tenant shall post a bond
in lieu thereof in an amount reasonably determined by Landlord but not less than
one hundred twenty-five percent (125%) of the amount demanded by the taxing
authorities, which bond shall be in a form satisfactory to Landlord, written by
an approved surety, and which shall hold Landlord and the Project harmless from
any damage arising out of the contest and ensure the payment of any judgment
that may be rendered. With respect to any contest of property taxes or Laws,
Tenant shall hold Landlord and the Premises harmless from any damage arising out
of such protest or contest and shall pay any judgment that may be rendered for
which Tenant would otherwise be liable under this Lease without such contest or
protest. Any contest conducted by Tenant under this Paragraph shall be at
Tenant's expense and if interest or late charges become payable as a result of
such contest or protest, Tenant

<PAGE>

shall pay the same. Tenant shall receive the net benefit (after Landlord's
expenses of obtaining the refund are paid) of all refunds of property taxes
received with respect to the Lease Term, to the extent that Tenant paid such
property taxes.

ARTICLE 9

INSURANCE

9.1 TENANT'S INSURANCE: Tenant shall maintain insurance complying with all
of the following:

A. Tenant shall procure, pay for and keep in full force and effect the
following:

(1) Commercial general liability insurance, including property
damage, against liability for personal injury, bodily injury, death and damage
to property occurring in or about, or resulting from an occurrence in or about,
the Premises with combined single limit coverage of not less than the amount of
Tenant's Liability Insurance Minimum specified in SECTION P of the Summary,
which insurance shall contain a "contractual liability" endorsement insuring
Tenant's performance of Tenant's obligation to indemnify Landlord contained in
PARA 10.3 (provided, however, that Tenant may satisfy all but $1,000,000.00 of
this commercial general liability insurance coverage requirement by an "umbrella
policy" of excess liability coverage which meets all of the other requirements
hereof, which covers at least the same losses and damages as a commercial
general liability policy, and which is in a form approved by Landlord);

(2) Fire and property damage insurance in so-called "all risk"
form insuring Tenant's Trade Fixtures and Tenant's Alterations for the full
actual replacement cost thereof;

(3) Such other insurance that is either (i) reasonably required by
any Lender, or (ii) reasonably required by Landlord and customarily carried by
tenants of similar property in similar businesses. In the event that Tenant
believes that a Lender's requirement is unreasonable, Tenant shall nevertheless
obtain the required insurance, but Landlord shall be reasonable for the cost
thereof if it is established that requirement was unreasonable.

B. Where applicable and required by Landlord, each policy of insurance
required to be carried by Tenant pursuant to this PARA 9.1: (i) shall name
Landlord and such other parties in interest as Landlord reasonably designates as
additional insured; (ii) shall be primary insurance which provides that the
insurer shall be liable for the full amount of the loss up to and including the
total amount of liability set forth in the declarations without the right of
contribution from any other insurance coverage of Landlord; (iii) shall be in a
form satisfactory to Landlord; (iv) shall be carried with companies reasonably
acceptable to Landlord; (v) shall provide that such policy shall not be subject
to cancellation, lapse, or reduction in coverage except after at least 30 days
prior written notice to Landlord so long as such provision of 30 days notice is
reasonably obtainable, but in any event not less than 10 days prior written
notice; (vi) shall not have a "deductible" in excess of such amount as is
reasonably approved by Landlord; (vii) shall contain a cross liability
endorsement; and (viii) shall contain a "severability" clause. If Tenant has in
full force and effect a blanket policy of liability insurance with the same
coverage for the Premises as described above, as well as other coverage of other
premises and properties of Tenant, or in which Tenant has some interest, such
blanket insurance shall satisfy the requirements of this PARA 9.1.

C. A copy of each certificate of the insurer, certifying that such
policy has been issued, providing the coverage required by this PARA 9.1, and
containing the provisions specified herein, shall be delivered to Landlord prior
to the time Tenant or any of its Agents enters the Premises and upon renewal of
such policies, but not less than 5 days prior to the expiration of the term of
such coverage. Landlord may, at any time, and form time to time, inspect and/or
copy any and all insurance policies required to be procured by Tenant pursuant
to this PARA 9.1. If any Lender or insurance advisor reasonably determines at
any time that the amount of coverage required for any policy of insurance Tenant
is to obtain pursuant to this PARA 9.1 is not adequate, then Tenant shall
increase such coverage for such insurance to such amount as such Lender or
insurance advisor reasonably deems adequate, not to exceed the level of coverage
for such insurance commonly carried by comparable businesses similarly situated.

9.2 LANDLORD'S INSURANCE: Landlord shall have the following obligations and
options regarding insurance:

A. Landlord shall maintain a policy or policies of fire and property
damage insurance in so-called "all risk" form insuring Landlord (and such others
as Landlord may designate) against loss of rents for a period of not less than
12 months and from physical damage to the Project with coverage of not less than
the full replacement cost thereof. Landlord may so insure the Project
separately, or may insure the Project with other property owned by Landlord
which Landlord elects to insure together under the same policy or policies.
Such fire and property damage insurance (i) may be endorsed to cover loss caused
by such additional perils against which Landlord may elect to insure, including
earthquake and/or flood, and to provide such additional coverage as Landlord
reasonably requires, (provided, that the cost of earthquake and flood insurance
coverage shall not exceed a commercially reasonable sum and (ii) shall contain
reasonable "deductibles" which, in the case of earthquake and flood insurance,
may be up to 10% of the replacement cost of the property insured or such higher
amount as is then commercially reasonable. Landlord shall not be required to
cause such insurance to cover any Trade Fixtures or Tenant's Alterations of
Tenant.

B. Landlord may maintain a policy or policies of commercial general
liability insurance insuring Landlord (and such others as are designated by
Landlord) against liability for personal injury, bodily injury, death and damage
to property occurring or resulting from an occurrence in, on or about the
Project, with combined single limit coverage in such amount as Landlord from
time to time determines is reasonably necessary for its protection.

<PAGE>

9.3 TENANT'S OBLIGATION TO REIMBURSE: If Landlord's insurance rates for the
Building are increased at any time during the Lease Term as a result of the
nature of Tenant's use of the Premises, Tenant shall reimburse Landlord for the
full amount of such increase immediately upon receipt of a bill from Landlord
therefor.

9.4 RELEASE AND WAIVER OF SUBROGATION: Notwithstanding anything to the
contrary contained in this Lease, the parties hereto release each other, and
their respective agents and employees, from any liability for injury to any
person or damage to property that is caused by or results from any risk
insured against under any valid and collectible insurance policy carried by
either of the parties which contains a waiver of subrogation by the insurer
and is in force at the time of such injury or damage; subject to the
following limitations: (i) the foregoing provision shall not apply to the
commercial general liability insurance described by subparagraphs PARA 9.1A
and PARA 9.2B; (ii) such release shall apply to liability resulting from any
risk insured against or covered by self-insurance maintained or provided by
Tenant to satisfy the requirements of PARA 9.1 to the extent permitted by
this Lease; and (iii) Tenant shall not be released from any such liability to
the extent any damages resulting from such injury or damage are not covered
by the recovery obtained by Landlord from such insurance, but only if the
insurance in question permits such partial release in connection with
obtaining a waiver of subrogation from the insurer. This release shall be in
effect only so long as the applicable insurance policy contains a clause to
the effect that this release shall not affect the right of the insured to
recover under such policy. Each party shall use reasonable efforts to cause
each insurance policy obtained by it to provide that the insurer waives all
right of recovery by way of subrogation against the other party and its
agents and employees in connection with any injury or damage covered by such
policy. However, if any insurance policy cannot be obtained with such a
waiver of subrogation, or if such waiver of subrogation is only available at
additional cost and the party for whose benefit the waiver is to be obtained
does not pay such additional cost, then the party obtaining such insurance
shall notify the other party of that fact and thereupon shall be relieved of
the obligation to obtain such waiver of subrogation rights from the insurer
with respect to the particular insurance involved.
Landlord and Tenant agree to consider, in good faith, the request of
either of them addressed to the other in writing, to extend the provisions of
this Paragraph 9.4 to a contractor or subcontractor engaged by or through the
requesting party, upon the offer of such contractor or subcontractor to enter
into a similar agreement acceptable to the party to whom the request is
addressed, but neither Landlord nor Tenant shall be obligated to grant such a
request, and the decision to grant or deny such request shall be in the sole
but reasonable discretion of the party to whom the request is addressed, and
shall not be subject to any standard of reasonableness, anything to the
contrary contained in this Lease to the contrary notwithstanding.

Neither party shall lose the benefit of the waivers contained in this
Paragraph 9.4 solely on account of the fact that a loss is not covered by
insurance, if such fact is due to the other party's failure to obtain such
insurance in breach of the other party's obligations under this Lease.

ARTICLE 10

LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY

10.1 LIMITATION ON LANDLORD'S LIABILITY: Landlord shall not be liable to
Tenant, nor shall Tenant be entitled to terminate this Lease or to any abatement
of rent (except as expressly provided otherwise herein), for any injury to
Tenant or Tenant's Agents, damage to the property of Tenant or Tenant's Agents,
or loss to Tenant's business resulting from any cause, including without
limitation any: (i) failure, interruption or installation of any HVAC or other
utility system or service; (ii) failure to furnish or delay in furnishing any
utilities or services when such failure or delay is caused by fire or other
peril, the elements, labor disturbances of any character, or any other accidents
or other conditions beyond the reasonable control of Landlord; (iii) limitation,
curtailment, rationing or restriction on the use of water or electricity, gas or
any other form of energy or any services or utility servicing the Project; (iv)
vandalism or forcible entry by unauthorized persons or the criminal act of any
person; or (v) penetration of water into or onto any portion of the Premises or
the Building through roof leaks or otherwise. Notwithstanding the foregoing but
subject to PARA 9.4, Landlord shall be liable for any such injury, damage or
loss which is proximately caused by Landlord's willful misconduct or gross or
active negligence.

10.2 LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity: (i) the obligations of Landlord shall not constitute personal
obligations of the officers, directors, trustees, partners, joint ventures,
members owners, stockholders, or other principals or representatives of such
business entity; and (ii) Tenant shall not have recourse to the assets of such
officers, directors, trustees, partners, joint venturers, members, owners,
stockholders, principals or representatives except to the extent of their
interest in the Project. Tenant shall have recourse only to the interest of
Landlord in the Project (or, if the Project is sold, the proceeds of sale) for
the satisfaction of the obligations of Landlord and shall not have recourse to
any other assets of Landlord for the satisfaction of such obligations.

10.3 INDEMNIFICATION OF LANDLORD: Tenant shall hold harmless, indemnify and
defend Landlord, and its employees agents and contractors, with competent
counsel reasonably satisfactory to Landlord (and Landlord agrees to accept
counsel that any insurer requires be used), from all liability, penalties,
losses, damages, costs, expenses, causes of action, claims and/or judgements
arising by reason of any death, bodily injury, personal injury or property
damage resulting from (i) any cause or causes whatsoever (other than the willful
misconduct or gross or active negligence of Landlord) occurring on or resulting
from an occurrence on the Project during the Lease Term, (ii) the negligence or
willful misconduct of Tenant or its agents, employees and contractors, wherever
the same may occur, or (iii) and Event of Tenant's Default. The provisions of
this PARA 10.3 shall survive the expiration or

<PAGE>

sooner termination of this Lease.

10.4 INDEMNIFICATION OF TENANT: Landlord shall hold harmless, indemnify and
defend Tenant, and its employees and Agents from all liability, penalties,
losses, damages, costs, expenses, causes of action, claims and/or judgments not
covered by insurance (including reasonable attorney's fees) arising by reason of
any death, bodily injury, personal injury or property damage resulting from the
gross or active negligence or willful misconduct of Landlord or its Agents or
employees and for which Tenant is not, pursuant to Paragraph 10.3, obligated to
indemnify Landlord. The provisions of this Paragraph 10.4 shall survive the
expiration or sooner termination of this Lease.

ARTICLE 11

DAMAGE TO PREMISES

11.1 LANDLORD'S DUTY TO RESTORE: If the Premises are damaged by any peril
after the Effective Date, Landlord shall restore the Premises unless the Lease
is terminated by Landlord pursuant to PARA 11.2 or by Tenant pursuant to PARA
11.3. All insurance proceeds available from the fire and property damage
insurance carried by Landlord pursuant to PARA 9.2 shall be paid to and become
the property of Landlord. If this Lease is terminated pursuant to either PARA
11.2 or PARA 11.3, then all insurance proceeds available from insurance carried
by Tenant which covers loss to property that is Landlord's property or would
become Landlord's property on termination of this Lease shall be paid or
assigned to and become the property of Landlord. If this Lease is not so
terminated, then upon receipt of the insurance proceeds (if the loss is covered
by insurance) and the issuance of all necessary governmental permits, Landlord
shall commence and diligently prosecute to completion the restoration of the
Premises, to the extent then allowed by Law, to substantially the same condition
in which the Premises were immediately prior to such damage. Landlord's
obligation to restore shall be limited to the Premises and interior improvements
constructed by Landlord as they existed as of the Commencement Date, excluding
any Tenant's Alterations, Trade Fixtures and/or personal property constructed or
installed by Tenant in the Premises. Tenant shall forthwith replace or fully
repair all Tenant's Alterations and Trade Fixtures installed by Tenant and
existing at the time of such damage or destruction, and all insurance proceeds
received by Tenant from the insurance carried by it pursuant to PARA 9.1A(2)
shall be used for such purpose. Landlord agrees to consult with Tenant in good
faith in regard to the replacement or repair of Tenant's Alterations or Trade
Fixtures which have been damaged, and to approve or disapprove Tenant's
proposals for Tenant's Alterations or Trade Fixtures not to be replaced or
repaired using a standard of commercial reasonableness.

11.2 LANDLORD'S RIGHT TO TERMINATE: Landlord shall have the right to
terminate this Lease in the event any of the following occurs, which right may
be exercised only by delivery to Tenant of a written notice of election to
terminate within 30 days after the date of such damage:

A. Either the Project or the Building is damaged by an Insured Peril to
such an extent that the estimated cost to restore exceeds 33% of the then
actual replacement cost thereof;

B. Either the Project or the Building is damaged by an Uninsured Peril
to such an extent that the estimated cost to restore exceeds 5% of the then
actual replacement cost thereof; provided, however, that Landlord may not
terminate this Lease pursuant to this PARA 11.2B if one or more tenants of the
Project agree in writing to pay the amount by which the cost to restore the
damage exceeds such amount and subsequently deposit such amount with Landlord
within 30 days after Landlord has notified Tenant of its election to terminate
this Lease;

C. The Premises are damaged by any peril within 12 months of the last
day of the Lease Term to such an extent that the estimated cost to restore
equals or exceeds an amount equal to six times the Base Monthly Rent then due;
provided, however, that Landlord may not terminate this Lease pursuant to this
PARA 11.2C if Tenant, at the time of such damage, has a then valid express
written option to extend the Lease Term and Tenant exercises such option to
extend the Lease Term within 15 days following the date of such damage; or

D. Either the Project or the Building is damaged by any peril and,
because of the Laws then in force, (i) cannot be restored at reasonable cost to
substantially the same condition in which it was prior to such damage, or (ii)
cannot be used for the same use being made thereof before such damage if
restored as required by this Article.

E. As used herein, the following terms shall have the following
meanings: (i) the term "Insured Peril" shall mean a peril actually or required
to be insured against for which the insurance proceeds actually received by
Landlord are sufficient (except for any "deductible" amount specified by such
insurance) to restore the Project under then existing building codes to the
condition existing immediately prior to the damage; and (ii) the term "Uninsured
Peril" shall mean any peril which is not an Insured Peril. Notwithstanding the
foregoing, if the "deductible" for earthquake or flood insurance exceeds 2% of
the replacement cost of the improvements insured, such peril shall be deemed an
"Uninsured Peril".

11.3 TENANT'S RIGHT TO TERMINATE: If the Premises are damaged by any peril
and Landlord does not elect to terminate this Lease or is not entitled to
terminate this Lease pursuant to PARA 11.2, then as soon as reasonably
practicable, Landlord shall furnish Tenant with the written opinion of
Landlord's architect or construction consultant as to when the restoration work
required of Landlord may be completed. Tenant shall have the right to terminate
this Lease in the event any of the following occurs, which right may be
exercised only by delivery to Landlord of a written notice of election to
terminate within 10 days after Tenant receives from Landlord the estimate of the
time needed to complete such restoration.

A. The Premises are damaged by any peril and, in the reasonable opinion
of Landlord's architect or construction consultant, the restoration of the
Premises cannot be substantially completed within

<PAGE>

180 days after the date of the report of Landlord's architect or construction
consultant; or

B. The Premises are damaged by any peril within 12 months of the last
day of the Lease Term and, in the reasonable opinion of Landlord's architect or
construction consultant, the restoration of the Premises cannot be substantially
completed within 90 days after the date of such damage and such damage renders
unusable more than 30% of the Premises.

11.4 ABATEMENT OF RENT: In the event of damage to the Premises which does not
result in the termination of this Lease, the Base Monthly Rent and the
Additional Rent shall be temporarily abated during the period of restoration in
proportion to the degree to which Tenant's use of the Premises is impaired by
such damage. Tenant shall not be entitled to any compensation or damages from
Landlord for loss of Tenant's business or property or for any inconvenience or
annoyance caused by such damage or restoration. Tenant hereby waives the
provisions of California Civil Code Sections 1932(2) and 1933(4) and the
provisions of any similar law hereinafter enacted.

ARTICLE 12

CONDEMNATION

12.1 LANDLORD'S TERMINATION RIGHT: Landlord shall have the right to terminate
this Lease if, as a result of a taking by means of the exercise of the power of
eminent domain (including a voluntary sale or transfer by Landlord to a
condemnor under threat of condemnation), (i) more than 10% of the Building
Leasable Area is so taken, or (ii) more than 50% of the Common Area (which in
this Article means the area of the Project outside the Premises) is so taken.
Any such right to terminate by Landlord must be exercised within a reasonable
period of time, to be effective as of the date possession is taken by the
condemnor.

12.2 TENANT'S TERMINATION RIGHT: Tenant shall have the right to terminate
this Lease if, as a result of any taking by means of the exercise of the power
of eminent domain (including any voluntary sale or transfer by Landlord to any
condemnor under threat of condemnation), (i) 10% or more of the Premises is so
taken and that part of the Premises that remains is not or cannot be restored
within a reasonable period of time and thereby made reasonably suitable for the
continued operation of the Tenant's business, or (ii) there is a taking
affecting the Common Area and, as a result of such taking, Landlord cannot
provide parking spaces within reasonable walking distance of the Premises equal
in number to at least 80% of the number of spaces allocated to Tenant by PARA
2.1, whether by rearrangement of the remaining parking areas in the Common Area
(including construction of multi-deck parking structures or restriping for
compact cars where permitted by Law) or by alternative parking facilities on
other land. Tenant must exercise such right within a reasonable period of time,
to be effective on the date that possession of that portion of the Premises or
Common Area that is condemned is taken by the condemnor.

12.3 RESTORATION AND ABATEMENT OF RENT: If any part of the Premises or the
Common Area is taken by condemnation and this Lease is not terminated, then
Landlord shall restore the remaining portion of the Premises and Common Area and
interior improvements constructed by Landlord as they existed as of the
Commencement Date, excluding any Tenant's Alterations, Trade Fixtures and/or
personal property constructed or installed by Tenant. Thereafter, except in the
case of a temporary taking, as of the date possession is taken (i) the Base
Monthly Rent shall be reduced in the same proportion that the floor area of that
part of the Premises so taken (less any addition thereto by reason of any
reconstruction) bears to the original floor area of the Premises and/or (ii)
there shall be an equitable adjustment of Base Monthly Rent to reflect any
taking of the Common Area, to the extent such taking results in material
diminishment of the value and useability of Tenant's's Lease; and in either
event, Tenant shall be entitled to the benefit of any actual reduction in Common
Operating Expenses which Landlord obtains as a result thereof (not including any
condemnation award).

12.4 TEMPORARY TAKING: If any portion of the Premises is temporarily taken
for one hundred eighty (180) days or less, this Lease shall remain in effect.
If any portion of the Premises is temporarily taken by condemnation for a period
which exceeds one hundred eighty (180) days or which extends beyond the natural
expiration of the Lease Term, and such taking materially and adversely affects
Tenant's ability to use the Premises for the Permitted Use, then Tenant shall
have the right to terminate this Lease, effective on the date possession is
taken by the condemnor.

12.5 DIVISION OF CONDEMNATION AWARD: Any award made as a result of any
condemnation of the Premises or the Common Area shall belong to and be paid to
Landlord, and Tenant hereby assigns to Landlord all of its right, title and
interest in any such award; provided, however, that Tenant shall be entitled to
receive any condemnation award that is made directly to Tenant for the following
so long as the award made to Landlord is not thereby reduced; (i) for the taking
of personal property or Trade Fixtures belonging to Tenant, (ii) for the
interruption of Tenant's business or its moving costs, (iii) for loss of
Tenant's goodwill; or (iv) for any temporary taking where this Lease is not
terminated as a result of such taking. The rights of Landlord and Tenant
regarding any condemnation shall be determined as provided in this Article, and
each party hereby waives the provisions of California Code of Civil Procedure
Section 1265.130 and the provisions of any similar law hereinafter enacted
allowing either party to petition the Superior Court to terminate this Lease in
the event of a partial taking of the Premises.

ARTICLE 13

DEFAULT AND REMEDIES

13.1 EVENTS OF TENANT'S DEFAULT: Tenant shall be in default of its
obligations under this Lease if any of the following events occurs (an "Event of
Tenant's Default"):

A. Tenant shall have failed to pay Base Monthly Rent or Additional Rent
when due, and such failure is not cured within five (5) days after delivery of
written notice from Landlord specifying such failure to

<PAGE>

pay, or

B. Tenant shall have failed to perform any term, covenant, or condition
of this Lease except those identified in Subparagraphs C through F of this
Paragraph or requiring the payment of Base Monthly Rent or Additional Rent,
and Tenant shall have failed to cure such breach within 30 days after written
notice from Landlord specifying the nature of such breach where such breach
could reasonably be cured within said 30 day period, or if such breach could
not be reasonably cured within said 30 day period, Tenant shall have failed
to commence such cure within said 30 day period and thereafter continue with
due diligence to prosecute such cure to completion within such time period as
is reasonably needed but not to exceed 120 days from the date of Landlord's
notice; or

C. Tenant shall have sublet the Premises or assigned its interest in
the Lease in violation of the provisions contained in Article 14; or

D. Tenant shall have abandoned the Premises; or

E. The occurrence of the following: (i) the making by Tenant of any
general arrangements or assignments for the benefit of creditors; (ii) Tenant
becomes a "debtor" as defined in 11 USC Section 101 or any successor statute
thereto (unless, in the case of a petition filed against Tenant, the same is
dismissed within 60 days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within 30 days; or (iv) the attachment, execution or other
judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where such seizure is not
discharged within 30 days; provided, however, in the event that any provision
of this Section 13.1E is contrary to any applicable Law, such provision shall
be of no force or effect; or

F. Tenant shall have failed to deliver documents required of it
pursuant to PARA 15.4 to PARA 15.6 within the time periods
specified therein, and shall have further failed to deliver such documents
within five (5) days after Landlord's further written notice declaring that
Tenant must either perform its obligations under PARA 15.4 or
PARA 15.6 or an Event of Tenant's Default will have occurred.

13.2 LANDLORD'S REMEDIES: If an Event of Tenant's Default occurs,
Landlord shall have the following remedies, in addition to all other rights
and remedies provided by any Law or otherwise provided in this Lease, to which
Landlord may resort cumulatively or in the alternative:

A. So long as Landlord does not terminate Tenant's right to possession
of the Premises, Landlord may keep this Lease in effect and enforce by an
action at law or in equity all of its rights and remedies under this Lease,
including (i) the right to recover the rent and other sums as they become due
by appropriate legal action, (ii) the right to make payments required of
Tenant or perform Tenant's obligations and be reimbursed by Tenant for the
cost thereof with interest at the Agreed Interest Rate from the date the sum
is paid by Landlord until Landlord is reimbursed by Tenant, and (iii) the
remedies of injunctive relief and specific performance to compel Tenant to
perform its obligations under this Lease. Notwithstanding anything contained
in this Lease, in the event of a breach of an obligation by Tenant which
results in a condition which poses an imminent danger to safety of persons or
damage to property, an unsightly condition visible from the exterior of the
Building, or a threat to insurance coverage, then if Tenant does not cure
such breach within five (5) days after delivery to it of written notice from
Landlord identifying the breach, Landlord may cure the breach of Tenant and
be reimbursed by Tenant for the cost thereof with interest at the Agreed
Interest Rate from the date the sum is paid by Landlord until Landlord is
reimbursed by Tenant.

B. Landlord may enter the Premises and release them to third parties
for Tenant's account for any period, whether shorter or longer than the
remaining Lease Term (provided, that in no event shall Tenant remain liable
for longer than the Lease Term). Tenant shall be liable immediately to
Landlord for all costs Landlord incurs in releasing the Premises, including
brokers' commissions, expenses of altering and preparing the Premises
required by the releasing. Tenant shall pay to Landlord the rent and other
sums due under this Lease on the date the rent is due, less the rent and
other sums Landlord received from any releasing. No act by Landlord allowed
by this subparagraph shall terminate this Lease unless Landlord notifies
Tenant in writing that Landlord elects to terminate this Lease.
Notwithstanding any releasing without termination, Landlord may later elect
to terminate this Lease because of the default by Tenant.

C. Landlord may terminate this Lease by giving Tenant written notice of
termination, in which event this Lease shall terminate on the date set forth
for termination in such notice. Any termination under this PARA 13.2C shall
not relieve Tenant from its obligation to pay sums then due Landlord or from
any claim against Tenant for damages or rent previously accrued or then
accruing. In no event shall any one or more of the following actions by
Landlord, in the absence of a written election by Landlord to terminate this
Lease or Tenant's right to possession of the Premises, constitute a
termination of this Lease: (i) appointment of a receiver or keeper in order
to protect Landlord's interest hereunder; (ii) consent to any subletting of
the Premises or assignment of this Lease by Tenant, whether pursuant to the
provisions hereof or otherwise; or (iii) any other action by Landlord or
Landlord's Agents intended to mitigate the adverse effects of any breach of
this Lease by Tenant, including without limitation any action taken to
maintain and preserve the Premises or any action taken to relet the Premises
or any portions thereof to the extent such actions do not affect a
termination of Tenant's right to possession of the Premises.

D. In the event Tenant breaches this Lease and abandons the Premises,
this Lease shall not terminate unless Landlord gives Tenant written notice of
its election to so terminate this Lease. No act by or on behalf of Landlord
intended to mitigate the adverse effect of such breach, including those
described by PARA 13.C, shall constitute a termination of Tenant's right to

<PAGE>

possession unless Landlord gives Tenant written notice of termination. Should
Landlord not terminate this Lease by giving Tenant written notice, Landlord
may enforce all its rights and remedies under this Lease, including the right
to recover the rent as it become due under the Lease as provided in
California Civil Code Section 1951.4.

E. In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election to damages in an amount as set forth in
California Civil Code Section 1951.2 as in effect on the Effective Date. For
purposes of computing damages pursuant to California Civil Code Section
1951.2, (i) an interest rate equal to the Agreed Interest Rate shall be used
where permitted, and (ii) the term "rent" includes Base Monthly Rent and
Additional Rent. Such damages shall include:

(1) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided,
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%); and

(2) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would
be likely to result therefrom, including the following: (i) expenses for
cleaning, repairing or restoring the Premises; (ii) expenses for altering,
remodeling or otherwise improving the Premises for the purpose of reletting,
including installation of leasehold improvement (whether such installation be
funded by a reduction of rent, direct payment or allowance to a new tenant,
or otherwise); (iii) broker's fees applicable to the remaining term of the
Lease, advertising costs and other expenses of reletting the Premises;
(iv) costs of carrying the Premises, such as taxes, insurance premiums,
utilities and security precautions; (v) expenses in retaking possession of
the Premises, and (vi) attorneys' fees and court costs incurred by Landlord
in retaking possession of the Premises and in releasing the Premises or
otherwise incurred as a result of Tenant's default.

F. Nothing in this PARA 13.2 shall limit Landlord's right to
indemnification from Tenant as provided in PARA 7.2 and PARA 10.3. Any notice
given by Landlord in order to satisfy the requirements of PARA 13.1A or
PARA 13.1B above shall also satisfy the notice requirements of California Code
of Civil Procedure Section 1161 regarding unlawful detainer proceedings, if
Landlord gives such notice(s) in compliance with the legal provisions
relating to notices in unlawful detainer proceedings.

13.3 WAIVER: One party's consent to or approval of any act by the other
party requiring the first party's consent or approval shall not be deemed to
waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. The receipt by Landlord of any
rent or payment with or without knowledge of the breach of any other
provision hereof shall not be deemed a waiver of any such breach unless such
waiver is in writing and signed by Landlord. No delay or omission in the
exercise of any right or remedy accruing to either party upon any breach by
the other party under this Lease shall impair such right or remedy or be
construed as a waiver of any such breach theretofore or thereafter occurring.
The waiver by either party of any breach of any provision of this Lease shall
not be deemed to be a waiver of any subsequent breach of the same or of any
other provisions herein contained.

13.4 LIMITATION ON EXERCISE OF RIGHTS: At any time that an Event of Tenant's
Default has occurred and remains uncured, (i) it shall not be unreasonable
for Landlord to deny or withhold any consent or approval requested of it by
Tenant which Landlord would otherwise be obligated to give, and (ii) Tenant
may not exercise any option to extend, right to terminate this Lease, or
other right granted to it by this Lease which would otherwise be available to
it.

13.5 WAIVER BY TENANT OF CERTAIN REMEDIES: Tenant waives the provisions of
Sections 1932(1), 1941 and 1942 of the California Civil Code and any similar
or successor law regarding Tenant's right to terminate this Lease or to make
repairs and deduct the expenses of such repairs from the rent due under this
Lease. Tenant hereby waives any right of redemption or relief from forfeiture
under the laws of the State of California, or under any other present or
future law, including the provisions of Sections 1174 and 1179 of the
California Code of Civil Procedure.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

14.1 TRANSFER BY TENANT: The following provisions shall apply to any
assignment, subletting or other transfer by Tenant or any subtenant or
assignee or other successor in interest of the original Tenant (collectively
referred to in this PARA 14.1 as "Tenant")

A. Tenant shall not do any of the following (collectively referred to
herein as a "Transfer"), whether voluntarily, involuntarily or by operation
of law, without the prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed: (i) sublet all or any part of the
Premises or allow it to be sublet, occupied or used by any person or entity
other than Tenant; (ii) assign its interest in this Lease; (iii) mortgage or
encumber the Lease (or otherwise use the Lease as a security device) in any
manner; or (iv) materially amend or modify an assignment, sublease or other
transfer that has been previously approved by Landlord. Landlord's
disapproval of a proposed Transfer shall be conclusively presumed reasonable
if (i) the proposed subtenant or assignee requires a change in the Permitted
Use or Landlord's consent to or approval of an "other legal use" under
Paragraph N of the Summary; or (ii) if the proposed subtenant or assignee uses
Hazardous Materials in its business (other than insignificant amounts used
for ordinary office purposes and cleaning); or (iii) if the proposed assignee
does not have at least as much net worth and creditworthiness, in Landlord's
reasonable judgment, as the greater of Tenant's net worth and
creditworthiness on the

<PAGE>

Effective Date or the date on which the request to Transfer is made,
whichever shall be greater, or in the ease of a sublease, if the proposed
subtenant does not have net worth and creditworthiness, in Landlord's
reasonable judgment, commensurate with the financial obligations of the
proposed sublease. Tenant shall reimburse Landlord for all reasonable costs
and attorneys' fees (which attorney's fees shall not exceed $1,500 in regard
to any one application for Transfer) incurred by Landlord in connection with
the evaluation, processing, and/or documentation of any requested Transfer,
whether or not Landlord's consent is granted. Landlord's reasonable costs
shall include the cost of any review or investigation performed by Landlord
or consultant acting on Landlord's behalf of (i) Hazardous Materials (as
defined in Section 7.2E of this Lease) used, stored, released, or disposed of
by the potential Subtenant or Assignee, and/or (ii) violations of Hazardous
Materials Law (as defined in Section 7.2E of this lease) by the Tenant or the
proposed Subtenant or Assignee. Any Transfer so approved by Landlord shall
not be effective until Tenant has delivered to Landlord an executed
counterpart of the document evidencing the Transfer which (i) is in a form
reasonably approved by Landlord, (ii) contains the same terms and conditions
as stated in Tenant's notice given to Landlord pursuant to PARA 14.1B, and
(iii) in the case of an assignment of the Lease, contains the agreement of
the proposed transferee to assume all obligations of Tenant under this Lease
arising after the effective date of such Transfer and to remain jointly and
severally liable therefor with Tenant. Any attempted Transfer without
Landlord's consent shall constitute an Event of Tenant's Default and shall be
voidable at Landlord's option. Landlord's consent to any one Transfer shall
not constitute a waiver of the provisions of this PARA 14.1 as to any
subsequent Transfer or a consent to any subsequent Transfer. No Transfer,
even with the consent of Landlord, shall relieve Tenant of its personal and
primary obligation to pay the rent and to perform all of the other
obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any person shall not be deemed to be a waiver by Landlord of
any provision of this Lease nor to be a consent to any Transfer.

B. At least 15 days before a proposed Transfer is to become effective,
Tenant shall give Landlord written notice of the proposed terms of such
Transfer and request Landlord's approval, which notice shall include the
following: (i) the name and legal composition of the proposed transferee;
(ii) a current financial statement of the transferee, financial statements of
the transferee covering the preceding three years if the same exist, and (if
available) an audited financial statement of the transferee for a period
ending not more than one year prior to the proposed effective date of the
Transfer, all of which statements are prepared in accordance with generally
accepted accounting principles; (iii) the nature of the proposed transferee's
business to be carried on in the Premises; (iv) all consideration to be given
on account of the Transfer; (v) a current financial statement of Tenant; and
(vi) an accurately filled out response to a Hazardous Materials
questionnaire. Tenant shall provide to Landlord such other information as may
be reasonably requested by Landlord within seven days after Landlord's
receipt of such notice from Tenant. Landlord shall respond in writing to
Tenant's request for Landlord's consent to a Transfer within the later of (i)
10 days of receipt of such request together with the required accompanying
documentation, or (ii) seven days after Landlord's receipt of all information
which Landlord reasonably requests within seven days after it receives
Tenant's first notice regarding the Transfer in question. If Landlord fails
to respond in writing within said period, Landlord will be deemed to have
withheld consent to such Transfer. Tenant shall immediately notify Landlord
of any material modification to the proposed terms of such Transfer.

C. In the event that Tenant seeks to make any Transfer, Landlord shall
have the right, in the case of a proposed assignment or a proposed sublease
of all or substantially all of the Premises, to terminate this Lease or, in
the case of a sublease of less than all of the Premises for all or
substantially all of the remainder of the Lease Term, terminate this Lease as
to that part of the Premises proposed to be so sublet, either (i) on the
condition that the proposed transferee immediately enter into a direct lease
of the Premises with Landlord (or, in the case of a partial sublease of less
than all of the Premises but for all or substantially all of the remaining
balance of the Lease Term, a lease for the portion proposed to be so sublet)
on the same terms and conditions contained in Tenant's notice, or (ii) so
that Landlord is thereafter free to lease the Premises (or, in the case of a
partial sublease of less than all of the Premises but for all or
substantially all of the remaining balance of the Lease Term, the portion
proposed to be so sublet) to whomever it pleases on whatever terms are
acceptable to Landlord. In the event Landlord elects to so terminate or
partially terminate this Lease, then (i) if such termination is conditioned
upon the execution of a lease between Landlord and the proposed transferee,
Tenant's obligations under this Lease shall not be terminated until such
transferee executes a new lease with Landlord, enters into possession and
commences the payment of rent, and (ii) if Landlord elects simply to
terminate this Lease (or, in the case of a partial sublease of less than all
of the Premises but for all or substantially all of the remaining balance of
the Lease Term, terminate this Lease as to the portion to be so sublet), the
Lease shall so terminate in its entirety (or as to the space to be so sublet)
fifteen (15) days after Landlord has notified Tenant in writing of such
election. Upon such termination, Tenant shall be released from any further
obligation under this Lease if it is terminated in its entirety, or shall be
released from any further obligation under the Lease with respect to the
space proposed to be sublet in the case of a proposed partial sublease of
less than all of the Premises but for all or substantially all of the
remaining balance of the Lease Term. In the case of the partial termination
of the Lease, the Base Monthly Rent and Tenant's Share shall be reduced to an
amount which bears the same relationship to the original amount thereof as
the area of that part of the Premises which remains subject to the Lease
bears to the original area of the Premises. Landlord and Tenant shall execute
a cancellation and release with respect to the Lease to effect such
termination.

D. If Landlord consents to a Transfer proposed by Tenant, Tenant may
enter into such Transfer, and if Tenant does so, the following shall apply:

(1) Tenant shall not be released

<PAGE>

of its liability for the performance of all of its obligations under the
Lease.

(2) If Tenant assigns its interest in this Lease, then Tenant shall
pay to Landlord 50% of all Subrent (as defined in PARA 14.1D(5)) received by
Tenant over and above (i) the assignee's agreement to assume the obligations
of Tenant under this Lease, and (ii) all Permitted Transfer Costs related to
such assignment. In the case of assignment, the amount of Subrent owned to
Landlord shall be paid to Landlord on the same basis, whether periodic or in
lump sum, that such Subrent is paid to Tenant by the assignee.

(3) If Tenant sublets any part of the Premises, then with respect
to the space so subleased, Tenant shall pay to Landlord 50% of the positive
difference, if any, between (i) all Subrent paid by the subtenant to Tenant,
less (ii) the sum of all Base Monthly Rent and Additional Rent allocable to
the space sublet and all Permitted Transfer Costs related to such sublease.
Such amount shall be paid to Landlord on the same basis, whether periodic or
in lump sum, that such Subrent is paid to Tenant by its subtenant. In
calculating Landlord's share of any periodic payments, all Permitted Transfer
Costs shall be first recovered by Tenant.

(4) Tenant's obligations under this PARA 14.1D shall survive any
Transfer, and Tenant's failure to perform its obligations hereunder shall be
an Event of Tenant's Default without notice or opportunity to cure. At the
time Tenant makes any payment to Landlord required by this PARA 14.1D, Tenant
shall deliver an itemized statement of the method by which the amount to
which Landlord is entitled was calculated, certified by Tenant as true and
correct. Landlord shall have the right at reasonable intervals to inspect
Tenant's books and records relating to the payments due hereunder. Upon
request therefor, Tenant shall deliver to Landlord copies of all bills,
invoices or other documents upon which its calculations are based. Landlord
may condition its approval of any Transfer upon obtaining a certification
from both Tenant and the proposed transferee of all Subrent and other amounts
that are to be paid to Tenant in connection with such Transfer.

(5) As used in this PARA 14.1D, the term "Subrent" shall mean any
consideration of any kind received, or to be received, by Tenant as a result
of the Transfer, if such sums are received by Tenant in return for Tenant's
Transfer of this Lease or the right to occupy all or part of the Premises, or
in lieu of rent payments, including payments from or on behalf of the
transferee (in excess of the book value thereof) for Tenant's assets,
fixtures, leasehold improvements, inventory, accounts, goodwill, equipment,
furniture, and general intangibles. As used in this PARA 14.1D, the term
"Permitted Transfer Costs" shall mean (i) all reasonable leasing commissions
paid to third parties not affiliated with Tenant in order to obtain the
Transfer in question, and (ii) all reasonable attorneys' fees incurred by
Tenant with respect to the Transfer in question.

E. If Tenant is a corporation, the following shall be deemed a voluntary
assignment of Tenant's interest in this Lease: (i) any dissolution, merger,
consolidation, or other reorganization of or affecting Tenant, whether or not
Tenant is the surviving corporation except as provided in Paragraph 14.1F,
and (ii) if the capital stock of Tenant is not publicly traded, the sale or
transfer to one person to entity (or to any group of related persons or
entities) of stock possessing more than 50% of the total combined voting
power of all classes of Tenant's capital stock issued, outstanding and
entitled to vote for the election of directors. If Tenant is a partnership,
any withdrawal or substitution (whether voluntary, involuntary or by
operation of law, and whether occurring at one time or over a period of time)
of any partner owning 25% of more (cumulatively) of any interest in the
capital or profits of the partnership, or the dissolution of the partnership,
shall be deemed a voluntary assignment of Tenant's interest in this Lease.

F. Notwithstanding anything contained in PARA 14.1, so long as Tenant
otherwise complies with the provisions of PARA 14.1 Tenant may enter into a
transfer (a "Permitted Transfer") without Landlord's prior written consent,
and Landlord shall not be entitled to terminate the Lease pursuant to PARA
14.1C or to receive any part of any Subrent resulting therefrom that would
otherwise be due it pursuant to PARA 14.1D, if Tenant is (i) subleasing all
or part of the Premises or assigning its interest in this Lease to any
corporation which controls, is controlled by, or is under common control with
the original Tenant to this Lease by means of an ownership interest of more
than 50%, or (ii) assigning this Lease to a successor corporation related to
Tenant by a merger in which Tenant is not the surviving corporation, or by a
consolidation or nonbankruptcy reorganization, or which purchases all or
substantially all of the assets of Tenant, which assignee in each such case
has at least as much net worth and creditworthiness, in Landlord's reasonable
judgment, as the greater of Tenant's net worth and creditworthiness on the
Effective Date or the date on which the merger, reorganization, or
consolidation is to take place, whichever shall be greater; or (iii) any
transaction relating to Tenant's stock which does not meet the requirements
of Paragraph 14.1E(ii). In order to have a Transfer treated as a Permitted
Transfer, Tenant must provide Landlord with (i) at least fifteen (15) days
advance written notice of the proposed Transfer, including therewith
sufficient documentation and information so that Landlord may reasonably
determine that the Transfer is a Permitted Transfer; (ii) any further
information reasonably requested by Landlord relating to the Transfer; and
(iii) written notice and documentation that the Transfer has taken place,
including documentation executed by the Transferee acknowledging that it has
assumed Tenant's responsibilities under the Lease, within fifteen (15) days
after the Transfer takes legal effect, and any Transfer made in violation of
this requirement shall not be a Permitted Transfer.

14.2 TRANSFER BY LANDLORD: Landlord and its successors in interest shall
have the right to transfer their interest in this Lease and the Project at
any time and to any person or entity. In the event of any such transfer, the
Landlord originally named herein (and, in the case of any subsequent
transfer, the transferror) from the date of such transfer, shall be
automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord
hereunder which may accrue after the date of such transfer. After the date of
any such transfer, the

<PAGE>

term "Landlord" as used herein shall mean the transferee of such interest in
the Premises.

ARTICLE 15

GENERAL PROVISIONS

15.1 LANDLORD'S RIGHT TO ENTER: Landlord and its agents may enter the
Premises at any reasonable time after giving at least 24 hours' prior notice
to Tenant (and immediately in the case of emergency) for the purpose of: (i)
inspecting the same; (ii) posting notices of non-responsibility; (iii)
supplying any service to be provided by Landlord to Tenant; (iv) showing the
Premises to prospective purchasers, mortgagees or tenants (but in regard to
Tenants, only during the last 180 days of the Lease Term, or during periods
when an uncured Event of Tenant's Default has occurred); (v) making necessary
alterations, additions or repairs; (vi) performing Tenant's obligations when
Tenant has failed to do so after written notice from Landlord; (vii) placing
upon the Premises ordinary "for lease" signs (but only within the last 180
days of the Lease Term) or "for sale" signs; and (viii) responding to an
emergency. Landlord shall have the right to use any and all means Landlord
may deem necessary ad proper to enter the Premises in an emergency. Any entry
into the Premises obtained by landlord in accordance with this PARA 15.1
shall not be a forcible or unlawful entry into, or a detainer of, the
Premises, or an eviction, actual or constructive, of Tenant from the
Premises. Any such entry by Landlord and Landlord's Agents shall comply with
all reasonable security measures of Tenant and shall not impair Tenant's
operations more than reasonably necessary. During any such entry, Landlord
and Landlord's agents shall at all times be accompanied by Tenant, so long as
Tenant remains in physical occupancy of the Premises.

15.2 SURRENDER OF THE PREMISES: Upon the expiration or sooner termination
of this Lease, Tenant shall vacate and surrender the Premises to Landlord in
the same condition as existed at the Commencement Date, except for (i)
reasonable wear and tear, (ii) damage caused by any peril or condemnation,
and (iii) contamination by Hazardous Materials for which Tenant is not
responsible pursuant to PARA 7.2A or PARA 7.2B. In this regard, normal wear
and tear shall be construed to mean wear and tear caused to the Premises by
the natural aging process which occurs in spite of prudent application of the
best reasonable standards for maintenance, repair and janitorial practices,
and does not include items of neglected or deferred maintenance. In any
event, Tenant shall cause the following to be done prior to the expiration or
the sooner termination of this Lease: (i) all interior walls shall be painted
or cleaned so that they appear freshly painted; (ii) all tiled floors shall
be cleaned and waxed; (iii) all carpets shall be cleaned and shampooed; (iv)
all broken, marred, stained or nonconforming acoustical ceiling tiles shall
be replaced; (v) all windows shall be washed; (vi) the HVAC system should be
serviced by a reputable and licensed service firm and left in good operating
condition and repair as so certified by such firm; and (vii) the plumbing and
electrical systems and lighting shall by placed in good order and repair
(including replacement of any burned out, discolored or broken light bulbs,
ballasts, or lenses). If Landlord so requests, Tenant shall, prior to the
expiration or sooner termination of this Lease, (i) remove any Tenant's
Alterations which Tenant is required to remove pursuant to PARA 5.2 and
repair all damage caused by such removal, and (ii) return the Premises or any
part thereof to its original configuration existing as of the time the
Premises were delivered to Tenant (provided, however, that Landlord agrees
that removal of Tenant's Alterations shown in Exhibit "B" is not required).
If the Premises are not so surrendered at the termination of this Lease,
Tenant shall be liable to Landlord for all costs incurred by landlord in
returning the Premises to the required condition, plus interest on all costs
incurred at the Agreed Interest Rate. Tenant shall indemnify Landlord against
loss or liability resulting from delay by Tenant in so surrendering the
Premises, including, without limitation, any claims made by any succeeding
tenant or losses to Landlord due to lost opportunities to lease to succeeding
tenants.

15.3 HOLDING OVER: This Lease shall terminate without further notice at
the expiration of the Lease Term. Any holding over by Tenant after expiration
of the Lease Term shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the Premises except as expressly provided in
this Lease. Any holding over after such expiration with the written consent
of Landlord shall be construed to be a tenancy from month to month on the
same terms and conditions herein specified insofar as applicable except that
Base Monthly Rent shall be increased to an amount equal to 125% of the Base
Monthly Rent payable during the last full calendar month of the Lease Term.

15.4 SUBORDINATION: The following provisions shall govern the
relationship of this Lease to any Security Instrument:

A. The Lease is subject and subordinate to all Security Instruments
existing as of the Effective Date. However, if any Lender so requires, the
Lease shall become prior and superior to any such Security Instrument.
Landlord will make its best efforts to obtain for Tenant, within forty five
(45) days of the Effective Date, (i) a subordination and non-disturbance
agreement in the form attached hereto as Exhibit G from Landlord's current
lender, including the changes requested by Tenant in Exhibit G, and (ii) a
subordination and non-disturbance agreement on the standard form of
Landlord's proposed bridge loan lender (currently expected to be Wells Fargo
Bank), with such commercially reasonable changes as Tenant shall request.

B. At Landlord's election, this Lease shall become subject and
subordinate to any Security Instrument created after the Effective Date.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed so long as Tenant is not in default and
performs all of its obligations under this Lease, unless this Lease is
otherwise terminated pursuant to its terms.

C. Tenant shall upon request execute any documentation or instrument
reasonably required by any Lender to make this Lease either prior or
subordinate to a Security Instrument, which may include such other matters as
the Lender customarily and reasonably requires in connection with such
agreements, including provisions that the Lender not be liable for (i) the
return of any security deposit unless the Lender receives it

<PAGE>

from Landlord, and (ii) any defaults on the part of Landlord occurring prior
to the time the Lender takes possession of the Project in connection with the
enforcement of its Security Instrument. Tenant's failure to execute any such
document or instrument within 10 days after written demand therefor shall
constitute an Event of Tenant's Default.

15.5 MORTGAGEE PROTECTION AND ATTORNMENT: In the event of any default on
the part of the Landlord, Tenant will use reasonable efforts to give notice
by certified mail to any Lender whose name has been provided to Tenant and
shall offer such Lender a reasonable opportunity to cure the default,
including time to obtain possession of the Premises by power of sale or
judicial foreclosure or other appropriate legal proceedings, if such should
prove necessary to effect a cure. Tenant shall attorn to any purchaser of the
Premises at any foreclosure sale or private sale conducted pursuant to any
Security Instrument encumbering the Premises, or to any grantee or transferee
designated in any deed given in lieu of foreclosure.

15.6 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS: At all times during
the Lease Term, each party agrees, following any request by the other party,
promptly to execute and deliver to the requesting party within 15 days
following delivery of such request an estoppel certificate: (i) certifying
that this Lease is unmodified and in full force and effect or, if modified,
stating the nature of such modification and certifying that this lease, as
so modified, is in full force and effect, (ii) stating the date to which the
rent and other charges are paid in advance, if any, (iii) acknowledging that
there are not, to the certifying party's knowledge, any uncured defaults on
the part of any party hereunder or, if there are uncured defaults,
specifying the nature of such defaults, and (iv) certifying such other
information about the Lease as may be reasonably required by the requesting
party. A failure to deliver an estoppel certificate within 15 days after
delivery of a request therefor shall be a conclusive admission that, as of
the date of the request for such statement: (i) this Lease is unmodified
except as may be represented by the requesting party in said request and is
in full force and effect, (ii) there are no uncured defaults in the
requesting party's performance, and (iii) no rent has been paid more than 30
days in advance. At any time during the Lease Term Tenant shall, upon 15
days' prior written notice from Landlord, provide Tenant's most recent
financial statement and financial statements covering the 24 month period
prior to the date of such most recent financial statement to any existing
Lender or to any potential Lender or buyer of the Premises, provided, that
any such statements are to be held by Landlord and any potential buyer or
Lender in the strictest confidence, unless the same are already public
knowledge or available to the public. Such statements shall be prepared in
accordance with generally accepted accounting principles and, if such is the
normal practice of Tenant, shall be audited by an independent certified
public accountant.

15.7 REASONABLE CONSENT: Except as otherwise provided herein, whenever
any party's approval or consent is required by this Lease before an action
may be taken by the other party, such approval or consent shall not be
unreasonably withheld or delayed.

15.8 NOTICES: Any notice required or desired to be given regarding this
Lease shall be in writing and may be given by personal delivery, by facsimile
telecopy, by courier service, or by mail. A notice shall be deemed to have
been given (i) on the third business day after mailing if such notice was
deposited in the United States mail, certified or registered, postage
prepaid, addressed to the party to be served at its Address for Notices
specified in SECTION Q or SECTION R of the Summary (as applicable), (ii) when
delivered if given by personal delivery, and (iii) in all other cases when
actually received at the party's Address for Notices. Either party may change
its address by giving notice of the same in accordance with this PARA 15.8,
provided, however, that any address to which notices may be sent must be a
California address.

15.9 ATTORNEY'S FEES. In the event either Landlord or Tenant shall
bring any action or legal proceeding for an alleged breach of any provision of
this Lease, to recover rent, to terminate this Lease or otherwise to enforce,
protect or establish any term or covenant of this Lease, the prevailing party
shall be entitled to recover as a part of such action or proceeding, or in a
separate action brought for that purpose, reasonable attorneys' fees,
court costs, and experts' fees as may be fixed by the court.

15.10 CORPORATE AUTHORITY: If Tenant is a corporation (or partnership),
each individual executing this Lease on behalf of Tenant represents and
warrants that he is duly authorized to execute and deliver this Lease on
behalf of such corporation in accordance with the by-laws of such corporation
(or partnership in accordance with the partnership agreement of such
partnership) and that this Lease is binding upon such corporation (or
partnership) in accordance with its terms. Each of the persons executing this
Lease on behalf of a corporation does hereby covenant and warrant that the
party for whom it is executing this Lease is a duly authorized and existing
corporation, that it is qualified to do business in California, and that the
corporation has full right and authority to enter into this Lease.

15.11 MISCELLANEOUS: Should any provision of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect,
impair or invalidate any other provision hereof, and such remaining
provisions shall remain in full force and effect. Time is of the essence with
respect to the performance of every provision of this Lease in which time of
performance is a factor. The captions used in this Lease are for convenience
only and shall not be considered in the construction or interpretation of any
provision hereof. Any executed copy of this Lease shall be deemed an original
for all purposes. This Lease shall, subject to the provisions regarding
assignment, apply to and bind the respective heirs, successors, executors,
administrators and assigns of Landlord and Tenant. "Party" shall mean
Landlord or Tenant, as the context implies. If Tenant consists of more than
one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the laws of the State of California. The language in all
parts of this Lease shall in all cases be construed as a whole according to
its fair meaning, and not strictly for or against either Landlord or Tenant.
When the context of

<PAGE>

this Lease requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the
plural. The terms "shall", "will" and "agree" are mandatory. The term "many"
is permissive. When a party is required to do something by this Lease, it
shall do so at its sole cost and expense without right of reimbursement from
the other party unless a provision of this Lease expressly requires
reimbursement. Landlord and Tenant agree that (i) the gross leasable area of
the Premises includes any atriums, depressed loading docks, covered entrances
or egresses, and covered loading areas, (ii) each has had an opportunity to
determine to its satisfaction the actual area of the Project and the
Premises, (iii) all measurements of area contained in this Lease are
conclusively agreed to be correct and binding upon the parties, even if a
subsequent measurement of any one of these areas determines that it is more
or less than the amount of area reflected in this Lease, and (iv) any such
subsequent determination that the area is more or less than shown in this
Lease shall not result in a change in any of the computations of rent,
improvement allowances, or other matters described in this Lease where area
is a factor. Where a party hereto is obligated not to perform any act, such
party is also obligated to restrain any others within its control from
performing said act, including the Agents of such party. Landlord shall not
become or be deemed a partner or a joint venture with Tenant by reason of the
provision of this Lease.

15.12 TERMINATION BY EXERCISE OF RIGHT: If this Lease is terminated
pursuant to its terms by the proper exercise of a right to terminate
specifically granted to Landlord or Tenant by this Lease, then this Lease
shall terminate 30 days after the date the right to terminate is properly
exercised (unless another date is specified in that part of the Lease
creating the right, in which event the date so specified for termination
shall prevail), the rent and all other charges due hereunder shall be
proacted as of the date of termination, and neither Landlord nor Tenant shall
have any further rights or obligations under this Lease except for those that
have accrued prior to the date of termination or those obligations which this
Lease specifically provides are to survive termination. This PARA-15.12 does
not apply to a termination of this Lease by Landlord as a result of an Event
of Tenant's Default.

15.13 BROKERAGE COMMISSIONS: Each party hereto (i) represents and
warrants to the other that it has not had any dealings with any real estate
brokers, leasing agents or salesmen, or incurred any obligations for the
payment of real estate brokerage commissions or finder's fees which would be
earned or due and payable by reason of the execution of this Lease, other
than to the Retained Real Estate Brokers described in SECTION S of the
Summary, and (ii) agrees to indemnify, defend, and hold harmless the other
party from any claim for any such commission of fees which result from the
actions of the indemnifying party. Landlord shall be responsible for the
payment of any commission owed to the Retained Real Estate Brokers.

15.14 FORCE MAJEURE: Any prevention, delay or stoppage due to strikes,
lock-outs, inclement weather, labor disputes, inability to obtain labor,
materials, fuels or reasonable substitutes therefor, governmental
restrictions, regulations, controls, action or inaction, civil commotion,
fire or other acts of God, and other causes beyond the reasonable control of
the party obligated to perform (except financial inability) shall excuse the
performance, for a period equal to the period of any said prevention, delay
or stoppage, of any obligation hereunder except the obligation of Tenant to
pay rent or any other sums due hereunder.

15.15 ENTIRE AGREEMENT: This Lease constitutes the entire agreement
between the parties and there are no binding agreements or representations
between the parties except as expressed herein. Tenant acknowledges that
neither Landlord nor Landlord's Agents has made any legally binding
representation or warranty as to any matter except those expressly set forth
herein, including any warranty as to (i) whether the Premises may be used for
Tenant's intended use under existing Law, (ii) the suitability of the
Premises or the Project for conduct of Tenant's business, or (iii) the
condition of any improvements. There are no oral agreements between Landlord
and Tenant affecting this Lease, and this Lease supersedes and cancels any
and all previous negotiations, arrangements, brochures, agreements and
understandings, if any, between Landlord and Tenant or displayed by Landlord
to Tenant with respect to the subject matter of this Lease. This instrument
shall not be legally binding until it is executed by both Landlord and
Tenant. No subsequent change or addition to this Lease shall be binding unless
in writing and signed by Landlord and Tenant.

<PAGE>

15.16 EXECUTION IN COUNTERPART AND BY FAX: This Lease may be executed in
counterpart, whereby different signatories execute this document on different
signature pages, and when so executed and all signature ages are attached
hereto, the resulting document shall be fully executed and shall be
considered a signed document. The parties agree that faxed copies of actual
signatures shall be as binding as if the party had received an executed
original, provided, that each party will, following the tender of any faxed
copy signature, promptly supply an original signature page.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease with
the intent to be legally bound thereby, to be effective as of the Effective
Date.

LANDLORD: TENANT:

LARVAN PROPERTIES HEALTHEON CORPORATION, A DELAWARE
A CALIFORNIA GENERAL PARTNERSHIP CORPORATION

By: VANDERSON CONSTRUCTION, INC. By: /s/ Kallen Chan
A California corporation, its -----------------------------
General Partner
Kallen Chan, Controller
By: /s/ George F. Van Sickle ------------------------------------
--------------------------- [Typed or printed name and title]

George F. Van Sickle - PRESIDENT Dated: 12/5/97
--------------------------------- ----------------------------
[Typed or printed name and title]

By: LARSCOM INCORPORATED
a Delaware corporation
its General Partner

By: /s/ Bruce Horn
-----------------------------

Bruce Horn V.P. Finance
--------------------------------
[Typed or printed name and title]

By: /s/ Donn Byrne
-------------------------------
DONN BYRNE, General Partner

Dated: 12/8/97
-------------------------

<PAGE>

FIRST ADDENDUM TO LEASE

This First Addendum to Lease is dated for reference purposes as of
December 3, 1997, and is made a part of that Lease Agreement (the "Lease")
dated December 3, 1997, by and between Larvan Properties, a California general
partnership ("Landlord") and Healtheon Corporation, a Delaware corporation
("Tenant") affecting certain real property commonly known as 4600 Patrick
Henry Drive, Santa Clara, California. Landlord and Tenant agree that the
Lease is hereby amended and supplemented as follows:

1. SECURITY DEPOSIT: In addition to the cash portion of the Security
Deposit set forth in the Summary of Basic Lease Terms, Paragraph K, and
Paragraph 3.3 of the Lease, Tenant shall provide to Landlord the additional
and further amount of $867,000.00 as a further Security Deposit, and said
amount shall be deemed to be and treated in all respects as a part of the
Security Deposit.

A. This amount, or any portion thereof, can be provided, at
Tenant's sole cost and option, by providing Landlord an irrevocable
Letter of Credit which (i) is for an initial term of at least
twelve (12) months; (ii) is drawn upon a local commercial bank reasonably
acceptable to Landlord; (iii) is in the amount of $867,000.00; (iv) is in
a form satisfactory to Landlord ; and (v) may be drawn on by Landlord
solely upon submission of a written certification of Landlord that there
exists an Event of Tenant's Default (as defined in Paragraph 13.1 or
other applicable provisions of this Lease or as defined in this
Addendum), that Tenant has not, as of the date of Landlord's draw
request, cured such Event of Default, and that the amount drawn on the
Letter of Credit is the net amount due Landlord after first applying any
cash Security Deposit then being held by Landlord.

Tenant and Landlord acknowledge that Landlord is in the
process of obtaining a bridge loan secured by the Project, that
Landlord's lender (the "Bridge Loan Lender") has required that
Landlord assign this Lease to the Bridge Loan Lender as part of the
security for the loan, that the Bridge Loan Lender is further requiring
that the Letter of Credit be assigned to the Bridge Loan Lender in
conjunction with the assignment of this Lease. Accordingly, Landlord
and Tenant agree that they will work together reasonably to replace or
restructure the Letter of Credit in order to meet Landlord's lender

Page 1 of 10

<PAGE>

requirements, and that Tenant will reasonably cooperate with Landlord in
providing documentation and taking action requested by the Bridge Loan
Lender in regard to such an assignment, at no cost to Tenant, including
but not limited to any necessary issuance of the Letter of Credit in the
name of the Bridge Loan Lender or jointly in the name of Landlord and the
Bridge Loan Lender, provided always, that no such arrangement shall be
required of Tenant without adequate protection of Tenant's rights under
the Letter of Credit provisions hereof.

B. Except as provided in Subparagraph H of this Paragraph,
Tenant shall keep the Letter of Credit in effect during the entire Lease
term plus a period of (30) days thereafter.

C. Tenant shall renew the Letter of Credit for an additional
period of at least twelve (12) months, and shall deliver the new or
renewed original Letter of Credit, in the required amount and in keeping
with all of the requirements hereof, to Landlord not later than 5:00 P.M.
on the thirty-first (31st) day before each date on which the then existing
Letter of Credit expires (such 31st day being referred to herein as the
"Renewal Date").

D. Tenant's failure to renew the Letter of Credit by the Renewal
Date shall be deemed an Event of Tenant's Default under this Lease,
without Landlord being required to give any notice or opportunity to
cure, except that Landlord shall give Tenant five (5) days written
notice of such failure to renew, and no Event of Default shall be
deemed to have occurred if, within such five (5) day period, Tenant
renews the Letter of Credit as required hereunder. Upon such an Event
of Tenant's Default, Landlord shall be immediately entitled to draw all
of the funds available under the Letter of Credit, which sum when received
shall remain a part of the Security Deposit until and unless applied by
Landlord pursuant to the provisions of Paragraph 3.5 of the Lease.

E. If Tenant shall allow the Letter of Credit to expire or to be
revoked at any time when it is required to be maintained hereunder, this
shall constitute an independent Event of Tenant's Default; provided,
however, that before such shall be deemed an Event of Tenant's Default,
Landlord shall give Tenant five (5) days written

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<PAGE>

notice to cure or have committed an Event of Tenant's Default, and Tenant
fails within such five (5) day period to cure by causing the Letter of Credit
to be reissued or renewed. Tenant's failure to replenish any cash Security
Deposit which is applied by Landlord, within ten (10) days after notice that
it has been applied, shall be an immediate Event of Tenant's Default (for
purposes of this Paragraph only), without further notice or opportunity to
cure, which shall entitle Landlord to resort to the Letter of Credit to
replenish its cash Security Deposit.

F. Any proceeds received by Landlord by drawing upon the Letter of
Credit shall be applied in accordance with the provisions of Paragraph 3.5 of
the Lease.

G. If Landlord transfers the Premises during the Lease Term, and if a
Letter of Credit is still posted as part of the Security Deposit, Tenant
agrees, promptly on receipt of a written request from Landlord, to take such
actions as are necessary to have the Letter of Credit redrawn in favor of the
new owner of the Premises, at Tenant's sole cost and expense.

H. Notwithstanding the foregoing, the Letter of Credit shall be wholly
or partially (as the case may be) released by Landlord upon the achievement
by Tenant of the following milestones:

1. Provided that Tenant is not in material default of any
obligations under the Lease on any one year anniversary of the
Commencement Date, has not been in material default more than one time
during the preceding one (1) year period, and is not in material
default as of the final date following such one year anniversary on
which Landlord must execute any documents authorizing such reduction,
and provided that as of such anniversary date, Tenant's financial
condition is, in Landlord's judgment reasonably applied, equal to or
better than its financial condition on the Execution Date, Tenant shall
be allowed to reduce the Letter of Credit by the amount of $289,000.00,
and Landlord shall execute such documents as are required by the issuing
bank to effectuate such

Page 3 of 10

<PAGE>

reduction and such review procedures shall occur on each anniversary of
the Commencement Date until the Letter of Credit is extinguished or the
Lease has expired or been terminated according to its terms, except that
no such reduction shall occur on an anniversary date which is within 6
months of the expiration date of the Lease.

2. Notwithstanding any of the foregoing, if Tenant provides
Landlord with documentation establishing to Landlord's reasonable
satisfaction that Tenant has successfully completed an initial public
offering of Tenant's stock and requests extinguishment of the Letter of
Credit, and further provided that Tenant has not been in material
default more than one time during the one (1) year period preceding the
date on which Tenant makes its request for extinguishment, and Tenant is
not in material default of any obligations under the Lease as of the
final date on which Landlord must execute any documents authorizing such
extinguishment, Tenant shall be allowed to extinguish the Letter of
Credit, and Landlord shall execute such documents as are required by the
issuing bank to effectuate such extinguishment. In the event that, as of
the date of the IPO, Tenant cannot satisfy the requirements hereof
because it has been in material default on more than one occasion during
the one (1) year preceding the date of the EPO, then Tenant may apply
for and obtain such an extinguishment at a later time, provided that (i)
Tenant has not been in material default on more than one occasion within
the one (1) year immediately preceding the date of such extinguishment
application and (ii) Tenant satisfies the other requirement hereof that
it not be in material default as of the date on which Landlord must
execute the extinguishment documents.

For purposes of this Subparagraph H, Tenant shall be deemed to be in
"material default" under the Lease if (a) Tenant has failed to make any
payment required hereunder or under the Lease within five (5) calendar days
of Landlord giving written notice that said payment is due and unpaid or

Page 4 of 10

<PAGE>

committed any financial Event of Tenant's Default; and/or (b) Tenant has
committed a material non-financial Event of Tenant's Default hereunder.

I. All additional costs and expenses incurred by Landlord in regard
to the Letter of Credit, including but not limited to any reasonable
attorney's fees incurred by Landlord in the administration of this
Paragraph, shall be paid by Tenant to Landlord as Additional Rent within
ten (10) days after Landlord provides its written invoice for such costs
and expenses.

J. If Tenant cannot post the Letter of Credit on or before the
Effective Date, Tenant shall provide the Letter of Credit no later than
seven (7) days thereafter. In the event that Tenant fails to do so (or
to provide equivalent cash security) within such period, Landlord may,
at its option, deem this failure to be an Event of Tenant's Default or
declare the Lease to be terminated, provided, however, that before such
shall be deemed an Event of Tenant's Default or before the Lease is
terminated, Landlord must give Tenant five (5) days written notice to
cure or, as the case may be, have the Lease terminate or have committed
an Event of Tenant's Default. If Tenant falls within such five (5) day
period to cure by causing the Letter of Credit to be posted, then
Landlord shall have the right to exercise the remedy of which Tenant has
been notified. Tenant shall not be entitled to early occupancy under
Paragraph 2.5 of the Lease until the Letter of Credit is posted.

2. TENANT IMPROVEMENT ALLOWANCE: Landlord shall provide to Tenant a
Tenant Improvement Allowance (defined below) for the purpose of improving
the Premises, on the following terms and conditions:

A. The term "Tenant Improvement Allowance" shall mean the
maximum amount Landlord is required to spend toward the payment of costs
for all Tenant's Alterations constructed in the Premises, which amount is
$249,185.00 (i.e., $5.00 per square foot for Tenant's Gross Leasable Area
within the Premises).

B. Tenant shall obtain Landlord's written consent, which shall not
unreasonably be withheld, for all proposed improvements, which shall be
conducted according to the standards set forth in Paragraph 5.2

Page 5 of 10

<PAGE>

of the Lease. Tenant shall construct the Tenant's Alterations as set forth
in the Space Plan and description of Tenant's Alterations which is attached
to the Lease as Exhibit B, or as otherwise approved in writing by Landlord.
However, Tenant is not required to construct all or any of the specified
Tenant's Alterations (and if Tenant does not do so, Landlord is not
obligated to provide the portion of the Tenant Improvement Allowance
relating to Tenant's Alterations which Tenant has elected not to
construct).

C. Upon completion of all work on the initial Tenant's Alterations
outlined in Exhibit "B", Landlord shall inspect the improvements, and if
satisfactorily constructed in accordance with Exhibit "B" and the approved
plans and specifications, and as required by Paragraph 5.2 (or any
modifications thereto approved in writing by Landlord), shall approve the
improvements. On receipt of Landlord's approval, Tenant will submit
invoices, lien releases, and other documentation reasonably required or
requested by Landlord in regard to the improvements, and Landlord shall,
within fifteen (15) days of receipt of all requested documentation,
reimburse Tenant for all documented expenses of constructing the
improvements up to the limit of the Tenant Improvement Allowance.
Provided that Tenant can so arrange with its contractors, Landlord will
make payments under the Tenant Improvement Allowance directly to the
contractors, upon receipt of appropriate lien releases reasonably
satisfactory to Landlord. Under such circumstances, Landlord will not
require that expenses of the Tenant's Alterations be actually paid by
Tenant to the contractor. In the event that the construction of Tenant's
Alterations cannot reasonably be completed by the Commencement Date,
Landlord will make a single progress payment of such part of the Tenant
Improvement Allowance as shall be merited by the progress toward completion
of the initial Tenant's Alterations as of the Commencement Date, on a
reasonable basis to be determined by mutual agreement of Landlord and
Tenant, to include such inspections and lien releases as Landlord shall
reasonably request.

3. INTERIOR IMPROVEMENTS: Except as otherwise set forth herein or in the
Lease, the Premises shall be delivered to Tenant in their then existing
"as-is" condition. Tenant acknowledges that it has had the opportunity to
inspect the Premises prior to execution of the Lease, and agrees that the
Premises are to be

Page 6 of 10

<PAGE>

leased and accepted by Tenant in their condition existing as of the Effective
Date of this Lease, "as is", without implied or expressed warranty or
representation and with all patent and latent defects. Landlord shall not
have any obligation to make any alterations or improvements to the Premises
prior to the commencement of the Lease Term except as otherwise specified
herein and in the Lease. Notwithstanding anything to the contrary contained
herein or in the Lease, Landlord represents and warrants to Tenant that the
plumbing and electrical systems of the Building and any other building
systems other than the HVAC and roof systems, which are dealt with below in
Paragraph 4, will be in good operating condition upon the Commencement Date.
Tenant shall not make any claims under any warranties set forth herein unless
the defect is brought to the Landlord's attention within one (1) year of the
Commencement Date, in the case of defects discovered by Tenant, or
discoverable by a reasonable Tenant's inspection (including the engagement of
appropriate expert consultants with regard to matters not within Tenant's
expertise); and within two (2) years for defects not so discovered or
discoverable.

4. CONDITION OF PREMISES: Landlord shall provide the Premises with all
existing electrical, plumbing, and building systems (other than the HVAC and
roof systems, which are dealt with below) in good and workable condition.
Landlord shall provide roof and HVAC systems as set forth below:

A. Prior to the Commencement Date, at its sole cost and expense,
Landlord will replace HVAC mechanical units and make other capital
improvements to the HVAC system as necessary, but Landlord's expense
thereof (measured by Landlord's out of pocket payments to third parties)
shall not exceed $35,000.00. Should any capital improvements to the HVAC
system be required after the Commencement Date, then Landlord will
continue to pay for such improvements so long as the total expense
(measured by Landlord's out of pocket payments to third parties) of all
capital improvements to the HVAC system (both before and after the
Commencement Date) does not exceed $35,000.00 in the aggregate. Any
costs incurred by Landlord in making any replacements to the HVAC system
(both before and after the Commencement Date) in excess of $35,000.00
in the aggregate will be considered a capital expenditure, which shall
be paid for by Landlord and reimbursed to Landlord by Tenant on an
amortized basis under the provisions set forth in Paragraph 5.4 of the
Lease.

Page 7 of 10

<PAGE>

B. Landlord shall promptly consult with Tenant as to the best date
for re-roofing the Building, and thereafter, as soon as reasonably
possible within the time guidelines of this Subparagraph, shall apply,
at Landlord's expense and on a schedule to be determined by Landlord
(depending on the weather and availability of a highly qualified roofing
company), not to be reimbursed as a Common Operating Expense, a new
roof. Landlord and Tenant acknowledge that such roof win not be applied
prior to the currently approaching rainy season, and that until the roof
is replaced, there may be leaks. Provided that Landlord has used
commercially reasonably efforts to replace the roof in accordance with
this Paragraph, Landlord shall not be liable for any roof leaks that may
occur prior to the roof's replacement, provided, however, that such
waiver shall not apply unless Landlord has used commercially reasonable
efforts to repair any leaks in a prompt and reasonable manner.

5. ASBESTOS CONTAINING MATERIALS. Tenant acknowledges that Landlord
has provided notification of possible asbestos containing materials in the
form attached hereto as Exhibit "H". Notwithstanding anything to the contrary
in this Lease, Landlord, at its sole cost and expense, shall (i) be
responsible keeping and maintaining the Premises in compliance with all Laws
(including all health and safety rules and regulations) concerning the
presence of asbestos-containing materials in commercial buildings and (ii)
performing any and all asbestos abatement and removal work required in the
Premises during the Lease term; provided, however, that if the removal,
encapsulation, or other treatment of asbestos containing materials in the
Building will be required as a result of improvements to be constructed by
Tenant in the Premises, then such abatement work, shall be at Tenant's sole
cost and expense, and without cost or liability on the part of Landlord.
However, such matters may be paid for, at Tenant's election, from any Tenant
Improvement Allowance granted by this Lease, to the extent that such
Allowance is sufficient to cover such costs. Notwithstanding anything above,
Landlord will, at its sole cost and expense, cause the asbestos containing
materials shown in Exhibit "H" to be removed during the Early Occupancy
Period, in compliance with all Laws relating to such removal, in a prompt
and diligent manner, and coordinating its work in regard to asbestos with
Tenant's contractor for maximum convenience and speed of work.

6. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. Landlord shall, at
its sole cost and expense, keep and maintain the exterior areas of the
Project in

Page 8 of 10

<PAGE>

compliance with the Americans With Disabilities Act of 1990 ("ADA") and the
regulations in force thereunder. Landlord shall deliver the Project in such a
state of compliance at Landlord's sole cost and expense as of the
Commencement Date, notwithstanding whether some improvements of the exterior
areas are required to be constructed solely as a result of any Tenant's
Alterations being constructed by Tenant prior to the Commencement Date (or
thereafter, if such construction is a continuation of construction begun
prior to the Commencement Date and continuously pursued thereafter), but in
the event that, thereafter, further work is required by changes in Law or
good practices, Landlord shall continue to take responsibility for
compliance, but any expenses thereof shall be Common Operating Expenses.
Tenant shall design, keep, and maintain the interior portions of the
Premises, including but not limited to the floor plan, design, and
furnishing thereof, in compliance with the ADA, at Tenant's sole cost and
expense. Each party shall indemnify, defend with counsel reasonably
acceptable to the indemnified party, and hold harmless the other party
against any claims, losses, liabilities, or damages which are incurred by the
other party by reason of a breach of the duties assumed in this Paragraph.

7. BROKER DISCLOSURE: Tenant understands that agents and/or
brokers associated with Cooper-Brady and Colliers Parrish International, to
wit, Jon Brady and Donn Byrne, are partners in Landlord.

8. SUBORDINATION TO GROUND LEASE: Tenant acknowledges that
Landlord leases a portion of the land within the Project from the City and
County of San Francisco pursuant to a Lease dated July 26, 1977 (referred to
herein as the "Ground Lease", a copy of which has been read and approved by
Tenant) and that this Lease is subject and subordinate to the terms of the
Ground Lease and to any extension, modifications or amendments thereof. The
portion of the Project to which this Ground Lease is applicable is as defined
in said Ground Lease. Landlord will at all times pay all amounts due and
satisfy any obligations under the Ground Lease, including but not limited to
payment of all rent thereunder and removal and/or restoration of parking
surfaces or landscaping as required thereunder, and such costs shall not be
reimbursed by Tenant as Common Operating Expenses or otherwise. In the event
that Landlord loses possession of the portion of the Project to which the
Ground Lease is applicable, then Tenant shall be entitled as its sole remedy
to an equitable adjustment of its Base Monthly Rent (as well as any actual
decrease in Common Operating Expenses), to the extent such taking results in
material diminishment of the value and useability of Tenant's Lease.

Page 9 of 10

<PAGE>

9. EFFECT OF ADDENDUM: Each term used herein with initial
capital letters shall have the meaning ascribed to such term in the Lease
unless specifically otherwise defined herein. In the event of any
inconsistency between this First Addendum to the Lease and the Lease, the
terms of this First Addendum to the Lease shall prevail.

LANDLORD: TENANT:

Larvan Properties, a California general Healtheon Corporation, a Delaware
partnership corporation

By: VANDERSON CONSTRUCTION, INC. By: /s/ Kallen Chan
a California corporation, its ------------------------------
General Partner Kallen Chan, Controller
---------------------------------
[Print Name and Title]
By: /s/ George F. Van Sickle
--------------------------- Dated: 12/8/97
George F. Van Sickle - President ---------------------------
------------------------------
[Print Name and Title]

By: LARSCOM INCORPORATED, a
Delaware corporation
its General Partner

By: /s/ Bruce Horn
------------------------------

Bruce Horn V.P. Finance
------------------------------
[Print Name and Title]

By: Donn Byrne, its General Partner

/s/ Don H. Byrne
------------------------------

Dated: 12/8/97
---------------------------

Page 10 of 10

<PAGE>

TENANT ESTOPPEL CERTIFICATE

TENANT: Healtheon Corporation, a Delaware Corporation
DATE OF LEASE: December 2, 1997
AMENDED: None
PREMISES: 49,837 square feet located at 4600 Patrick Henry Drive, Santa
Clara, California

ESTOPPEL CERTIFICATE

RE: Lease dated December 2, 1997 between Larvan Properties, a California
general Partnership, as Landlord, and Healtheon Corporation, a
Delaware corporation, as Tenant.

The undersigned hereby certifies to MELP VII L.P., a California limited
partnership ("Buyer") as follows:

1 . The undersigned is the "Tenant" under the above-referenced lease
("Lease"), a true and complete copy of which is attached hereto as Exhibit
"A", covering the above-referenced Premises ("Premises") located in that
certain building commonly known as 4600 Patrick Henry Drive, Santa Clara,
California ("Property").

2. The Lease is in full force and effect and constitutes the entire
agreement between the Landlord under the Lease and Tenant with respect to the
Premises, and the Lease has not been modified, changed, altered or amended in
any respect except as set forth in Exhibit "A".

3. The term of the Lease commenced on February 1, 1997, and will expire
on January 31, 2008. Tenant has accepted possession of the Premises and is
the actual occupant in possession and has not sublet, assigned or
hypothecated Tenant's leasehold interest. Landlord has no obligation to
construct any tenant improvements in the Premises (except as provided with
respect to roof in Paragraph 4 of the First Addendum) and the only allowances
to be paid by Landlord in connection with any improvements to be made to the
Premises are in the amount of $249,815 for tenant improvements and $35,000
for HVAC work pursuant to Paragraphs 2 and 4 of the First Addendum to the
Lease. Tenant is not currently aware of any defects in the existing
electrical, plumbing and other building systems serving the Premises;
provided, however that (i) Tenant is aware of a split puralin in the roof
structure of the Premises and the exterior loading dock is not level and may
not comply with building code requirements, and (ii) Landlord is performing,
at Landlord's sole cost and expense, certain seismic and other structural
upgrades to the building. Except as otherwise provided herein, to Tenant's
knowledge, the building systems serving the Premises were delivered by
Landlord in good and workable condition as required by Paragraph 4 of the
First Addendum to Lease. Nothing herein shall constitute of a waiver of any
Landlord's obligations under the Lease with respect to maintenance and repair
of the Premises. Tenant acknowledges that it is completing certain tenant
improvements and that rent obligations under the Lease have commenced even
though construction is not yet complete.

<PAGE>

4. As of the date of this Estoppel Certificate, to Tenant's knowledge
there exists no breach or default, nor any state of facts which, with notice,
the passage of time, or both, would result in a breach or default on the part
of either Tenant or Landlord.

5. Tenant is currently obligated to pay annual rental of $867,164.28 in
monthly installments of $72,263.69 per month and monthly installments of
annual rental have been paid through March 31, 1998. Tenant's pro rata share
of real estate taxes and "Common Operating Expenses" as defined in the Lease
for the Property is one hundred percent (100%). Tenant's pro rata share of
real estate taxes and Common Operating Expenses for the Property are due from
February 1, 1998 and thereafter. No other rent has been paid in advance and
Tenant presently has no claim or defense against Landlord under the Lease and
is asserting no offset or credits against either the rent or Landlord. Tenant
has no claim against Landlord for any security or other deposits except
$72,203.69 plus a letter of credit as set forth in the First Addendum to
Lease in the amount of $867,000 which was paid or deposited with Landlord
pursuant to the Lease.

6. Tenant has no option or preferential right to purchase all or any
part of the Premises (or the real property of which the Premises are a part)
nor any right or interest with respect to the Property other than as Tenant
under the Lease.

7. Tenant has no option, right of first offer or right of first refusal
to lease or occupy any other space within the Property, and Tenant has no
right to renew or extend the terms of the Lease except as follows: NO
EXCEPTIONS.

8. Tenant has made no agreement with Landlord or any agent,
representative or employee of Landlord concerning free rent, partial rent,
rebate or rental payments or any other type of rental or other concession
except as expressly set forth in the Lease.

9. To Tenant's knowledge, there has not been filed by or against Tenant
a petition in bankruptcy, voluntary or otherwise, any assignment for the
benefit of creditors, any petition seeking reorganization or arrangement
under the bankruptcy laws of the United States, or any state thereof, or any
other action brought under said bankruptcy laws with respect to Tenant.

This Estoppel Certificate is made to Buyer in connection with the
prospective purchase by Buyer, or Buyer's assignee, of the Property. This
Estoppel Certificate may be relied on by Buyer or Buyer's assignee and any
other party who acquires an interest in the Premises in connection with such
purchase or any person or entity which may finance such purchase. The
statements made herein shall be binding upon us, our successors and assigns.
Nothing contained herein shall constitute or be deemed to constitute an
amendment or modification of any term or condition of the Lease or any right
or remedy of Tenant thereunder all of which are expressly reserved. The
officers or persons executing this letter have been duly empowered to do so
on behalf of Tenant.

-2-

<PAGE>

Dated this 11 day of March, 1998.

"TENANT"
HEALTHEON CORPORATION, a Delaware
corporation

By: /s/ Kallen Chan
-------------------------------------
Print Name: Kallen Chan
-----------------------------
Its: Corporate Controller
------------------------------------

-3-

<PAGE>

CENTRAL PARK

LEASE AGREEMENT

BY AND BETWEEN

ZML-CENTRAL PARK, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY

("LANDLORD")

AND

ACTAMED CORP., A GEORGIA CORPORATION
("TENANT")

DATED

NOVEMBER 6, 1995

FOR

SUITE NUMBER 400
SUITE NUMBER 600

CONTAINING

41,292 SQUARE FEET OF RENTABLE FLOOR AREA

AT BUILDING 7000

TERM: 60 MONTHS

<PAGE>

TABLE OF CONTENTS

PAGE
----
<S> <C> <C>
1. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Lease of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. Rental Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
6. Base Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
7. Rental Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
8. Additional Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
9. Operating Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
10. Tenant Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
12. Late Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
13. Use Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
14. Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
15. Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
16. Landlord's Right of Entry . . . . . . . . . . . . . . . . . . . . . . . . 7
17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
18. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . 7
19. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
20. Waiver of Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
21. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . 8
22. Destruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
24. Services by Landlord. . . . . . . . . . . . . . . . . . . . . . . . . . .10
25. Attorneys' Fees and Homestead . . . . . . . . . . . . . . . . . . . . . .10
26. Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
27. Subordination and Attornment. . . . . . . . . . . . . . . . . . . . . . .10
28. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . .11
29. No Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
30. Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
31. Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
32. Surrender of Premises . . . . . . . . . . . . . . . . . . . . . . . . . .11
33. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
34. Damage or Theft of Personal Property. . . . . . . . . . . . . . . . . . .11
35. Eminent Domain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
36. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
39. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
40. Landlord's Liability. . . . . . . . . . . . . . . . . . . . . . . . . . .13
41. Landlord's Covenant of Quiet Enjoyment. . . . . . . . . . . . . . . . . .13
42. Security Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
43. Hazardous Substances. . . . . . . . . . . . . . . . . . . . . . . . . . .13
44. Submission of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . .14
45. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
46. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
47. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
48. Broker. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
49. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
50. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
51. Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . .14
52. Special Stipulations. . . . . . . . . . . . . . . . . . . . . . . . . . .14
</TABLE>

RULES AND REGULATIONS
EXHIBIT "A" - Legal Description
EXHIBIT "B" - Floor Plan
EXHIBIT "C" - Supplemental Notice
EXHIBIT "D" - Landlord's Construction
EXHIBIT "E" - Building Standard Services
EXHIBIT "F" - Special Stipulations

<PAGE>

LEASE AGREEMENT

THIS LEASE AGREEMENT ("Lease") is made and entered into this 6th day of
November 1995, by and between Landlord and Tenant.

W I T N E S S E T H:
1. CERTAIN DEFINITIONS. For purposes of this Lease, the following terms shall
have the meanings hereinafter ascribed thereto:

(a) LANDLORD: The Equitable Life Assurance Society of the United States

(b) LANDLORD'S ADDRESS: LANDLORD'S ADDRESS FOR PAYMENTS:
c/o Equity Office Holding, c/o Equity Office Properties, L.L.C.
L.L.C. Suite 1040
Two North Riverside Plaza 7000 Central Parkway, N.E.
22nd Floor Atlanta, Georgia 30328
Chicago, Illinois 60606
Attention: General Counsel

(d) TENANT'S ADDRESS:

Suite 400
7000 Central Parkway
Atlanta, Georgia 30328
Attn: Chief Financial Officer

(e) BUILDING ADDRESS:

7000 Central Parkway
Atlanta, Georgia 30328

(f) SUITE NUMBERS:

Suite 400: 25,331 rentable square feet
Suite 600: 15,961 rentable square feet

Total: 41,292 rentable square feet

(g) RENTABLE FLOOR AREA OF DEMISED PREMISES:

Total 41,292 square feet.

(h) RENTABLE FLOOR AREA OF BUILDING: 410,490 square feet.

(i) LEASE TERM: Suite 400 - 60 months
Suite 600 - 55 months

(j) BASE RENTAL RATE: $19.95 per square foot of Rentable Floor Area of
Demised Premises per year.

(k) RENTAL COMMENCEMENT DATE: Suite 400 - August 1, 1996
Suite 600 - January 1, 1997

See Special Stipulation No. 34.

(l) TENANT IMPROVEMENT ALLOWANCE: $7.83 per square foot of rentable floor
area in Demised Premises.

See Special Stipulation No. 11.

<PAGE>

(m) SECURITY DEPOSITS:

(i) $43,875.04 [Article 42(a)].
(ii) $ N/A [Article 42(b)].

(n) BROKER(S): CB Commercial Real Estate Group, Inc.

2. LEASE OF PREMISES. Landlord, in consideration of the covenants and
agreements to be performed by Tenant, and upon the terms and conditions
hereinafter stated, does hereby rent and lease unto Tenant, and Tenant does
hereby rent and lease from Landlord, certain premises (the "Demised Premises")
in the building (the "Building") located on that certain tract of land (the
"Land") more particularly described on EXHIBIT "A" attached hereto and by this
reference made a part hereof, which Demised Premises are outlined in red or
cross-hatched on the floor plan attached hereto as EXHIBIT "B" and by this
reference made a part hereof, with no easement for light, view or air included
in the Demised Premises or being granted hereunder. The "Project" is comprised
of the Building, the Land, the Building's parking facilities, any walkways,
covered walkways, tunnels or other means of access to the Building and the
Building's parking facilities, all common areas, including any lobbies or
plazas, and any other improvements or landscaping on the Land.

3. TERM. The term of this Lease (the "Lease Term") shall commence on
the date first hereinabove set forth (the "Term Commencement Due"), and,
unless sooner terminated as provided in this Lease, shall end on the
expiration of the period designated in Article 1(i) above, which period shall
commence on the Rental Commencement Date, unless the Rental Commencement Date
shall be other than the first day of a calendar month, in which event such
period shall commence on the first day of the calendar month following the
month in which the Rental Commencement Date occurs. Promptly after the
Rental Commencement Date, Landlord or Landlord's agent shall send to Tenant a
Supplemental Notice in the form of EXHIBIT "C" attached hereto and by this
reference made a part hereof, specifying the Rental Commencement Date, the
date of expiration of the Lease Term in accordance with Article 1(i) above
and certain other matters as therein set forth. Notwithstanding anything
herein to the contrary, if the Additional Space is not substantially complete
within sixty (60) days after the scheduled Rental Commencement Date, Tenant
shall have the option of terminating this Lease upon written notice to
Landlord, provided that if any delay in Landlord's completion of the Demised
Premises shall be caused by Tenant the deadline for substantial completion
shall be adjusted accordingly.

See Special Stipulation No. 34.

4. POSSESSION. The obligations of Landlord and Tenant with respect to
the initial leasehold improvements to the Additional Space are set forth in
EXHIBIT "D" attached hereto and by this reference made a part hereof. Taking of
possession by Tenant of the Additional Space shall be deemed conclusively to
establish that Landlord's construction obligations with respect to the
Additional Space have been completed in accordance with the plans and
specifications approved by Landlord and Tenant and that the Additional Space, to
the extent of Landlord's construction obligations with respect thereto, are in
good and satisfactory condition, except as to latent defects and any items
Tenant notifies Landlord of in writing within ten (10) days of Tenant's taking
possession of the Additional Space. Landlord shall repair any such defects and
items within a reasonable period following receipt of notice from Tenant.

5. RENTAL PAYMENTS.

(a) Commencing on the Rental Commencement Date, and continuing
thereafter throughout the Lease Term, Tenant hereby agrees to pay all Rent due
and payable under this Lease. As used in this Lease, the term "Rent" shall mean
the Base Rental, Rental Adjustment, Tenant's Forecast Additional Rental,
Tenant's Additional Rental, and any other amounts that Tenant assumes or agrees
to pay under the provisions of this Lease that are owed to Landlord, including,
without limitation, any and all other sums that may become due by reason of any
default of Tenant or failure on Tenant's part to comply with the agreements,
terms, covenants and conditions of this Lease to be performed by Tenant. Base
Rental, together with Tenant's Forecast Additional Rental, shall be due and
payable in twelve (12) equal installments on the first day of each calendar
month, commencing on the Rental Commencement Date and continuing thereafter
throughout the Lease Term and any extensions or renewals thereof. Tenant hereby
agrees to pay such Rent to Landlord at Landlord's address as provided herein (or
such other address as may be designated by Landlord from time to time) monthly
in advance. Tenant shall pay all Rent and other sums of money as shall become
due from and payable by Tenant to Landlord under this Lease at the times and in
the manner provided in this Lease, without demand, set-off or counterclaim,
except as specifically set forth in this Lease.

(b) If the Rental Commencement Date is other than the first day of a
calendar month or if this Lease terminates on a day other than the last day of a
calendar month, then the installments of Base Rental and Tenant's Forecast
Additional Rental for such month or months shall be prorated on a daily basis
and the installment or installments so prorated shall be paid in advance. Also,
if the Rental Commencement Date occurs on a day other than the first day of a
calendar year, or if this Lease expires or is terminated on a day other than the
last day of a calendar year, Tenant's Additional Rental shall be prorated for
such commencement or termination year, as the case may be, by multiplying such
Tenant's Additional Rental by a fraction, the numerator of which shall be the
number of days of the Lease Term (from and after the Rental Commencement Date)
during the commencement or expiration or termination year, as the case may be,
and the denominator of which shall be 365, and the calculation described in
Article 8 hereof shall be made as soon as possible after the expiration or
termination of this Lease, Landlord and Tenant hereby agreeing that the
provisions relating to said calculation shall survive the expiration or
termination of this Lease, by not more than three (3) years.

6. BASE RENTAL. From and after the applicable Rental Commencement Date,
Tenant shall pay to Landlord a base annual rental (herein called "Base Rental")
equal to the Base Rental Rate set forth in Article 1(j) above multiplied by the
Rentable Floor Area of the portion of the Demised Premises as set forth in
Article 1(f) above.

2
<PAGE>

7. RENTAL ADJUSTMENT.

(a) Tenant shall pay to Landlord as additional rental a rental
adjustment (the "Rental Adjustment") which shall be determined as of the
first anniversary of the Rental Commencement Date and as of each January 1
thereafter during the Lease Term in the manner hereinafter provided (each
such date being hereinafter in this Article 7 called an "Adjustment Date",
and each period of time from any given Adjustment Date through the day before
the next succeeding Adjustment Date being herein called an "Adjustment
Period"). Each such Rental Adjustment shall be payable in monthly
installments in advance on the first day of every such calendar month during
the Adjustment Period for which such Rental Adjustment was determined. A
prorated monthly installment, based on the number of days in the partial
month, shall be paid for any fraction of a month if the Rental Commencement
Date falls on any day other than the first day of a calendar month, or if the
Lease Term is terminated or expires on any other day than the last day of a
calendar month. Landlord shall use reasonable efforts to notify Tenant in
writing of the monthly amount of the Rental Adjustment for each Adjustment
Period at least ten (10) days prior to the date on which the first
installment of such Rental Adjustment is due and payable, or as soon
thereafter as is practicable. Failure by Landlord to notify Tenant of the
monthly amount of such Rental Adjustment shall not prejudice Landlord's right
to collect the full amount of such Rental Adjustment, nor shall Landlord be
deemed to have forfeited or surrendered its rights to collect such Rental
Adjustment which may have become due pursuant to this Article 7, and Tenant
agrees to pay within thirty (30) days after notice all accrued but unpaid
Rental Adjustment.

(b) For each Adjustment Period, each monthly installment of the
Rental Adjustment shall be an amount equal to one-twelfth (1/12th) of the
product of: (i) the annual Base Rental set forth in Article 6 hereof,
multiplied by (ii) .50, multiplied by (iii) the "percentage increase" (as
hereinafter defined), if any, in the "index" (as hereinafter defined), as
such percentage increase is determined with respect to the Adjustment Date
beginning such Adjustment Period.

(c) For purposes of Articles 7(a) and (b) above, the "percentage
increase," if any, in the Index for each Adjustment Date shall mean and equal
the quotient (expressed as a decimal) determined by dividing (i) the
difference obtained by subtracting the Index for the calendar month in which
the Rental Commencement Date falls from the Index for the calendar month of
October immediately preceding the Adjustment Date in question [if the
difference so obtained is negative, then this factor (i) shall be deemed to
be zero], by (ii) the Index for the calendar month in which the Rental
Commencement Date falls.

(d) The term "Index" as used in Articles 7(b) and (c) above shall
mean the Consumer Price Index for All Urban Consumers, U.S. City Average, All
Items (1982-84 = 100), published by the Bureau of Labor Statistics of the
United States Department of Labor. If the Bureau of Labor Statistics should
discontinue the publication of the Index, or publish the same less
frequently, or alter the same in some manner, then Landlord shall adopt a
substitute Index or substitute procedure which reasonably reflects and
monitors consumer prices.

(e) Nothing contained in this Article 7 shall be construed at any
time so to reduce the monthly installments of Base Rental payable hereunder
below the amount set forth in Article 6 of this Lease. Notwithstanding
anything contained in this Lease to the contrary, it is agreed that (i) the
Rental Adjustment for any given Adjustment Period shall not be less than the
Rental Adjustment for the immediately preceding Adjustment Period, and (ii)
Tenant's payments pursuant to this Article 7 shall not be deemed payments of
rent as that term is construed relative to governmental wage and price
controls or analogous governmental actions affecting the amount of rent which
Landlord may charge Tenant.

See Special Stipulation No. 3

8. ADDITIONAL RENTAL.

(a) For purposes of this Lease, "Tenant's Forecast Additional
Rental" shall mean Landlord's reasonable estimate of Tenant's Additional
Rental for each calendar year or portion thereof during the Lease Term. If
at any time it appears to Landlord that Tenant's Additional Rental for the
current calendar year then at hand will vary from Landlord's estimate,
Landlord shall have the right to revise, by notice to Tenant, its estimate
for such year, and subsequent payments by Tenant for such year shall be based
upon such revised estimate of Tenant's Additional Rental. Failure to make a
revision contemplated by the immediately preceding sentence shall not
prejudice Landlord's right to collect the full amount of Tenant's Additional
Rental. "Prior to the Rental Commencement Date, and thereafter prior to the
beginning of each calendar year during the Lease Term, including any
extensions or renewals thereof, Landlord shall present to Tenant a statement
of Tenant's Forecast Additional Rental for such calendar year; provided,
however, that if such statement is not given prior to the beginning of any
calendar year as aforesaid, Tenant shall continue to pay during the next
ensuing calendar year on the basis of the amount of Tenant's Forecast
Additional Rental payable during the calendar year just ended until the month
after such statement is delivered to Tenant."

(b) For purposes of this Lease, "Tenant's Additional Rental" shall
mean for each calendar year (or portion thereof) during the Lease Term the
excess of (x) the Operating Expense Amount (defined below) multiplied by the
number of square feet of Rentable Floor Area of the Demised Premises, over
(y) the Operating Expense Stop (as hereinafter defined). As used herein,
"Operating Expense Amount" shall mean an amount equal to the amount of
Operating Expenses (as defined below) for such calendar year divided by the
greater of (i) ninety-five percent (95%) of the number of square feet of
Rentable Floor Area of the Building, or (ii) the total number of square feet
of Rentable Floor Area occupied in the Building for such calendar year on an
average annualized basis; provided, however, if the amount is calculated
under (i) above, the Operating Expenses actually incurred with respect to
such calendar year shall be adjusted to reflect the amount of Operating
Expenses which would have been incurred if the Building were ninety-five
percent (95%) occupied throughout such calendar year. As used herein,
"Operating Expense Stop" shall be determined by calculating the Operating
Expenses during the first twelve (12) months following the Rental
Commencement Date for Suite 400.

(c) Within one hundred fifty (150) days after the end of the
calendar year in which the Rental Commencement Date occurs and of each
calendar year thereafter during the Lease Term, or as soon thereafter as
practicable, Landlord shall provide Tenant a statement showing the Operating

<PAGE>

Expenses for said calendar year, as prepared by an authorized representative
of Landlord, and a statement prepared by Landlord comparing Tenant's Forecast
Additional Rental with Tenant's Additional Rental. In the event Tenant's
Forecast Additional Rental exceeds Tenant's Additional Rental for said
calendar year, Landlord shall credit such amount against the Forecast
Additional Rental next due hereunder or, if the Lease Term has expired or is
about to expire, promptly refund such excess to Tenant if Tenant is not in
default under this Lease (in the instance of a default, such excess shall be
held as additional security for Tenant's performance, may be applied by
Landlord to cure any such default, and shall not be refunded until any such
default is cured). In the event that the Tenant's Additional Rental exceeds
Tenant's Forecast Additional Rental for said calendar year, Tenant shall pay
Landlord, within thirty (30) days of receipt of the statement, an amount
equal to such difference. The provisions of this Lease concerning the payment
of Tenant's Additional Rental shall survive the expiration or earlier
termination of this Lease.

(d) Landlord's books and records pertaining to the calculation of
Operating Expenses for any calendar year within the Lease Term may be audited
by Tenant or its representatives at Landlord's office where Operating Expense
records are kept, at Tenant's expense, at any time within ninety (90) days
after Landlord's annual statement is delivered to Tenant for such calendar
year; provided that Tenant shall give Landlord not less than thirty (30)
days' prior written notice of any such audit. If Landlord's calculations of
Tenant's Additional Rental for the audited calendar year was incorrect, then
Tenant shall be entitled to a prompt refund of any overpayment or Tenant
shall promptly pay to Landlord the amount of any underpayment, as the case
may be.

See Special Stipulation No. 21.

9. OPERATING EXPENSES.

(a) For the purposes of this Lease, "Operating Expenses" shall
mean all expenses, costs and disbursements (but not specific costs billed or
billable to specific tenants of the Building) of every kind and nature,
computed on an accrual basis and in conformity with generally accepted
accounting principles consistently applied, relating to or incurred or paid
in connection with the ownership, management, operation, repair and
maintenance of the Project, including but not limited to, the following:

(1) wages, salaries and other costs of all on-site and
off-site employees engaged either full or part time in the operation,
management, maintenance or access control of the Project, including
taxes, insurance and benefits relating to such employees, allocated
based upon the time such employees are engaged directly in providing
such services;

(2) the cost of all supplies, tools, equipment and materials
used in the operation, management, maintenance and access control of the
Project;

(3) the cost of all utilities for the Project, including but
not limited to the cost of electricity, gas, water, sewer services and
power for heating, lighting, air conditioning and ventilating;

(4) the cost of all maintenance and service agreements for
the Project and the equipment therein, including, but not limited to,
security service, garage operators, window cleaning, elevator
maintenance, HVAC maintenance, janitorial service, landscaping
maintenance and customary landscaping replacement;

(5) the cost of inspections, repairs and general maintenance
of the Project;

(6) amortization (together with reasonable financing charges,
whether or not actually incurred) of the cost of acquisition and/or
installation of capital investment items (including security equipment),
amortized over their respective useful lives, which are installed for
the purpose of reducing operating expenses (providing that such
amortization charge shall not exceed the cost reduction attributable to
the capital investment item for the related period), promoting safety,
complying with governmental requirements, or maintaining the first-class
nature of the Project;

(7) the cost of casualty, rental loss, liability and other
insurance applicable to the Project and Landlord's personal property
used in connection therewith;

(8) the cost of trash and garbage removal, vermin
extermination, and snow, ice and debris removal;

(9) the cost of legal and accounting services incurred by
Landlord in connection with the management, maintenance, operation and
repair of the Project, excluding the owner's or Landlord's general
accounting, such as partnership statements and tax returns, and
excluding services described in Article 9(b)(14) below;

(10) all taxes, assessments and governmental charges, whether
or not directly paid by Landlord, whether federal, state, country or
municipal and whether they be by taxing districts or authorities
presently taxing the Project or by others subsequently created or
otherwise, and any other taxes and assessments attributable to the
Project or its operation (and the costs of monitoring and contesting any
of the same), including business license taxes and fees (all of the
foregoing are herein sometimes collectively referred to as "Taxes"),
excluding, however, taxes and assessments imposed on the personal
property of the tenants of the Project, federal and state taxes on
income, death taxes, franchise taxes, and any taxes (other than business
license taxes and fees) imposed or measured on or by the income of
Landlord from the operation of the Project; provided, however, that if
at any time during the Lease Term, the present method of taxation or
assessment shall be so changed that the whole or any part of the taxes,
assessments, levies, impositions or charges now levied, assessed or
imposed on real estate and the improvements thereon shall be
discontinued and as a substitute therefor, or in lieu of or in addition
thereto, taxes, assessments, levies, impositions or charges shall be

<PAGE>

levied, assessed and/or imposed wholly or partially as a capital levy or
otherwise on the rents received from the Project or the rents reserved
herein or any part thereof, then such substitute or additional taxes,
assessments, levies, impositions or charges, to the extent so levied,
assessed or imposed, shall be deemed to be included within the Operating
Expenses to the extent that such substitute or additional tax would be
payable if the Project were the only property of the Landlord subject to
such tax; and it is agreed that Tenant will be responsible for ad
valorem taxes on its personal property and on the value of the leasehold
improvements in the Demised Premises to the extent that the same exceed
building standard allowances, if said taxes are based upon an assessment
which includes the cost of such leasehold improvements in excess of
building standard allowances (and if the taxing authorities do not
separately assess Tenant's leasehold improvements, Landlord may make an
appropriate allocation of the ad valorem taxes allocated to the Project
to give effect to this sentence) (for purposes of this subparagraph
only, "building standard allowances" shall mean the improvements which
exist in the Demised Premises as of the Term Commencement Date plus all
additional improvements constructed using the Tenant Improvement
Allowances);

(11) the cost of operating the management office for the
Project, including cost of office supplies, telephone expenses and
non-capital investment equipment and amortization (together with
reasonable financing charges) of the cost of capital investment
equipment; and

(12) management fees consistent with those charged for
comparable buildings in the north central submarket of Atlanta, Georgia.

Tenant acknowledges that the Project is part of a development, which
will or may include other improvements and that the costs of management,
operation and maintenance of the development shall, from time to time, be
allocated among and shared by two or more of the improvements in the
development (including the Project). The determination of such costs and
their allocation shall be made by Landlord in its reasonable discretion. In
addition, Landlord reserves the right to recompute and adjust the base year
of any component of Operating Expenses at any time during the Lease Term as a
result of any reallocation within the Project. Accordingly, the term
"Operating Expenses" as used in this Lease shall, from time to time, include
some costs, expenses and taxes enumerated above which were incurred with
respect to other improvements in the development but which were allocated to
and shared by the Project in accordance with the foregoing. Notwithstanding
the foregoing, Tenant understands and agrees that its right to use other
portions of the development of which the Project is a part are those
available to the general public and that this Lease does not grant to Tenant
additional rights of use.

(b) For purposes of this Lease, and notwithstanding anything in
any other provision of this Lease to the contrary, "Operating Expenses" shall
not include the following:

(1) the cost of any special work or service performed for any
tenant (including Tenant) at such tenant's cost;

(2) the cost of installing, operating and maintaining any
specialty service, such as an observatory, broadcasting facility,
luncheon club, restaurant, cafeteria, retail store, sundry shop,
newsstand, or concession, but only to the extent such costs exceed those
which would normally be expected to be incurred had such space been
general office space;

(3) the cost of correcting defects in construction;

(4) compensation paid to officers and executives of Landlord
(but it is understood that the on-site building manager and other
on-site employees below the grade of building manager may carry a title
such as vice president and the salaries and related benefits of these
officers/employees of Landlord would be allowable Operating Expenses
under Article 9[a][1] above);

(5) the cost of any items for which Landlord is reimbursed by
insurance, condemnation or otherwise, except for costs reimbursed
pursuant to provisions similar to Articles 8 and 9 hereof;

(6) the cost of any additions, changes, replacements and
other items which are made in order to prepare for a new tenant's
occupancy;

(7) the cost of repairs incurred by reason of fire or other
casualty;

(8) insurance premiums to the extent Landlord may be directly
reimbursed therefor, except for premiums reimbursed pursuant to
provisions similar to Articles 8 and 9 hereof;

(9) interest on debt or amortization payments on any mortgage
or deed to secure debt (except to the extent specifically permitted by
Article 9[a]) and rental under any ground lease or other underlying
lease;

(10) any real estate brokerage commissions or other costs
incurred in procuring tenants or any fee in lieu of such commission;

(11) any advertising expenses incurred in connection with the
marketing of any rentable space;

(12) rental payments for base building equipment such as HVAC
equipment and elevators;

(13) any expenses for repairs or maintenance which are covered
by warranties and service contracts, to the extent such maintenance and
repairs are made at no cost to Landlord;

<PAGE>

(14) legal expenses arising out of the construction of the
improvements on the Land or the enforcement of the provisions of any
lease affecting the Land or Building, including without limitation this
Lease; and

(15) amortization or depreciation of the cost of acquisition
of the Building, project and any improvements thereto (other than those
described in section 9(a)(6).

See Special Stipulation No. 22.

10. TENANT TAXES. Tenant shall pay promptly when due all taxes
directly or indirectly imposed or assessed upon Tenant's gross sales,
business operations, machinery, equipment, trade fixtures and other personal
property or assets, whether such taxes are assessed against Tenant, Landlord
or the Building. In the event that such taxes are imposed or assessed
against Landlord or the Building, Landlord shall furnish Tenant with all
applicable tax bills, public charges and other assessments or impositions and
Tenant shall forthwith pay the same either directly to the taxing authority
or, at Landlord's option, to Landlord.

11. PAYMENTS. All payments of Rent and other payments to be made to
Landlord shall be made on a timely basis and shall be payable to Landlord or
as Landlord may otherwise designate. All such payments shall be mailed or
delivered to Landlord's Address designated in Article 1(b) above or at such
other place as Landlord may designate from time to time in writing. If
mailed, all payments shall be mailed in sufficient time and with adequate
postage thereon to be received in Landlord's account by no later than the due
date for such payment.

12. LATE CHARGES. Any Rent or other amounts payable to Landlord under
this Lease, if not paid by the fifth day of the month for which such Rent is
due, or by the due date specified on any invoices from Landlord for any other
amounts payable hereunder, shall incur a late charge of Fifty Dollars
($50.00) for Landlord's administrative expense in processing such delinquent
payment and in addition thereto shall bear interest at the rate of fifteen
percent (15%) per annum from and after the due date for such payment.
Notwithstanding anything to the contrary contained in this Lease, in no event
shall the rate of interest payable on any amount due under this Lease exceed
the legal limits for such interest enforceable under applicable law.

13. USE RULES. The Demised Premises shall be used for executive,
general administrative and office space purposes, including, without
limitation, sales offices, training facilities for Tenant's customers and
employees, ancillary kitchen facilities (including use of vending machines),
and no other purposes and in accordance with all applicable laws, ordinances,
rules and regulations of governmental authorities and the Rules and
Regulations attached hereto and made a part hereof. Tenant covenants and
agrees that it will, at its expense, comply with all laws, ordinances,
orders, directions, requirements, rules and regulations of all governmental
authorities (including Federal, State, county and municipal authorities), now
in force or which may hereafter be in force ("Legal Requirements"), which
shall impose any duty upon Landlord or Tenant with respect to the use,
occupancy or alteration of the Demised Premises, and of all insurance bodies
applicable to the Demised Premises or to the Tenant's use or occupancy
thereof. Notwithstanding the foregoing, nothing in this Lease shall be
construed to require Tenant to make any structural repairs, alterations or
modifications to the Demised Premises, the Building (including the bathrooms
and Common Areas) or the Project, in connection with any Legal Requirements.
Tenant covenants and agrees to abide by the Rules and Regulations in all
respects as now set forth and attached hereto or as hereafter promulgated by
Landlord, provided that such rules do not materially and adversely affect
Tenant's rights hereunder. Landlord shall have the right at all times during
the Lease Term to publish and promulgate and thereafter enforce such rules
and regulations or changes in the existing Rules and Regulations as it may
reasonably deem necessary in its sole discretion to protect the
tenantability, safety, operation, and welfare of the Demised Premises and the
Project.

See Special Stipulation No. 27.

14. ALTERATIONS. Except for any initial improvement of the Demised
Premises pursuant to EXHIBIT "D", which shall be governed by the provisions
of said EXHIBIT "D", Tenant shall not make, suffer or permit to be made any
alterations, additions or improvements to or of the Demised Premises or any
part thereof, or attach any fixtures or equipment thereto, without first
obtaining Landlord's written consent. With respect to any alteration,
addition or improvement which does not affect the structure of the Building,
does not affect any of the Building's systems (e.g., mechanical, electrical
or plumbing), does not diminish the capacity of such Building systems
available to other portions of the Building, is not visible from the common
areas or exterior of the Building, and is in full compliance with all laws,
orders, ordinances, directions, requirements, rules and regulations of all
governmental authorities. Landlord's consent shall not be unreasonably
withheld (and Landlord's consent shall not be required if the cost of the
aforesaid type of alteration is less than $15,000.00). Any such alterations,
additions or improvements to the Demised Premises consented to by Landlord
shall be made by Landlord or under Landlord's supervision for Tenant's
account and Tenant shall reimburse Landlord for all costs thereof (including
a reasonable charge for Landlord's overhead), as Rent, within ten (10) days
after receipt of a statement. All such alterations, additions and
improvements (except for Tenant's trade fixtures and computer and electronic
equipment) shall become Landlord's property at the expiration or earlier
termination of the Lease Term and shall remain on the Demised Premises
without compensation to Tenant unless Landlord elects by notice to Tenant to
have Tenant remove such alterations, additions and improvements, in which
event, notwithstanding any contrary provisions respecting such alterations,
additions and improvements contained in Article 32 hereof, Tenant shall
promptly restore, at its sole cost and expense, the Demised Premises to its
condition prior to the installation of such alterations, additions and
improvements, normal wear and tear excepted. Tenant shall under no
circumstances be required to remove any alterations, additions and
improvements which are part of the initial improvement of the Demised
Premises which do not require Landlord's consent, or which are made with
Landlord's consent (unless the removal requirement is specified by Landlord
at the time of initial approval).

See Special Stipulation No. 39.

6
<PAGE>

15. REPAIRS.

(a) Landlord shall maintain in good order and repair, subject to
normal wear and tear and subject to casualty and condemnation, the Building
(excluding the Demised Premises, other than the structural portions thereof,
and other portions of the Building leased to other tenants, other than the
structural portions thereof), the Building parking facilities, the public
areas and the landscaped areas. Notwithstanding the foregoing obligation,
the cost of any repairs or maintenance to the foregoing necessitated by the
intentional acts or negligence of Tenant or its agents, contractors,
employees, invitees, licensees, tenants or assigns, shall be borne solely by
Tenant and shall be deemed Rent hereunder and shall be reimbursed by Tenant
to Landlord upon demand. Landlord shall not be required to make any repairs
or improvements to the Demised Premises except structural repairs necessary
for safety and tenantability.

(b) Tenant covenants and agrees that it will take good care of the
Demised Premises and all alterations, additions and improvements thereto and
will keep and maintain the same in good condition and repair, except for
normal wear and tear (Covered Repairs" (as defined in Special Stipulation No.
36), condemnation and casualty. To the fullest extent permitted by law,
Tenant hereby waives all rights to make repairs at the expense of Landlord or
in lieu thereof to vacate the Demised Premises as may be provided by any law,
statute or ordinance now or hereafter in effect. Landlord has no obligation
and has made no promise to alter, remodel, improve, repair, decorate or paint
the Demised Premises or any part thereof, except as specifically and
expressly herein set forth.

16. LANDLORD'S RIGHT OF ENTRY. Landlord shall retain duplicate keys to
all doors of the Demised Premises and Landlord and its agents, employees and
independent contractors shall have the right to enter the Demised Premises at
reasonable hours to inspect and examine same, to make repairs, additions,
alterations and improvements, to exhibit the Demised Premises to mortgagees,
prospective mortgagees, purchasers or tenants, and to inspect the Demised
Premises to ascertain that Tenant is complying with all of its covenants and
obligations hereunder, all without being liable to Tenant in any manner
whatsoever for any damages arising therefrom, unless caused by Landlord's
negligence or willful misconduct; provided, however, that Landlord shall, except
in case of emergency, afford Tenant such prior notification of any entry into
the Demised Premises as shall be reasonably practicable under the circumstances.
Landlord shall be allowed to take into and through the Demised Premises any and
all materials (except hazardous substances as defined in Article 43) that may be
required to make such repairs. During such time as such work is being carried
on, in or about the Demised Premises, the Rent provided herein shall not abate,
and Tenant waives any claim or cause of action against Landlord for damages by
reason of interruption of Tenant's business or loss of profits therefrom because
of the prosecution of any such work or any part thereof.

See Special Stipulation No. 23.

17. INSURANCE. Tenant shall procure at its expense and maintain
throughout the Lease Term a policy or policies of commercial property insurance,
issued on an "all risks" basis insuring the full replacement cost with a
reasonable deductible amount of its furniture, equipment, supplies and other
property owned, leased, held or possessed by it and contained in the Demised
Premises, together with the excess value of the improvements to the Demised
Premises over the "building standard allowances" as defined in subparagraph
9(a)(10) (with a replacement cost endorsement sufficient to prevent Tenant from
becoming a co-insurer), and workmen's compensation insurance as required by
applicable law. Tenant shall also procure at its expense and maintain
throughout the Lease Term a policy or policies of commercial general liability
insurance, written on an occurrence basis and insuring Tenant, and naming as an
additional insured, Landlord and any mortgagee identified by written notice to
Tenant, against any and all liability for injury to or death of a person or
persons and for damage to property occasioned by or arising out of any
construction work being done on the Demised Premises by Tenant or its agent or
contractors, or arising out of the use or occupancy of the Demised Premises, or
in any way occasioned by or arising out of the activities of Tenant, its agents,
contractors, employees, guests or licensees in the Demised Premises, or other
portions of the Building or the Project, the limits of such policy or policies
to be in combined single limits for both damage to property and personal injury
and in amounts not less than Three Million Dollars ($3,000,000.00) for each
occurrence. Such insurance shall, in addition, extend to any liability of
Tenant arising out of the indemnities provided for in this Lease. Landlord
shall keep and maintain in effect fire insurance with extended coverage in an
amount equal to at least eighty percent (80%) of the insurable amount of the
Building. Such insurance company (an "Eligible Company") shall be solvent,
authorized to do business in Atlanta, Georgia, and be acceptable to prudent
landlords of first class office buildings in the Atlanta, Georgia, area similar
to the Building. Landlord shall keep and maintain comprehensive general
liability insurance, including contractual liability coverage issued by an
Eligible Company. The insurance policies evidencing the coverages described
above shall contain such terms and conditions as similar policies obtained by
landlords of similar first class office buildings in the Atlanta, Georgia, area.
All insurance policies procured and maintained by Tenant pursuant to this
Article 17 shall name Landlord and any mortgagee as additional insured, shall be
carried with companies licensed to do business in the State of Georgia
reasonably satisfactory to Landlord and shall be non-cancelable and not subject
to material change except after twenty (20) days' written notice to Landlord.
Duly executed certificates of insurance with respect to such policies,
accompanied by proof of payment of the premium therefor, shall be delivered to
Landlord prior to the Rental Commencement Date, and renewals of such policies
shall be delivered to Landlord at least thirty (30) days prior to the expiration
of each respective policy term.

18. WAIVER OF SUBROGATION. Landlord and Tenant shall each have included
in all policies of commercial property insurance, commercial general liability
insurance, and business interruption and other insurance respectively obtained
by them pursuant to this Lease, a waiver by the insurer of all right of
subrogation against the other in connection with any loss or damage thereby
insured against. Any additional premium for such waiver shall be paid by the
primary insured. To the full extent permitted by law, Landlord and Tenant each
waives all right of recovery against the other for, and releases the other from
liability for, loss or damage to the extent such loss or damage is covered by
valid and collectible insurance in effect at the time of such loss or damage or,
in the event of self-insurance or a failure to insure, would be covered by the
insurance required to be maintained under this Lease by the party seeking
recovery.

7
<PAGE>

19. DEFAULT

(a) The following events shall be deemed to be events of default
by Tenant under this Lease: (i) Tenant shall fail to pay any installment of
Rent or any other charge or assessment against Tenant pursuant to the terms
hereof within five (5) days following written notice by Landlord to Tenant of
its failure to pay such installments, provided that Landlord shall not be
obligated to send to Tenant such written notice more often than twice in any
calendar year during the term hereof; (ii) Tenant shall fail to comply with
any term, provision, covenant or warranty made under this Lease by Tenant,
other than the payment of the Rent or any other charge or assessment payable
by Tenant, and shall not cure such failure within twenty (20) days after
notice thereof to Tenant; (iii) Tenant or any guarantor of this Lease shall
make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts as they become due, or shall file a
petition in bankruptcy, or shall be adjudicated as bankrupt or insolvent, or
shall file a petition in any proceeding seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or shall file
an answer admitting or fail timely to contest the material allegations of a
petition filed against it in any such proceeding; (iv) a proceeding is
commenced against Tenant or any guarantor of this Lease seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, and such proceeding shall not have been dismissed within
forty-five (45) days after the commencement thereof; (v) a receiver or
trustee shall be appointed for the Demised Premises or for all or
substantially all of the assets of Tenant or of any guarantor of this Lease
(unless such receiver is removed within thirty (30) days after appointment
thereof); and (vi) Tenant shall do or permit to be done anything which
creates a lien upon the Demised Premises or the Project and such lien is not
removed or discharged within fifteen (15) days after the filing thereof.
Notwithstanding the foregoing, in the case of a non-monetary default which is
subject to cure but which cannot by its very nature be cured within said
twenty (20) day period, Tenant shall be granted an additional period of time,
not to exceed twenty-five (25) days, in which to effect such cure, provided
Tenant promptly commences to cure such default and diligently pursues said
cure to completion.

(b) Upon the occurrence of any of the aforesaid events of default,
Landlord shall have the option to pursue any one or more of the following
remedies without any notice or demand whatsoever: (i) terminate this Lease,
in which event Tenant shall immediately surrender the Demised Premises to
Landlord and if Tenant fails to do so, Landlord may without prejudice to any
other remedy which it may have for possession or arrearages in Rent, enter
upon and take possession of the Demised Premises and expel or remove Tenant
and any other person who may be occupying said Demised Premises or any part
thereof, in accordance with applicable law, without being liable for
prosecution or any claim of damages therefor; Tenant hereby agreeing to pay
to Landlord on demand the amount of all loss and damage which Landlord may
suffer by reason of such termination, whether through inability to relet the
Demised Premises on satisfactory terms or otherwise; (ii) terminate Tenant's
right of possession (but not this Lease) and enter upon and take possession
of the Demised Premises and expel or remove Tenant and any other person who
may be occupying said Demised Premises or any part thereof, by entry (in
accordance with applicable law), dispossessory suit or otherwise, without
thereby releasing Tenant from any liability hereunder, without terminating
this Lease, and without being liable for prosecution or any claim of damages
therefor and, if Landlord so elects, make such alterations, redecorations and
repairs as, in Landlord's judgment, may be necessary to relet the Demised
Premises, and Landlord may, but shall be under no obligation to do so, relet
the Demised Premises or any portion thereof in Landlord's or Tenant's name,
but for the account of Tenant, for such term or terms (which may be for a
term extending beyond the Lease Term) and at such rental or rentals and upon
such other terms as Landlord may deem advisable, with or without
advertisement, and by private negotiations, and receive the rent therefor,
Tenant hereby agreeing to pay to Landlord the deficiency, if any, between all
Rent reserved hereunder and the total rental applicable to the Lease Term
hereof obtained by Landlord re-letting, and Tenant shall be liable for
Landlord's expenses in redecorating and restoring the Demised Premises and
all costs incident to such re-letting, including broker's commissions and
lease assumptions, and in no event shall Tenant be entitled to any rentals
received by Landlord in excess of the amounts due by Tenant hereunder; or
(iii) enter upon the Demised Premises, in accordance with applicable law,
without being liable for prosecution or any claim of damages therefor, and do
whatever Tenant is obligated to do under the terms of this Lease; and Tenant
agrees to reimburse Landlord on demand for any expenses including, without
limitation, reasonable attorneys' fees which Landlord may incur in this
effecting compliance with Tenant's obligations under this Lease and Tenant
further agrees that Landlord shall not be liable for any damages resulting to
Tenant from such action. If this Lease is terminated by Landlord as a result
of the occurrence of an event of default, Landlord may declare due and
payable immediately an amount determined as follows: (x) the entire amount of
Rent and other charges and assessments which would have become due and
payable during the remainder of the Lease Term (including, without
limitation, increases in Rent pursuant to Article 7 hereof), discounted to
present value by using a discount factor of eight percent (8%) per annum,
plus (y) all of Landlord's costs and expenses (including, without limitation,
Landlord's expenses in redecorating and restoring the Demised Premises and
all costs relating to such reletting, including broker's commissions and
lease assumptions) reasonably incurred in connection with or related to the
reletting of the Demised Premises, minus (z) the market rental value of the
Demised Premises for the remainder of the Lease Term, based on Landlord's
reasonable determination of both future rental value and the probability of
reletting the Demised Premises for all or part of the remaining Term,
discounted to present value by using a discount factor of eight percent (8%)
per annum. Such payment shall not constitute a penalty or forfeiture but
shall constitute liquidated damages for Tenant's failure to comply with the
terms and provisions of this Lease (Landlord and Tenant agreeing that
Landlord's exact damages in such event are impossible to ascertain and that
the amount set forth above is a reasonable estimate thereof). For purposes of
determining what could be collected by Landlord by reletting under this
subsection, Landlord is not required to relet when other comparable space in
the Building is available. The term "remaining Lease Term" as used in this
subsection shall mean the period which otherwise would have (but for the
termination of this Lease) constituted the balance of the Lease Term from the
date of the termination of this Lease.

(c) Pursuit of any of the foregoing remedies shall not preclude
pursuit of any other remedy herein provided or any other remedy provided by
law or at equity, nor shall pursuit of any remedy herein provided constitute
an election of remedies thereby excluding the later election of an alternate
remedy, or a forfeiture or waiver of any Rent or other charges and
assessments payable by Tenant and due to Landlord hereunder or of any damages
accruing to Landlord by reason of violation of any of the terms, covenants,
warranties and provisions herein contained. No reentry or taking possession

8
<PAGE>

of the Demised Premises by Landlord or any other action taken by or on behalf of
Landlord shall be construed to be an acceptance of a surrender of this Lease or
an election by Landlord to terminate this Lease unless written notice of such
intention is given to Tenant. Forbearance by Landlord to enforce one or more of
the remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default. In determining the amount of
loss or damage which Landlord may suffer by reason of termination of this Lease
or the deficiency arising by reason of any reletting of the Demised Premises by
Landlord as above provided, allowance shall be made for the expense of
repossession. Tenant agrees to pay to Landlord all costs and expenses incurred
by Landlord in the enforcement of this Lease, including without limitation, the
fees of Landlord's attorneys as provided in Article 25 hereof.

20. WAIVER OF BREACH. No waiver of any breach of the covenants,
warranties, agreements, provisions, or conditions contained in this Lease shall
be construed as a waiver of said covenant, warranty, provision, agreement or
condition or of any subsequent breach thereof, and if any breach shall occur and
afterwards be compromised, settled or adjusted, this Lease shall continue in
full force and effect as if no breach had occurred.

21. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord, assign this Lease or any interest herein or in
the Demised Premises, or mortgage, pledge, encumber, hypothecate or otherwise
transfer or sublet the Demised Premises or any part thereof or permit the use
of the Demised Premises by any party other than Tenant. Consent to one or
more such transfers or subleases shall not destroy or waive this provision,
and all subsequent transfers and subleases shall likewise be made only upon
obtaining the prior written consent of Landlord. Without limiting the
foregoing prohibition, in no event shall Tenant assign this Lease or any
interest herein, whether directly, indirectly or by operation of law, or
sublet the Demised Premises or any part thereof or permit the use of the
Demised Premises or any part thereof by any party if such proposed
assignment, subletting or use would contravene any restrictive covenant
(including any exclusive use) granted to any other tenant of the Building or
would contravene the provisions of Article 13 of this Lease. Sublessees or
transferees of the Demised Premises for the balance of the Lease Term shall
become directly liable to Landlord for all obligations of Tenant hereunder,
without relieving Tenant (or any guarantor of Tenant's obligations hereunder)
of any liability therefor, and Tenant shall remain obligated for all
liability to Landlord arising under this Lease during the entire remaining
Lease Term including any extensions thereof, whether or not authorized
herein. If Tenant is a partnership, a withdrawal or change, whether
voluntary, involuntary or by operation of law, of partners owning a
controlling interest in the Tenant shall be deemed a voluntary assignment of
this Lease and subject to the foregoing provisions. If Tenant is a
corporation, any dissolution, merger, consolidation or other reorganization
of Tenant, or the sale or transfer of a controlling interest in the capital
stock of Tenant, whether in a single transaction or in a series of
transactions, shall be deemed a voluntary assignment of this Lease and
subject to the foregoing provisions. Landlord may, as a prior condition to
considering any request for consent to an assignment or sublease, require
Tenant to obtain and submit current financial statements of any proposed
subtenant or assignee and such other financial documentation relative to the
proposed subtenant or assignee as Landlord may reasonably require. In the
event Landlord consents to an assignment or sublease, Tenant shall pay to
Landlord a fee to cover Landlord's accounting costs plus any legal fees
actually incurred by Landlord as a result of the assignment or sublease (not
to exceed $1,000.00). The consent of Landlord to any proposed assignment or
sublease may be withheld by Landlord in its sole and absolute discretion.
Any consideration, in excess of the Rent and other charges and sums due and
payable by Tenant under this Lease, paid to Tenant by any assignee of this
Lease for its assignment, or by any sublessee under or in connection with its
sublease, or otherwise paid to Tenant by another party for use and occupancy
of the Demised Premises or any portion thereof (after deducting Tenant's
reasonable costs associated therewith, including brokerage fees, attorneys'
fees and remodeling costs), shall be promptly remitted by Tenant to Landlord
as additional rent hereunder and Tenant shall have no right or claim thereto
as against Landlord. No assignment of this Lease consented to by Landlord
shall be effective unless and until Landlord shall receive an original
assignment and assumption agreement, in form and substance satisfactory to
Landlord, signed by Tenant and Tenant's proposed assignee, whereby the
assignee assumes due performance of this Lease to be done and performed for
the balance of the then remaining Lease Term of this Lease. No subletting of
the Demised Premises, or any part thereof, shall be effective unless and
until there shall have been delivered to Landlord an agreement, in form and
substance satisfactory to Landlord, signed by Tenant and the proposed
sublessee, whereby the sublessee acknowledges the right of Landlord to
continue or terminate any sublease, in Landlord's sole discretion, upon
termination of this Lease, and such sublessee agrees to recognize and attorn
to Landlord in the event that Landlord elects under such circumstances to
continue such sublease. Upon Landlord's receipt of a request by Tenant to
assign this Lease or any interest herein or in the Demised Premises or to
transfer or sublet the Demised Premises or any part thereof or permit the use
of the Demised Premises by any party other than Tenant, Landlord shall
exercise in writing one of the following options: (a) to terminate this Lease
as to the portion of the Demised Premises proposed to be assigned or sublet;
(b) to consent to the proposed assignment or sublease, subject to the other
terms and conditions set forth in this Article 21; or (c) to refuse to
consent to the proposed assignment or sublease, which refusal shall be deemed
to have been exercised unless Landlord gives Tenant written notice providing
otherwise. Landlord agrees to respond to any such request within ten (10)
days after receipt of such request, together with such information as may be
reasonably necessary to enable Landlord to make an informed decision with
respect to such request.

See Special Stipulation No. 5.

22. DESTRUCTION.

(a) If the Demised Premises are damaged by fire or other casualty,
the same shall be repaired or rebuilt as speedily as practical under the
circumstances as the expense of Landlord, unless this Lease is terminated as
provided in this Article 22, and during the period required for restoration,
a just and proportionate part of Base Rental shall be abated until the
Demised Premises are repaired or rebuilt.

(b) If the Demised Premises are (i) damaged to such an extent that
repairs cannot be completed within one hundred eighty (180) days after the
date of the casualty, or (ii) damaged or destroyed as a result of a risk
which is not insured under the insurance policies required hereunder, or
(iii) damaged or destroyed during the last eighteen (18) months of the Lease
Term, or (iv) if the Building is damaged in whole or in part (whether or not
the Demised Premises are damaged) to such an extent that the Building cannot,
in Landlord's reasonable judgment, be operated economically as an integral
unit, then and in any such event Landlord may at its option terminate this
Lease by notice in writing to Tenant within sixty (60) days after the day of
such occurrence. With respect to condition (iv) above, Landlord must
terminate all other leases

9
<PAGE>

in the Building in order to terminate this Lease. If the Demised Premises are
damaged to such an extent that repairs cannot reasonably be anticipated to be
to be or are not completed within one hundred eighty (180) days after the date
of the casualty or if the Demised Premises are substantially damaged during
the last eighteen (18) months of the Lease Term, then in either such event
Tenant may elect to terminate this Lease by notice in writing to Landlord
given within forty-five (45) days after the date of such occurrence (or
within thirty (30) days of the conclusion of such one hundred eighty (180)
day period if the repairs are not completed within such period). Unless
Landlord or Tenant elects to terminate this Lease as hereinabove provided,
this Lease will remain in full force and effect and Landlord shall repair such
damage at its expense to the extent required under subparagraph (c) below as
expeditiously as possible under the circumstances.

(c) If Landlord should elect or be obligated pursuant to
subparagraph (a) above to repair or rebuild because of any damage or
destruction, Landlord's obligation shall be limited to the original Building
and any other work or improvements which were originally performed or
installed at Landlord's expense as described in EXHIBIT "D" hereto or with
the proceeds of the Tenant Improvement Allowance. If Landlord's mortgagee or
the lessor under a ground or underlying lease shall require that any
insurance proceeds from a casualty loss be paid to it, Landlord may terminate
this Lease unless Tenant, within fifteen (15) days after demand therefor,
deposits with Landlord a sum of money sufficient to pay the difference
between the cost of repair and the proceeds of the insurance available to
Landlord for such purpose.

(d) In no event shall Landlord be liable for any loss or damage
sustained by Tenant by reason of casualties mentioned hereinabove or any
other accidental casualty.

(e) In the event of a minor casualty (i.e., one which can be fully
repaired in less than thirty (30) days), Landlord shall not be entitled to
terminate this Lease and shall restore the Demised Premises in accordance
with the provisions of this Article 22.

See Special Stipulation No. 37.

23. LANDLORD'S LIEN. [INTENTIONALLY DELETED.]

24. SERVICES BY LANDLORD. Landlord shall provide the Building Standard
Services described on EXHIBIT "E" attached hereto and by this reference made
a part hereof.

25. ATTORNEYS' FEES AND HOMESTEAD. [INTENTIONALLY DELETED.]

See Special Stipulation No. 18.

26. TIME. Time is of the essence of this Lease and whenever a certain
day is stated for payment or performance of any obligation of Tenant or
Landlord, the same enters into and becomes a part of the consideration hereof.

27. SUBORDINATION AND ATTORNMENT.

(a) Tenant agrees that this Lease and all rights of Tenant
hereunder are and shall be subject and subordinate to any ground or
underlying lease which may now or hereafter be in effect regarding the
Project or any component thereof, to any mortgage now or hereafter
encumbering the Demised Premises or the Project or any component thereof, to
all advances made or hereafter to be made upon the security of such mortgage,
to all amendments, modifications, renewals, consolidations, extensions and
restatements of such mortgage, and to any replacements and substitutions for
such mortgage. The terms of this provision shall be self-operative and no
further instrument of subordination shall be required. Tenant, however, upon
request of any party in interest, shall execute promptly such instrument or
certificates as may be reasonably required to carry out the intent hereof,
whether said requirement is that of Landlord or any other party in interest,
including, without limitation, any mortgagee.

(b) If any mortgagee or lessee under a ground or underlying lease
elects to have this Lease superior to its mortgage or lease and signifies its
election in the instrument creating its lien or lease or by separate recorded
instrument, then this Lease shall be superior to such mortgage or lease, as
the case may be. The term "mortgage", as used in this Lease, includes any
deed to secure debt, deed of trust or security deed and any other instrument
creating a lien in connection with any other method of financing or
refinancing. The term "mortgagee", as used in this Lease, refers to the
holder(s) of the indebtedness secured by a mortgage.

(c) In the event any proceedings are brought for the foreclosure
of, or in the event of exercise of the power of sale under, any mortgage
covering the Demised Premises or the Project, or in the event the interests
of Landlord under this Lease shall be transferred by reason of deed in lieu
of foreclosure or other legal proceedings, or in the event of termination of
any lease under which Landlord may hold title, Tenant shall, at the option of
the transferee or purchaser at foreclosure or under power of sale, or the
lessor of the Landlord upon such lease termination, as the case may be
(sometimes hereinafter called "such person"), attorn to such person and shall
recognize and be bound and obligated hereunder to such person as the Landlord
under this Lease; provided, however, that no such person shall be (i) bound
by any payment of Rent for more than one (1) month in advance, except
prepayments in the nature of security for the performance by Tenant of its
obligations under this Lease; (ii) bound by any amendment or modification of
this Lease made without the express written consent of the mortgagee or lessor
of the Landlord, as the case may be (provided that Tenant was notified in
writing of such mortgagee or lessor of Landlord); (iii) obligated to cure
any defaults under this Lease of any prior landlord (including Landlord);
(iv) liable for any act or omission of any

<PAGE>

prior landlord (including Landlord); (v) subject to any offsets or defenses
which Tenant might have against any prior landlord (including Landlord); or
(vi) bound by any warranty or representation of any prior landlord (including
Landlord) relating to work performed by any prior landlord (including
Landlord) under this Lease. Landlord's successor shall not be liable for the
matters described in clauses (iii) through (vi) of the preceding sentence,
provided Landlord shall remain liable to Tenant for the matters described
therein. Tenant agrees to execute any attornment agreement reasonable in form
and content and not in conflict herewith requested by Landlord, the mortgagee
or such person. Tenant's obligation to attorn to such person shall survive
the exercise of any such power of sale, foreclosure or other proceeding.
Tenant agrees that the institution of any suit, action or other proceeding by
any mortgagee to realize on Landlord's interest in the Demised Premises or
the Building pursuant to the powers granted to a mortgagee under its
mortgage, shall not, by operation of law or otherwise, result in the
cancellation or termination of the obligations of Tenant hereunder. Landlord
and Tenant agree that notwithstanding that this Lease is expressly subject
and subordinate to any mortgages, any mortgagee, its successors and assigns,
or other holder of a mortgage or of a note secured thereby, may sell the
Demised Premises or the Building, in the manner provided in the mortgage and
may, at the option of such mortgagee, its successors and assigns, or other
holder of the mortgage or note secured thereby, make such sale of the Demised
Premises or Building subject to this Lease.

See Special Stipulation No. 6.

28. ESTOPPEL CERTIFICATES. Within twenty (20) days after written
request therefor by Landlord, Tenant agrees to execute and deliver to
Landlord in recordable form an estoppel certificate addressed to Landlord,
any mortgagee or assignee of Landlord's interest in, or purchaser of, the
Demised Premises or the Building or any part thereof, certifying (if such be
the case) that this Lease is unmodified and is in full force and effect (and
if there have been modifications, that the same is in full force and effect
as modified and stating said modifications); that there are no defenses or
offsets against the enforcement thereof to Tenant's knowledge or stating
those claimed by Tenant; and stating the date to which Rent and other charges
have been paid. Such certificate shall also include such other information
concerning the Lease and Tenant's occupancy as may reasonably be required by
such mortgagee, proposed mortgagee, assignee, purchaser or Landlord. Any such
certificate may be relied upon by Landlord, any mortgagee, proposed
mortgagee, assignee, purchaser and any other party to whom such certificate
is addressed. Upon written request from Tenant, Landlord agrees to provide
estoppel certificates to Tenant generally in the same manner as set forth
herein above.

29. NO ESTATE. This Lease shall create the relationship of landlord and
tenant only between Landlord and Tenant and no estate shall pass out of
Landlord. Tenant shall have only an usufruct, not subject to levy and sale
and not assignable in whole or in part by Tenant except as herein provided.

30. CUMULATIVE RIGHTS. All rights, powers and privileges conferred
hereunder upon the parties hereto shall be cumulative to, but not restrictive
of, or in lieu of those conferred by law.

31. HOLDING OVER. If Tenant remains in possession after expiration or
termination of the Lease Term with or without Landlord's written consent,
Tenant shall become a tenant-at-sufferance, and there shall be no renewal of
this Lease by operation of law. During the period of any such holding over,
all provisions of this Lease shall be and remain in effect except that the
monthly rental shall be one hundred fifty percent (150%) of Rent (including
any adjustments as provided herein) payable for the last full calendar month
of the Lease Term including renewals or extensions. The inclusion of the
preceding sentence in this Lease shall not be construed as Landlord's consent
for Tenant to hold over.

32. SURRENDER OF PREMISES. Upon the expiration or other termination of
this Lease, Tenant shall quit and surrender to Landlord the Demised Premises
and every part thereof and all alterations, additions and improvements
thereto, broom clean and in good condition and state of repair, reasonable
wear and tear and damage caused by casualty or condemnation excepted. Tenant
shall remove all personalty and equipment not attached to the Demised
Premises which it has placed upon the Demised Premises, and Tenant shall
restore the Demised Premises to the condition immediately preceding the time
of placement thereof. If Tenant shall fail or refuse to remove all of
Tenant's effects, personalty and equipment from the Demised Premises upon the
expiration or termination of this Lease for any cause whatsoever or upon
Tenant being dispossessed by process of law or otherwise, such effects,
personalty and equipment shall be deemed upon three (3) business days prior
written notice to Tenant to be abandoned and may be appropriated, sold,
stored, destroyed or otherwise disposed of by Landlord without written notice
to Tenant or any other party and without obligation to account for them.
Tenant shall pay Landlord on demand any and all reasonable expenses incurred
by Landlord in the removal of such property, including, without limitation,
the cost of repairing any damage to the Building or Project caused by the
removal of such property and storage charges (if Landlord elects to store
such property). The covenants and conditions of this Article 32 shall survive
any expiration or termination of this Lease.

See Special Stipulation No. 39.

33. NOTICES. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been fully given, whether
actually received or not, when delivered in person, or one (1) days after
being deposited with an overnight commercial courier, or three (3) days after
being deposited, postage prepaid, in the United States Mail, certified,
return receipt requested, and addressed to Landlord or Tenant at their
respective address set forth hereinabove or at such other address as either
party shall have theretofore given to the other by notice as herein provided.

See Special Stipulation No. 33.

34. DAMAGE OR THEFT OF PERSONAL PROPERTY. All personal property brought
into the Demised Premises by Tenant, or Tenant's employees, agents, or
business visitors, shall be at the risk of Tenant only, and Landlord shall
not be liable for theft thereof or any damage thereto occasioned by any act

<PAGE>

of co-tenants, occupants, invitees or other users of the Building or any other
person unless damage or theft is caused by Landlord's negligence or misconduct.
Landlord shall not at any time be liable for damage to any personal property of
Tenant, its employees, sublessees, or invitees in or upon the Demised Premises,
which results from gas, smoke, water, rain, ice or snow which issues or leaks
from or forms upon any part of the Building or from the pipes or plumbing work
of the same, or from any other place whatsoever unless damage is caused by
Landlord's negligence or misconduct.

35. EMINENT DOMAIN.

(a) If all or part of the Project shall be taken for any public or
quasi-public use by virtue of the exercise of the power of eminent domain or by
private purchase in lieu thereof, this Lease shall terminate as to any part of
the Demised Premises so taken as of the date of taking, and, in the case of a
partial taking, either Landlord or Tenant shall have the right to terminate this
Lease by written notice to the other within thirty (30) days after such date;
provided, however, that a condition to the exercise by Tenant of such right to
terminate shall be that the portion of the Project taken shall be of such extent
and nature as to materially impair Tenant's use of the balance of the Demised
Premises (i.e. insufficient parking, lack of access, non-availability of
essential services). If title to so much of the Project is taken that a
reasonable amount of reconstruction thereof will not in Landlord's sole
discretion result in the Building being a practical improvement and reasonably
suitable for use for the purpose for which it is designed, then this Lease shall
terminate on the date that the condemning authority actually takes possession of
the part so condemned or purchased; provided, however, that as a condition to
terminating this Lease, Landlord must also terminate all other leases in the
Building. If a temporary taking has a material, adverse effect on the Demised
Premises and will extend beyond one hundred eighty (180) days, then Tenant shall
have the right to terminate this Lease by timely notice to Landlord. If any
part of the Demised Premises is taken and Tenant elects not to terminate the
Lease, rent will be reduced in proportion to the area of the Demised Premises so
taken.

(b) If this Lease is terminated under the provisions of this
Article 35, Rent shall be apportioned and adjusted as of the date of
termination. Tenant shall have no claim against Landlord or against the
condemning authority for the value of any leasehold estate or for the value
of the unexpired Lease Term provided that the foregoing shall not preclude
any claim that Tenant may have against the condemning authority for the
unamortized cost of leasehold improvements, to the extent the same were
installed at Tenant's expense (and not with the proceeds of the Tenant
Improvement Allowance), or for loss of business, moving expenses or other
consequential damages, in accordance with subparagraph (d) below.

(c) If there is a partial taking of the Project and this Lease is
not thereupon terminated under the provisions of this Article 35, then this
Lease shall remain in full force and effect, and Landlord shall, within a
reasonable time thereafter, repair or reconstruct the remaining portion of
the Project or Building to the extent necessary to make the same a complete
architectural unit; provided, that in complying with its obligations
hereunder, Landlord shall not be required to expend more than the net
proceeds of the condemnation award which are paid to Landlord. Upon any such
partial taking, Landlord shall have the right to reduce the figure described
in Article 8(b)(y) hereof by an amount equal to the product of (x) the amount
of tax savings arising from such partial taking, as determined by Landlord in
its reasonable discretion, divided by the number of square feet of Rentable
Floor Area of the Building, multiplied by (y) the number of square feet of
Rentable Floor Area of the Demised Premises. Landlord shall give Tenant
notice of such adjustment and a statement setting forth a reasonably detailed
explanation of how the adjustment was calculated.

(d) All compensation awarded or paid to Landlord upon a total or
partial taking of the Demised Premises or the Project shall belong to and be
the property of Landlord without any participation by Tenant. Nothing herein
shall be construed to preclude Tenant from prosecuting any claim directly
against the condemning authority for loss of business, for damage to, and
cost of removal of, trade fixtures, furniture and other personal property
belonging to Tenant, and for the unamortized cost of leasehold improvements
to the extent the same were installed at Tenant's expense (and not with the
proceeds of the Tenant Improvement Allowance); provided, however, that no
such claim shall diminish or adversely affect Landlord's award.

(e) Notwithstanding anything to the contrary contained in this
Article 35, if, during the Lease Term, the use or occupancy of any part of
the Project or the Demised Premises shall be taken or appropriated
temporarily for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain, this Lease shall be
and remain unaffected by such taking or appropriation and Tenant shall
continue to pay in full all Rent payable hereunder by Tenant during the Lease
Term. In the event of any such temporary appropriation or taking, Tenant
shall be entitled to receive that portion of any award which represents
compensation for the loss of use or occupancy of the Demised Premises during
the Lease Term, and Landlord shall be entitled to receive that portion of any
award which represents the cost of restoration and compensation for the loss
of use or occupancy of the Demised Premises after the end of the Lease Term.

36. PARTIES. The term "Landlord", as used in this Lease, shall include
Landlord and its successors and assigns. It is hereby covenanted and agreed by
Tenant that should Landlord's interest in the Demised Premises cease to exist
for any reason during the Lease Term, then notwithstanding the happening of such
event, this Lease nevertheless shall remain in full force and effect, and Tenant
hereby agrees to attorn to the then owner of the Demised Premises. The term
"Tenant" shall include Tenant and its heirs, legal representatives and
successors, and shall also include Tenant's assignees, if this Lease shall be
validly assigned for the balance of the Lease Term or any renewals or extensions
thereof. In addition, Landlord and Tenant covenant and agree that Landlord's
right to transfer or assign Landlord's interest in and to the Demised Premises,
or any part or parts thereof, shall be unrestricted, and that in the event of
any such transfer or assignment by Landlord which includes the Demised Premises,
Landlord's obligations to Tenant hereunder shall cease and terminate, and Tenant
shall look only and solely to Landlord's assignee or transferee for performance
thereof, provided Landlord's successor assumes all of Landlord's liability
hereunder.

37. [INTENTIONALLY DELETED.]

12
<PAGE>

See Special Stipulation No. 17.

38. RELOCATION OF THE PREMISES. [INTENTIONALLY DELETED.]

39. FORCE MAJEURE. In the event of strike, lockout, labor trouble,
civil commotion, Act of God, or any other cause beyond a party's control
(collectively "force majeure") resulting in Landlord's inability to supply
the services or perform the other obligations required of Landlord hereunder,
this Lease shall not terminate and Tenant's obligation to pay Rent and all
other charges and sums due and payable by Tenant shall not be affected or
excused and Landlord shall not be considered to be in default under this
Lease. If, as a result of force majeure, Tenant is delayed in performing any
of its obligations under this Lease, other than Tenant's obligation to take
possession of the Demised Premises on or before the Rental Commencement Date
and to pay Rent and all other charges and sums payable by Tenant hereunder,
Tenant's performance shall be excused for a period equal to such delay and
Tenant shall not during such period be considered to be in default under this
Lease with respect to the obligation, performance of which has thus been
delayed.

40. LANDLORD'S LIABILITY. Landlord shall have no personal liability
with respect to any of the provisions of this Lease. If Landlord is in
default with respect to its obligations under this Lease, Tenant shall look
solely to the interest of Landlord in and to the Building and the Land
(including net rental income and net sales, insurance and condemnation
proceeds) for satisfaction of Tenant's remedies, if any. It is expressly
understood and agreed that Landlord's liability under the terms of this Lease
shall in no event exceed the amount of its interest in and to said Land and
Building. In no event shall any partner of Landlord nor any joint venturer in
Landlord, nor any officer, director or shareholder of Landlord or any such
partner or joint venturer of Landlord be personally liable with respect to
any of the provisions of this Lease.

41. LANDLORD'S COVENANT OF QUIET ENJOYMENT. Provided Tenant performs
the terms, conditions and covenants of this Lease, and subject to the terms
and provisions hereof, Landlord covenants and agrees that Tenant shall have
the quiet and peaceful possession of the Demised Premises, for the Lease
Term, without hindrance, claim or molestation by Landlord or any other person
lawfully claiming under Landlord.

42. SECURITY DEPOSITS.

(a) As security for Tenant's obligations to take possession of the
Demised Premises in accordance with the terms of this Lease and to comply
with all of Tenant's covenants, warranties and agreements hereunder, Tenant
shall deposit with Landlord the sum set forth in Article 1(m)(i) above on the
date Tenant executes and delivers this Lease to Landlord as prepaid rent.
Such amount shall be applied by Landlord, without interest, to the first
monthly installment(s) of Base Rental as they become due hereunder. In the
event Tenant fails to take possession of the Demised Premises as aforesaid,
said sum shall be retained by Landlord for application in reduction, but not
in satisfaction, of damages suffered by Landlord as a result of such breach by
Tenant.

(c) In the event of a sale or transfer of Landlord's interest in
the Demised Premises or the Building or a lease by Landlord of the Building,
Landlord shall have the right to transfer the within described security
deposits to the purchaser or lessor, as the case may be, and Landlord shall
be relieved of all liability to Tenant for the return of such security
deposits. Tenant shall look solely to the new owner or lessor for the return
of said security deposits. The security deposits shall not be mortgaged,
assigned or encumbered by Tenant. In the event of a permitted assignment
under this Lease by Tenant, the security deposits shall be held by Landlord as
a deposit made by the permitted assignee and Landlord shall have no further
liability with respect to the return of said security deposits to the
original Tenant.

(d) Neither Landlord nor its agents shall be required to keep the
security deposits separate from their general accounts, it being agreed that
the security deposits may be commingled with other funds of Landlord or of
its agents. It is further agreed and acknowledged by Tenant that Landlord or
its agents shall have the right to deposit the security deposits in an
interest-bearing account, and all interest accrued on the security deposits
shall belong to Landlord and will be retained by Landlord as its property.

43. HAZARDOUS SUBSTANCES. Tenant hereby covenants and agrees that
Tenant shall not bring or cause to be brought any "Hazardous Substances" (as
hereinafter defined) or knowingly permit to be generated, placed, held,
stored, used, located or disposed of at the Project or any part thereof,
except for Hazardous Substances as are commonly and legally used or stored as
a consequence of using the Demised Premises for general office and
administrative purposes, but only so long as the quantities thereof do not
pose a threat to public health or to the environment or would necessitate a
"response action", as that term is defined in CERCLA (as hereinafter
defined), and so long as Tenant strictly complies or causes compliance with
all

<PAGE>

applicable governmental rules and regulations concerning the use or
production of such Hazardous Substances, at the time such materials are
placed in or on the Land, Building or the Demised Premises. For purposes of
this Article 43, "Hazardous Substances" shall mean and include those elements
or compounds which are contained in the list of Hazardous Substances adopted
by the United States Environmental Protection Agency (EPA) or the list of
toxic pollutants designated by Congress or the EPA which are defined as
hazardous, toxic, pollutant, infectious or radioactive by any other federal,
state or local statute, law, ordinance, code, rule, regulation, order or
decree regulating, relating to or imposing liability (including, without
limitation, strict liability) or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereinafter in effect (collectively "Environmental Laws"). Tenant hereby
agrees to indemnify Landlord and hold Landlord harmless from and against any
and all losses, liabilities, including strict liability, damages, injuries,
expenses, including reasonable attorneys' fees, costs of settlement or
judgment and claims of any and every kind whatsoever paid, incurred or
suffered by, or asserted against, Landlord by any person, entity or
governmental agency for, with respect to, or as a direct or indirect result
of Tenant's breach of this paragraph 43 (including, without limitation, any
losses, liabilities, including strict liability, damages, injuries, expenses,
including reasonable attorneys' fees, costs of any settlement or judgment or
claims asserted or arising under the Comprehensive Environmental Response,
Compensation and Liability Act ["CERCLA"], any so-called federal, state or
local "Superfund" or "Superlien" laws or any other Environmental Law);
provided, however, that the foregoing indemnity is limited to matters arising
solely from Tenant's violation of the covenant contained in this Article. The
obligations of Tenant under this Article shall survive any expiration or
termination of this Lease.

See Special Stipulation No. 16.

44. SUBMISSION OF LEASE. The submission of this Lease for examination
does not constitute an offer to lease and this Lease shall be effective only
upon execution hereof by Landlord and Tenant.

45. SEVERABILITY. If any clause or provision of the Lease is illegal,
invalid or unenforceable under present or future laws, the remainder of this
Lease shall not be affected thereby, and in lieu of each clause or provision
of this Lease which is illegal, invalid or unenforceable, there shall be
added as a part of this Lease a clause or provision as nearly identical to
the said clause or provision as may be legal, valid and enforceable.

46. ENTIRE AGREEMENT. This Lease contains the entire agreement of the
parties and no representations, inducements, promises or agreements, oral or
otherwise, between the parties not embodied herein shall be of any force or
effect. No failure of Landlord to exercise any power given Landlord
hereunder, or to insist upon strict compliance by Tenant with any obligation
of Tenant hereunder, and no custom or practice of the parties at variance
with the terms hereof, shall constitute a waiver of Landlord's right to
demand exact compliance with the terms hereof. This Lease may not be
altered, waived, amended or extended except by an instrument in writing
signed by Landlord and Tenant. This Lease is not in recordable form, and
Tenant agrees not to record or cause to be recorded this Lease or any short
form or memorandum thereof.

47. HEADINGS. The use of headings herein is solely for the convenience
of indexing the various paragraphs hereof and shall in no event be considered
in construing or interpreting any provision of this Lease.

48. BROKER. Broker(s) [as defined in Article 1(n)] is(are) entitled to
a leasing commission from Landlord by virtue of this Lease, which leasing
commission shall be paid by Landlord to Broker(s) in accordance with the
terms of a separate agreement between Landlord and Broker(s). Tenant
represents and warrants to Landlord that [except with respect to any Broker(s)
identified in Article 1(n) hereinabove, which has(have) acted as agent for
Tenant (and not for Landlord) in this transaction] no broker, agent,
commission salesperson, or other person has represented Tenant in the
negotiations for and procurement of this Lease and that [except with respect
to any Broker(s) identified in Article 1(n) hereinabove] no commissions, fees
or compensation of any kind are due and payable in connection herewith to any
broker, agent, commission salesperson or other person as a result of any act
or agreement of Tenant. Tenant agrees to indemnify and hold Landlord harmless
from all loss, liability, damage, claim, judgment, cost or expense (including
reasonable attorneys' fees and court costs) suffered or incurred by Landlord
as a result of a breach by Tenant of the representation and warranty
contained in the immediately preceding sentence or as a result of Tenant's
failure to pay commissions, fees or compensation due to any broker who
represented Tenant, whether or not disclosed, or as a result of any claim for
any fee, commission or similar compensation with respect to this Lease made
by any broker, agent or finder [other than the Broker(s) identified in
Article 1(n) hereinabove] claiming to have dealt with Tenant with respect to
the Lease, whether or not such claim is meritorious. The parties hereto do
hereby acknowledge and agree that COMPASS Management and Leasing, Inc., a
subsidiary of Equitable Real Estate Investment Management, Inc., has acted as
agent for Landlord in this transaction and shall be paid a commission by
Landlord in connection with this transaction pursuant to the terms of a
separate written commission agreement. COMPASS Management and Leasing, Inc.
has not acted as agent for Tenant in this transaction. Landlord hereby
warrants and represents to Tenant that Landlord has not dealt with any
broker, agent or finder other than COMPASS Management and Leasing, Inc. and
Broker as defined in subparagraph 1(n) in connection with this Lease, and,
Landlord hereby agrees to indemnify and hold Tenant harmless from and against
any and all loss, damage, liability, claim, judgment, cost or expense
(including, but not limited to, reasonable attorneys' fees and court costs)
that may be incurred or suffered by Tenant because of any claim for any fee,
commission or similar compensation with respect to this Lease made by any
broker, agent or finder claiming to have represented Landlord.

49. GOVERNING LAW. The laws of the State of Georgia shall govern the
validity, performance and enforcement of this Lease.

50. AUTHORITY. If Tenant executes this Lease as a corporation, Tenant
does hereby represent and warrant that Tenant is a duly incorporated or a
duly qualified (if a foreign corporation) corporation and is fully authorized
and qualified to do business in the State in which the Demised Premises are
located, that the corporation has full right and authority to enter into this
Lease, and that each person signing on behalf of the corporation is an
officer of the corporation and is authorized to sign on behalf of the
corporation. If Tenant signs as a partnership, joint venture or sole
proprietorship or other

14
<PAGE>

business entity (each being herein called "Entity"), each of the persons
executing on behalf of Tenant does hereby covenant and warrant that Tenant is
a duly authorized and existing Entity, that Tenant has full right and
authority to enter into this Lease, that all persons executing this Lease on
behalf of the Entity are authorized to do so on behalf of the Entity, and
that such execution is fully binding upon the Entity and its partners, joint
venturers or principal, as the case may be. Upon the request of Landlord,
Tenant shall deliver to Landlord documentation satisfactory to Landlord
evidencing Tenant's compliance with this Article, and Tenant agrees to
promptly execute all necessary and reasonable applications or documents as
reasonably requested by Landlord, required by the jurisdiction in which the
Demised Premises is located, to permit the issuance of necessary permits and
certificates for Tenant's use and occupancy of the Demised Premises.

51. JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one person,
corporation, partnership or other entity, the liability hereunder of all such
persons, corporations, partnerships or other entities shall be joint and
several.

52. SPECIAL STIPULATIONS. The special stipulations attached hereto as
EXHIBIT "F" are hereby incorporated herein by this reference as though fully set
forth (if none, so state). To the extent the special stipulations conflict with
or are inconsistent with the foregoing provisions of this Lease or any exhibit
to this Lease, the special stipulations shall control.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day, month and year first above written.

"LANDLORD": ZML-CENTRAL PARK, L.L.C., a Delaware
Limited Liability Company
BY: EQUITY OFFICE HOLDINGS, L.L.C., as agent

Date executed by Landlord By: /s/ Arvid Povilaitis
-------------------------------------------
11/6/95 Arvid Povilaitis
- ------------------- Title: Vice President
----------------------------------------

"TENANT":
ACTAMED CORP., a Georgia corporation

Date executed by Tenant By: /s/ Nancy J. Ham
10/2/95 -------------------------------------------
- ----------- Title: Chief Financial Officer
----------------------------------------
Attest:
---------------------------------------
Title:
---------------------------------------

[CORPORATE SEAL]

Exhibits Attached

Rules and Regulations
Exhibit "A" - Legal Description of Building 7000
Exhibit "A-1" - Storage Space
Exhibit "B" - Floor Plan
Exhibit "C" - Supplemental Notice
Exhibit "D" - Landlord's Construction
Exhibit "E" - Building Standard Services
Exhibit "F" - Special Stipulations
Exhibit "G" - Janitorial Specifications

15
<PAGE>

ADDENDUM

This Addendum is entered into as of the 6th day of November, 1995 by
and between ZML-Central Park, L.L.C., a Delaware Limited Liability Company
("Landlord") by its agent Equity Office Holdings, L.L.C., a Delaware Limited
Liability Company, and Actamed Corp., a Georgia Corporation ("Tenant").

WITNESSETH:

WHEREAS, simultaneously with the execution of this Addendum, Landlord and Tenant
have entered into that certain lease of even date herewith (the "Lease") for
approximately 41,292 square feet of Rentable Floor Area on the 4th and 6th
floors of the building located at 7000 Central Parkway, Atlanta, Georgia and
commonly known as Central Park (the "Building"), all as more particularly
described in the Lease; and

WHEREAS, Landlord and Tenant desire to modify certain terms and conditions of
the Lease as set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration, the sufficiency and receipt of which is
acknowledge, Landlord and Tenant agree as follows:

1. TERM. Article 3 of the Lease is hereby amended by adding the
following language at the end thereof:

"Notwithstanding anything herein to the contrary, if Landlord determines
that it will be unable to substantially complete the Additional Space by
sixty (60) days after the scheduled Rental Commencement Date for the
Additional Space (the "Outside Completion Date"), Landlord shall have the
right to provide Tenant with written notice (the "Outside Extension
Notice") of such inability, which Outside Extension Notice shall set forth
the date on which Landlord reasonably believes that it will be able to
substantially complete the Additional Space. Upon receipt of the Outside
Extension Notice, Tenant shall have the right to terminate this Lease by
providing written notice of termination to Landlord within five (5)
business days after the date of the Outside Extension Notice. In the event
that Tenant does not terminate this Lease within such five (5) business day
period, the Outside Completion Date shall automatically be amended to be
the date set forth in Landlord"s Outside Extension Notice."

2. RELOCATION OF PREMISES. Article 38 of the Lease is hereby amended by
deleting the words "INTENTIONALLY DELETED" and adding the following in lieu
thereof:

"In the event that: (i) Tenant leases First Refusal Space (as defined in
Exhibit F) on any floor of the Building other than the 4th and 6th floors;
and (ii) such First Refusal Space, when combined with any other space
already leased by Tenant on such floor, equals a total of less than 6,000
rentable square feet, then Landlord, at its expense, shall be entitled to
cause Tenant to relocate from such First Refusal Space to space containing
comparable improvements and approximately the same Rentable Area as the
First Refusal Space (the "Relocation Space")

<PAGE>

SECOND AMENDMENT

This Second Amendment (the "Amendment") is made and entered into as of the
22nd day of April 1996, by and between ZML-Central Park, L.L.C., a Delaware
limited liability company "Landlord") by its agent, Equity Office Holdings,
L.L.C., a Delaware limited liability company and ActaMed Corporation, a Georgia
corporation ("Tenant").

WITNESSETH

A. WHEREAS, Landlord and Tenant are parties to that certain Lease Agreement
dated the 4th day of November, 1995 as amended by that certain Addendum dated
the 6th day of November, 1995, for approximately 41,292 rentable square feet of
space described as Suite No(s). 400 and 600 on the fourth (4th) and sixth (6th)
floor(s) of the building commonly known as 7000 Central Park and the address of
which is 7000 Central Parkway, Atlanta, Georgia (the "Building"); and

B. WHEREAS, Tenant has requested that additional space consisting of 2,404
rentable square feet on the third (3rd) floor of the Building shown on Exhibit A
hereto (the "Expansion Space") be added to the Premises and that the Lease be
appropriately amended, and Landlord is willing to do the same on the terms and
conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant agree as
follows:

I. EXPANSION AND EFFECTIVE DATE. Effective as of the Expansion
Effective Date (as hereinafter defined), the Premises is increased from
41,292 rentable square feet on the fourth (4th) and sixth (6th) floor(s) to
43,696 rentable square feet on the third (3rd), fourth (4th) and sixth (6th)
floor(s) by the addition of the Expansion Space. The lease term for the
Expansion Space shall commence on the Expansion Effective Date and end at
5:00 p.m. on the last day following thirty-six (36) calendar months following
the Expansion Effective Date (the "Expansion Space Termination Date"). The
Expansion Space is subject to all the terms and conditions of the Lease
except as expressly modified herein and except that Tenant shall not be
entitled to receive any allowances, abatement or other financial concession
granted with respect to the Premises unless such concessions are expressly
provided for herein with respect to the Expansion Space.

A. The Expansion Effective Date shall be April 22, 1996
("Expansion Effective Date").

II. MONTHLY BASE RENTAL.

In addition to Tenants' obligation to pay Base Rental for the Premises,
Tenant shall pay Landlord the sum of One Hundred Sixty-two Thousand Two Hundred
Seventy and 00/100's Dollars ($165,539.40) as Base Rental for the Expansion
Space in Thirty-six monthly installments as follows:

A. Twelve equal installments of Four Thousand Five Hundred
Seven and 50/100's Dollars ($4,507.50) each payable on or before
the first day of each month during the period beginning April 22,
1996 and ending April 21, 1997.

B. Twelve equal installments of Four Thousand Five Hundred
Ninety-seven and 65/100's Dollars ($4,597.65) each payable on or
before the first day of each month during the period beginning
April 22, 1997 and ending April 21, 1998.

<PAGE>

C. Twelve equal installment of Four Thousand Six Hundred
Eighty-nine and 80/100's Dollars ($4,689.80) each payable on or
before the first day of each month during the period beginning
April 22, 1998 and ending April 21, 1999.

All such Base Rental shall be payable by Tenant in accordance with the
terms of Article V of the Lease.

III. TENANT'S PRO RATA SHARE. For the period commencing with the
Expansion Effective Date and ending on the Expansion Space Termination Date
unless terminated sooner as provided herein, Tenants Pro Rata Share for purposes
of calculating Tenant's Additional Rental for the Expansion Space is Fifty-nine
One Hundredths percent (.59%).

IV. BASE YEAR, BASE AMOUNT, TAX BASE, AND EXPENSE BASE. For the
period commencing with the Expansion Effective Date and ending on the Expansion
Space Termination Date, the Base Year for the computation of Tenant's Pro Rata
Share of Basic Costs applicable to the Expansion Space is 1996.

V. IMPROVEMENTS TO EXPANSION SPACE.

A. ACCEPTANCE OF EXPANSION SPACE. Tenant has inspected the
Expansion Space and agrees to accept the same "as is" without any
agreements, representations, understandings or obligations on the
part of Landlord to perform any alterations, repairs or
improvements, except as may be expressly provided otherwise in this
Amendment.

B. OCCUPANCY OF EXPANSION SPACE. Tenant shall have the right to
take occupancy of the Expansion Space on April 22, 1996. Tenant
may elect to perform improvements or have Landlord perform
improvements to the Expansion Space thereafter.

C. COST OF IMPROVEMENTS TO EXPANSION SPACE. Provided Tenant is
not in default, Tenant shall be entitled to receive an improvement
allowance (the "Expansion Improvement Allowance") in an amount not
to exceed Nineteen Thousand Five Hundred Ninety-two and 60/100
Dollars ($19,592.60) to be applied toward the cost of performing
initial construction, alteration or improvement of the Expansion
Space, including but not limited to the cost of space planning,
design and related architectural and engineering services and a
five percent (5%) construction management fee if Tenant elects to
have Landlord manage the construction of the Expansion Space. In
the event the total cost of the initial improvements to the
Expansion Space exceeds the Expansion Improvement Allowance, Tenant
shall pay for such excess upon demand. Any unused Expansion
Improvement Allowance may be used by Tenant for improvements in the
original Premises within eight (8) months after the Expansion
Effective Date or if not used within said eight (8) months, accrue
to the sole benefit of Landlord. Landlord shall pay such Expansion
Improvement Allowance directly to the contractors retained to
perform the construction, design or related improvement work to the
Expansion Space.

<PAGE>

D. RESPONSIBILITY FOR IMPROVEMENTS TO EXPANSION SPACE.

(i) WORK PERFORMED BY OR ON BEHALF OF LANDLORD PURSUANT TO
PLANS YET TO BE PREPARED.

If Tenant elects to have Landlord manage the construction of
the Expansion Space, Landlord shall enter into a direct
contract for the initial improvements to the Expansion Space
with a general contractor selected by Landlord. Tenant
shall devote such time in consultation with Landlord or
Landlord's architect as may be required to provide all
information Landlord deems necessary in order to enable
Landlord to complete, and obtain Tenant's written approval
of, the plans for the initial improvements to the Expansion
Space in a timely manner. All plans for the initial
improvements to the Expansion Space shall be subject to
Landlord's consent, which consent shall not be unreasonably
withheld. If the cost of such improvements exceeds the
Expansion Improvement Allowance, then prior to commencing
any construction of improvements to the Expansion Space,
Landlord shall submit to Tenant a written estimate setting
forth the anticipated cost, including but not limited to the
cost of space planning, design and related architectural and
engineering services, labor and materials, contractor's
fees, and permit fees. Within a reasonable time thereafter,
Tenant shall either notify Landlord in writing of its
approval of the cost estimate or specify its objections
thereto and any desired changes to the proposed
improvements. In the event Tenant notifies Landlord of such
objections and desired changes, Tenant shall work with
Landlord to reach a mutually acceptable alternative cost
estimate.

VI. RIGHT TO TERMINATE. Provided Tenant is not in default under the
Lease, as amended, Tenant shall have a one-time right to terminate the Lease
with respect to the Expansion Space only as defined by this Second Amendment
effective as of October 21, 1997 (the "Early Termination Date") subject to the
following terms and conditions:

A. Tenant shall notify Landlord in writing of its desire to
terminate the Lease with respect to the Expansion space no less
than six (6) months prior to the Early Termination Date.

B. Tenant shall pay to Landlord no later than October 1, 1997 a
termination fee equal to Thirty-five Thousand three Hundred
Ninety-eight and 90/100 Dollars ($35,398.90) which is the (i)
unamortized Expansion Improvement Allowance (at 13%), (ii) the
difference between a Base Rental Rate of $22.50 and $25.00 for
twelve (12) months and the difference between a Base Rental Rate
of $22.95 and $25.00 for six (6) months and (iii) three (3) months
rent at $25.00 per rentable square foot.

C. Tenant shall vacate the Expansion Space effective October
21, 1997 and leave same in broom clean condition.

VII. MISCELLANEOUS.

A. This Second Amendment sets forth the entire agreement
between the parties with respect to the matters set forth herein.
There have been no additional oral or written representations or
agreements.

<PAGE>

B. Except as herein modified or amended, the provisions,
conditions and terms of the Lease shall remain unchanged and in
full force and effect.

C. In the case of any inconsistency between the provisions of
the Lease and this Second Amendment, the provisions of this
Amendment shall govern and control.

D. Submission of this Second Amendment by Landlord is not an
offer to enter into this Second Amendment but rather is a
solicitation for such an offer by Tenant. Landlord shall not be
bound by this Second Amendment until Landlord has executed and
delivered the same to Tenant.

E. The capitalized terms used in this Second Amendment shall
have the same definitions as set forth in the Lease to the extent
that such capitalized terms are defined therein and not redefined
in this Second Amendment.

F. This Second Amendment shall be of no force and effect unless
and until accepted by any guarantors of the Lease, who by signing
below shall agree that their guarantee shall apply to the Lease as
amended herein, unless such requirement is waived by Landlord in
writing.

G. Landlord and Tenant each warrant and represent to the other
that CB Commercial Real Estate Services ("Broker") has represented
Tenant in connection with the negotiations of the Second Amendment
and that Equity Office Properties, L.L.C. ("Co-Broker"),
collectively "Brokers", has represented Landlord, and it knows of
no other real estate broker, agent or finder other than the Brokers
who is entitled to any commission in connection with this Second
Amendment. Landlord and Tenant each covenant and agree to defend,
indemnify and hold the other harmless from and against any and all
loss, liability, damage, claim, judgment, cost or expense
(including, but not limited to, reasonable attorneys' fees and
expenses and court costs) that may be incurred or suffered by the
other because of any claim for any fee, commission or similar
compensation with respect to the Second Amendment made by any
broker, agent or finder claiming to have dealt with the
indemnifying party whether or not such claim is meritorious.
Landlord agrees to pay the commission due Brokers in connection
with this Second Amendment pursuant to a separate written
commission agreement. The parties hereby acknowledge CB Commercial
Real Estate Services has represented Tenant and Equity Office
Properties, L.L.C. has represented Landlord in this transaction.

<PAGE>

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Second
Amendment as of the day and year first above written.

WITNESSES; ATTESTATION LANDLORD:ZML-Central Park, L.L.C.,
a Delaware limited liability company

BY: EQUITY OFFICE HOLDINGS, L.L.C.,
a Delaware limited liability company as
agent

By: /s/ Arvid A. Povilaitis
--------------------------------
/s/ Angel Rivera
- ----------------------------

Name (print): Angel Rivera Name: /s/ Arvid A Povilaitis
-------------- ------------------------------

/s/ illegible
- ----------------------------
Title: VP -- ASSET MANAGEMENT
-----------------------------

Name (print): illegible
- ----------------------------
Date:
------------------------------

TENANT: ActaMed Corporation,
a Georgia corporation

/s/ Mary Lee Lockhart
- ----------------------------
By: /s/ Nancy J. Ham
--------------------------------
Name (print): Mary Lee Lockhart

/s/ Katherine B. Grissom Its: CFO
- ---------------------------- -------------------------------

Name (print): Katherine B. Grissom Date: 4/22/96
--------------------- ------------------------------

<PAGE>

EXHIBIT A

This Exhibit is attached to and made a part of the Third Amendment dated
April 22nd, 1996, by and between ZML-Central Park, L.L.C., a Delaware limited
liability company ("Landlord"), by its agent Equity Office Holdings, L.L.C., a
Delaware limited liability company and ActaMed Corporation, a Georgia
corporation ("Tenant") for space in the Building located at 7000 Central
Parkway, Atlanta, Georgia.

The Expansion Space shall consist of 2,404 rentable square feet located on
the third (3rd) floor in the Building commonly known as 7000 Central Park in the
approximate location outlined below.

[MAP]

<PAGE>

THIRD AMENDMENT

This Third Amendment (the "Amendment") is made and entered into as of the
9th day of February, 1998, by and between EOP-Central Park, L.L.C., a Delaware
limited liability company ("Landlord"), and ActaMed Corporation, a Georgia
corporation ("Tenant").

WITNESSETH

A. WHEREAS, Landlord (f/k/a ZML-Central Park, L.L.C.) and Tenant are parties
to that certain lease dated the 6th day of November, 1995, for space
currently containing approximately 43,696 rentable square feet of space
(the "Original Premises") described as Suite No(s). 370, 400, and 600 on
the Third, Fourth, and Sixth floor(s) of the building commonly known as
Central Park and the address of which is 7000 Central Parkway, Atlanta, GA
30328 (the "Building"), which lease has been previously amended or assigned
by instrument(s) dated November 6, 1995 and April 22, 1996 (collectively,
the "Lease"); and

B. WHEREAS, Tenant desires to surrender a portion of the Premises to Landlord
containing approximately 2,404 rentable square feet on the Third floor(s)
of the Building as shown on EXHIBIT A hereto (the "Reduction Space") and
that the Lease be appropriately amended, and Landlord is willing to accept
such surrender on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant agree as
follows:

I. REDUCTION. Effective as of December 31, 1997 (the "Reduction
Effective Date"), the Premises is decreased from 43,696 rentable
square feet on the Third, Fourth and Sixth floor(s) to 41,292
rentable square feet on the Fourth and Sixth floor(s) by the
elimination of the Reduction Space. As of the Reduction Effective
Date, the Reduction Space shall be deemed surrendered by Tenant to
Landlord, the Lease shall be deemed terminated with respect to the
Reduction Space, and the "Premises", as defined in the Lease, shall
be deemed to mean the Original Premises, less the Reduction Space.
Tenant shall fully comply with all obligations under the Lease
respecting the Reduction Space through the Reduction Effective
Date, including those provisions relating to the condition of the
Reduction Space and removal of Tenant's Property therefrom upon
termination or expiration of the Lease. Landlord acknowledges
that Tenant has surrendered the Reduction Space as of the Reduction
Effective Date and Tenant will not be subject to any holdover
provisions as defined in the Lease, as it relates to the Reduction
Space. Landlord also acknowledges that the Reduction Space was
returned to it in broom clean condition.

II. MONTHLY BASE RENTAL. As of the Reduction Effective Date, the
schedule of monthly installments of Base Rental contained in the
Second Amendment is hereby deleted.

III. TENANT'S PRO RATA SHARE. For the period commencing with the
Reduction Effective Date, Tenant's Pro Rata Share as contained in
the Second Amendment is hereby deleted.

IV. REPRESENTATIONS. Each party represents to the other that it has
full power and authority to execute this Amendment. Tenant
represents that it has not made any assignment, sublease, transfer,
conveyance of the Lease or any interest therein or in the Reduction
Space other than those explicitly recited herein and further
represents that there is not and will not hereafter be any claim,
demand, obligation, liability, action or cause of action by any
other party respecting, relating to or arising out of the Reduction
Space, and Tenant agrees to indemnify and hold harmless Landlord
and the Landlord Related Parties (as defined in the "Miscellaneous"
Section below) from all liabilities, expenses, claims, demands,
judgments, damages or costs arising from any of the same, including
without limitation, attorneys' fees. Tenant acknowledges that
Landlord will be relying on this Amendment in entering into leases
for the Reduction Space with other parties.

VII. MISCELLANEOUS.

A. This Amendment sets forth the entire agreement between the
parties with respect to the matters set forth herein. There
have been no additional oral or written representations or
agreements. Under no circumstances shall Tenant be entitled
to any Rent abatement, improvement allowance, leasehold
improvements, or other work to the Premises, or any similar
economic incentives that may have been provided Tenant in
connection

<PAGE>

with entering into the Lease, unless specifically set forth
in this Amendment. This Amendment shall not be relied upon
by any other party, individual, corporation, partnership or
entity as a basis for reducing its lease obligations with
Landlord. Tenant agrees that it shall not disclose any
matters set forth in this Amendment or disseminate or
distribute any information concerning the terms, details or
conditions hereof to any person, firm or entity without
obtaining the express written consent of Landlord.

B. Except as herein modified or amended, the provisions,
conditions and terms of the Lease shall remain unchanged and
in full force and effect.

C. In the case of any inconsistency between the provisions of
the Lease and this Amendment, the provisions of this
Amendment shall govern and control.

D. Submission of this Amendment by Landlord is not an offer to
enter into this Amendment but rather is a solicitation for
such an offer by Tenant. Landlord shall not be bound by
this Amendment until Landlord has executed and delivered the
same to Tenant.

E. The capitalized terms used in this Amendment shall have the
same definitions as set forth in the Lease to the extent
that such capitalized terms are defined therein and not
redefined in this Amendment.

F. Tenant hereby represents to Landlord that Tenant has dealt
with no broker in connection with this Amendment. Tenant
agrees to indemnify and hold Landlord, its members,
principals, beneficiaries, partners, officers, directors,
employees, mortgagee(s) and agents, and the respective
principals and members of any such agents (collectively, the
"Landlord Related Parties") harmless from all claims of any
brokers claiming to have represented Tenant in connection
with this Amendment. Landlord hereby represents to Tenant
that Landlord has dealt with no broker in connection with
this Amendment. Landlord agrees to indemnify and hold
Tenant, its members, principals, beneficiaries, partners,
officers, directors, employees, and agents, and the
respective principals and members of any such agents
(collectively, the "Tenant Related Parties") harmless from
all claims of any brokers claiming to have represented
Landlord in connection with this Amendment.

2
<PAGE>

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment
as of the day and year first above written.

WITNESS/ATTEST: LANDLORD:

EOP-CENTRAL PARK, L.L.C., A DELAWARE
LIMITED LIABILITY COMPANY

By: EOP Operating Limited Partnership,
a Delaware limited partnership, its
managing member

By Equity Office Properties Trust,
a Maryland real estate
investment trust, its managing
general partner

By:
- ----------------------------------- --------------------------------

Name (print): Name:
---------------------- ------------------------------

Title:
- ----------------------------------- -----------------------------

Name (print):
----------------------

TENANT: ACTAMED CORPORATION,
a Georgia corporation

/s/ Katherine B. Grissom By: /s/ Lewis R. Belote
- ----------------------------------- --------------------------------

Name: Lewis R. Belote, II
--------------------------------

Pat N. Daer
- -----------------------------------
Title: Senior VP & CFO
-----------------------------

<PAGE>

HEALTHEON CORPORATION

SECURITIES PURCHASE AGREEMENT

INITIAL CLOSING:
JANUARY 26, 1996

SUBSEQUENT CLOSING:
August 15, 1996

<PAGE>

TABLE OF CONTENTS

Page
----
<S> <C>
SECTION 1 - Authorization and Sale of Stock. . . . . . . . . . . . 1

1.1 Authorization . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale of Stock . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2 - Closing Date; Delivery . . . . . . . . . . . . . . . . 1

2.1 Closing Date. . . . . . . . . . . . . . . . . . . . . . 1
2.2 Subsequent Closing. . . . . . . . . . . . . . . . . . . 2
2.3 Delivery. . . . . . . . . . . . . . . . . . . . . . . . 2

SECTION 3 - Representations and Warranties of the Company. . . . . 2

3.1 Organization and Standing; Certificate and Bylaws . . . 2
3.2 Corporate Power . . . . . . . . . . . . . . . . . . . . 2
3.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 3
3.4 Capitalization. . . . . . . . . . . . . . . . . . . . . 3
3.5 Authorization . . . . . . . . . . . . . . . . . . . . . 3
3.6 Title to Properties and Assets; Liens, etc. . . . . . . 3
3.7 Financial Statements. . . . . . . . . . . . . . . . . . 4
3.8 Activities Since Balance Sheet Date . . . . . . . . . . 4
3.9 Tax Returns and Payments. . . . . . . . . . . . . . . . 5
3.10 Patents, Trademarks, etc. . . . . . . . . . . . . . . . 5
3.11 Material Contracts and Commitments. . . . . . . . . . . 5
3.12 Compliance with Other Instruments, None
Burdensome, etc. . . . . . . . . . . . . . . . . . . . 6
3.13 Litigation, etc.. . . . . . . . . . . . . . . . . . . . 6
3.14 Employees . . . . . . . . . . . . . . . . . . . . . . . 6
3.15 Registration Rights . . . . . . . . . . . . . . . . . . 6
3.16 Governmental Consent, etc.. . . . . . . . . . . . . . . 6
3.17 Brokers or Finders. . . . . . . . . . . . . . . . . . . 7
3.18 Disclosures . . . . . . . . . . . . . . . . . . . . . . 7
3.19 Permits . . . . . . . . . . . . . . . . . . . . . . . . 7

SECTION 4 - Representations and Warranties of the Investors. . . . 7

4.1 Authorization . . . . . . . . . . . . . . . . . . . . . 7
4.2 Purchase Entirely for Own Account . . . . . . . . . . . 7
4.3 Investment Experience . . . . . . . . . . . . . . . . . 8
4.4 Accredited Investor . . . . . . . . . . . . . . . . . . 8
4.5 No Public Market. . . . . . . . . . . . . . . . . . . . 8
4.6 Receipt of Information. . . . . . . . . . . . . . . . . 8
4.7 Restricted Securities . . . . . . . . . . . . . . . . . 8
4.8 Further Limitations on Disposition. . . . . . . . . . . 9
</TABLE>

-i-

<PAGE>

TABLE OF CONTENTS
(continued)

<TABLE>
<CAPTION>
Page
----
<S> <C>
4.9 Legends . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Government Consents . . . . . . . . . . . . . . . . . .10

SECTION 5 - Conditions to Closing of Investors . . . . . . . . . .10

5.1 Representations and Warranties Correct. . . . . . . . .10
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . .10
5.3 Opinion of Company's Counsel. . . . . . . . . . . . . .10
5.4 Compliance Certificate. . . . . . . . . . . . . . . . .10
5.5 Blue Sky. . . . . . . . . . . . . . . . . . . . . . . .10
5.6 Board of Directors. . . . . . . . . . . . . . . . . . .10
5.7 Restated Certificate. . . . . . . . . . . . . . . . . .11
5.8 No Material Adverse Change. . . . . . . . . . . . . . .11
5.9 Investors' Rights Agreement . . . . . . . . . . . . . .11

SECTION 6 - Conditions to Closing of Company . . . . . . . . . . .11

6.1 Representations . . . . . . . . . . . . . . . . . . . .11
6.2 Blue Sky. . . . . . . . . . . . . . . . . . . . . . . .11
6.3 Restated Certificate. . . . . . . . . . . . . . . . . .11

SECTION 7 - Miscellaneous. . . . . . . . . . . . . . . . . . . . .11

7.1 Governing Law . . . . . . . . . . . . . . . . . . . . .11
7.2 Survival. . . . . . . . . . . . . . . . . . . . . . . .11
7.3 Successors and Assigns. . . . . . . . . . . . . . . . .11
7.4 Entire Agreement; Amendment . . . . . . . . . . . . . .12
7.5 Notices, etc. . . . . . . . . . . . . . . . . . . . . .12
7.6 Delays or Omissions . . . . . . . . . . . . . . . . . .12
7.7 California Corporate Securities Law . . . . . . . . . .12
7.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . .13
7.9 Counterparts. . . . . . . . . . . . . . . . . . . . . .13
7.10 Severability. . . . . . . . . . . . . . . . . . . . . .13
7.11 Gender. . . . . . . . . . . . . . . . . . . . . . . . .13
</TABLE>

-ii-

<PAGE>

EXHIBITS

A. Schedule of Investors

B. Restated Certificate of Incorporation

C. Exceptions to Representations and Warranties of the Company

D. Amended and Restated Investors' Rights Agreement

E. Form of Opinion of Wilson Sonsini Goodrich & Rosati

<PAGE>

HEALTHEON CORPORATION

AMENDED AND RESTATED

SECURITIES PURCHASE AGREEMENT

This Amended and Restated Securities Purchase Agreement (the "Agreement")
is made as of August 15, 1996, by and among Healtheon Corporation, a Delaware
corporation (the "Company"), with its principal office at 87 Encina Avenue, Palo
Alto, California 94301, and the persons and entities listed on the Schedule of
Investors attached as Exhibit A hereto (the "Investors").

SECTION 1

AUTHORIZATION AND SALE OF STOCK

1.1 AUTHORIZATION. The Company has authorized the sale and issuance of up
to 1,000,000 shares of its Common Stock ("Common Stock") and up to 10,285,000
shares of its Series A Preferred Stock ("Series A Preferred"), each having the
rights, restrictions, privileges and preferences as set forth in the Company's
Restated Certificate of Incorporation in the form attached to this Agreement as
Exhibit B (the "Restated Certificate").

1.2 SALE OF STOCK. Subject to the terms and conditions hereof, the
Company will issue and sell to the Investors, and the Investors will buy from
the Company, the number of shares (the "Shares") of Common Stock and Series A
Preferred specified opposite each Investor's name on the Schedule of Investors,
at a cash purchase price of $0.05 per share and $0.50 per share, respectively.
The Company's agreements with each of the Investors are separate agreements, and
the sales of the Shares to each of the Investors are separate sales.

SECTION 2

CLOSING DATE; DELIVERY

2.1 CLOSING DATE. The initial closing of the purchase and sale of the
Shares hereunder (the "Closing") shall be held at 3:00 p.m. on January 26, 1996
or on such later date or dates as the Company and the Investors may agree to
(the date of such Closing being referred to as the "Closing Date"). The place
of the Closing (including the place of delivery to the Investors by the Company
of the certificates evidencing all shares of Common Stock and Series A Preferred
being purchased and the place of payment to the Company by the Investors of the
purchase price therefor) shall be at the offices of Wilson Sonsini Goodrich &
Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California
94304-1050, or such other place as the Investors and the Company may mutually

<PAGE>

agree. The date of any closing of the transactions contemplated by this
Agreement is sometimes also referred to herein as the "Closing Date."

2.2 SUBSEQUENT CLOSING. The Company may, in its sole discretion, provide
for deferred closings hereunder (the "Subsequent Closings"), to be held at the
offices of Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California, at such time and dates as the Company may determine (the date of
such Subsequent Closing being referred to as the "Subsequent Closing Date").
The persons entitled to purchase shares of Series A Preferred pursuant to this
Section 2.2 will be limited to those individuals and entities who, based on
their reputations, experience and contacts within the Company's business, the
Board of Directors unanimously believes can contribute to the success of the
Company (the "Friends of the Company"). The Closing(s) for the Friends of the
Company will take place as promptly as possible following the initial Closing
hereunder. The number of shares of Series A Preferred which each such Friend of
the Company shall be entitled to purchase, shall be determined within the sole
discretion of the Company, but in no event shall the total number of shares of
Series A Preferred sold pursuant to this Agreement be more than 10,285,000.
Upon completion of each Subsequent Closing, if any, all additional purchasers of
shares of Series A Preferred shall be considered "Investors" within the meaning
of this Agreement.

2.3 DELIVERY. At the Closing and any Subsequent Closing, the Company will
deliver to each Investor a certificate or certificates representing the number
of Shares designated in column 2 of the Schedule of Investors to be purchased by
each Investor, against payment of the purchase price therefor, by check or wire
transfer payable to the Company, or by cancellation of outstanding indebtedness
from the Company to such Investor, or by a combination thereof, in the amount
specified in column 3 of the Schedule of Investors.

SECTION 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on Exhibit C attached hereto, the Company hereby
represents and warrants to the Investors as follows:

3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of the
State of Delaware and is in good standing under such laws. The Company has
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted and as proposed to be conducted.
The Company is not qualified to do business as a foreign corporation in any
jurisdiction and such qualification is not presently required.

-2-
<PAGE>

Shares hereunder, to issue the underlying Series A-1 Preferred Stock (the
"Series A-1 Preferred") and Common Stock (together, the "Conversion Stock")
in accordance with the provisions of the Restated Certificate, and to carry
out and perform its obligations under the terms of this Agreement and the
Investors' Rights Agreement.

3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated companies
and does not otherwise own or control, directly or indirectly, any other
corporation, association or business entity.

3.4 CAPITALIZATION. The authorized capital stock of the Company consists
of 23,000,000 shares of Common Stock, 1,000,300 shares of which are issued and
outstanding prior to the Closing, and 11,000,000 shares of Series A Preferred,
10,000,000 shares of which are issued and outstanding prior to the Closing and
11,000,000 shares of Series A-1 Preferred, none of which has been or will be
issued or outstanding prior to the Closing. The Company has reserved
(i) 10,285,000 shares of Series A Preferred for issuance hereunder,
(ii) sufficient shares of Common Stock for issuance upon conversion of the
Series A Preferred and/or Series A-1 Preferred, (iii) 10,285,000 shares of
Series A-1 Preferred for issuance upon conversion of the Series A Preferred,
(iv) 1,000,000 shares of Common Stock for issuance hereunder and (v) 9,000,000
shares of Common Stock for issuance to employees iv) 9,000,000 shares of Common
Stock for issuance to employees and consultants pursuant to the Company's 1996
Stock Plan (of which 3,389,800 shares have been granted prior to the date
hereof). The Series A Preferred and the Series A-1 Preferred shall have the
rights, preferences, privileges and restrictions set forth in the Restated
Certificate. There are no other options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of capital stock or other securities of the
Company. Assuming the accuracy of each Investor's representations in Section 4
below, upon issuance, the Shares will have been issued in compliance with all
federal and state securities laws.

3.5 AUTHORIZATION. All corporate action on the part of the Company,
its directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Investors' Rights
Agreement by the Company, the authorization, sale, issuance and delivery of
the Shares and the Conversion Stock and the performance of the Company's
obligations hereunder has been taken or will be taken prior to the Closing.
This Agreement and the Investors' Rights Agreement, when executed and
delivered by the Company, shall constitute the valid and binding obligations
of the Company enforceable in accordance with their respective terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, and other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal and
state securities laws. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued and will be fully paid
and nonassessable; the Series A-1 Preferred issuable upon conversion of the
Series A Preferred has been duly and validly reserved and, when issued in
compliance with the provisions of this Agreement, will be validly issued and
will be fully paid and nonassessable and the Common Stock issuable upon
conversion of the Series A Preferred and/or the Series A-1 Preferred has been
duly and validly reserved and, when issued in compliance with the provisions
of this Agreement, will be validly issued and will be fully

-3-
<PAGE>

paid and nonassessable, and free of any liens or encumbrances (assuming the
Investors take the Shares with no notice thereof) other than any liens or
encumbrances created by or imposed upon the holders; provided, however, that
the Shares and the Conversion Stock may be subject to restrictions on
transfer under state or federal securities laws and restrictions set forth
herein.

3.6 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
valid title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, and (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.

3.7 FINANCIAL STATEMENTS. The Company has delivered to each Investor its
unaudited financial statements (balance sheet and income statement) at June 30,
1996 and for the period from inception through June 30, 1996 (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other, except that the Financial
Statements may not contain all footnotes required by generally accepted
principles and are subject to normal year end adjustments. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein. Except as set
forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1996, which individually or in the
aggregate are not material to the financial condition or operating results of
the Company, and (ii) obligations not required under generally accepted
accounting principles to be reflected in the Financial Statements.

3.8 ACTIVITIES SINCE BALANCE SHEET DATE. Since the Company's balance
sheet dated June 30, 1996 there has not been:

(a) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, or business of the Company;

(b) any waiver by the Company of a valuable right or of a material
debt owed to it;

(c) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject, except for changes or amendments which are expressly provided for or
disclosed in this Agreement;

(d) any loans or guarantees made by the Company to or for the benefit
of its employees, officers or directors, or any members of their immediate
families, other than travel advances or other advances made in the ordinary
course of business;

-4-
<PAGE>

(e) any declaration, setting aside of payment or other distribution
in respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any such stock by the Company;

(f) any incurrance of indebtedness for money borrowed individually in
excess of $50,000 or in excess of $100,000 in the aggregate;

(g) any material change in any compensation arrangement or agreement
with any employee;

(h) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;

(i) any resignation or termination of employment of any key officer
of the Company; and

(j) to the Company's knowledge, any other event or condition or any
character which would be reasonably likely to materially and adversely affect
the assets, properties, financial condition, operating results or business of
the Company;

3.9 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns and reports when and as required by law and has never been audited by
any state or federal taxing authority. All tax returns and reports of the
Company, if applicable, are true and correct in all material respects.

3.10 PATENTS, TRADEMARKS, ETC. The Company owns or has the right, or prior
to the Closing will own or have the right, to use, free and clear of all liens,
charges, claims and restrictions, all patents, trademarks, service marks, trade
names, copyrights, licenses and rights necessary to its business as now
conducted, and is not, to the best of its knowledge, infringing upon or
otherwise acting adversely to the right or claimed right of any person under or
with respect to any of the foregoing. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. The Company has not received any written communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any patent, trademark, service mark, trade name,
copyright or trade secret or other proprietary right of any other person or
entity. The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument

-5-
<PAGE>

under which any of such employees is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by the Company.

3.11 MATERIAL CONTRACTS AND COMMITMENTS. Neither the Company, nor, to the
best knowledge of the Company, any third party is in default under any material
contract, agreement or instrument to which the Company is a party.

3.12 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company
is not in violation of any term of the Restated Certificate of Incorporation or
Bylaws, or in any material respect of any term or provision of any material
mortgage, indenture, contract, agreement or instrument to which it is a party or
by which it is bound, and to the best of its knowledge, is not in violation of
any order, statute, rule or regulation applicable to the Company, which
violation reasonably would be expected to have a material adverse effect on the
Company's business or financial condition. The execution, delivery and
performance of and compliance with this Agreement, and the issuance of the
Shares and the Conversion Stock, have not resulted and will not result in any
violation of, or conflict with, or constitute a default under, or result in the
creation of, any material mortgage, pledge, lien, encumbrance or charge upon any
of the properties or assets of the Company.

3.13 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
written threat thereof), which, either in any case or in the aggregate,
reasonably would be expected to result in any material adverse change in the
business or financial condition of the Company or any of its properties or
assets, or in any material impairment of the right or ability of the Company to
carry on its business as now conducted, and none which questions the validity of
this Agreement or the Investors' Rights Agreement or any action taken or to be
taken in connection herewith. The Company is not a party to, or to the best of
its knowledge named in any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit or
proceeding by the Company currently pending or that the Company currently
intends to initiate.

3.14 EMPLOYEES. To the best of the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. The
Company does not have any collective bargaining agreements covering any of its
employees.

3.15 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not currently under any obligation to register under
the Securities Act of 1933, as amended (the "Act") any of its presently
outstanding securities or any of its securities which may hereafter be issued.

-6-

<PAGE>

3.16 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of, or designation, declaration or filing with, any federal, state or local
governmental authority on the part of the Company is required in connection
with the valid execution and delivery of this Agreement and the Investors'
Rights Agreement, or the offer, sale or issuance of the Shares and the
Conversion Stock, or the consummation of any other transaction contemplated
hereby, except (a) filing of the Restated Certificate in the office of the
Secretary of State of the State of Delaware, and (b) qualification (or taking
such action as may be necessary to secure an exemption from qualification, if
available) of the offer and sale of the Shares and the Conversion Stock under
the California Corporate Securities Law and other applicable Blue Sky laws,
which filing and qualification, if required, will be accomplished in a timely
manner prior to or promptly upon completion of the Closing.

3.17 BROKERS OR FINDERS. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.

3.18 DISCLOSURES. No representation, warranty or statement by the
Company in this Agreement, or in any written statement or certificate
furnished to the Investors pursuant to this Agreement, contains any untrue
statement of a material fact or, when taken together, omits to state a
material fact necessary to make the statements made herein, in light of the
circumstances under which they were made, not misleading. However, as to any
projections furnished to the Investors, such projections were prepared in
good faith by the Company, but the Company makes no representation or
warranty that it will be able to achieve such projections. The Company has
fully provided each Investor with all the information that such Investor has
requested for deciding whether to purchase the Shares.

3.19 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties or financial condition of the Company, and believes it
can obtain without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted. The Company is not in
default in any material respect under any of such franchises, permits,
licenses or other similar authority.

SECTION 4

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

Each Investor hereby represents and warrants to the Company with respect
to its purchase of the Shares as follows:

4.1 AUTHORIZATION. Each of this Agreement and the Investors' Right
Agreement, when executed and delivered by the Investor, will constitute the
Investor's valid and legally binding obligation, enforceable in accordance
with its terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement

-7-
<PAGE>

of creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.

4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with the
Investor in reliance upon the Investor's representation to the Company, which
by the Investor's execution of this Agreement the Investor hereby confirms,
that the Common Stock or Series A Preferred to be received by the Investor
and the Common Stock and Series A-1 Preferred issuable upon conversion of the
Series A Preferred (collectively, the "Securities") will be acquired for
investment for the Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Investor has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, the
Investor further represents that the Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participations to such person or to any third person, with respect to
any of the Securities. The Investor represents that it has the full power
and authority to enter into this Agreement.

4.3 INVESTMENT EXPERIENCE. The Investor is an investor in securities
of companies in the development stage and acknowledges that it is able to
fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable
of evaluating the merits and risks of the investment in the Common Stock or
Series A Preferred. If other than an individual, the Investor also represents
it has not been organized solely for the purpose of acquiring the Common
Stock or Series A Preferred, or if the Investor has been organized solely for
the purpose of acquiring the Common Stock or Series A Preferred, that all of
the equity owners of the Investor are "accredited investors" as defined below.

4.4 ACCREDITED INVESTOR. The Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.

4.5 NO PUBLIC MARKET. Each Investor understands that no public market
now exists for any of the securities issued by the Company and that it is
unlikely that a public market will ever exist for the Shares.

4.6 RECEIPT OF INFORMATION. Each Investor has received and reviewed
this Agreement and all Exhibits thereto; it, its attorney and its accountant
have had access to, and an opportunity to review all documents and other
materials requested of, the Company; it and they have been given an
opportunity to ask any and all questions of, and receive answers from, the
Company concerning the terms and conditions of the offering and to obtain all
information it or they believe necessary or appropriate to evaluate the
suitability of an investment in the Common Stock or Series A Preferred; and,
in evaluating the suitability of an investment in the Common Stock or Series
A Preferred, it and they have not relied upon any representations or other
information (whether oral or written) other than as set forth in the
documents and answers referred to above.

-8-
<PAGE>

4.7 RESTRICTED SECURITIES. The Investor understands that the
Securities it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the Act only in certain limited circumstances. In
addition, the Investor represents that it is familiar with Rule 144
promulgated under the Act, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.

4.8 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, the Investor further agrees not to make
any disposition of all or any portion of the Securities unless:

(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such Registration Statement;

(b) The Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and if requested by the
Company, the Investor shall have furnished the Company with either (i) an
unqualified written opinion of counsel who shall be reasonably satisfactory
to the Company addressed to the Company and reasonably satisfactory in form
and substance to the Company's counsel to the effect that the proposed
transfer may be effected without registration under the Act or (ii) a "No
Action" letter from the Securities and Exchange Commission to the effect that
the transfer of such securities without registration will not result in a
recommendation by the staff of the Securities and Exchange Commission that
action be taken with respect thereto, whereupon the holder of such Securities
shall be entitled to transfer such Securities in accordance with the terms of
the notice delivered by the Holder to the Company; or

(c) The Investor shall have sold, assigned, transferred, pledged
or otherwise disposed of the Securities in a transaction involving the
distribution without consideration of the Securities by the Investor to any
of its partners or retired partners, or to the estate of any of its partners
or retired partners, or in a transaction involving the transfer or
distribution of the Securities by a corporation to any subsidiary, parent or
affiliated corporation of such corporation; provided in each case that the
Investor shall give written notice to the Company of such Investor's
intention to effect such transfer, sale, assignment, pledge or other
disposition. The Investor will cause any such proposed purchaser, assignee,
transferee or pledgee of any Securities held by the Investor to agree to take
and hold such Securities subject to the provisions and upon the conditions
specified in this Agreement.

4.9 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:

(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR

-9-
<PAGE>

SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A OF SUCH ACT."

(b) Any legend required by the laws of the State of Delaware or
the State of California, including any legend required by the California
Department of Corporations.

4.10 GOVERNMENT CONSENTS. Other than securities law filings required to
be made by the Company, no consent, approval or authorization of or
designation, declaration or filing with any state, federal or foreign
governmental authority on the part of the Investor is required in connection
with the valid execution and delivery of this Agreement and the Investors'
Rights Agreement by the Investor and the consummation by the Investor of the
transactions contemplated hereby and thereby.

SECTION 5

CONDITIONS TO CLOSING OF INVESTORS

The Investors' obligations to purchase the Shares at the Closing or at
any Subsequent Closing are, at the option of each Investor, subject to the
fulfillment on or prior to the Closing Date or at any Subsequent Closing Date
of the following conditions:

5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
in all material respects when made, and shall be true and correct in all
material respects on the Closing Date, or the Subsequent Closing Date, as the
case may be, with the same force and effect as if they had been made on and
as of said date.

5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
or the Subsequent Closing Date, as the case may be, shall have been performed
or complied with in all material respects.

5.3 OPINION OF COMPANY'S COUNSEL. The Investors shall have received
from Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to
the Company, an opinion addressed to them, dated the Closing Date or the
Subsequent Closing Date, as the case may be, in substantially the form
attached hereto as Exhibit E.

5.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Investors a certificate executed by the President of the Company, dated the
Closing Date or the Subsequent Closing Date, as the case may be, and
certifying to the fulfillment of the conditions specified in Sections 5.1,
5.2, and 5.8 of this Agreement, and that he has made, or caused to be made,
such investigations as he deemed necessary in order to permit him to verify
the accuracy of the information set forth in such certificate.

-10-
<PAGE>

5.5 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured an exemption therefrom, required
by any state for the offer and sale of the Shares and the Conversion Stock.

5.6 BOARD OF DIRECTORS. On or before the Closing, the Bylaws of the
Company shall provide for a flexible number of directors from three to five
and fixing the current number of directors at four. The Board of Directors
shall at the Closing consist of Jim Clark, Brook Byers, Hugh Reinhoff and
David Schnell.

5.7 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware.

5.8 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's business or financial condition.

5.9 INVESTORS' RIGHTS AGREEMENT. The Investors and the Company shall
have entered into the Investors' Rights Agreement in substantially the form
attached hereto as Exhibit D.

SECTION 6

CONDITIONS TO CLOSING OF COMPANY

The Company's obligation to sell and issue the Shares at the Closing or
at any Subsequent Closing, is at the option of the Company, subject to the
fulfillment of the following conditions:

6.1 REPRESENTATIONS. The representations made by the Investors in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date or the Subsequent Closing Date, as the case may
be.

6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured an exemption therefrom, required
by any state for the offer and sale of the Shares and the Conversion Stock.

6.3 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware.

SECTION 7

MISCELLANEOUS

7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, without giving effect to the conflicts
of laws principles thereof.

-11-
<PAGE>

7.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Investor
and the closing of the transactions contemplated hereby.

7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties
hereto, provided, however, that the rights of a Investor to purchase Shares
shall not be assignable without the written consent of the Company.

7.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged, or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge, or termination is sought; provided, however, that holders of a
majority of the shares of Common Stock issued or issuable upon conversion of
the Shares and/or the Series A-1 Preferred and (whether or not converted) not
resold to the public may waive or amend, on behalf of all Investors, any
provisions hereof benefiting Investors in respect of the Shares.

7.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by registered or
certified mail, postage prepaid, addressed (a) if to a Investor, at such
Investor's address set forth in Exhibit A, or at such other address as such
Investor shall have furnished to the Company in writing, or (b) if to any
other holder of any Shares, at such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Shares who has so furnished an address to the Company, or (c) if to the
Company, one copy should be sent to its address set forth on the cover page
of this Agreement and addressed to the attention of the Corporate Secretary,
or at such other address as the Company shall have furnished to the Investors.

7.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or
default of the Company under this Agreement, shall impair any such right,
power or remedy of such holder nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.

-12-

<PAGE>

7.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM SUCH QUALIFICATION IS
AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION BEING
AVAILABLE.

7.8 EXPENSES. The Company and the Investors shall each bear their own
expenses and legal fees with respect to this Agreement and the transactions
contemplated hereby except that, assuming a successful completion of the
offering the Company will pay at the initial Closing the reasonable legal fees
and reasonable expenses upon receipt of a bill therefor, incurred by one counsel
to the Investors.

7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Investors,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.

7.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

7.11 GENDER. The use of the neuter gender herein shall be deemed to
include the masculine and the feminine gender, if the context so requires.

-13-
<PAGE>

The foregoing Amended and Restated Securities Purchase Agreement is hereby
executed as of the date first above written.

COMPANY:

HEALTHEON CORPORATION

By: /s/ David Schnell, M.D.
--------------------------------------------
David Schnell, M.D.,
President

Address: 87 Encina Avenue
Palo Alto, CA 94301

-14-
<PAGE>

HEALTHEON CORPORATION

SIGNATURE PAGE

AMENDED AND RESTATED

SECURITIES PURCHASE AGREEMENT

The undersigned hereby executes and delivers the Amended and Restated Securities
Purchase Agreement (the "Agreement") to which this Signature Page is attached
effective as of the date of the Agreement, which Agreement and Signature Page,
together with all counterparts of said Agreement and Signature Pages of the
other parties named in said Agreement, shall constitute one and the same
document in accordance with the terms of said Agreement.

--------------------------------------------
Name of Stockholder

By:
-----------------------------------------

Print Name:
---------------------------------

Title:
--------------------------------------

<PAGE>

HEALTHEON CORPORATION

AMENDED AND RESTATED

SERIES B PREFERRED STOCK PURCHASE AGREEMENT

OCTOBER 31, 1996

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 - Authorization and Sale of Stock.................................. 1

1.1 Authorization........................................................... 1
1.2 Sale of Stock........................................................... 1

SECTION 2 - Closing Date; Delivery........................................... 1

2.1 Closing Date............................................................ 1
2.2 Subsequent Closing...................................................... 1
2.3 Delivery................................................................ 2

SECTION 3 - Representations and Warranties of the Company.................... 2

3.1 Organization and Standing; Certificate and Bylaws....................... 2
3.2 Corporate Power......................................................... 2
3.3 Subsidiaries............................................................ 2
3.4 Capitalization.......................................................... 2
3.5 Authorization........................................................... 3
3.6 Title to Properties and Assets; Liens, etc.............................. 3
3.7 Financial Statements.................................................... 4
3.8 Activities Since Balance Sheet Date..................................... 4
3.9 Tax Returns and Payments................................................ 5
3.10 Patents, Trademarks, etc............................................... 5
3.11 Material Contracts and Commitments..................................... 5
3.12 Compliance with Other Instruments, None Burdensome, etc................ 5
3.13 Litigation, etc........................................................ 6
3.14 Employees.............................................................. 6
3.15 Registration Rights.................................................... 6
3.16 Governmental Consent, etc.............................................. 6
3.17 Brokers or Finders..................................................... 7
3.18 Disclosures............................................................ 7
3.19 Permits................................................................ 7

SECTION 4 - Representations and Warranties of the Investors.................. 7

4.1 Authorization........................................................... 7
4.2 Purchase Entirely for Own Account....................................... 7
4.3 Investment Experience................................................... 8
4.4 Accredited Investor..................................................... 8
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
4.5 No Public Market........................................................ 8
4.6 Receipt of Information.................................................. 8
4.7 Restricted Securities................................................... 8
4.8 Further Limitations on Disposition...................................... 8
4.9 Legends................................................................. 9
4.10 Government Consents.................................................... 9
4.11 Waiver of Right of First Refusal...................................... 10

SECTION 5 - Conditions to Closing of Investors.............................. 10

5.1 Representations and Warranties Correct................................. 10
5.2 Covenants.............................................................. 10
5.3 Opinion of Company's Counsel........................................... 10
5.4 Compliance Certificate................................................. 10
5.5 Blue Sky............................................................... 10
5.6 Board of Directors..................................................... 10
5.7 Restated Certificate................................................... 10
5.8 No Material Adverse Change............................................. 11
5.9 Investors' Rights Agreement............................................ 11

SECTION 6 - Conditions to Closing of Company................................ 11

6.1 Representations........................................................ 11
6.2 Blue Sky............................................................... 11
6.3 Restated Certificate................................................... 11

SECTION 7 - Miscellaneous................................................... 11

7.1 Governing Law.......................................................... 11
7.2 Survival............................................................... 11
7.3 Successors and Assigns................................................. 11
7.4 Entire Agreement; Amendment............................................ 11
7.5 Notices, etc........................................................... 12
7.6 Delays or Omissions.................................................... 12
7.7 California Corporate Securities Law.................................... 12
7.8 Expenses............................................................... 12
7.9 Counterparts........................................................... 13
7.10 Severability.......................................................... 13
7.11 Gender................................................................ 13
</TABLE>

-ii-

<PAGE>

EXHIBITS

A. Schedule of Investors

B. Restated Certificate of Incorporation

C. Form of Warrant

D. Exceptions to Representations and Warranties of the Company

E. Second Amended and Restated Investors' Rights Agreement

F. Form of Opinion of Wilson Sonsini Goodrich & Rosati

-iii-

<PAGE>

HEALTHEON CORPORATION

AMENDED AND RESTATED

SERIES B PREFERRED

STOCK PURCHASE AGREEMENT

This Amended and Restated Series B Preferred Stock Purchase Agreement
(the "Agreement") is made as of October 31, 1996, by and among Healtheon
Corporation, a Delaware corporation (the "Company"), with its principal
office at 87 Encina Avenue, Palo Alto, California 94301, and the persons and
entities listed on the Schedule of Investors attached as Exhibit A hereto
(the "Investors"). This Agreement amends and restates, in its entirety, the
Series B Preferred Stock Purchase Agreement dated as of October 1, 1996.

SECTION I

AUTHORIZATION AND SALE OF STOCK AND ISSUANCE OF THE WARRANTS

1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
up to an aggregate of five million (5,000,000) shares of its Series B
Preferred Stock (the "Series B Preferred"), having the rights, restrictions,
privileges and preferences as set forth in the Company's Restated Certificate
of Incorporation in the form attached to this Agreement as Exhibit B (the
"Restated Certificate').

1.2 SALE OF STOCK AND ISSUANCE OF WARRANTS. Subject to the terms and
conditions hereof, the Company will issue and sell to the Investors, and the
Investors will buy from the Company, the number of shares (the "Shares") of
Series B Preferred specified opposite each Investor's name on the Schedule of
Investors, at a cash purchase price of two dollars ($2.00) per share and the
Company will issue warrants, in the form attached hereto as Exhibit C, with
respect to the number of shares of Series B Preferred specified opposite the
applicable Investors' names on the Schedule of Investors (the "Warrants"). The
Company's agreements with each of the Investors are separate agreements, and the
sales of the Shares, and the issuance of the warrant, if applicable, to each of
the Investors are separate sales and issuances.

SECTION 2

CLOSING DATE, DELIVERY

2.1 CLOSING DATE. The initial closing of the purchase and sale of an
aggregate of one million eight hundred seventy five thousand (1,875,000) of
the Shares hereunder was held at 1:00 p.m. on October 1, 1996 (the "First
Closing"). The subsequent closing and the issuance of the Warrants hereunder
shall be held on October 31, 1996 or on such later date or dates as the
Company and the affected Investors may agree to (the "Second Closing"). The
date of each such Closing

<PAGE>

being referred to as a "Closing Date". The place of the Closing (including
the place of delivery to the Investors by the Company of the certificates
evidencing all shares Series B Preferred being purchased and the Warrants
being issued and the place of payment to the Company by the Investors of the
purchase price therefor) shall be at the offices of the Company located at 87
Encina Avenue, Palo Alto, California 94301, or such other place as the
Investors and the Company may mutually agree.

2.2 SUBSEQUENT CLOSING. The Company may, in its sole discretion, provide
for deferred closings hereunder (a "Subsequent Closing"), to be held at the
offices of the Company, at such time and dates as the Company may determine
(the date of any such Subsequent Closing being referred to as a "Subsequent
Closing Date"). Any Subsequent Closing(s) will take place as promptly as
possible following the initial Closing hereunder. The number of shares of
Series B Preferred which any Subsequent Investor shall be entitled to
purchase, shall be determined within the sole discretion of the Company, but
in no event shall the total number of shares of Series B Preferred sold
pursuant to this Agreement and/or subject to the Warrants or any other
purchase rights be more than an aggregate of five million (5,000,000) shares.
Upon completion of any Subsequent Closing, if any, all additional purchasers
of shares of Series B Preferred shall be considered "Investors" within the
meaning of this Agreement.

2.3 DELIVERY. At each Closing the Company will deliver to each Investor
a certificate or certificates representing the applicable number of Shares,
as designated in column 2 of the Schedule of Investors to be purchased by
such Investor at such Closing, against payment of the purchase price
therefor, by check or wire transfer payable to the Company, or by
cancellation of outstanding indebtedness from the Company to such Investor,
or by a combination thereof, in the amount specified in column 3 of the
Schedule of Investors and at the Second Closing the Company shall issue the
Warrants as set forth in the Schedule of Investors.

SECTION 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on Exhibit D attached hereto, the Company hereby
represents and warrants to the Investors as follows:

3.1 ORGANIZATION AND STANDING: CERTIFICATE AND BYLAWS. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of
the State of Delaware and is in good standing under such laws. The Company
has requisite corporate power to own and operate its properties and assets,
and to carry on its business as presently conducted and as proposed to be
conducted. The Company is not qualified to do business as a foreign
corporation in any jurisdiction and such qualification is not presently
required.

3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite corporate power to execute and deliver this Agreement and the
Second Amended and Restated Investors' Rights Agreement attached hereto as
Exhibit E (the "Investors' Rights Agreement"), to sell and issue the Shares
hereunder, to issue the underlying Series B-1 Preferred Stock (the
"Series B-1

<PAGE>

Preferred") and Common Stock (together, the "Conversion Stock") in accordance
with the provisions of the Restated Certificate, and to carry out and
perform its obligations under the terms of this Agreement and the
Investors' Rights Agreement.

3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
other corporation, association or business entity.

3.4 CAPITALIZATION. The authorized capital stock of the Company consists
of 28,000,000 shares of Common Stock, 2,230,834 shares of which are issued
and outstanding prior to the Closing, 10,305,000 shares of Series A
Preferred, 10,285,000 shares of which are issued and outstanding prior to the
Closing and 10,305,000 shares of Series A-1 Preferred, none of which has been
or will be issued or outstanding prior to the Closing, and 5,000,000 shares
of Series B Preferred 1,875,000 of which were issued in the First Closing and
are outstanding as of the date hereof, and 5,000,000 shares of Series B-1
Preferred, none of which has been or will be issued or outstanding prior to
the Closing. The Company has reserved (i) an aggregate of 5,000,000 shares of
Series B Preferred for issuance hereunder and/or for issuance pursuant to the
exercise of the Warrants which may be issued hereunder, (ii) sufficient
shares of Common Stock for issuance upon conversion of the Series B Preferred
and/or Series B-1 Preferred, (iii) 5,000,000 shares of Series B-1 Preferred
for issuance upon conversion of the Series B Preferred, (iv) 10,285,000
shares of Series A-1 Preferred for issuance upon conversion of the Series A
Preferred, (v) sufficient shares of Common Stock for issuance upon conversion
of the Series A Preferred and/or Series A-1 Preferred and (vi) 9,000,000
shares of Common Stock for issuance to employees and consultants pursuant to
the Company's 1996 Stock Plan (of which 4,268,934 shares have been issued
and/or option granted with respect thereto, prior to the date hereof). The
Series B Preferred and the Series B-1 Preferred shall have the rights,
preferences, privileges and restrictions set forth in the Restated
Certificate. There are no other options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorization but unissued shares of capital stock or other securities of the
Company. Assuming the accuracy of each Investor's representations in Section
4 below, upon issuance, the Shares will have been issued in compliance with
all federal and state securities laws.

<PAGE>

duly and validly reserved and, when issued in compliance with the provisions
of this Agreement, will be validly issued and will be fully paid and
nonassessable and the Common Stock issuable upon conversion of the Series B
Preferred and/or the Series B-1 Preferred has been duly and validly reserved
and, when issued in compliance with the provisions of this Agreement, will be
validly issued and will be fully paid and nonassessable, and free of any
liens or encumbrances (assuming the Investors take the Shares with no notice
thereof) other than any liens or encumbrances created by or imposed upon the
holders; provided, however, that the Shares and the Conversion Stock may be
subject to restrictions on transfer under state or federal securities laws
and restrictions set forth herein.

3.6 TITLE TO PROPERTIES AND ASSETS, LIENS, ETC. The Company has good and
valid title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not yet
due and payable, and (ii) possible minor liens and encumbrances which do not
in any case materially detract from the value of the property subject thereto
or materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business.

3.7 FINANCIAL STATEMENTS. The Company has delivered to each Investor
its unaudited financial statements (balance sheet and income statement) at
July 31, 1996 and for the period from inception through July 31, 1996 (the
"Financial Statement"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other, except
that the Financial Statements may not contain all footnotes required by
generally accepted principles and are subject to normal year end adjustments.
The Financial Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods, indicated
therein. Except as set forth in the Financial Statements, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to July 31, 1996,
which individually or in the aggregate are not material to the financial
condition or operating results of the Company, and (ii) obligations not
required under generally accepted accounting principles to be reflected in
the Financial Statements.

3.8 ACTIVITIES SINCE BALANCE SHEET DATE. Since the Company's balance
sheet dated July 31, 1996 there has not been:

(a) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, or business of the Company;

(b) any waiver by the Company of a valuable right or of a material
debt owed to it;

(c) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound
or subject, except for changes or amendments which are expressly provided for
or disclosed in this Agreement;

<PAGE>

(d) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances or other advances made in the
ordinary course of business;

(e) any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any such stock by the Company;

(f) any incurrence of indebtedness for money borrowed individually
in excess of $50,000 or in excess of $100,000 in the aggregate;

(g) any material change in any compensation arrangement or agreement
with any employee;

(h) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;

(i) any resignation or termination of employment of any key officer
of the Company; and

3.9 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns and reports when and as required by law and has never been audited by
any state or federal taxing authority. All tax and reports of the Company, if
applicable, are true and correct in all material respects.

3. 10 PATENTS, TRADEMARKS, ETC. The Company owns or has the right, or
prior to the Closing will own or have the right, to use, free and clear of
all liens, charges, claims and restrictions, all patents, trademarks, service
marks, trade names, copyrights, licenses and rights necessary to its business
as now conducted, and is not, to the best of its knowledge, infringing upon
or otherwise acting adversely to the right or claimed right of any person
under or with respect to any of the foregoing. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor
is the Company bound by or a party to any options, licenses or agreements of
any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
written communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any patent, trademark,
service mark, trade name, copyright or trade secret or other proprietary
right of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with the use of such employee's best efforts to promote the interests of the
Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying

<PAGE>

on of the Company's business by the employees of the Company, nor the conduct
of the Company's business as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract, covenant or instrument under
which any of such employees is now obligated. The Company does not believe it
is or will be necessary to utilize any inventions of any of its employees (or
people it currently intends to hire) made prior to their employment by the
Company.

3.11 MATERIAL CONTRACTS AND COMMITMENTS. Neither the Company, nor, to
the best knowledge of the Company, any third party is in default under any
material contract, agreement or instrument to which the Company is a party.

3.12 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of the Restated Certificate of
Incorporation or Bylaws, or in any material respect of any term or provision
of any material mortgage, indenture, contact, agreement or instrument to
which it is a party or by which it is bound, and to the best of its
knowledge, is not in violation of any order, statute, rule or regulation
applicable to the Company, which violation reasonably would be expected to
have a material adverse effect on the Company's business or financial
condition. The execution, delivery and performance of and compliance with
this Agreement, and the issuance of the Shares and the Conversion Stock, have
not resulted and will not result in any violation of, or conflict with, or
constitute a default under, or result in the creation of, any material
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company.

3.13 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to the best of the Company's knowledge, is there
any written threat thereof), which, either in any case or in the aggregate,
reasonably would be expected to result in any material adverse change in the
business or financial condition of the Company or any of its properties or
assets, or in any material impairment of the right or ability of the Company
to carry on its business as now conducted, and none which questions the
validity of this Agreement or the Investors' Rights Agreement or any action
taken or to be taken in connection herewith. The Company is not a party to,
or to the best of its knowledge named in any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality.
There is no action, suit or proceeding by the Company currently pending or
that the Company currently intends to initiate.

3.14 EMPLOYEES. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with the Company or any other party because
of the nature of the business conducted or to be conducted by the Company.
The Company does not have any collective bargaining agreements covering any
of its employees.

3.15 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not currently under any obligation to register
under the Securities Act of 1933, as amended (the "Act) any of its presently
outstanding securities or any of its securities which may hereafter be issued.

<PAGE>

3.16 GOVERNMENTAL CONSENT ETC. No consent, approval or authorization
of, or designation, declaration or filing with, any federal, state or local
governmental authority on the part of the Company is required in connection
with the valid execution and delivery of this Agreement and the Investors'
Rights Agreement, or the offer, sale or issuance of the Shares and the
Conversion Stock, or the consummation of any other transaction contemplated
hereby, except (a) filing of the Restated Certificate in the office of the
Secretary of State of the State of Delaware, and (b) qualification (or taking
such action as may be necessary to secure an exemption from qualification, if
available) of the offer and sale of the Shares and the Conversion Stock under
the California Corporate Securities Law and other applicable Blue Sky laws,
which filing and qualification, if required, will be accomplished in a timely
manner prior to or promptly upon completion of the Closing.

SECTION 4

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

Each Investor hereby represents and warrants to the Company with
respect to its purchase of the Shares as follows:

<PAGE>

performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.

4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with the
Investor in reliance upon the Investor's representation to the Company, which
by the Investor's execution of this Agreement the Investor hereby confirms,
that the Common Stock or Series B Preferred to be received by the Investor
and the Common Stock and Series B-1 Preferred issuable upon conversion of the
Series B Preferred (collectively, the "Securities') will be acquired for
investment for the Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Investor has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, the Investor
further represents that the Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Securities. The Investor represents that it has the full power and
authority to enter into this Agreement.

4.3 INVESTMENT EXPERIENCE. The Investor is an investor in securities
of companies in the development stage and acknowledges that it is able to
fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable
of evaluating the merits and risks of the investment in the Common Stock or
Series B Preferred. If other than an individual, the Investor also represents
it has not been organized solely for the purpose of acquiring the Common
Stock or Series B Preferred or if the Investor has been organized solely for
the purpose of acquiring the Common Stock or Series B Preferred that all of
the equity owners of the Investor are "accredited investors" as defined below.

4.4 ACCREDITED INVESTOR. The Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.

4.6 RECEIPT OF INFORMATION. Each Investor has received and reviewed
this Agreement and all Exhibits thereto; it, its attorney and its accountant
have had access to, and an opportunity to review all documents and other
materials requested of, the Company; it and they have been given an
opportunity to ask any and all questions of, and receive answers from, the
Company concerning the terms and conditions of the offering and to obtain all
information it or they believe necessary or appropriate to evaluate the
suitability of an investment in the Common Stock or Series B Preferred; and,
in evaluating the suitability of an investment in the Common Stock or Series
B Preferred, it and they have not relied upon any representations or other
information (whether oral or written) other than as set forth in the
documents and answers referred to above.

<PAGE>

such laws and applicable regulations such securities may be resold without
registration under the Act only in certain limited circumstances. In
addition, the Investor represents that it is familiar with Rule 144
promulgated under the Act, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.

(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such Registration Statement;

(b) The Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and if requested by the
Company, the Investor shall have furnished the Company with either (i) an
unqualified written opinion of counsel who shall be reasonably satisfactory
to the Company addressed to the Company and reasonably satisfactory in form
and substance to the Company's counsel to the effect that the proposed
transfer may be effected without registration under the Act or (ii) a "No
Action" letter from the Securities and Exchange Commission to the effect that
the transfer of such securities without registration will not result in a
recommendation by the staff of the Securities and Exchange Commission that
action be taken with respect thereto, whereupon the holder of such Securities
shall be entitled to offer such Securities in accordance with the terms of
the notice delivered by the Holder to the Company; or

(c) The Investor shall have sold, assigned, transferred, pledged
or otherwise disposed of the Securities in a transaction involving the
distribution without consideration of the Securities by the Investor to any
of its partners or retired partners, or to the estate of any of its partners
or retired partners, or in a transaction involving the offer or distribution
of the Securities by a corporation to any subsidiary, parent or affiliated
corporation of such corporation; provided in each case that the Investor
shall give written notice to the Company of such Investor's intention to
effect such transfer, sale, assignment, pledge or other disposition. The
Investor will cause any such proposed purchaser, assignee, transferee or
pledgee of any Securities held by the Investor to agree to take and hold such
Securities subject to the provisions and upon the conditions specified in
this Agreement.

4.9 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:

(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A OF SUCH ACT."

<PAGE>

(b) Any legend required by the laws of the State of Delaware or
the State of California, including any legend required by the California
Department of Corporations.

4.10 GOVERNMENT CONSENTS. Other than securities law filings required
to be made by the Company, no consent, approval or authorization of or
designation, declaration or filing with any state, federal or foreign
governmental authority on the part of the Investor is required in connection
with the valid execution and delivery of this Agreement and the Investors'
Rights Agreement by the Investor and the consummation by the Investor of the
transactions contemplated hereby and thereby.

4.11 WAIVER OF RIGHT OF FIRST REFUSAL. Each Investor hereby waives all
rights which it may have had under Section 2.5 of the Amended and Restated
Investors' Rights Agreement, including notice rights, with respect to the
sale of the Series B Preferred Stock and the issuance of the Warrants with
respect thereto, hereunder.

SECTION 5

CONDITIONS TO CLOSING OF INVESTORS

<PAGE>

5.5 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured an exemption therefrom, required by
any state for the offer and sale of the Shares and the Conversion Stock.

5.6 BOARD OF DIRECTORS. The Board of Directors shall at the Closing
consist of Jim Clark, Brook Byers, Hugh Reinhoff, Jr., M.D. and David
Schnell, M.D.

5.7 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware.

5.8 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's business or financial condition.

5.9 INVESTORS' RIGHTS AGREEMENT. The Investors and the Company shall
have entered into the Investors' Rights Agreement in substantially the form
attached hereto as Exhibit E.

SECTION 6

CONDITIONS TO CLOSING OF COMPANY

The Company's obligation to sell and issue the Shares at the Closing or
at any Subsequent Closing, is at the option of the Company, subject to the
fulfillment of the following conditions:

6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured an exemption therefrom, required by
any state for the offer and sale of the Shares and the Conversion Stock.

6.3 RESTATED CERTIFICATE. The Restated Certificate shall have been filed
with the Secretary of State of the State of Delaware.

SECTION 7

MISCELLANEOUS

7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, without giving effect to the conflicts
of laws principles thereof.

7.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Investor
and the closing of the transactions contemplated hereby.

<PAGE>

7.4 ENTIRE AGREEMENT, AMENDMENT. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged, or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge, or termination is sought; provided, however, that holders of a
majority of the shares of Common Stock issued or issuable upon conversion of
the Shares and/or the Series B-1 Preferred and (whether or not converted) not
resold to the public may waive or amend, on behalf of all Investors, any
provisions hereof benefiting Investors in respect of the Shares.

7.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM
SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS

<PAGE>

OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION BEING AVAILABLE.

7.8 EXPENSES. The Company and the Investors shall each bear their own
expenses and legal fees with respect to this Agreement and the transactions
contemplated hereby except that, assuming a successful completion of the
offering the Company will pay at the initial Closing the reasonable legal
fees and reasonable expenses upon receipt of a bill therefor, incurred by one
counsel to the Investors.

7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the
Investors, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

7.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.

7.11 GENDER. The use of the neuter gender herein shall be deemed to
include the masculine and the feminine gender, if the context so requires.

The foregoing Amended and Restated Series B Preferred Stock Purchase
Agreement is hereby executed as of the date first above written.

COMPANY:

HEALTHEON CORPORATION

By: /s/ David Schnell, M.D.
------------------------------
David Schnell, M.D.,
President

Address: 87 Encina Avenue
Palo Alto, CA 94301

<PAGE>

EXHIBIT 10.22

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A OF SUCH ACT.

HEALTHEON CORPORATION

SERIES B PREFERRED STOCK PURCHASE WARRANT

THIS CERTIFIES THAT, for value received ________ ("Holder"), is entitled to
purchase up to ________ shares of Series B Preferred Stock (the "Shares") of
HEALTHEON CORPORATION, a Delaware corporation (the "Company"), subject to the
terms and conditions of this Warrant set forth herein, at an exercise price
per share of two dollars ($2.00) (the "Warrant Price"), as adjusted from
time-to-time pursuant to Section 3 below.

1. TERM. The purchase right represented by this Warrant is
exercisable, in whole or in part, only during the period (the "Exercise
Period") commencing on July 1, 1997 and expiring automatically on June 30,
2002.

2. METHOD OF EXERCISE AND PAYMENT.

(a) METHOD OF EXERCISE. Subject to Section I hereof and compliance
with all applicable federal and state securities laws, the purchase right
represented by this Warrant only may be exercised, in whole or in part, by
the Holder by (i) surrender of this Warrant and delivery of the Notice of
Exercise (the form of which is attached hereto as Exhibit A), duly executed,
at the principal office of the Company during the Exercise Period and (ii)
payment to the Company during the Exercise Period of an amount equal to the
product of the then applicable Warrant Price multiplied by the number of
Shares then being purchased pursuant to one of the payment methods permitted
under Section 2(b) (or as set forth below in Section 2(c)).

(b) METHOD OF PAYMENT. Payment shall be made by: (1) check drawn on
a United States bank and for United States funds made payable to the Company,
(2) wire transfer of United States funds to the account of the Company, (3)
cancellation of indebtedness of the Company, or (4) any combination of the
foregoing at the option of the Holder.

(c) NET ISSUE EXERCISE. In lieu of paying the aggregate Warrant
Price for the Shares by one of the payment methods specified in Section 2(b)
above, the Holder may elect to receive Shares equal to the value of this
Wan-ant (or the portion thereof being canceled) by surrender of this Warrant
at the principal office of the Company together with notice of such election,
in which event the Company shall issue to the Holder a number of shares of
the Company's Series B Preferred Stock computed using the following formula:

Y (A - B)
X = ----------
A
Where X = the number of shares of Series B Preferred Stock to be issued to
Holder.

Y = the number of shares of Series B Preferred Stock purchasable under
this Warrant.

<PAGE>

A = the fair market value of one share of the Company's Series B Preferred
Stock (at the date of calculation).

B = Warrant Price (as adjusted to the date of such calculations).

For the purposes of the above calculation, the fair market value of
the Series B Preferred Stock shall mean with respect to each share of Series
B Preferred Stock:

(i) the product of (x) the number of shares of Common Stock
into which each share of Series B Preferred Stock is convertible at the time
of exercise and (y) the average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of the WALL
STREET JOURNAL for the ten trading days prior to the date of determination of
fair market value; or

(ii) if the Company's Common Stock is not traded
Over-The-Counter or on an exchange, fair market value of each share of the
Series B Preferred Stock shall be determined in good faith by the Company's
Board of Directors. Receipt and acknowledgment of this Warrant by the Holder
shall be deemed to be an acknowledgment and acceptance of any such fair
market value determination by the Company's Board of Directors as the final
and binding determination of such value for purposes of this Warrant.

(d) DELIVERY OF CERTIFICATE. In the event of any exercise of the
purchase right represented by this Warrant, certificates for the Shares so
purchased shall be delivered to the Holder within thirty (30) days of
delivery of the Notice of Exercise and, unless this Warrant has been fully
exercised or has expired, a new warrant representing the portion of the
Shares with respect to which this Warrant shall not then have been exercised
shall also be issued to the Holder within such thirty (30) day period.

(e) NO FRACTIONAL SHARES. No fractional Shares shall be issued in
connection with any exercise hereunder, but in lieu of such fractional Shares
the Company shall make a cash payment therefor upon the basis of the fair
market value per Share as of the date of exercise (as determined above).

3. ADJUSTMENTS. The number and kind of securities issuable upon the
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time upon the occurrence of certain events, as follows:

(a) REORGANIZATION, CONSOLIDATION OR MERGER. In the case of any
reorganization, consolidation or merger of the Company (including, without
limitation, any change of control transaction whereby immediately following
such transaction or series of transactions 50% or more of the Company's
outstanding capital stock is held by new stockholders) with or into another
corporation, the Company, or such successor entity, as the case may be, shall
execute a new warrant providing that the Holder shall have the right to
exercise such new warrant and, upon such exercise. to receive, in lieu of
each Share issuable upon exercise of this Warrant, the number and kind of
shares of stock, other securities, money or property receivable upon such
reorganization, consolidation or merger by a holder of the number of Shares
then purchasable with this Warrant. Such new warrant shall contain
provisions relating to the rights and obligations of the Holder and the
Company after such reorganization, consolidation or merger that shall have,
as nearly as possible after appropriate adjustment, the same effect as the
provisions of this Warrant, including the provisions of this Warrant relating
to the exercise price and number and type of shares of stock deliverable upon
exercise.

(b) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the Company at
any time while this Warrant remains outstanding and unexpired shall split,
subdivide or combine its authorized stock that is of the

<PAGE>

same class and/or series as the Shares, the Warrant Price shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination. Any adjustment under
this subsection (b) shall become effective at the close of business on the
date the split, subdivision or combination becomes effective.

(c) STOCK DIVIDENDS. If the Company at any time while this Warrant
remains outstanding and unexpired shall pay a stock dividend with respect to
the shares of stock of the same class and/or series as the Shares, or make
any other distribution with respect to such shares (except any distribution
specifically provided for in Sections 3(a) or 3(b) above) of similar shares,
the Warrant Price shall be adjusted, from and after the date of determination
of the stockholders entitled to receive such dividend or distribution, to
that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
shall be the total number of the shares of stock of the same class and/or
series as the Shares outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of
such shares outstanding immediately after such dividend or distribution. Any
adjustment under this subsection (c) shall become effective at the close of
business on the date such stock dividend becomes effective.

(d) RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If the Shares
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than a split,
subdivision or combination of the Shares pursuant to Section 3(b)), the
Holder shall, upon exercise of this Warrant, be entitled to purchase, in lieu
of the shares which the Holder would have been entitled to purchase but for
such change, the number and kind of shares of stock receivable upon such
reclassification, exchange or substitution by a holder of shares of the
shares of stock of the same class and/or series as the Shares.

4. NOTICE OF ADJUSTMENTS. Whenever the number or kind of Shares or the
Warrant Price shall be adjusted pursuant to Section 3 hereof, the Company
shall mail to the Holder, at least ten (10) days prior to the event requiring
such adjustment, a notice setting forth, in reasonable detail, the event
requiring the adjustment, and, within thirty (30) days after any such
adjustment, the Company shall issue a certificate signed by its Chief
Financial Officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated and the number or kind of shares or the Warrant
Price or Warrant Prices after giving effect to such adjustment, and shall
cause a copy of such certificate to be delivered to the Holder.

5. COMPANY'S REPRESENTATIONS. All Shares which may be issued upon the
exercise of the purchase right represented by this Warrant shall, upon
issuance in accordance with this Warrant, be duly authorized, validly issued,
fully paid and nonassessable, and free of any liens and encumbrances except
for restrictions on transfer provided for herein or under applicable federal
and state securities laws. During the Exercise Period, the Company shall at
all times have authorized, and reserved for the purpose of issuance upon
exercise right represented by this Warrant, a sufficient number of shares of
Series B Preferred Stock to provide for the exercise of the purchase right
represented by this Warrant.

6. COMPLIANCE WITH SECURITIES ACT; TRANSFERABILITY AND NEGOTIABILITY
OF WARRANT; DISPOSITION OF SHARES.

(a) COMPLIANCE WITH SECURITIES ACT. The Holder, by acceptance
hereof, agrees that this Warrant and the Shares to be issued upon the
exercise hereof are being acquired solely for its own account and not as a
nominee for any other party and not with a view toward the resale or
distribution thereof and that it will not offer, sell or otherwise dispose of
this Warrant or any Shares to be issued upon the exercise hereof except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the

<PAGE>

"Securities Act"). Upon the exercise of this Warrant, the Holder shall
confirm in writing, in a form reasonably satisfactory to the Company, that
the Shares so issued are being acquired solely for its own account and not as
a nominee for any other party and not with a view toward resale or
distribution thereto. This Warrant and the Shares to be issued upon the
exercise hereof (unless registered under the Act) shall be imprinted with a
legend in substantially the following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO T14E COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A OF
SUCH ACT.

In addition, this Warrant and the Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.

(b) TRANSFERABILITY AND NEGOTIABILITY OF WARRANT. This Warrant may
not be transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by the transferor and the
transferee (including, if the transfer is being made other than in a
transaction registered under the Securities Act or exempt from registration
under Rule 144 under the Securities Act, the delivery of investment
representation letters and, if the transfer is being made other than in a
transaction registered under the Securities Act, the delivery of legal
opinions satisfactory to the Company, if requested by the Company) and unless
the transfer is to a transferee or assignee who the Company does not
reasonably consider to be an actual or potential competitor of the Company.
Subject to the provisions of this Warrant with respect to compliance with the
Securities Act, title to this Warrant may be transferred by endorsement and
delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery. The Company shall act promptly to record transfers
of this Warrant on its books, but the Company may treat the registered holder
of this Warrant as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.

(c) DISPOSITION OF SHARES. With respect to any offer, sale,
transfer or other disposition of any Shares acquired pursuant to the exercise
of this Warrant prior to registration of such Shares, the Holder and each
subsequent holder of this Warrant agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of legal counsel for such holder, reasonably satisfactory to
the Company and its legal counsel, if requested by the Company, to the effect
that such offer, sale or other disposition may be effected without
registration or qualification (under the Act or any other federal or state
securities laws) of such Shares and indicating whether or not under the Act,
certificates for such Shares to be sold or otherwise disposed of require any
restrictive legend as to the applicable restrictions on transferability in
order to insure compliance with the Securities Act. Promptly upon receiving
such written notice and reasonably satisfactory opinion, if so requested, the
Company, as promptly as practicable, shall notify such holder that such
holder may sell or otherwise dispose of such Shares, all in accordance with
the terms of the notice delivered to the Company. Each certificate
representing the Shares thus transferred (except a transfer pursuant to Rule
144(k)) shall bear a restrictive legend as to the applicable restrictions on
transferability in order to insure compliance with the Act, unless in the
aforesaid opinion of legal counsel for the holder, such legend is not
required in order to insure compliance with the Securities Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.

7. RIGHTS OF STOCKHOLDERS. The Holder shall not be entitled to
vote or receive dividends or be deemed the holder of Shares or any other
securities of the Company which may at any time be issuable on the exercise
of this Warrant for any purpose, nor shall anything contained herein be
construed to confer upon the

<PAGE>

Holder, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the shares issuable upon exercise hereof shall have become deliverable,
as provided herein.

8. NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or five (5) days after mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been furnished
to the Company or the Holder, as the case may be, in writing by the Company
or such holder from time to time.

9. WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

10. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to
its principles regarding conflicts of law.

11. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
P.M., Pacific Standard Time, on June 30, 2002, if not terminated earlier
pursuant to any other provision of this Warrant.

Dated: __________, 1997

HEALTHEON CORPORATION

By: /s/ David Schnell, M.D.
-----------------------------------
David Schnell, M.D.
President

<PAGE>
EXHIBIT A

NOTICE OF EXERCISE

TO: HEALTHEON CORPORATION

1. The undersigned Holder of the attached original, executed Series B
Preferred Stock Purchase Warrant (the "Warrant") hereby elects to exercise
its purchase right under such Warrant with respect to _____________________
shares of Series B Preferred Stock of Healtheon Corporation (the "Company").

2. The undersigned Holder elects to exercise the Warrant for such shares
(the "Exercise Shares") in the following manner:

[ ] by the enclosed check drawn on a United States bank and for
United States funds made payable to the Company in the amount of $___________;

[ ] by wire transfer of United States funds to the account of the
Company in the amount of which $____________, transfer has been made before
or simultaneously with the delivery of this Notice pursuant to the
instructions of the Company;

[ ] by cancellation of indebtedness of the Company in the amount
of $______________;

[ ] by net issue exercise pursuant to Section 2(c) of the Warrant;

[ ] by the combination of the foregoing indicated above or on the
attached sheet.

3. Please issue a stock certificate or certificates representing the
appropriate number of shares in the name of the undersigned or in such other
names as is specified below:

Name:
-----------------------------------------
Address:
-----------------------------------------

Tax Ident. No.:
------------------------------------

HOLDER:

By:
-------------------------------
Date:
-------------------------------

<PAGE>

HEALTHEON CORPORATION

SERIES C PREFERRED STOCK PURCHASE AGREEMENT

JULY 25, 1997

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
SECTION I - Authorization and Sale of Stock
<S> <C> <C>
1.1 Authorization.............................................. 1
1.2 Sale of Stock.............................................. 1

<CAPTION>
SECTION 2 - Closing Date; Delivery....................................... 1
<S> <C> <C>
2.1 Closing Date............................................... 1
2.2 Subsequent Closing......................................... 1
2.3 Delivery................................................... 2

<CAPTION>
SECTION 3 - Representations and Warranties of the Company................ 2
<S> <C> <C>
3.1 Organization and Standing; Certificate and Bylaws........... 2
3.2 Corporate Power............................................. 2
3.3 Subsidiaries................................................ 2
3.4 Capitalization.............................................. 2
3.5 Authorization............................................... 3
3.6 Title to Properties and Assets; Liens, etc.................. 3
3.7 Financial Statements........................................ 3
3.8 Activities Since Balance Sheet Date......................... 4
3.9 Tax Returns and Payments.................................... 5
3.10 Patents, Trademarks, etc.................................... 5
3.11 Material Contracts and Commitments.......................... 5
3.12 Compliance with Other Instruments, None Burdensome, etc..... 5
3.13 Litigation, etc............................................. 5
3.14 Employees................................................... 6
3.15 Registration Rights......................................... 6
3.16 Governmental Consent, etc................................... 6
3.17 Brokers or Finders.......................................... 6
3.18 Disclosures................................................. 6
3.19 Permits..................................................... 6
3.20 Real Property Holding Company............................... 6

<CAPTION>
SECTION 4 - Representations and Warranties of the Investors............... 7
<S> <C> <C>
4.1 Authorization............................................... 7
4.2 Purchase Entirely for Own Account........................... 7
4.3 Investment Experience....................................... 7
4.4 Accredited Investor......................................... 7
4.5 No Public Market............................................ 7
4.6 Receipt of Information...................................... 7
</TABLE>

-i-

<PAGE>

<TABLE>
<S> <C> <C>
4.7 Restricted Securities....................................... 8
4.8 Further Limitations on Disposition.......................... 8
4.9 Legends..................................................... 8
4.10 Government Consents......................................... 9

<CAPTION>
SECTION 5 - Conditions to Closing of Investors............................ 9
<S> <C> <C>
5.1 Representations and Warranties Correct...................... 9
5.2 Covenants................................................... 9
5.3 Opinion of Company's Counsel................................ 9
5.4 Compliance Certificate...................................... 9
5.5 Blue Sky.................................................... 9
5.6 Board of Directors.......................................... 9
5.7 Restated Certificate........................................ 9
5.8 No Material Adverse Change.................................. 10
5.9 Investors' Rights Agreement................................. 10

<CAPTION>
SECTION 6 - Conditions to Closing of Company.............................. 10
<S> <C> <C>
6.1 Representations............................................. 10
6.2 Blue Sky.................................................... 10
6.3 Restated Certificate........................................ 10

<CAPTION>
SECTION 7 - Miscellaneous................................................ 10
<S> <C> <C>
7.1 Governing Law............................................... 10
7.2 Survival.................................................... 10
7.3 Successors and Assigns...................................... 10
7.4 Entire Agreement; Amendment................................. 10
7.5 Notices, etc................................................ 11
7.6 Delays or Omissions......................................... 11
7.7 California Corporate Securities Law......................... 11
7.8 Expenses.................................................... 11
7.9 Counterparts................................................ 11
7.10 Severability................................................ 11
7.11 Gender...................................................... 11
7.12 Information Rights.......................................... 12
</TABLE>

-ii-

<PAGE>

EXHIBITS

A. Schedule of Investors

B. Restated Certificate of Incorporation

C. Exceptions to Representations and Warranties of the Company

D. Fourth Amended and Restated Investors' Rights Agreement

-iii-

<PAGE>

HEALTHEON CORPORATION

SERIES C PREFERRED

STOCK PURCHASE AGREEMENT

This Series C Preferred Stock Purchase Agreement (the "Agreement') is
made as of July 25, 1997, by and among Healtheon Corporation, a Delaware
corporation (the "Company"), with its principal office at 87 Encina Avenue,
Palo Alto, California 94301, and the persons and entities listed on the
Schedule of Investors attached as Exhibit A hereto (the "Investors").

SECTION I

AUTHORIZATION AND SALE OF STOCK

1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
up to two million six hundred thousand (2,600,000) shares of its Series C
Preferred Stock (the "Series C Preferred"), having the rights, restrictions,
privileges and preferences as set forth in the Company's Restated Certificate
of Incorporation in the form attached to this Agreement as Exhibit B (the
"Restated Certificate").

1.2 SALE OF STOCK. Subject to the terms and conditions hereof, the
Company will issue and sell to the Investors, and the Investors will buy from
the Company, the number of shares (the "Shares") of Series C Preferred
specified opposite each Investor's name on the Schedule of Investors, at a
cash purchase price of two dollars and fifty cents ($2.50) per share. The
Company's agreements with each of the Investors are separate agreements, and
the sales of the Shares to each of the Investors are separate sales.

SECTION 2

CLOSING DATE; DELIVERY

2.1 CLOSING DATE. The initial closing of the purchase and sale of two
million four hundred thousand (2,400,000) shares of the Series C Preferred Stock
was held at 11:00 a.m. on July 1, 1997 and the second closing with respect to
two hundred thousand (200,000) shares of Series C Preferred is anticipated to be
held on July 25, 1997 at 11:00 a.m. (the "Closing") or on such later date or
dates as the Company and the applicable Investors may agree to (the date of such
Closing being referred to as the "Closing Date"). The place of the Closing
(including the place of delivery to the Investors by the Company of the
certificates evidencing all shares Series C Preferred being purchased and the
place of payment to the Company by the Investors of the purchase price therefor)
shall be at the offices of the Company located at 87 Encina Avenue, Palo Alto,
California 94301, or such other place as the Investors and the Company may
mutually agree.

2.2 SUBSEQUENT CLOSING. The Company may, in its sole discretion,
provide for deferred closings hereunder (a "Subsequent Closing"), to be held
at the offices of the Company, at such time and dates as the Company may
determine (the date of any such Subsequent Closing being referred to as a
"Subsequent Closing Date"). Any Subsequent Closing(s) will take place as
promptly as possible following the initial Closing hereunder. The number of
shares of Series C Preferred which any Subsequent Investor shall be entitled
to purchase, shall be determined within the sole discretion of the Company,
but in no event shall the total number of shares of Series C Preferred sold
pursuant to this Agreement be more than three million

<PAGE>

(3,000,000) shares. Upon completion of any Subsequent Closing, if any, all
additional purchasers of shares of Series C Preferred shall be considered
"Investors" within the meaning of this Agreement.

2.3 DELIVERY. At the Closing and any Subsequent Closing, the Company will
deliver to each Investor a certificate or certificates representing the number
of Shares designated in column 2 of the Schedule of Investors to be purchased by
each Investor, against payment of the purchase price therefor, by check or
wire transfer payable to the Company, or by cancellation of outstanding
indebtedness from the Company to such Investor, or by a combination thereof, in
the amount specified in column 3 of the Schedule of Investors.

SECTION 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on Exhibit C attached hereto, the Company hereby
represents and warrants to the Investors as follows:

3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS. The Company is
a corporation duly organized and existing under, and by virtue of, the laws
of the State of Delaware and is in good standing under such laws. The Company
has requisite corporate power to own and operate its properties and assets,
and to carry on its business as presently conducted and as proposed to be
conducted. The Company is not qualified to do business as a foreign
corporation in any jurisdiction and such qualification is not presently
required.

3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite corporate power to execute and deliver this Agreement and the Fourth
Amended and Restated Investors' Rights Agreement attached hereto as Exhibit D
(the "Investors' Rights Agreement"), to sell and issue the Shares hereunder, to
issue the underlying Series C-1 Preferred Stock (the "Series C-1 Preferred")
and Common Stock (together, the "Conversion Stock") in accordance with the
provisions of the Restated Certificate, and to carry out and perform its
obligations under the terms of this Agreement and the Investors' Rights
Agreement.

3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated companies
and does not otherwise own or control, directly or indirectly, any other
corporation, association or business entity.

3.4 CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 34,000,000 shares of Common Stock, 2,353,221 shares of which
are issued and outstanding prior to the Closing; (b) 10,305,000 shares of
Series A Preferred, 10,285,000 shares of which are issued and outstanding
prior to the Closing and 10,305,000 shares of Series A-1 Preferred, none of
which has been or will be issued or outstanding prior to the Closing (c)
8,000,000 shares of Series B Preferred, 3,000,000 of which are issued and are
outstanding as of the date hereof, 2,000,000 of which are subject to
outstanding warrants as of the date hereof and up to 1,015,000 of which are
subject to outstanding purchase and/or warrant rights as of the date hereof
and 8,000,000 shares of Series B-1 Preferred, none of which has been or will
be issued or outstanding prior to the Closing; and (d) 3,000,000 shares of
Series C Preferred, 2,400,000 of which will be issued and outstanding prior
to the Closing and 3,000,000 shares of Series C-1 Preferred, none of which
has been or will be issued or outstanding prior to the Closing. The Company
has reserved (i) 200,000 shares of Series C Preferred for issuance hereunder,
(ii) sufficient shares of Common Stock for issuance upon conversion of the
Series C Preferred and/or Series C-1 Preferred, (iii) an aggregate of
2,600,000 shares of Series C-1 Preferred for issuance upon conversion of the
Series C Preferred, (iv) two million (2,000,000) shares of Series B Preferred
for issuance pursuant to outstanding warrants; (v) 72,000 shares of Series B
Preferred which will be subject to issuance upon the exercise of warrants
issued pursuant to the Company's

<PAGE>

April 1997 Bridge Loan; (vi) one million (1,000,000) shares of Series B
Preferred for issuance pursuant to an outstanding purchase right and/or
warrant right which has been granted to the Company's Chief Executive
Officer candidate; (vii) fifteen thousand (15,000) shares of Series B
Preferred for issuance pursuant to an outstanding purchase right which has
been granted to a member of the Company's Board of Directors; (viii)
sufficient shares of Common Stock for issuance upon conversion of the Series
B Preferred and/or Series B-1 Preferred, (ix) sufficient number of shares
of Series B-1 Preferred for issuance upon conversion of the Series B
Preferred, (x) 10,285,000 shares of Series A-1 Preferred for issuance upon
conversion of the Series A Preferred, (xi) sufficient shares of Common Stock
for issuance upon conversion of the Series A Preferred and/or Series A-1
Preferred, and (xii) 9,000,000 shares of Common Stock for issuance to
employees and consultants pursuant to the Company's 1996 Stock Plan (of
which 4,130,608 shares have been issued and/or option granted with respect
thereto, prior to the date hereof). There are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of capital stock or
other securities of the Company. The Series C Preferred and the Series C-1
Preferred shall have the rights, preferences, privileges and restrictions
set forth in the Restated Certificate. There are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of capital stock or
other securities of the Company. Assuming the accuracy of each Investor's
representations in Section 4 below, upon issuance, the Shares will have been
issued in compliance with all federal and state securities laws.

3.5 AUTHORIZATION. All corporate action on the part of the Company,
its directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Investors' Rights
Agreement by the Company, the authorization, sale, issuance and delivery of
the Shares and the Conversion Stock and the performance of the Company's
obligations hereunder has been taken or will be taken prior to the Closing.
This Agreement and the Investors' Rights Agreement, when executed and
delivered by the Company, shall constitute the valid and binding obligations
of the Company enforceable in accordance with their respective terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, and other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal and
state securities laws. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued and will be fully paid
and nonassessable; the Series C-1 Preferred issuable upon conversion of the
Series C Preferred has been duly and validly reserved and, when issued in
compliance with the provisions of this Agreement, will be validly issued and
will be fully paid and nonassessable and the Common Stock issuable upon
conversion of the Series C Preferred and/or the Series C-1 Preferred has been
duly and validly reserved and, when issued in compliance with the provisions
of this Agreement, will be validly issued and will be fully paid and
nonassessable, and free of any liens or encumbrances (assuming the Investors
take the Shares with no notice thereof) other than any liens or encumbrances
created by or imposed upon the holders; provided, however, that the Shares
and the Conversion Stock may be subject to restrictions on transfer under
state or federal securities laws and restrictions set forth herein.

3.6 TITLE TO PROPERTIES AND ASSETS; LIENS ETC. The Company has
good and valid title to its properties and assets, and has good title
to all its leasehold interests, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (i) the lien of
current taxes not yet due and payable, and (ii) possible minor liens
and encumbrances which do not in any case materially detract from the
value of the property subject thereto or materially impair the
operations of the Company, and which have not arisen otherwise than in
the ordinary course of business.

<PAGE>

3.7 FINANCIAL STATEMENTS. The Company has delivered to each Investor its
audited financial statements (balance sheet, income statement and statement of
cashflow) for the period from inception through December 31, 1996 and its
unaudited financial statements (balance sheet and income statement) for the
period ended May 31, 1997 (the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis, except that the Financial
Statements may not contain all footnotes required by GAAP and the May 31, 1997
Financial Statement are subject to normal year end adjustments. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein. Except as set
forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to May 31, 1997 which individually or in the
aggregate are not material to the financial condition or operating results of
the Company, and (ii) obligations not required under generally accepted
accounting principles to be reflected in the Financial Statements.

3.8 ACTIVITIES SINCE BALANCE SHEET DATE. Since the Company's balance
sheet dated May 3 1, 1997 there has not been:

(a) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, or business of the Company;

(b) any waiver by the Company of a valuable right or of a material
debt owed to it;

(c) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound
or subject, except for changes or amendments which are expressly provided for
or disclosed in this Agreement;

(d) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances or other advances made in the
ordinary course of business;

(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct
or indirect redemption, purchase or other acquisition of any such stock by
the Company;

(f) any incurrance of indebtedness for money borrowed individually
in excess of $50,000 or in excess of $100,000 in the aggregate;

(g) any material change in any compensation arrangement or
agreement with any employee;

(h) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;

(i) any resignation or termination of employment of any key
officer of the Company; and

(j) to the Company's knowledge, any other event or condition or
any character which would be reasonably likely to materially and adversely
affect the assets, properties, financial condition, operating results or
business of the Company;

<PAGE>

3.10 PATENTS, TRADEMARKS, ETC. The Company owns or has the right, or
prior to the Closing will own or have the right, to use, free and clear of
all liens, charges, claims and restrictions, all patents, trademarks,
service marks, trade names, copyrights, licenses and rights necessary to its
business as now conducted, and is not, to the best of its knowledge,
infringing upon or otherwise acting adversely to the right or claimed right
of any person under or with respect to any of the foregoing. There are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company
has not received any written communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any
patent, trademark, service mark, trade name, copyright or trade secret or
other proprietary right of any other person or entity. The Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of such employee's best efforts to
promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by
the employees of the Company, nor the conduct of the Company's business as
proposed, will, to the Company's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees
is now obligated. The Company does not believe it is or will be necessary to
utilize any inventions of any of its employees (or people it currently
intends to hire) made prior to their employment by the Company.

3.11 MATERIAL CONTRACTS AND COMMITMENTS. Neither the Company, nor, to
the best knowledge of the Company, any third party is in default under any
material contract, agreement or instrument to which the Company is a party.

3.12 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of the Restated Certificate of
Incorporation or Bylaws, or in any material respect of any term or provision
of any material mortgage, indenture, contract, agreement or instrument to
which it is a party or by which it is bound, and to the best of its
knowledge, is not in violation of any order, statute, rule or regulation
applicable to the Company, which violation reasonably would be expected to
have a material adverse effect on the Company's business or financial
condition. The execution, delivery and performance of and compliance
with this Agreement, and the issuance of the Shares and the Conversion Stock,
have not resulted and will not result in any violation of, or conflict with,
or constitute a default under, or result in the creation of, any material
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company.

3.13 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to the best of the Company's knowledge, is there
any written threat thereof), which, either in any case or in the aggregate,
reasonably would be expected to result in any material adverse change in the
business or financial condition of the Company or any of its properties or
assets, or in any material impairment of the right or ability of the Company
to carry on its business as now conducted, and none which questions the
validity of this Agreement or the Investors' Rights Agreement or any action
taken or to be taken in connection herewith. The Company is not a party to,
or to the best of its knowledge named in any order, writ, injunction,

5
<PAGE>

judgment or decree of any court or government agency or instrumentality.
There is no action, suit or proceeding by the Company currently pending or
that the Company currently intends to initiate.

3.14 EMPLOYEES. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of any such employee with the Company or any other party because
of the nature of the business conducted or to be conducted by the Company.
The Company does not have any collective bargaining agreements covering any
of its employees.

3.15 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not currently under any obligation to register
under the Securities Act of 1933, as amended (the "Act") any of its presently
outstanding securities or any of its securities which may hereafter be issued.

3.16 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of, or designation, declaration or filing with, any federal, state or local
governmental authority on the part of the Company is required in connection
with the valid execution and delivery of this Agreement and the Investors'
Rights Agreement, or the offer, sale or issuance of the Shares and the
Conversion Stock, or the consummation of any other transaction contemplated
hereby, except (a) filing of the Restated Certificate in the office of the
Secretary of State of the State of Delaware, and (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) of the offer and sale of the Shares and the
Conversion Stock under the California Corporate Securities Law and other
applicable Blue Sky laws, which filing and qualification, if required, will
be accomplished in a timely manner prior to or promptly upon completion of
the Closing.

3.18 DISCLOSURES. No representation, warranty or statement by the
Company in this Agreement, or in any written statement or certificate
furnished to the Investors in connection with this Agreement, contains any
untrue statement of a material fact or, when taken together, omits to state a
material fact necessary to make the statements made herein, in light of the
circumstances under which they were made, not misleading. However, as to any
projections furnished to the Investors, such projections were prepared in good
faith by the Company, but the Company makes no representation or warranty
that it will be able to achieve such projections. The Company has fully
provided each Investor with all the information that such Investor has
requested for deciding whether to purchase the Shares.

3.20 REAL PROPERTY HOLDING COMPANY. The Company is not a "real property
holding company" as defined under Section 897 of the Internal Revenue Code.

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SECTION 4

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

Each Investor hereby represents and warrants to the Company with respect
to its purchase of the Shares as follows:

4.1 AUTHORIZATION. This Agreement and the Investors' Right Agreement,
when executed and delivered by the Investor, will each constitute the
Investor's valid and legally binding obligation, enforceable in accordance
with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief,
or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.

4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with the
Investor in reliance upon the Investor's representation to the Company, which
by the Investor's execution of this Agreement the Investor hereby confirms,
that the Common Stock or Series C Preferred to be received by the Investor
and the Common Stock and Series C-1 Preferred issuable upon conversion of the
Series C Preferred (collectively, the "Securities") will be acquired for
investment for the Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Investor has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, the Investor
further represents that the Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Securities. The Investor represents that it has the full power and
authority to enter into this Agreement.

4.3 INVESTMENT EXPERIENCE. The Investor is an investor in securities of
companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable
of evaluating the merits and risks of the investment in the Series C
Preferred. If other than an individual, the Investor also represents it has
not been organized solely for the purpose of acquiring the Series C
Preferred, or if the Investor has been organized solely for the purpose of
acquiring the Series C Preferred, that all of the equity owners of the
Investor are "accredited investors" as defined below.

4.4 ACCREDITED INVESTOR. The Investor is an "accredited investor" within
the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.

4.6 RECEIPT OF INFORMATION. Each Investor has received and reviewed this
Agreement and all Exhibits thereto; it, its attorney and its accountant have
had access to, and an opportunity to review all documents and other materials
provided by or requested of, the Company; it and they have been given an
opportunity to ask any and all questions of, and receive answers from, the
Company concerning the terms and conditions of the offering and to obtain all
information it or they believe necessary or appropriate to evaluate the
suitability of an investment in the Common Stock or Series C Preferred;
and, in evaluating the suitability of an investment in the Common Stock or
Series C Preferred, it and they have not relied upon any

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representations or other information (whether oral or written) other than as
set forth in the documents and answers referred to above.

4.7 RESTRICTED SECURITIES. The Investor understands that the Securities
it is purchasing are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration
under the Act only in certain limited circumstances. In addition, the
Investor represents that it is familiar with Rule 144 promulgated under
the Act, as presently in effect, and understands the resale limitations
imposed thereby and by the Act.

4.8 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless:

(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such Registration Statement;

(c) The Investor shall have sold, assigned, transferred, pledged or
otherwise disposed of the Securities in a transaction involving the
distribution without consideration of the Securities by the Investor to any
of its partners or retired partners, or to the estate of any of its partners
or retired partners, or in a transaction involving the transfer or
distribution of the Securities by a corporation to any subsidiary, parent or
affiliated corporation of such corporation; provided in each case that the
Investor shall give written notice to the Company of such Investor's
intention to effect such transfer, sale, assignment, pledge or other
disposition. The Investor will cause any such proposed purchaser assignee,
transferee or pledgee of any Securities held by the Investor to agree to take
and hold such Securities subject to the provisions and upon the conditions
specified in this Agreement.

4.9 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:

(b) Any legend required by the laws of the State of Delaware or
the State of California, including any legend required by the California
Department of Corporations.

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SECTION 5

CONDITIONS TO CLOSING OF INVESTORS

5.3 OPINION OF COMPANY'S COUNSEL. The Investors shall have received from
counsel to the Company, an opinion addressed to them, dated the Closing Date
or the Subsequent Closing Date, as the case may be, in a form reasonably
acceptable to the Investors.

5.5 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured an exemption therefrom, required by
any state for the offer and sale of the Shares and the Conversion Stock.

5.6 BOARD OF DIRECTORS. The Board of Directors shall at the Closing
consist of Jim Clark, Brook Byers, Hugh Rienhoff, Jr., M.D. and John Doerr.

5.7 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Secretary of State of the State of Delaware.

5.8 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's business or financial condition.

5.9 INVESTORS' RIGHTS AGREEMENT. The Investors and the Company shall
have entered into the Investors' Rights Agreement in substantially the form
attached hereto as Exhibit D.

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<PAGE>

SECTION 6

CONDITIONS TO CLOSING OF COMPANY

The Company's obligation to sell and issue the Shares at the Closing or
at any Subsequent Closing, is at the option of the Company, subject to the
fulfillment of the following conditions:

6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured an exemption therefrom, required by
any state for the offer and sale of the Shares and the Conversion Stock.

6.3 RESTATED CERTIFICATE. The Restated Certificate shall have been filed
with the Secretary of State of the State of Delaware.

SECTION 7

MISCELLANEOUS

7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, without giving effect to the conflicts
of laws principles thereof.

7.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Investor and the
closing of the transactions contemplated hereby.

7.4 ENTIRE AGREEEMNT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived,
discharged, or terminated other than by a written instrument signed by the
party against whom enforcement of any such amendment, waiver, discharge, or
termination is sought; provided, however, that holders of a majority of the
shares of Common Stock issued or issuable upon conversion of the Shares
and/or the Series C-I Preferred and (whether or not converted) not resold
to the public may waive or amend, on behalf of all Investors, any provisions
hereof benefiting Investors in respect of the Shares.

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<PAGE>

so furnished an address to the Company, or (c) if to the Company, one copy
should be sent to its address set forth on the cover page of this
Agreement and addressed to the attention of the Corporate Secretary, or at
such other address as the Company shall have furnished to the Investors.

7.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or
default of the Company under this Agreement, shall impair at such right,
power or remedy of such holder nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.

7.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM
SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH
EXEMPTION BEING AVAILABLE.

7.8 EXPENSES. The Company and the Investors shall each bear their own
expenses and legal fees with respect to this Agreement and the transactions
contemplated hereby except that, assuming a successful completion of the
offering the Company will pay at the initial Closing the reasonable legal
fees and reasonable expenses upon receipt of a bill therefor, incurred by one
counsel to the Investors.

7.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the
Investors, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

7.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severablility shall be
effective if it materially changes the economic benefit of this Agreement to
any party.

7.11 GENDER. The use of the neuter gender herein shall be deemed to
include the masculine and the feminine gender, if the context so requires.

7.12 INFORMATION RIGHTS. The Company hereby agrees to provide the
Investors with the following information rights:

a. The Company shall, as soon as practicable, but in any event
within ninety (90) days after the end of each fiscal year of the Company,
furnish to Investor a consolidated profit and loss statement for such fiscal
year, a consolidated balance sheet of the Company and a consolidated
statement of stockholders' equity as of the end of such year, and a
consolidated statement of cash flows for such year, such year-end financial
reports to be prepared in accordance with generally accepted accounting
principles

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<PAGE>

and audited and certified by independent public accountants of nationally
recognized standing selected by the Company.

b. The Company shall furnish to Investor, as soon as practicable
following the end of each quarter at such time as the Company furnishes to
its other venture capital investors, a consolidated profit and loss statement
for each quarter and year-to-date, a consolidated balance sheet of the
Company and a consolidated statement of cash flows for such quarter and
year-to-date prepared in accordance with generally accepted accounting
principles consistently applied.

c. The Company shall furnish Investor, provided Investor continues
to hold all of the Shares purchased hereunder, upon request, within thirty
(30) days of the end of each month, an unaudited consolidated profit and loss
statement, consolidated statement of cash flows and consolidated balance
sheet for and as of the end of such month, and comparison to year-end results
(if any).

d. The rights to receive financial information set forth herein
above may be assigned by Investor to a subsequent transferee or assignee
which holds in the aggregate at least two hundred fifty thousand (250,000)
shares (as adjusted for stock splits, combinations, dividends and the like)
of such Investor's Shares (or Common Stock issued upon conversion of such
Preferred Stock), provided that the transferee or assignee of such rights is
not deemed by the Board of Directors, in its reasonable judgment, to be a
current or potential competitor of the Company.

The foregoing Series C Preferred Stock Purchase Agreement is hereby
executed as of the date first above written.

HEALTHEON CORPORATE

By: /s/ W. Michael Long
----------------------------
President

<PAGE>

HEALTHEON CORPORATION

SERIES D PREFERRED

STOCK PURCHASE AGREEMENT

This Series D Preferred Stock Purchase Agreement (the "Agreement") is
made as of October 13, 1997, by and among Healtheon Corporation, a
Delaware corporation (the "Company"), with its principal office at 87 Encina
Avenue, Palo Alto, California 94301, and the persons and entities listed on
the Schedule of Investors attached as Exhibit A hereto (the "Investors").

SECTION 1

AUTHORIZATION AND SALE OF STOCK

1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
up to four million eight hundred seven thousand six hundred ninety-three
(4,807,693) shares of its Series D Preferred Stock (the "Series D
Preferred"), having the rights, restrictions, privileges and preferences as
set forth in the Company's Restated Certificate of Incorporation in the form
attached to this Agreement as Exhibit B (the "Restated Certificate").

1.2 SALE OF STOCK. Subject to the terms and conditions hereof, the
Company will issue and sell to the Investors, and the Investors will buy from
the Company, the number of shares (the "Shares") of Series D Preferred
specified opposite each Investor's name on the Schedule of Investors, at a
cash purchase price of five dollars and twenty cents ($5.20) per share. The
Company's agreements with each of the Investors are separate agreements, and
the sales of the Shares to each of the Investors are separate sales.

SECTION 2

CLOSING DATE; DELIVERY

2.1 CLOSING DATE. The initial closing of the purchase and sale of the
Shares hereunder (the "Closing") shall be held at 11:00 a.m. on October 13,
1997 or on such later date or dates as the Company and the Investors may
agree to (the date of such Closing being referred to as the "Closing Date").
The place of the Closing (including the place of delivery to the Investors by
the Company of the certificates evidencing all shares Series D Preferred
being purchased and the place of payment to the Company by the Investors of
the purchase price therefor) shall be at the offices of the Company located
at 87 Encina Avenue, Palo Alto, California 94301, or such other place as the
Investors and the Company may mutually agree.

2.2 SUBSEQUENT CLOSING. The Company may, in its sole discretion,
provide for deferred closings hereunder (a "Subsequent Closing"), to be held
at the offices of the Company, at such time and dates as the Company may
determine (the date of any such Subsequent Closing being referred to as a
"Subsequent Closing Date"). Any Subsequent Closing(s) will take place as
promptly as possible following the initial Closing hereunder. The number of
shares of Series D Preferred which any Subsequent Investor shall be entitled
to purchase, shall be determined within the sole discretion of the Company,
but in no event shall the total number of shares of Series D Preferred sold
pursuant to this Agreement be more than three million (3,000,000) shares.
Upon completion of any Subsequent Closing, if any, all additional purchasers
of shares of Series D Preferred shall be considered "Investors" within the
meaning of this Agreement.

<PAGE>

2.3 DELIVERY. At the Closing and any Subsequent Closing, the Company
will deliver to each Investor a certificate or certificates representing the
number of Shares designated in column 2 of the Schedule of Investors to be
purchased by each Investor, against payment of the purchase price therefor,
by check or wire transfer payable to the Company, or by cancellation of
outstanding indebtedness from the Company to such Investor, or by a
combination thereof, in the amount specified in column 3 of the Schedule of
Investors.

SECTION 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on Exhibit C attached hereto, the Company hereby
represents and warrants to the Investors as follows:

3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of
the State of Delaware and is in good standing under such laws. The Company
has requisite corporate power to own and operate its properties and assets,
and to carry on its business as presently conducted and as proposed to be
conducted. The Company is not qualified to do business as a foreign
corporation in any jurisdiction and such qualification is not presently
required.

3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite corporate power to execute and deliver this Agreement and the
Amended and Restated Investors' Rights Agreement dated October 13, 1997
attached hereto as Exhibit D (the "Investors' Rights Agreement"), to sell and
issue the Shares hereunder, to issue the underlying Series D-1 Preferred
Stock (the "Series D-1 Preferred") and Common Stock (together, the
"Conversion Stock") in accordance with the provisions of the Restated
Certificate, and to carry out and perform its obligations under the terms of
this Agreement and the Investors' Rights Agreement.

3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
other corporation, association or business entity.

3.4 CAPITALIZATION. The authorized capital stock of the Company consists
of (a) 37,00,000 shares of Common Stock, 2,167,804 shares of which are
issued and outstanding prior to the Closing; (b) 10,305,000 shares of Series
A Preferred, 10,305,000 shares of which are issued and outstanding prior to
the Closing and 10,305,000 shares of Series A-1 Preferred, none of which has
been or will be issued or outstanding prior to the Closing (c) 6,105,000
shares of Series B Preferred, 3,277,500 of which are issued and are
outstanding as of the date hereof, 2,811,947 of which are subject to
outstanding warrants as of the date hereof and 6,105,000 shares of Series B-1
Preferred, none of which has been or will be issued or outstanding prior to
the Closing; (d) 2,600,000 shares of Series C Preferred, 2,600,000 of which
are issued and outstanding prior to the Closing and 2,600,000 shares of
Series C-1 Preferred, none of which has been or will be issued or
outstanding prior to the Closing; (e) 5,000,000 shares of Series D Preferred,
none of which will be issued and outstanding prior to the Closing and
5,000,000 shares of Series D-1 Preferred, none of which has been or will be
issued or outstanding prior to the Closing. The Company has reserved (i)
4,807,693 shares of Series D Preferred for issuance hereunder, (ii)
sufficient shares of Common Stock for issuance upon conversion of the Series
D Preferred and/or Series D-1 Preferred, (iii) 4,807,693 shares of Series D-1
Preferred for issuance upon conversion of the Series D Preferred, (iv)
sufficient shares of Common Stock for issuance upon conversion of the Series
C Preferred and/or Series C-1 Preferred, (v) 2,600,000 shares of Series C-1
Preferred for issuance upon conversion of the Series C Preferred, (vi) two
million eight hundred eleven thousand nine hundred forty seven (2,811,947)
shares of Series B Preferred for issuance pursuant to outstanding warrants;
(vii) sufficient

<PAGE>

shares of Common Stock for issuance upon conversion of the Series B Preferred
and/or Series B-1 Preferred, (viii) sufficient number of shares of Series B-1
Preferred for issuance upon conversion of the Series B Preferred, (ix)
10,305,000 shares of Series A-1 Preferred for issuance upon conversion of the
Series A Preferred, (x) sufficient shares of Common Stock for issuance upon
conversion of the Series A Preferred and/or Series A-1 Preferred, and (xi)
9,000,000 shares of Common Stock for issuance to employees and consultants
pursuant to the Company's 1996 Stock Plan (of which 7,928,191 shares have
been issued and/or options granted,with respect thereto, prior to the date
hereof). There are no other options, warrants, conversion privileges or other
rights presently outstanding to purchase or otherwise acquire any authorized
but unissued shares of capital stock or other securities of the Company. The
Series D Preferred and the Series D-1 Preferred shall have the rights,
preferences, privileges and restrictions set forth in the Restated
Certificate. There are no other options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of capital stock or other securities of the
Company. Assuming the accuracy of each Investor's representations in Section
4 below, upon issuance, the Shares will have been issued in compliance with
all federal and state securities laws.

3.5 AUTHORIZATION. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Investors' Rights
Agreement by the Company, the authorization, sale, issuance and delivery of
the Shares and the Conversion Stock and the performance of the Company's
obligations hereunder has been taken or will be taken prior to the Closing.
This Agreement and the Investors' Rights Agreement, when executed and
delivered by the Company, shall constitute the valid and binding obligations
of the Company enforceable in accordance with their respective terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, and other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal and
state securities laws. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued and will be fully paid
and nonassessable; the Series D-1 Preferred issuable upon conversion of the
Series D Preferred has been duly and validly reserved and, when issued in
compliance with the provisions of this Agreement, will be validly issued and
will be fully paid and nonassessable and the Common Stock issuable upon
conversion of the Series D Preferred and/or the Series D-1 Preferred has been
duly and validly reserved and, when issued in compliance with the provisions
of this Agreement, will be validly issued and will be fully paid and
nonassessable, and free of any liens or encumbrances (assuming the Investors
take the Shares with no notice thereof) other than any liens or encumbrances
created by or imposed upon the holders; provided, however, that the Shares
and the Conversion Stock may be subject to restrictions on transfer under
state or federal securities laws and restrictions set forth herein.

3.6 TITLE TO PROPERTIES AND ASSETS, LIENS, ETC. The Company has good
and valid title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not
yet due and payable, and (ii) possible minor liens and encumbrances which do
not in any case materially detract from the value of the property subject
thereto or materially impair the operations of the Company, and which have
not arisen otherwise than in the ordinary course of business.

<PAGE>

normal year end adjustments. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein. Except as set forth in the Financial
Statements, the Company has no material liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to August 31, 1997 which individually or in the aggregate are not
material to the financial condition or operating results of the Company, and
(ii) obligations not required under generally accepted accounting principles
to be reflected in the Financial Statements.

3.8 ACTIVITIES SINCE BALANCE SHEET DATE. Since the Company's balance
sheet dated August 3 1, 1997 there has not been: