YAHOO INC
8-K, 1998-06-12
COMPUTER INTEGRATED SYSTEMS DESIGN
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                         SECURITIES AND EXCHANGE COMMISSION

                               Washington, D.C. 20549

                                      FORM 8-K

     CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                    ACT OF 1934

DATE OF REPORT      June 12, 1998


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


                                    YAHOO! INC.

               (Exact name of registrant as specified in its charter)

                                      0-26822
                              (Commission File Number)

     California                         77-0398689
     (State or other jurisdiction of    (I.R.S. Employer Identification No.)
     incorporation or organization)


                              3420 Central Expressway
                           Santa Clara, California 95051
              (Address of principal executive offices, with zip code)


                                   (408) 731-3300
                (Registrant's telephone number, including area code)


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ITEM 2.        ACQUISITION OR DISPOSITION OF ASSETS.

               On June 4, 1998, Yahoo! Inc., a California corporation
     ("Yahoo!"), entered into an Agreement and Plan of Merger ("Agreement") by
     and among Yahoo!, XY Acquisition Corporation, a wholly-owned subsidiary of
     Yahoo!, and Viaweb Inc., a Delaware corporation ("Viaweb").  Pursuant to
     the Agreement, on June 10, 1998 all outstanding shares of Viaweb capital
     stock were converted into 393,591 shares of capital stock and options to
     purchase Viaweb capital stock were converted into options to purchase
     61,126 shares of Yahoo! Common Stock.

               Yahoo! will file a registration statement on Form S-3 with the
     Securities and Exchange Commission, dated June 12, 1998, to permit the
     resale of the outstanding shares issued in the Merger. Yahoo! also has
     filed a registration statement on Form S-8 with the Securities and Exchange
     Commission with respect to the issuance of shares upon exercise of options
     assumed in the Merger.

               Under the terms of the Agreement and a related Escrow Agreement
     dated June 10, 1998, a total of 62,673 shares of Yahoo!'s Common Stock and
     options to purchase 5,537 shares of Yahoo! Common Stock will be held in
     escrow for the purpose of indemnifying Yahoo! against certain liabilities
     of Viaweb.  Such escrow will terminate on December 9, 1999.

          This transaction was originally reported voluntarily under Item 5
     (Other Events) of Form 8-K, dated June 8, 1998.

<PAGE>
ITEM 5         OTHER EVENTS

    The following risk factors are included for informational purposes and 
are hereby incorporated by reference in the Company's Registration Statements 
on Form S-3 and S-8 that will be filed with the Securities and Exchange 
Commission: 

                                  RISK FACTORS
 
    THESE RISK FACTORS CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING 
OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE 
SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS 
REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE 
STRATEGIES. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE 
BASED ON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE HEREOF, AND THE 
COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. 
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE 
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW.

LIMITED OPERATING HISTORY; ANTICIPATED LOSSES
 
    The Company was incorporated in March 1995 and did not commence generating
advertising revenues until August 1995. Accordingly, the Company has a limited
operating history upon which an evaluation of the Company can be based, and its
prospects are subject to the risks, expenses and uncertainties frequently
encountered by companies in the new and rapidly evolving markets for Internet
products and services, including the Web-based advertising market. Specifically,
such risks include, without limitation, the failure to continue to develop and
extend the Yahoo! brand, the failure to develop new media properties, the
inability of the Company to maintain and increase the levels of traffic on
Yahoo! properties, the development or acquisition of equal or superior services
or products by competitors, the failure of the market to adopt the Web as an
advertising medium, the failure to successfully sell Web-based advertising
through the Company's recently developed internal sales force, potential
reductions in market prices for Web-based advertising as a result of competition
or other factors, the failure of the Company to effectively generate
commerce-related revenues through sponsored services and placements in Yahoo!
properties, the inability of the Company to effectively integrate the technology
and operations of any other acquired businesses or technologies with its
operations, such as the recent acquisition of Viaweb Inc., the failure of the
Company to successfully develop and offer personalized Web-based services, such
as e-mail services, to consumers without errors or interruptions in service, and
the inability to continue to identify, attract, retain and motivate qualified
personnel. There can be no assurance that the Company will be successful in
addressing such risks. As of March 31, 1998, the Company had an accumulated
deficit of $23,686,000. The limited operating history of the Company and the
uncertain nature of the markets addressed by the Company make the prediction of
future results of operations difficult or impossible and, therefore, the recent
revenue growth experienced by the Company should not be taken as indicative of
the rate of revenue growth, if any, that can be expected in the future. The
Company believes that period-to-period comparisons of its operating results are
not meaningful and that the results for any period should not be relied upon as
an indication of future performance. The Company currently expects to continue
to significantly increase its operating expenses to expand its sales and
marketing operations, to continue to develop and extend the Yahoo! brand, to
fund greater levels of product development, to develop and commercialize
additional media properties, and to acquire complementary businesses and
technologies. As a result of these factors, there can be no assurance that the
Company will not incur significant losses on a quarterly and annual basis.
 
    On June 10, 1998, the Company completed the acquisition of Viaweb Inc., a
provider of software and services for hosting online stores, in exchange for
393,591 shares of the Company's Common Stock and assumption of options to
purchase an aggregate of 61,126 shares of the Company's Common Stock. Based
 
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upon the closing price of the Company's Common Stock on June 5, 1998, the shares
issued or issuable in the transaction had an aggregate value of approximately
$49 million. The Company anticipates that it will incur a one-time charge of
approximately $45 million in the second quarter of 1998 for acquired in-process
technology and expenses associated with the transaction. The remaining purchase
price of approximately $4 million will be allocated to acquired technology and
other intangible assets to be amortized over a three-year period. As a result of
the expense to be incurred in the second quarter of 1998, the Company
anticipates reporting a net loss for such quarter and for the year ending
December 31, 1998.
 
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
 
    As a result of the Company's limited operating history, the Company does not
have historical financial data for a significant number of periods on which to
base planned operating expenses. The Company derives the majority of its
revenues from the sale of advertisements under short-term contracts, which are
difficult to forecast accurately. The Company's expense levels are based in part
on its expectations concerning future revenue and, to a large extent, are fixed.
Quarterly revenues and operating results depend substantially upon the
advertising revenues received within the quarter, which are difficult to
forecast accurately. Accordingly, the cancellation or deferral of a small number
of advertising or sponsorship contracts could have a material adverse effect on
the Company's business, results of operations, and financial condition. The
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall, and any significant shortfall in revenue in
relation to the Company's expectations would have an immediate adverse effect on
the Company's business, operating results, and financial condition. In addition,
the Company plans to continue to significantly increase its operating expenses
to expand its sales and marketing operations, to continue to develop and extend
the Yahoo! brand, to fund greater levels of product development, and to develop
and commercialize additional media properties. To the extent that such expenses
precede or are not subsequently followed by increased revenues, the Company's
business, operating results, and financial condition will be materially and
adversely affected. As a result of these factors, there can be no assurance that
the Company will not incur significant losses in the future.
 
    The Company's operating results may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside the Company's
control. These factors include the level of usage of the Internet, demand for
Internet advertising, the addition or loss of advertisers, the level of user
traffic on Yahoo! and the Company's other online media properties, the
advertising budgeting cycles of individual advertisers, the mix of types of
advertising sold by the Company (such as the amount of targeted advertising,
which generally has higher rates), sold as a percentage of total advertising
sold, the amount and timing of capital expenditures and other costs relating to
the expansion of the Company's operations, the introduction of new products or
services by the Company or its competitors, pricing changes for Web-based
advertising, the timing of initial set-up, engineering or development fees that
may be paid in connection with larger advertising and distribution arrangements,
technical difficulties with respect to the use of Yahoo! or other media
properties developed by the Company, incurrence of costs relating to future
acquisitions, general economic conditions, and economic conditions specific to
the Internet and online media. As a strategic response to changes in the
competitive environment, the Company may from time to time make certain pricing,
service or marketing decisions, or business combinations that could have a
material adverse effect on the Company's business, results of operations, and
financial condition. Seasonality may affect the amount of customer advertising
dollars placed with the Company in the first and third calendar quarters as
advertisers historically spend less during these quarters. The Company also
expects to experience seasonality in its business, with user traffic on Yahoo!
and the Company's other online media properties being lower during the summer
and year-end vacation and holiday periods, when usage of the Web and the
Company's services typically experience slower growth or decline.
 
    A key element of the Company's strategy is to generate advertising revenues
through sponsored services and placements by third parties in the Company's
online media properties in addition to banner
 
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advertising. In connection with these arrangements, the Company may receive
sponsorship fees as well as a portion of transaction revenues received by the
third-party sponsor from users originated through the Yahoo! placement, in
return for minimum levels of user impressions to be provided by the Company. To
the extent implemented, these arrangements expose the Company to potentially
significant financial risks, including the risk that the Company fails to
deliver required minimum levels of user impressions or "click throughs" (in
which case, these agreements typically provide for adjustments to the fees
payable thereunder or "make good" periods), that third-party sponsors do not
renew the agreements at the end of their term, that the arrangements do not
generate anticipated levels of shared transaction revenue, or that sponsors
default in the payment commitments in such agreements, which could result in the
Company failing to achieve anticipated revenue from the sponsorship
arrangements. In addition, because the Company has limited experience with these
arrangements, the Company is unable to determine what effect such arrangements
will have on gross margins and results of operations. Although transaction-based
fees have not to date represented a material portion of the Company's net
revenues, if and to the extent such revenues become significant, the foregoing
factors could result in greater variations in the Company's quarterly operating
results and could have a material adverse effect on the Company's business,
results of operations, and financial condition.
 
    Due to all of the foregoing factors, in some future quarter the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Company's Common Stock would
likely be materially and adversely affected.
 
COMPETITION
 
    The market for Internet products and services is highly competitive and
competition is expected to continue to increase significantly. There are no
substantial barriers to entry in these markets, and the Company expects that
competition will continue to intensify.
 
    MULTIPLE PROVIDERS OF COMPETITIVE SERVICE.  The Company competes with 
many other providers of online navigation, information and community 
services. As the Company expands the scope of its Internet services, it will 
compete directly with a greater number of Internet sites and other media 
companies. Many companies offer competitive products or services addressing 
Web navigation services, including, among others, America Online Inc. 
(NetFind), C--NET, Inc. (Snap! Online), Digital Equipment Corporation 
(AltaVista), Excite, Inc. (including WebCrawler), Infoseek Corporation, 
Inktomi, Lycos, Inc. (including Tripod), Microsoft Corporation (Internet 
Start), Netscape Communications Corporation (Netcenter), and Wired Ventures, 
Inc. (hotbot). In addition, the Company competes with metasearch services and 
software applications, such as C--NET's search.com service, that allow a user 
to search the databases of several directories and catalogs simultaneously. 
The Company also competes indirectly with database vendors that offer 
information search and retrieval capabilities with their core database 
products. In addition, many large media companies have announced that they 
are contemplating Internet navigation services and are attempting to become 
"gateway" sites for Web users. For example, both Time Inc. and CBS have 
announced initiatives to develop Web services in order to have their Web 
sites become the starting point for users navigating the Web and C--NET 
recently announced that NBC has purchased an equity interest in C--NET's 
Snap! Online navigational service, and that C--NET and NBC will operate the 
service as a joint venture.
 
    A large number of Web sites and online services (including, among others,
the Microsoft Network, AOL, Netscape (Netcenter), and other Web navigation
companies such as Excite, Lycos, and Infoseek) also offer informational and
community features, such as news, stock quotes, sports coverage, Yellow Pages
and email listings, weather news, chat services, bulletin board listings and
online store hosting services that are competitive with the services offered by
the Company. For example, Netscape, which experiences high levels of traffic on
its Web sites by virtue of default settings and buttons on its popular Web
browser products, recently announced an initiative to significantly enhance its
Netcenter service as a "gateway" Web site, which will involve commercial
relationships between Netscape and certain of the
 
<PAGE>
Company's competitors. A number of companies, including HotMail (which was
recently acquired by Microsoft) and WhoWhere?, offer Web-based email service
similar to those offered by the Company, and such companies have and are
expected to continue to provide such services in tandem with larger navigational
sites and online services. AOL recently announced the acquisition of Mirabilis,
a provider of "ICQ" instant Internet messaging software and services that
compete with the Company's Yahoo! Pager offering, and the ICQ user base will
provide AOL with an additional platform for distribution of AOL's other
navigation, information and communications services that compete with those of
the Company. Several companies, including large companies such as Microsoft and
AOL and their affiliates, also are developing or currently offer online
information services for local markets, which compete with the Company's
regional Yahoo! online properties. As a result of the Company's recent
acquisition of Viaweb, Inc., the Company also expects to face competition in the
market for hosting online merchant stores. The Company also faces intense
competition in international markets, including competition from U.S.-based
competitors as well as media and online companies that are already well
established in those foreign markets.
 
    CONSOLIDATION OF PRODUCTS OFFERED BY WEB BROWSERS AND OTHER INTERNET POINTS
OF ENTRY.  The Company also faces competition from providers of software and
other Internet products and services that incorporate search and retrieval
features into their offerings. For example, Web browsers offered by Netscape and
Microsoft, which are the most widely used browsers, increasingly incorporate
prominent search buttons and similar features, such as features based on "push"
technologies, that direct search traffic to competing services, including those
that may be developed or licensed by such parties, that could make it more
difficult for Internet viewers to find and use the Company's products and
services. Netscape recently announced an agreement with Excite under which
Excite will be the most prominent navigational service within the Netcenter
Website. In the future, Netscape and Microsoft and other browser suppliers may
also more tightly integrate products and services similar to the Company's into
their browsers or their browsers' pre-set home pages. In addition, entities that
sponsor or maintain high-traffic Web sites or that provide an initial point of
entry for Internet users, such as the Regional Bell Operating Companies or
Internet Service Providers ("ISPs") such as Microsoft and AOL, currently offer
and could further develop, acquire or license Internet search and navigation
functions that compete with those offered by the Company and could take actions
that make it more difficult for consumers to find and use Yahoo! services. For
example, Microsoft recently announced that it will feature and promote Internet
search engine services provided by Inktomi in the Microsoft Network and other
Microsoft online properties, and offers personalized Web services through its
Internet Start service. The Company expects that such search services may be
tightly integrated into future versions of the Microsoft operating system, the
Internet Explorer browser and other software applications, and that Microsoft
will promote such services within the Microsoft Network or through other
Microsoft affiliated end-user services such as MSNBC or WebTV Networks, Inc.
Insofar as Microsoft's Internet navigational offerings may be more conveniently
accessed by users than those of the Company, this may provide Microsoft with
significant competitive advantages that could have a material adverse effect on
the Company's business.
 
    COMPETITION FOR ADVERTISING EXPENDITURES.  The Company also competes with
online services, other Web site operators and advertising networks, as well as
traditional offline media such as television, radio and print for a share of
advertisers' total advertising budgets. The Company believes that the number of
companies selling Web-based advertising and the available inventory of
advertising space have increased substantially during recent periods.
Accordingly, the Company may face increased pricing pressure for the sale of
advertisements and reductions in the Company's advertising revenues.
 
    PRINCIPAL COMPETITIVE FACTORS.  The Company believes that the principal
competitive factors in its markets are brand recognition, ease of use,
comprehensiveness, independence, quality and responsiveness of search results,
the availability of high-quality, targeted content and focused value added
products and services, quality and brand appeal, access to end users, and, with
respect to advertisers and sponsors, the number of users, duration and frequency
of visits and user demographics. Competition among current and
 
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future suppliers of Internet navigational and informational services,
high-traffic Web sites and ISPs, as well as competition with other media for
advertising placements, could result in significant price competition and
reductions in advertising revenues. Additionally, the Company has faced and
expects to continue to face competition with respect to the acquisition of
strategic businesses and technologies. There can be no assurance that the
Company will be able to compete successfully or that the competitive pressures
faced by the Company will not have a material adverse effect on the Company's
business, operating results, and financial condition.
 
    Many of the Company's existing competitors, as well as a number of potential
new competitors, have significantly greater financial, technical, marketing and
distribution resources. In addition, providers of Internet tools and services
may be acquired by, receive investments from, or enter into other commercial
relationships with larger, well-established and well-financed companies, such as
Microsoft or AOL. For example, AOL is a significant shareholder of Excite, and a
version of the Excite service (AOL NetFind) has been designated as the exclusive
Internet search service for use by AOL's subscribers. In addition, well-
established traditional media companies may acquire, invest or otherwise
establish commercial relationships with the Company's competitors, such as NBC's
recent investment in C--NET's Snap! Online service, and may use their
substantial media resources to promote and enhance such competitor's services.
Greater competition resulting from such relationships could have a material
adverse effect on the Company's business, operating results and financial
condition.
 
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET; TECHNOLOGICAL CHANGE
 
    The Company's future success is substantially dependent upon continued
growth in the use of the Internet and the Web in order to support the sale of
advertising on the Company's online media properties. There can be no assurance
that communication or commerce over the Internet will become more widespread or
that extensive content will continue to be provided over the Internet. The
Internet may not prove to be a viable commercial marketplace for a number of
reasons, including lack of acceptable security technologies, potentially
inadequate development of the necessary infrastructure, such as a reliable
network backbone, or timely development and commercialization of performance
improvements, including high speed modems. In addition, to the extent that the
Internet continues to experience significant growth in the number of users and
level of use, there can be no assurance that the Internet infrastructure will
continue to be able to support the demands placed upon it by such potential
growth or that the performance or reliability of the Web will not be adversely
affected by this continued growth. If use of the Internet does not continue to
grow, or if the Internet infrastructure does not effectively support growth that
may occur, the Company's business, operating results, and financial condition
would be materially and adversely affected. The market for Internet products and
services is characterized by rapid technological developments, evolving industry
standards and customer demands, and frequent new product introductions and
enhancements. These market characteristics are exacerbated by the emerging
nature of this market and the fact that many companies are expected to introduce
new Internet products and services in the near future. Failure of the Company to
effectively adapt to technological developments could adversely affect the
Company's business, operating results, and financial condition.
 
DEVELOPING MARKET; UNPROVEN ACCEPTANCE OF THE COMPANY'S PRODUCTS AND MEDIA
  PROPERTIES
 
    The markets for the Company's products and media properties have only
recently begun to develop, are rapidly evolving, and are characterized by an
increasing number of market entrants who have introduced or developed
information navigation products and services for use on the Internet and the
Web. As is typical in the case of a new and rapidly evolving industry, demand
and market acceptance for recently introduced products and services are subject
to a high level of uncertainty and risk. Because the market for the Company's
products and media properties is new and evolving, it is difficult to predict
the future growth rate, if any, and size of this market. There can be no
assurance either that the market for the Company's products and media properties
will continue to develop or that demand for the Company's
 
<PAGE>
products or media properties will be sustainable. If the market develops more
slowly than expected or becomes saturated with competitors, or if the Company's
products and media properties do not sustain market acceptance, the Company's
business, operating results, and financial condition will be materially and
adversely affected.
 
RISKS ASSOCIATED WITH BRAND DEVELOPMENT
 
    The Company believes that establishing and maintaining the Yahoo! brand is a
critical aspect of its efforts to attract and expand its user and advertiser
base and that the importance of brand recognition will increase due to the
growing number of Internet sites and the relatively low barriers to entry.
Promotion and enhancement of the Yahoo! brand will depend largely on the
Company's success in providing high-quality products and services, which success
cannot be assured. In order to attract and retain Internet users and to promote
and maintain the Yahoo! brand in response to competitive pressures, the Company
may find it necessary to increase substantially its financial commitment to
creating and maintaining a distinct brand loyalty among consumers. If the
Company is unable to provide high-quality products and services or otherwise
fails to promote and maintain its brand, or if the Company incurs excessive
expenses in an attempt to improve its products and services or promote and
maintain its brand, the Company's business, operating results, and financial
condition will be materially and adversely affected.
 
RELIANCE ON ADVERTISING REVENUES AND UNCERTAIN ADOPTION OF THE WEB AS AN
  ADVERTISING MEDIUM
 
    The Company derives substantially all of its revenues from the sale of
advertisements on its Web pages under short-term contracts. Most of the
Company's advertising customers have only limited experience with the Web as an
advertising medium, have not devoted a significant portion of their advertising
expenditures to Web-based advertising, and may not find such advertising to be
effective for promoting their products and services relative to traditional
print and broadcast media. The Company's ability to generate significant
advertising revenues will depend upon, among other things, advertisers'
acceptance of the Web as an effective and sustainable advertising medium, the
development of a large base of users of the Company's services possessing
demographic characteristics attractive to advertisers, and the ability of the
Company to continue to develop and update effective advertising delivery and
measurement systems. No standards have yet been widely accepted for the
measurement of the effectiveness of Web-based advertising, and there can be no
assurance that such standards will develop sufficiently to support Web-based
advertising as a significant advertising medium. In addition, there can be no
assurance that the advertisers will determine that banner advertising, which
comprises the majority of the Company's revenues, is an effective advertising
medium, and there can be no assurance that the Company will effectively
transition to any other forms of Web-based advertising, should they develop.
Certain advertising filter software programs are available that limit or remove
advertising from an Internet user's desktop. Such software, if generally adopted
by users, may have a materially adverse effect upon the viability of advertising
on the Internet. There also can be no assurance that the Company's advertising
customers will accept the internal and third-party measurements of impressions
received by advertisements on Yahoo! and the Company's online media properties,
or that such measurements will not contain errors. The Company relies primarily
on its internal advertising sales force for domestic advertising sales, which
involves additional risks and uncertainties, including (among others) risks
associated with the recruitment, retention, management, training, and motivation
of sales personnel. As a result of these factors, there can be no assurance that
the Company will sustain or increase current advertising sales levels. Failure
to do so will have a material adverse effect on the Company's business,
operating results, and financial position.
 
SUBSTANTIAL DEPENDENCE UPON THIRD PARTIES
 
    The Company depends substantially upon third parties for several critical
elements of its business including, among others, technology and infrastructure,
content development, and distribution activities.
 
<PAGE>
    TECHNOLOGY AND INFRASTRUCTURE.  In May 1998, the Company and Inktomi entered
into an agreement under which Inktomi will provide text-based Web search results
to complement the Company's directory and navigational guide. The Inktomi
service is expected to be integrated during the third quarter of 1998. The
Company will depend substantially upon ongoing maintenance and technical support
from Inktomi to ensure accurate and rapid presentation of such search results to
the Company's customers. Any termination of the agreement with Inktomi or
Inktomi's failure to renew such agreement upon expiration could result in
substantial additional costs to the Company in developing or licensing
replacement technology, and could result in a loss of levels of use of the
Company's navigational services. The Company also relies principally on a
private third-party provider, Frontier GlobalCenter, Inc. ("GlobalCenter"), for
the Company's principal Internet connections. Additionally, email service
Internet connections are provided by GTE. Any disruption in the Internet access
provided by these third-party providers or any failure of these third-party
providers to handle current or higher volumes of use could have a material
adverse effect on the Company's business, operating results, and financial
condition. The Company also licenses technology and related databases from third
parties for certain elements of Yahoo! properties, including, among others,
technology underlying news, stock quotes and current financial information, chat
services, street mapping, telephone listings, and similar services. The Company
has experienced and expects to continue to experience interruptions and delays
in service and availability for such elements, such as recent interruptions in
the Company's stock quote services. Any errors, failures, or delays experienced
in connection with these third-party technologies and information services could
negatively impact the Company's relationship with users and adversely affect the
Company's brand and its business, and could expose the Company to liabilities to
third parties.
 
    CONTENT DEVELOPMENT.  A key element of the Company's strategy involves the
implementation of Yahoo!-branded media properties targeted for interest areas,
demographic groups, and geographic areas. In these efforts, the Company has
relied and will continue to rely substantially on content development and
localization efforts of third parties. For example, the Company has entered into
an agreement with Ziff-Davis pursuant to which Ziff-Davis publishes an online
publication and a print magazine under the Yahoo! brand. The Company also
expects to rely substantially on third-party affiliates, including SOFTBANK in
Japan and Korea, and Rogers Communications ("Rogers") in Canada, to localize,
maintain, and promote these services and to sell advertising in local markets.
There can be no assurance that the Company's current or future third-party
affiliates will effectively implement these properties, or that their efforts
will result in significant revenue to the Company. Any failure of these parties
to develop and maintain high-quality and successful media properties also could
result in unfavorable dilution to the Yahoo! brand. Certain of these
arrangements also require the Company to integrate third parties' content with
the Company's services, which can require the dedication of resources and
significant programming and design efforts to accomplish. In addition, the
Company has granted exclusivity provisions to certain third parties, and may in
the future grant additional exclusivity provisions. Such exclusivity provisions
may have the effect of preventing the Company, for the duration of such
exclusivity arrangements, from accepting advertising or sponsorship arrangements
within a particular subject matter with respect to portions of the Company's
network of media properties, which could have an adverse effect on the Company.
 
    DISTRIBUTION RELATIONSHIPS.  In order to create traffic for the Company's
online properties and make them more attractive to advertisers and consumers,
the Company has entered into certain distribution agreements and informal
relationships with leading Web browser providers (Microsoft and Netscape),
operators of online networks and leading Web sites, and computer manufacturers,
such as Compaq Computer and Gateway 2000. The Company believes these
arrangements are important to the promotion of the Company's online media
properties, particularly among new Web users who may first access the Web
through these browsers, services, Web sites, or computers. The Company's
business relationships with these companies consist of arrangements for the
positioning of access to Yahoo! properties on Web browsers and cooperative
marketing programs and licenses to include Yahoo! in online networks or services
offered by these parties, which are intended to increase the use and visibility
of Yahoo!. These distribution arrangements typically are not exclusive, and may
be terminated upon little or no notice. Third
 
<PAGE>
parties that provide distribution channels for the Company may also assess fees
or otherwise impose additional conditions on the listing of Yahoo! or other
online properties of the Company. Any such event could have a material adverse
effect on the Company's business, results of operations, and financial
condition.
 
    The Company recently announced a co-branding and distribution arrangement
with MCI under which the Company will provide a Web-based online service in
conjunction with dial-up Internet access provided by MCI. In this arrangement,
the Company will depend substantially upon MCI for, among other things,
effective marketing and promotion efforts and the provision of competitive
Internet access service to customers. Any failure by MCI in these respects could
materially impair the benefits received by the Company from this arrangement,
and could negatively affect the Yahoo! brand.
 
ENHANCEMENT OF YAHOO! PROPERTIES AND DEVELOPMENT OF NEW PROPERTIES
 
    To remain competitive, the Company must continue to enhance and improve the
functionality, features, and content of the Yahoo! main site, as well as the
Company's other branded media properties. There can be no assurance that the
Company will be able to successfully maintain competitive user response times or
implement new features and functions, such as new search capabilities, greater
levels of user personalization, simplified searching from the Web browser,
real-time chat and Internet paging, localized content filter and information
delivery through "push" or other methods, which will involve the development of
increasingly complex technologies. The Company also expects that personalized
information services, such as the Company's recently launched Web-based email
service, will require significantly greater expenses associated with, among
other things, increased server capacity and equipment and requirements for
additional customer support personnel and systems. To the extent such additional
expenses are not offset by additional revenues from such personalized services,
the Company's financial results will be adversely affected.
 
    The Company's future success also depends in part upon the timely processing
of Web site listings submitted by users and Web content providers, which have
increased substantially in recent periods. The Company has from time to time
experienced significant delays in the processing of submissions, and further
delays could have a material adverse effect on the Company's goodwill among Web
users and content providers, and on the Company's business.
 
    A key element of the Company's business strategy is the development and
introduction of new Yahoo!-branded online properties targeted for specific
interest areas, user groups with particular demographic characteristics, and
geographic areas. There can be no assurance that the Company will be successful
in developing, introducing, and marketing such products or media properties or
that such products and media properties will achieve market acceptance, enhance
the Company's brand name recognition, or increase traffic on Yahoo!'s online
properties. Furthermore, enhancements of or improvements to Yahoo! or new media
properties may contain undetected errors that require significant design
modifications, resulting in a loss of customer confidence and user support and a
decrease in the value of the Company's brand name recognition. The Company's
ability to successfully develop additional targeted media properties depends
substantially on use of Yahoo! to promote such properties. If use of Yahoo!
fails to continue to grow, the Company's ability to establish other targeted
properties would be adversely affected. Any failure of the Company to
effectively develop and introduce these properties, or failure of such
properties to achieve market acceptance, could adversely affect the Company's
business, results of operations, and financial condition.
 
INVESTMENTS IN AFFILIATES
 
    The Company has made equity investments in affiliated companies that are
involved in the commercialization of Yahoo!-branded online properties, such as
versions of Yahoo! localized for foreign markets. The Company currently intends
to continue to make significant additional investments in such companies
 
<PAGE>
from time to time in the future, as well as other companies involved in the
development of technologies or services that are complementary or related to the
Company's business, such as the December 1997 investments in GeoCities and
AudioNet. These affiliated companies typically are in an early stage of
development and may be expected to incur substantial losses. As a result, the
Company has recorded and expects to continue to record a share of the losses in
such affiliates attributable to the Company's ownership, which losses have had
and will continue to have an adverse effect on the Company's results of
operations. Furthermore, there can be no assurance that any investments in such
companies will result in any return, nor can there be any assurance as to the
timing of any such return, or that the Company will not lose its entire
investment.
 
MANAGEMENT OF POTENTIAL GROWTH AND INTEGRATION OF ACQUISITIONS
 
    The Company's recent growth has placed, and is expected to continue to
place, a significant strain on its managerial, operational, and financial
resources. To manage its potential growth, the Company must continue to
implement and improve its operational and financial systems and to expand,
train, and manage its employee base. The process of managing advertising within
large, high traffic Web sites such as those in the Yahoo! network is an
increasingly important and complex task. The Company relies on both internal and
licensed third-party advertising inventory management and analysis systems. To
the extent that any extended failure of the Company's advertising management
system results in incorrect advertising insertions, the Company may be exposed
to "make good" obligations with its advertising customers, which, by displacing
advertising inventory, could defer advertising revenues and thereby have a
material adverse effect on the Company's business, operating results, and
financial condition. Failure of the Company's advertising management systems to
effectively track and provide accurate and timely reports on advertising results
also could negatively affect the Company's relationships with advertisers and
thereby have an adverse effect on the Company's business. There can be no
assurance that the Company's systems, procedures, or controls will be adequate
to support the Company's operations or that Company management will be able to
achieve the rapid execution necessary to fully exploit the Company's market
opportunity. Any inability to effectively manage growth, if any, could have a
material adverse effect on the Company's business, operating results, and
financial condition.
 
    As part of its business strategy, the Company has completed and expects to
enter into additional business combinations and acquisitions, such as the
October 1997 acquisition of Four11 and the June 1998 acquisition of Viaweb.
Acquisition transactions are accompanied by a number of risks, including, among
other things, the difficulty of assimilating the operations and personnel of the
acquired companies, the potential disruption of the Company's ongoing business,
the inability of management to maximize the financial and strategic position of
the Company through the successful incorporation of acquired technology or
content and rights into the Company's products and media properties, expenses
associated with the transactions, additional expenses associated with
amortization of acquired intangible assets, the maintenance of uniform
standards, controls, procedures and policies, the impairment of relationships
with employees and customers as a result of any integration of new management
personnel, and the potential unknown liabilities associated with acquired
businesses. There can be no assurance that the Company would be successful in
addressing these risks or any other problems encountered in connection with such
acquisitions.
 
RISK OF CAPACITY CONSTRAINTS AND SYSTEMS FAILURES
 
    The Company is dependent on its ability to effectively serve a high volume
of use of its online media properties. Accordingly, the performance of the
Company's online media properties is critical to the Company's reputation, its
ability to attract advertisers to the Company's Web sites, and to achieve market
acceptance of these products and media properties. Any system failure that
causes an interruption or an increase in response time of the Company's products
and media properties could result in less traffic to the Company's Web sites
and, if sustained or repeated, could reduce the attractiveness of the Company's
 
<PAGE>
products and media properties to advertisers and licensees. An increase in the
volume of queries conducted through the Company's products and media properties
could strain the capacity of the software or hardware deployed by the Company,
which could lead to slower response time or system failures, and adversely
affect the number of impressions received by advertisers and thus the Company's
advertising revenues. In addition, as the number of Web pages and users
increase, there can be no assurance that the Company's products and media
properties and infrastructure will be able to scale accordingly. The Company
also faces technical challenges associated with higher levels of personalization
and localization of content delivered to users of its services, which adds
strain to the Company's development and operational resources. For example,
personalized information services, such as Web-based email services, involve
increasingly complex technical and operational challenges, and there can be no
assurance that the Company will successfully implement and scale such services
to the extent required by any growth in the number of users of such services, or
that the failure to do so will not materially and adversely affect the goodwill
of users of these services, or negatively affect the Company's brand and
reputation. The Company is also dependent upon Web browsers and Internet and
online service providers for access to its products and media properties. In
particular, a private third-party provider, GlobalCenter, provides the Company's
principal Internet connections. In the past, users have occasionally experienced
difficulties due to system failures, including failures unrelated to the
Company's systems. Additionally, Internet connections for the Company's
Web-based email services are provided by GTE. Any disruption in the Internet
access provided by these third-party providers or any failure of these
third-party providers to handle higher volumes of user traffic could have a
material adverse effect on the Company's business, operating results, and
financial condition. Furthermore, the Company is dependent on hardware suppliers
for prompt delivery, installation, and service of servers and other equipment
used to deliver the Company's products and services.
 
    The Company's operations are susceptible to outages due to fire, floods,
power loss, telecommunications failures, break-ins, and similar events. In
addition, substantially all of the Company's network infrastructure is located
in Northern California, an area susceptible to earthquakes, which also could
cause system outages or failures. The Company does not presently have multiple
site capacity in the event of any such occurrence. Despite the implementation of
network security measures by the Company, its servers are vulnerable to computer
viruses, break-ins, and similar disruptions from unauthorized tampering with the
Company's computer systems. The Company does not carry sufficient business
interruption insurance to compensate the Company for losses that may occur as a
result of any of these events. Such events could have a material adverse effect
on the Company's business, operating results, and financial condition.
 
TRADEMARKS AND PROPRIETARY RIGHTS
 
    The Company regards its copyrights, trademarks, trade dress, trade secrets,
and similar intellectual property as critical to its success, and the Company
relies upon trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with its employees, customers,
partners and others to protect its proprietary rights. The Company pursues the
registration of its trademarks in the United States and internationally, and has
applied for and obtained the registration for certain of its trademarks,
including "Yahoo!" and "Yahooligans!". Effective trademark, copyright, and trade
secret protection may not be available in every country in which the Company's
products and media properties are distributed or made available through the
Internet. The Company has licensed in the past, and it expects that it may
license in the future, elements of its distinctive trademarks, trade dress, and
similar proprietary rights to third parties, including in connection with
branded mirror sites of Yahoo!, and other media properties and merchandise that
may be controlled operationally by third parties. While the Company attempts to
ensure that the quality of its brand is maintained by such licensees, no
assurances can be given that such licensees will not take actions that could
materially and adversely affect the value of the Company's proprietary rights or
the reputation of its products and media properties, either of which could have
a material adverse effect on the Company's business. Also, the Company is aware
that third parties have from time to time copied significant portions of Yahoo!
directory listings for use in competitive Internet navigational tools and
services, and there can be no assurance that the distinctive
 
<PAGE>
elements of Yahoo! will be protectible under copyright law. 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, trade dress, and similar proprietary rights.
In addition, there can be no assurance that other parties will not assert
infringement claims against the Company.
 
    Many parties are actively developing search, indexing, and related Web
technologies at the present time. The Company believes that such parties have
taken and will continue to take steps to protect these technologies, including
seeking patent protection. As a result, the Company believes that disputes
regarding the ownership of such technologies are likely to arise in the future.
For example, the Company is aware that a number of patents have been issued in
the areas of electronic commerce and Web-based information indexing and
retrieval (including patents recently issued to one of the Company's direct
competitors), and the Company anticipates that additional third-party patents
will be issued in the future. There can be no assurance that the technology
recently acquired through the Viaweb acquisition, or any other technology
relating to the Company's business that has been or may be developed by the
Company or licensed from third parties, will not be determined to infringe one
or more third-party patents. In the event of such infringement, there can be no
assurance that the Company will be able to license such patents on reasonable
terms, if any, or that such infringement will not result in substantial monetary
liability to the Company, including substantial expenses that may be incurred in
defending against third-party patent claims regardless of the merit of such
claims.
 
DEPENDENCE ON KEY PERSONNEL
 
    The Company's performance is substantially dependent on the performance of
its senior management and key technical personnel. In particular, the Company's
success depends substantially on the continued efforts of its senior management
team. The Company does not carry key person life insurance on any of its senior
management personnel. The loss of the services of any of its executive officers
or other key employees could have a material adverse effect on the business,
operating results, and financial condition of the Company.
 
    The Company's future success also depends on its continuing ability to
attract and retain highly qualified technical and managerial personnel.
Competition for such personnel is intense and there can be no assurance that the
Company will be able to retain its key managerial and technical employees or
that it will be able to attract and retain additional highly qualified technical
and managerial personnel in the future. The inability to attract and retain the
necessary technical and managerial personnel could have a material and adverse
effect upon the Company's business, operating results, and financial condition.
 
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
 
    There are currently few laws or regulations directly applicable to access to
or commerce on the Internet. Due to the increasing popularity and use of the
Internet, it is possible that a number of laws and regulations may be adopted
with respect to the Internet, covering issues such as user privacy, defamation,
pricing, taxation, content regulation, quality of products and services, and
intellectual property ownership and infringement. For example, although the
Communications Decency Act was held to be unconstitutional, there can be no
assurance that similar legislation will not be enacted in the future, and it is
possible that such legislation could expose the Company to substantial
liability. Such legislation could also dampen the growth in use of the Web
generally, decrease the acceptance of the Web as a communications and commercial
medium and require the Company to incur expense in complying with any new
regulations, and could, thereby, have a material adverse effect on the Company's
business, results of operations, and financial condition. Other nations,
including Germany, have taken actions to restrict the free flow of material
deemed to be objectionable on the Web. In addition, several telecommunications
carriers are seeking to have telecommunications over the Web regulated by the
Federal Communications Commission (the "FCC") in the same manner as other
telecommunications services. For example, America's Carriers
 
<PAGE>

Telecommunications Association ("ACTA") has filed a petition with the FCC for
this purpose. In addition, because the growing popularity and use of the Web has
burdened the existing telecommunications infrastructure and many areas with high
Web use have begun to experience interruptions in phone service, local telephone
carriers, such as Pacific Bell, have petitioned the FCC to regulate ISPs and
OSPs in a manner similar to long distance telephone carriers and to impose
access fees on the ISPs and OSPs. If either of these petitions is granted, or
the relief sought therein is otherwise granted, the costs of communicating on
the Web could increase substantially, potentially slowing the growth in use of
the Web, which could in turn decrease the demand for the Company's products and
media properties. A number of proposals have been made at the federal, state and
local level that would impose additional taxes on the sale of goods and services
through the Internet. Such proposals, if adopted, could substantially impair the
growth of electronic commerce, and could adversely affect the Company's
opportunity to derive financial benefit from such activities. Also, legislation
is pending in Congress that would impose liability on online service providers
such as the Company for listing or linking to third-party Web sites or hosting
third-party Web sites that include materials that infringe copyrights or other
rights of others. In addition, a number of other countries have announced or are
considering additional regulation in many of the foregoing areas. Such laws and
regulations if enacted in the United States or abroad could fundamentally impair
the Company's ability to provide Internet navigation services, or substantially
increase the cost of doing so, which would have a material adverse effect on the
Company's business, operating results, and financial condition. Moreover, the
applicability to the Internet of the existing laws governing issues such as
property ownership, copyright, defamation, obscenity, and personal privacy is
uncertain, and the Company may be subject to claims that its services violate
such laws. Any such new legislation or regulation in the United States or abroad
or the application of existing laws and regulations to the Internet could have a
material adverse effect on the Company's business, operating results, and
financial condition.
 
    Due to the global nature of the Web, it is possible that, although
transmissions by the Company over the Internet originate primarily in the State
of California, the governments of other states and foreign countries might
attempt to regulate the Company's transmissions or prosecute the Company for
violations of their laws. There can be no assurance that violations of local
laws will not be alleged or charged by state or foreign governments, that the
Company might not unintentionally violate such law or that such laws will not be
modified, or new laws enacted, in the future. Any of the foregoing developments
could have a material adverse effect on the Company's business, results of
operations, and financial condition.
 
LIABILITY FOR INFORMATION SERVICES
 
    Because materials may be downloaded by the online or Internet services
operated or facilitated by the Company and may be subsequently distributed to
others, there is a potential that claims will be made against the Company for
defamation, negligence, copyright or trademark infringement, personal injury or
other theories based on the nature and content of such materials. Such claims
have been brought, and sometimes successfully pressed, against online service
providers in the past. In addition, the Company could be exposed to liability
with respect to the selection of listings that may be accessible through the
Company's Yahoo!-branded products and media properties, or through content and
materials that may be posted by users in classifieds, message board and chat
room services offered by the Company. Such claims might include, among others,
that by providing hypertext links to Web sites operated by third parties, the
Company is liable for copyright or trademark infringement or other wrongful
actions by such third parties through such Web sites, or that the Company is
responsible for legal injury caused by statements made for or actions taken by
participants in the Company's message board services. It is also possible that
if any information provided through the Company's services, such as stock
quotes, analyst estimates or other trading information, contains errors, third
parties could make claims against the Company for losses incurred in reliance on
such information. In connection with the acquisition of Four11 Corporation, the
Company recently began offering Web-based email services, which expose the
Company to potential risks, such as liabilities or claims resulting from
unsolicited email (spamming), lost or misdirected messages, illegal or
fraudulent use of email or interruptions or delays in email service. Even to the
extent such claims
 
<PAGE>
do not result in liability to the Company, the Company expects to incur
significant costs in investigating and defending such claims.
 
    The Company also from time to time enters into arrangements to offer
third-party products and services under the Yahoo! brand or via distribution on
Yahoo! properties. For example, the Company recently announced an agreement with
GeoCities under which GeoCities will offer free home page services and certain
related products to Yahoo! users. The Company also recently announced an
arrangement with AudioNet, an Internet-based broadcast network, whereby links to
AudioNet's site and content will be distributed via Yahoo! properties. These
business arrangements involve additional legal risks, such as potential
liabilities for content posted by free home page users or made available by
other third-party providers. The Company may be subject to claims concerning
such services or content by virtue of the Company's involvement in marketing,
branding or providing access to such services, even if the Company does not
itself host, operate, or provide such services. While the Company's agreements
with these parties often provide that the Company will be indemnified against
such liabilities, there can be no assurance that such indemnification, if
available, will be adequate.
 
POTENTIAL COMMERCE-RELATED LIABILITIES AND EXPENSES
 
    From time to time, the Company enters into agreements with sponsors, content
providers, service providers, and merchants under which the Company is entitled
to receive a share of revenue from the purchase of goods and services by users
of the Company's online properties. Such arrangements may expose the Company to
additional legal risks and uncertainties, including (without limitation)
potential liabilities to consumers of such products and services. Although the
Company carries general liability insurance, the Company's insurance may not
cover potential claims of this type or may not be adequate to indemnify the
Company for all liability that may be imposed.
 
    The Company recently began offering a Yahoo!-branded VISA credit card, which
includes a "rewards" program entitling card users to receive points that may be
redeemed for merchandise, such as books or music. This arrangement exposes the
Company to certain additional risks and expenses, including, without limitation,
those relating to compliance with consumer protection laws, loss of customer
data, disputes over redemption procedures and rules, products liability, sales
taxation and liabilities associated with any failure in performance by
participating merchants.
 
    In June 1998, the Company completed the acquisition of Viaweb, a provider of
software and reporting tools for the operation of online commerce Web sites. The
Company intends to use the Viaweb technology to host and promote online stores
on behalf of third-party merchants, the operation and maintenance of which will
be largely under the independent control of such merchants. These activities
expose the Company to a number of additional risks and uncertainties, including
(without limitation) potential liabilities for illegal activities that may be
conducted by participating merchants; products liability or other tort claims
relating to goods or services sold through hosted commerce sites; consumer fraud
and false or deceptive advertising or sales practices; breach of contract claims
relating to merchant transactions; claims that materials included in merchant
sites or sold by merchants through these sites infringe third-party patents,
copyrights, trademarks or other intellectual property rights, or are libelous,
defamatory or in breach of third-party confidentiality or privacy rights; claims
relating to any failure of merchants to appropriately collect and remit sales or
other taxes arising from e-commerce transactions; and claims that may be brought
by merchants as a result of their exclusion from the Company's commerce services
or losses resulting from any downtime or other performance failures in the
Company's hosting services. Although the Company maintains liability insurance,
there can be no assurance that insurance will cover these claims or that such
coverage, if available, will be adequate. Even to the extent such claims do not
result in material liability to the Company, the Company expects to incur
significant costs in investigating and defending such claims.
 
<PAGE>
YEAR 2000 IMPLICATIONS
 
    Many currently installed computer systems and software products are coded 
to accept only two digit entries in the date code field and cannot 
distinguish 21st century dates from 20th century dates. These date code 
fields will need to distinguish 21st century dates from 20th century dates 
and, as a result, many companies' software and computer systems may need to 
be upgraded or replaced in order to comply with such "Year 2000" 
requirements. Although the Company believes that its systems are Year 2000 
compliant in all material respects, there can be no assurances that the 
Company's current systems and products do not contain undetected errors or 
defects with Year 2000 date functions that may result in material costs to 
the Company. Although the Company is not aware of any material operational 
issues or costs associated with preparing its internal systems for the Year 
2000, there can be no assurances that the Company will not experience serious 
unanticipated negative consequences (such as significant downtime for one or 
more Yahoo! Media properties) and/or material costs caused by undetected 
errors or defects in the technology used in its internal systems. In 
addition, the Company utilizes third-party equipment, software and content 
that may not be Year 2000 compliant. Failure of such third-party equipment, 
software or content 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, results of operations and financial condition. 
Furthermore, the purchasing patterns of advertisers may be affected by Year 
2000 issues as companies expend significant resources to correct their 
current systems for Year 2000 compliance. These expenditures may result in 
reduced funds available for Web advertising or sponsorship of Web services, 
which could have a material adverse effect on the Company's business, results 
of operations and financial condition.
 
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXPANSION
 
    A key part of the Company's strategy is to develop Yahoo!-branded online
properties in international markets. The Company has developed and operates,
through joint ventures with SOFTBANK and related entities, versions of Yahoo!
localized for Japan, Germany, France, the United Kingdom, and Korea. The Company
offers a version of Yahoo! localized for Canada under an agreement with Rogers
Communications, and the Company operates localized or mirror versions of Yahoo!
through wholly-owned subsidiaries in Australia, Denmark, Italy, Norway, Sweden,
and Singapore. The Company also offers Yahoo! guides in Spanish and Mandarin
Chinese languages.
 
    To date, the Company has only limited experience in developing localized
versions of its products and marketing and operating its products and services
internationally, and the Company relies substantially on the efforts and
abilities of its foreign business partners in such activities. The Company has
experienced and expects to continue to experience higher costs as a percentage
of revenues in connection with international online properties than domestic
online properties. If the international revenues are not adequate to offset
investments in such activities, the Company's business, operating results, and
financial condition could be materially adversely affected. The Company may
experience difficulty in managing international operations as a result of
distance as well as language and cultural differences, and there can be no
assurance that the Company or its partners will be able to successfully market
and operate its products and services in foreign markets. The Company also
believes that in light of substantial anticipated competition, it will be
necessary to move quickly into international markets in order to effectively
obtain market share, and there can be no assurance that the Company will be able
to do so. In addition to the uncertainty as to the Company's ability to continue
to generate revenues from its foreign operations and expand its international
presence, there are certain risks inherent in doing business on an international
level, such as unexpected changes in regulatory requirements, trade barriers,
difficulties in staffing and managing foreign operations, longer payment cycles,
problems in collecting accounts receivable, political instability, export
restrictions, export controls relating to encryption technology, seasonal
reductions in business activity in certain other parts of the world, and
potentially adverse tax consequences. There can be no assurance that one or more
of such factors will not have a material adverse effect on the Company's
 
<PAGE>
future international operations and, consequently, on the Company's business,
operating results, and financial condition.
 
CONCENTRATION OF STOCK OWNERSHIP
 
    As of May 31. 1998, the present directors, executive officers, and their
respective affiliates beneficially owned approximately 58% of the outstanding
Common Stock of the Company. As of May 31, 1998, SOFTBANK beneficially owned
approximately 29% of the outstanding Common Stock of the Company. As a result of
their ownership, the directors, executive officers, greater than 5% shareholders
and their respective affiliates (including SOFTBANK) collectively are able to
control all matters requiring shareholder approval, including the election of
directors and approval of significant corporate transactions. Such concentration
of ownership may also have the effect of delaying or preventing a change in
control of the Company.
 
VOLATILITY OF STOCK PRICE
 
    The trading price of the Company's Common Stock has been and may continue to
be subject to wide fluctuations in response to a number of events and factors,
such as quarterly variations in operating results, announcements of
technological innovations or new products and media properties by the Company or
its competitors, changes in financial estimates and recommendations by
securities analysts, the operating and stock price performance of other
companies that investors may deem comparable to the Company, and news reports
relating to trends in the Company's markets. In addition, the stock market in
general, and the market prices for Internet-related companies in particular,
have experienced extreme volatility that often has been unrelated to the
operating performance of such companies. These broad market and industry
fluctuations may adversely affect the trading price of the Company's Common
Stock, regardless of the Company's operating performance.
 
LEGAL PROCEEDINGS
 
    In July 1997, GTE New Media Services Incorporated ("GTE New Media"), an
affiliate of GTE, filed suit in Dallas, Texas against Netscape and the Company,
in which GTE New Media made a number of claims relating to the inclusion of
certain Yellow Pages hypertext links in the Netscape Guide by Yahoo!, an online
navigational property operated by the Company under an agreement with Netscape.
In this lawsuit, GTE New Media has alleged, among other things, that by
including such links to the Yellow Pages service operated by several Regional
Bell Operating Companies (the "RBOCs") within the Guide, the Company has
tortiously interfered with an alleged contractual relationship between GTE New
Media and Netscape relating to placement of links by Netscape for a Yellow Pages
service operated by GTE New Media. GTE New Media seeks injunctive relief as well
as actual and punitive damages. In October 1997, GTE New Media brought suit in
the U.S. District Court for the District of Columbia, against the RBOCs,
Netscape, and the Company, in which GTE New Media has alleged, among other
things, that the alleged exclusion of the GTE New Media Yellow Pages from the
Netscape Guide Yellow Pages service violates federal antitrust laws, and GTE New
Media seeks injunctive relief and damages (trebled under federal antitrust laws)
from such alleged actions. The Company believes that the claims against the
Company in these lawsuits are without merit and intends to contest them
vigorously. Although the Company cannot predict with certainty the outcome of
these lawsuits or the expenses that may be incurred in defending the lawsuits,
the Company does not believe that the result in the lawsuits will have a
material adverse effect on the Company's financial position or results of
operations.
 
    From time to time the Company has been, and expects to continue to be,
subject to other legal proceedings and claims in the ordinary course of its
business, including, among others, contractual disputes with advertisers and
content distribution providers, claims of alleged infringement of trademarks and
other intellectual property rights, and a variety of claims arising in
connection with the Company's email, message boards and other communications and
community features, such as claims alleging defamation
 
<PAGE>
and invasion of privacy. Such claims, even if not meritorious, could result in
the expenditure of significant financial and managerial resources. Although the
Company cannot predict the outcome of any proceeding, the Company is not
currently aware of any such legal proceedings or claims that the Company
believes will have, individually or in the aggregate, a material adverse effect
on the Company's financial position or results of operations.
 
ANTITAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
 
    The Board of Directors has the authority to issue up to 10,000,000 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 shareholders. The rights of the holders of Common Stock may 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 may have the effect of delaying, deferring or preventing a change of
control of the Company without further action by the shareholders and may
adversely affect the voting and other rights of the holders of Common Stock. The
Company has no present plans to issue shares of Preferred Stock. Further,
certain provisions of the Company's charter documents, including provisions
eliminating the ability of shareholders to take action by written consent and
limiting the ability of shareholders to raise matters at a meeting of
shareholders without giving advance notice, may have the effect of delaying or
preventing changes in control or management of the Company, which could have an
adverse effect on the market price of the Company's Common Stock. In addition,
the Company's charter documents do not permit cumulative voting and provide
that, at such time as the Company has at least six directors, the Company's
Board of Directors will be divided into two classes, each of which serves for a
staggered two-year term, which may make it more difficult for a third-party to
gain control of the Company's Board of Directors.
 
SHARES ELIGIBLE FOR FUTURE SALE
 
    As of June 10, 1998, the Company had outstanding 46,836,053 shares of 
Common Stock, and options to purchase a total of approximately 11,664,648 
shares of the Company's Common Stock under the Company's stock option plans, 
including shares issued and options assumed in the recent acquisition of 
Viaweb. Of these shares, an estimated number of 3,186,132 shares recently 
issued in connection with acquisitions and investments have been or will be 
available for resale pursuant to registration statements filed by the Company 
with the SEC. Sales of substantial amounts of such shares in the public 
market or the prospect of such sales could adversely affect the market price 
of the Company's Common Stock.
 
<PAGE>

ITEM 7.        FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
               EXHIBITS.

          (a)  FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.

               The audited financial statements of Viaweb (a development 
     stage enterprise) as of and for the year ended December 31, 1997 and the 
     unaudited interim financial statements for the period from August 31, 
     1995 (Inception) through March 31, 1998 and the periods ended March 31, 
     1998 and March 31, 1997 are attached to and filed with this report.

<PAGE>

                          REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders 
   of Viaweb Incorporated

     In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' deficit and of cash flows present fairly, in all
material respects, the financial position of Viaweb Incorporated (a development
stage enterprise) at December 31, 1997 and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.  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 audit.  We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for the opinion expressed above.

     As discussed in Note 8, on June 10, 1998, the Company consummated an
Agreement and Plan of Merger with Yahoo! Inc., a publicly held company, upon
which the Company's stockholders exchanged all of their shares of Common Stock
and options to purchase shares of Common Stock for shares of Yahoo! Inc. Common
Stock and options to purchase shares of Yahoo! Inc. Common Stock in a business
combination to be accounted for as a purchase.


/s/ PRICE WATERHOUSE LLP
San Jose, California
June 2, 1998, except as to Note 8, which
is as of June 10, 1998



<PAGE>

                                    VIAWEB INC.
                          (A DEVELOPMENT STAGE ENTERPRISE)
                                   BALANCE SHEET

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,     MARCH 31, 
                                                                       1997            1998    
                                                                    ------------   ------------
<S>                                                                 <C>            <C>         
                                                                                    (UNAUDITED)
ASSETS
Current Assets:
  Cash                                                              $     14,000   $    106,000
  Accounts receivable, net of allowance of $35,000 and $32,000            23,000         49,000
  Note receivable from stockholder                                        65,000         65,000
  Prepaid expenses                                                        16,000         22,000
                                                                    ------------   ------------
       Total current assets                                              118,000        242,000

Property and equipment, net                                              192,000        172,000
Other assets                                                              12,000         12,000
                                                                    ------------   ------------

                                                                    $    322,000   $    426,000
                                                                    ------------   ------------
                                                                    ------------   ------------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
  Notes payable to bank                                             $    926,000   $          -
  Notes payable to stockholders (Note 4)                                       -      1,228,000
  Accounts payable                                                       249,000        370,000
  Accrued expenses                                                       182,000        196,000
                                                                    ------------   ------------
       Total current liabilities                                       1,357,000      1,794,000
                                                                    ------------   ------------

Commitments and contingencies (Note 5)

Stockholders' Deficit:
  Common Stock:  $0.01 par value;
    2,000,000 shares authorized;
    1,057,250 shares issued and
    outstanding                                                           11,000         11,000
  Additional paid-in capital                                           1,331,000      1,465,000
  Deficit accumulated during the development stage                    (2,242,000)    (2,709,000)
  Stock subscription receivable from officer                            (135,000)      (135,000)
                                                                    ------------   ------------

       Total stockholders' deficit                                    (1,035,000)    (1,368,000)
                                                                    ------------   ------------

                                                                    $    322,000   $    426,000
                                                                    ------------   ------------
                                                                    ------------   ------------
</TABLE>
 


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


<PAGE>

                                    VIAWEB INC.
                          (A DEVELOPMENT STAGE ENTERPRISE)
                              STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                          PERIOD FROM
                                                                                        AUGUST 31, 1995
                                            YEAR ENDED    THREE MONTHS ENDED MARCH 31,  (INCEPTION) TO
                                            DECEMBER 31,  ----------------------------     MARCH 31,
                                               1997           1997           1998            1998   
                                            -----------    -----------    -----------   ---------------
<S>                                         <C>            <C>            <C>           <C>         
                                                                  (UNAUDITED)            (UNAUDITED)


Net revenues                                $   343,000    $    34,000    $   290,000   $     650,000
                                            -----------    -----------    -----------   ---------------

Operating expenses:
  Cost of revenues                              268,000         39,000         94,000         410,000
  Sales and marketing                           863,000        167,000        237,000       1,329,000
  Research and development                      321,000         49,000        170,000         575,000
  General and administrative                    528,000         75,000        151,000         824,000
                                            -----------    -----------    -----------   ---------------

     Total operating expenses                 1,980,000        330,000        652,000       3,138,000
                                            -----------    -----------    -----------   ---------------

     Loss from operations                    (1,637,000)      (296,000)      (362,000)     (2,488,000)

Interest income (expense), net                 (110,000)         1,000       (105,000)       (215,000) 
                                            -----------    -----------    -----------   ---------------

     Net loss                               $(1,747,000)   $  (295,000)   $  (467,000)  $  (2,703,000)
                                            -----------    -----------    -----------   ---------------
                                            -----------    -----------    -----------   ---------------

Basic and diluted net loss per share        $     (1.78)   $     (0.31)   $     (0.44)
                                            -----------    -----------    -----------
                                            -----------    -----------    -----------

Shares used in computing basic and 
  diluted net loss per share:                   982,000        955,000      1,057,000
                                            -----------    -----------    -----------
                                            -----------    -----------    -----------

</TABLE>
 
      The accompanying notes are an integral part of these financial statements.

<PAGE>

                                    VIAWEB INC.
                          (A DEVELOPMENT STAGE ENTERPRISE)
                         STATEMENT OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
                                                                                COMMON STOCK            ADDITIONAL  
                                                                         ---------------------------     PAID-IN    
                                                                            SHARES         AMOUNT        CAPITAL    
                                                                         ------------   ------------   ------------ 
<S>                                                                      <C>            <C>            <C>          
Sept. 1995     Issuance of Common Stock to founders for
                 services at $0.0001 per share                                606,500   $      6,000   $          - 
Dec. 1995      Issuance of Common Stock for cash at $0.10
                 per share                                                     84,500          1,000          7,000 
Jan. - Mar.    Issuance of Common Stock for cash at $1.00
   1996          per share, net of issuance costs of $3,000,
                 which represented 2,500 shares of common stock               102,500          1,000         99,000 
Apr. 1996      Issuance of Common Stock for services at $1.00
                 per share                                                      2,000              -          2,000 
June 1996      Compensation expense on option grants at $2.50
                 per share                                                          -              -         88,000 
July 1996      Issuance of Common Stock for cash at $3.00
                 per share, net of issuance costs of $9,000,
                 which included 2,500 shares of common stock                   52,500              -        149,000 
Dec. 1996      Issuance of Common Stock for cash at $5.86
                 per share, net of issuance costs of $2,000                    64,000          1,000        371,000 
               Net loss for the period from August 31, 1995 
                 (Inception) to December 31, 1996                                   -              -              - 
                                                                         ------------   ------------   ------------ 
               Balance at December 31, 1996                                   912,000          9,000        716,000 

Jan. 1997      Issuance of Common Stock for cash at $5.86 per share            64,000          1,000        374,000 
Nov. 1997      Issuance of Common Stock under stock option plan
                 for cash and subscription receivable
                 at $0.001 - $6.00 per share                                   81,250          1,000        141,000 
July - Dec.    Warrants issued in exchange for
  1997           professional services                                              -              -         20,000 
Oct. - Dec.    Warrants issued in conjunction with
   1997          notes payable                                                      -              -         80,000 
               Net loss                                                             -              -              - 
                                                                         ------------   ------------   ------------ 
               Balance at December 31, 1997                                 1,057,250         11,000      1,331,000 

Feb. 1998      Warrants issued in conjunction with notes
                 payable (unaudited)                                                -              -         80,000 
Jan. - Mar.    Warrants issued in exchange for
    1998         professional services (unaudited)                                  -              -         54,000 
               Net loss (unaudited)                                                 -              -              - 
                                                                         ------------   ------------   ------------ 
               Balance at March 31, 1998 (unaudited)                        1,057,250   $     11,000   $  1,465,000 
                                                                         ------------   ------------   ------------ 
                                                                         ------------   ------------   ------------ 

<CAPTION>

                                                                             DEFICIT        STOCK                    
                                                                           ACCUMULATED   SUBSCRIPTION
                                                                           DURING THE     RECEIVABLE 
                                                                           DEVELOPMENT       FROM    
                                                                              STAGE        OFFICER          TOTAL   
                                                                          ------------   ------------   ------------
<S>                                                                       <C>            <C>            <C>         
Sept. 1995     Issuance of Common Stock to founders for
                 services at $0.0001 per share                            $     (6,000)  $          -   $          -
Dec. 1995      Issuance of Common Stock for cash at $0.10
                 per share                                                           -              -          8,000
Jan. - Mar.    Issuance of Common Stock for cash at $1.00
   1996          per share, net of issuance costs of $3,000,
                 which represented 2,500 shares of common stock                      -              -        100,000
Apr. 1996      Issuance of Common Stock for services at $1.00
                 per share                                                           -              -          2,000
June 1996      Compensation expense on option grants at $2.50
                 per share                                                           -              -         88,000
July 1996      Issuance of Common Stock for cash at $3.00
                 per share, net of issuance costs of $9,000,
                 which included 2,500 shares of common stock                         -              -        149,000
Dec. 1996      Issuance of Common Stock for cash at $5.86
                 per share, net of issuance costs of $2,000                          -              -        372,000
               Net loss for the period from August 31, 1995
                 (Inception) to December 31, 1996                             (489,000)             -       (489,000)
                                                                          ------------   ------------   ------------
               Balance at December 31, 1996                                   (495,000)             -        230,000

Jan. 1997      Issuance of Common Stock for cash at $5.86 per share                  -              -        375,000
Nov. 1997      Issuance of Common Stock under stock option plan
                 for cash and subscription receivable
                 at $0.001 - $6.00 per share                                         -       (135,000)         7,000
July - Dec.    Warrants issued in exchange for
  1997           professional services                                               -              -         20,000
Oct. - Dec.    Warrants issued in conjunction with
   1997          notes payable                                                       -              -         80,000
               Net loss                                                     (1,747,000)             -     (1,747,000)
                                                                          ------------   ------------   ------------
               Balance at December 31, 1997                                 (2,242,000)      (135,000)    (1,035,000)

Feb. 1998      Warrants issued in conjunction with notes
                 payable (unaudited)                                                 -              -         80,000
Jan. - Mar.    Warrants issued in exchange for
    1998         professional services (unaudited)                                   -              -         54,000
               Net loss (unaudited)                                           (467,000)             -       (467,000)
                                                                          ------------   ------------   ------------
               Balance at March 31, 1998 (unaudited)                      $ (2,709,000)  $   (135,000)  $ (1,368,000)
                                                                          ------------   ------------   ------------ 
                                                                          ------------   ------------   ------------ 
</TABLE>
 

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


<PAGE>


                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                               STATEMENT OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                                                      PERIOD FROM  
                                                                          YEAR                                      AUGUST 31, 1995
                                                                          ENDED         THREE MONTHS ENDED MARCH 31, (INCEPTION) TO
                                                                       DECEMBER 31,    ----------------------------    MARCH 31,    
                                                                           1997           1997           1998            1998
                                                                      -------------    ------------  -------------  ---------------
                                                                                              (UNAUDITED)           (UNAUDITED)
<S>                                                                   <C>              <C>           <C>            <C>
Cash flows from operating activities:
  Net loss                                                             $(1,747,000)       $(295,000)    $ (467,000)   $ (2,703,000)
  Adjustments to reconcile net loss to net cash used                                                                
    in operating activities:                                                                                      
       Depreciation and amortization                                        55,000            8,000         21,000          89,000
       Expenses associated with the issuance of                                                                     
          Common Stock, warrants and options                               100,000                -         84,000         273,000
       Changes in assets and liabilities:                                                                           
          Accounts receivable, net                                         (13,000)         (15,000)       (26,000)        (49,000)
          Note receivable from stockholder                                 (65,000)               -              -         (65,000)
          Prepaid expenses                                                  (7,000)         (12,000)        (6,000)        (22,000)
          Accounts payable and accrued expenses                            306,000          (27,000)       185,000         616,000
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
            Net cash used in operating activities                       (1,371,000)        (341,000)      (209,000)     (1,861,000)
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
Cash flows from investing activities:                                                                               
  Purchase of property and equipment                                      (179,000)         (50,000)        (1,000)       (261,000)
  Other assets                                                              (4,000)               -              -         (12,000)
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
            Net cash used in investing activities                         (183,000)         (50,000)        (1,000)       (273,000)
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
Cash flows from financing activities:                                                                               
  Proceeds from issuance of Common Stock, net                              382,000          375,000              -       1,012,000
  Proceeds from note payable to bank and stockholders                      926,000                -        302,000       1,268,000
  Principal payments on note payable to bank                               (40,000)         (40,000)             -         (40,000)
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
            Net cash provided by financing activities                    1,268,000          335,000        302,000       2,240,000
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
Net change in cash                                                        (286,000)         (56,000)        92,000         106,000
                                                                                                                    
Cash at beginning of period                                                300,000          300,000         14,000               -
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
Cash at end of period                                                  $    14,000        $ 244,000     $  106,000    $    106,000
                                                                       -----------        ---------     ----------    ------------
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                   
  Cash paid during the period for interest                             $    27,000        $   1,000     $   47,000    $     74,000
                                                                       -----------        ---------     ----------    ------------
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING TRANSACTIONS:                                                          
                                                                                                                    
  Issuance of Common Stock for subscription receivable from officer    $  135,000         $       -     $        -    $    135,000
                                                                       -----------        ---------     ----------    ------------
                                                                                                                    
  Conversion of accounts payable into Common Stock warrants            $        -         $       -     $   50,000    $     50,000
                                                                       -----------        ---------     ----------    ------------
</TABLE>

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


                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                            NOTES TO FINANCIAL STATEMENTS



NOTE 1 - OPERATIONS AND SIGNIFICANT POLICIES:

THE COMPANY

     Viaweb Inc. (the "Company") is a provider of services and software for
electronic commerce on the Internet.  The Company was incorporated in Delaware
on August 30, 1995 and commenced operations on that date.  The Company conducts
its business within one industry segment.

     Since inception, the Company has been in the development stage, engaged
primarily in product development, and has incurred significant losses from
operations.  To date, insignificant revenues have been generated from its
planned product offerings and significant resources have been expended in the
development of proprietary technologies.  Accordingly, the accompanying
financial statements are not indicative of a normal operating period.

     On June 10, 1998, the Company consummated an Agreement and Plan of Merger
(the "Plan") with Yahoo! Inc., a publicly-held company, upon which the Company's
stockholders exchanged all of their shares of Common Stock and options to
purchase Common Stock for shares of Yahoo! Inc. Common Stock and options to
purchase shares of Yahoo! Inc. Common Stock in a business combination to be
accounted for as a purchase (Note 8).

     The Company's significant accounting policies are set forth below:

REVENUE RECOGNITION

     The Company recognizes revenue in the period in which the service is
provided, provided that no significant Company obligations remain and collection
of the resulting receivable is probable.

USE OF ESTIMATES

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

BASIC AND DILUTED NET LOSS PER SHARE  

     The Company adopted SFAS 128, "Earnings per Share" during the year ended 
December 31, 1997 and retroactively restated all prior periods. Basic 
earnings per share is computed using the weighted average number of common 
shares outstanding during the period. Diluted earnings per share is computed 
using the weighted average number of common and common equivalent shares 
outstanding during the period. Common equivalent shares consist of the 
incremental common shares issuable upon the exercise of stock options and 
warrants (using the treasury stock method). Common equivalent shares are 
excluded from the computation if their effect is anti-dilutive.

CONCENTRATION OF CREDIT RISK

     Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, accounts receivable,
notes receivable from stockholder and stock subscription receivable from
officer.  Substantially all of the Company's cash is held in demand deposit
accounts with two financial institutions.  Accounts receivable are typically
unsecured and are derived from revenues earned from customers primarily located
in the United States.  At December 31 ,1997, two customers accounted for 22% of
the accounts receivable balance. Notes receivable from stockholder and stock
subscription receivable from officer are full recourse and are secured by shares
of the Company's Common Stock.

PROPERTY AND EQUIPMENT

     Property and equipment are stated as cost.  Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
generally three to five years.

<PAGE>

                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                            NOTES TO FINANCIAL STATEMENTS
                                     (CONTINUED)

RESEARCH AND DEVELOPMENT

     Costs incurred in the development of new products and enhancements to
existing products are charged to expense as incurred.  Statement of Financial
Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer
Software to Be Sold, Leased or Otherwise Marketed," requires capitalization of
certain software development costs subsequent to the establishment of
technological feasibility.  Based upon the Company's product development
process, technological feasibility is established upon completion of a working
model.  Costs incurred by the Company between completion of the working model
and the point at which the product is ready for general release have been
insignificant.

STOCK-BASED COMPENSATION

     The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion ("APB")
No. 25, "Accounting for Stock Issued to Employees," and complies with the
disclosure provisions of SFAS 123, "Accounting for Stock-Based Compensation." 
Under APB 25, compensation cost is recognized over the vesting period based on
the difference, if any, on the date of grant between the fair value of the
Company's stock and the amount an employee must pay to acquire the stock.

WARRANTS

     Warrants issued under certain agreements are accounted for in accordance
with SFAS 123.  The costs associated with warrants granted are amortized over
the period of expected benefit.  

FAIR VALUE OF FINANCIAL INSTRUMENTS

     For certain of the Company's financial instruments, including accounts
receivable, notes receivable from stockholder, stock subscription receivable,
accounts payable and notes payable, the carrying amounts approximate fair value
due to their relatively short maturity.

INCOME TAXES

     Income taxes are accounted for using an asset and liability approach in
accordance with SFAS No. 109, "Accounting for Income Taxes."  The asset and
liability approach requires the recognition of taxes payable or refundable for
the current year and deferred tax liabilities and assets for the future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns.  The measurement of current and deferred tax
liabilities and assets are based on provisions of the enacted tax law; the
effects of future changes in tax laws or rates are not anticipated.  The
carrying value of deferred tax assets is reduced, if necessary, by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized.

COMPREHENSIVE INCOME

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS 130, "Reporting Comprehensive Income."  SFAS 130 establishes standards for
reporting comprehensive income and its components in a financial statement. 
Comprehensive income is defined as all changes in equity (net assets) during a
period from non-owner sources including foreign currency translation adjustments
and unrealized gains/losses on available-for-sale securities.  The Company
adopted the provisions of SFAS 130 effective January 1, 1998.  There were no
changes in equity from non-owner sources during the three months ended March 31,
1997 or 1998.

<PAGE>

                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                            NOTES TO FINANCIAL STATEMENTS
                                     (CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS

     During June 1997, the FASB issued SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information."  This statement establishes standards
for the way companies report information about operating segments in annual
financial statements.  It also establishes standards for related disclosures
about products and services, geographic areas, and major customers.  The Company
has not yet determined the impact, if any, of adopting this new standard.  The
disclosures prescribed by SFAS 131 will be effective for the year ending
December 31, 1998 financial statements.  

INTERIM FINANCIAL INFORMATION (UNAUDITED)

     The accompanying balance sheet and statement of stockholders' deficit as of
March 31, 1998 and the statements of operations and cash flows for the period
from August 31, 1995 (Inception) through March 31, 1998 and for the three months
ended March 31, 1997 and 1998 are unaudited.  In the opinion of management,
these statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of the results of the interim
periods.  The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any future
period.

NOTE 2 - BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
                                               DECEMBER 31,      MARCH 31,
                                                   1997           1998
                                               ------------    -----------
<S>                                             <C>             <C>
                                                                (UNAUDITED)
     PROPERTY AND EQUIPMENT:
        Computer equipment                      $   246,000     $  247,000
        Office furniture and equipment               14,000         14,000
                                               ------------    -----------
                                                    260,000        261,000
        Less: accumulated depreciation              (68,000)       (89,000)

                                               ------------    -----------
                                                $   192,000     $  172,000
                                               ------------    -----------
                                               ------------    -----------

     ACCRUED EXPENSES:
        Payroll and related amounts             $    39,000     $   37,000
        Professional fees                           123,000        129,000
        Other                                        20,000         30,000
                                               ------------    -----------
                                                $  182,000      $ 196,000 
                                               ------------    -----------
                                               ------------    -----------
</TABLE>

NOTE 3 - RELATED PARTY TRANSACTIONS:

NOTE RECEIVABLE FROM STOCKHOLDER

     At December 31, 1997, the Company has a $65,000 note receivable from a
stockholder which bears interest at 8% commencing during February 1998.  The
note is full recourse, is secured by 35,000 shares of the Company's Common Stock
and is due upon the earlier of September 19, 1998 or 30 days after such shares
are eligible for public sale.


<PAGE>

                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                            NOTES TO FINANCIAL STATEMENTS
                                     (CONTINUED)

FACILITY LEASE

     The Company maintains certain equipment at a facility leased by an officer
of the Company.  During 1997, total rent expense incurred under this
month-to-month arrangement was approximately $17,000.

LOAN AGREEMENT

     During 1997, warrants to purchase 11,740 shares of Common Stock (Note 7)
were issued to certain stockholders in return for personal guarantees on the
Company's line of credit.  In February 1998, additional warrants to purchase
23,659 shares of Common Stock (Note 7) were issued to certain stockholders upon
assumption of the line of credit (Note 4).

NOTE 4 - FINANCING ARRANGEMENTS:

     During 1997, the Company entered into a line of credit agreement (the
"Agreement") with a bank which, as amended, provided up to $1,100,000 of
borrowings with an interest rate of prime plus 2 1/2 percent (11% at December
31, 1997).  Under the Agreement, all of the Company's assets are pledged as
collateral and warrants to purchase 4,310 shares of Common Stock with an
exercise price of $8.14 were issued to the bank (Note 7).  Additionally, certain
stockholders entered into an agreement to guarantee the line of credit upon the
Company's default.  In an event of default, the bank agreed to assign to the
stockholders its rights under the Agreement.  In return, the Company granted to
the stockholders warrants to purchase 11,740 shares of Common Stock at an 
exercise price of $7.89 per share (Note 7).

     During February 1998, certain stockholders assumed the bank's
responsibilities under the Agreement and repaid to the bank principal and
interest of $1,117,000.  In connection with assuming the bank's rights under the
Agreement, the Company issued to such stockholders warrants to purchase 23,659
shares of Common Stock with an exercise price of $7.89 (Note 7).

NOTE 5 - COMMITMENTS AND CONTINGENCIES:

EMPLOYMENT AGREEMENT

     The Company has a three-year employment agreement with an officer of the
Company providing maximum annual aggregate compensation of $120,000, expiring in
October 1999.

LITIGATION

     From time to time the Company is subject to legal proceedings and claims in
the ordinary course of business, including claims of alleged infringement of
trademarks and other intellectual property rights.  The Company is not aware of
any legal proceedings or claims that the Company believes will have,
individually or in the aggregate, a material adverse effect on the Company's
financial position or results of operations.

NOTE 6 - INCOME TAXES:

     No deferred benefit for income taxes has been recorded as the Company is in
a net deferred tax asset position for which a full valuation allowance has been
provided due to uncertainty of its realization.  Deferred tax assets of
approximately $1,100,000 at December 31, 1997 consist primarily of net operating
loss carryforwards and accrued expenses not currently deductible for tax
purposes.

     At December 31, 1997, the Company had federal net operating loss and
research and development credit carryforwards of approximately $2,500,000 and
$17,000, respectively, available to reduce future taxable income, which expire
through 2012.

<PAGE>

                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                            NOTES TO FINANCIAL STATEMENTS
                                     (CONTINUED)

     Under the Tax Reform Act of 1986, the amount of and the benefit from net
operating losses that can be carried forward may be limited in certain
circumstances including, but not limited to, a cumulative stock ownership change
of more than 50% over a three-year period, as defined.  Upon completion of the
Company's private placement in January 1997, the maximum net operating loss
carryforward that may be used in any year for losses incurred prior to such date
is approximately $325,000.  However, use of the Company's net operating loss
carryforward incurred after the completion of the private placement of
approximately $1,700,000 is not limited as of December 31, 1997.

NOTE 7 - STOCKHOLDERS' EQUITY:

COMMON STOCK

     The Company, prior to the issuance of any debt or equity securities, as
defined, shall offer certain stockholders the right to purchase 50% of such
securities.  This preemptive right expires 30 days after notice is provided to
such stockholders.

     In connection with the stock agreements, there are certain restrictive
covenants, including the payment of dividends, issuance of Preferred Stock,
consolidation or sale of the Company, that require the approval of certain
stockholders and/or a percentage of the Company's Board of Directors.  Certain
stockholders also have the right to require the Company to register its shares
in the event of a public offering of the Company's Common Stock.

     Common shares reserved for future issuance at December 31, 1997 
consisted of 18,018 and 292,250 shares for Common Stock warrants and stock 
options, respectively.

SUBSCRIPTION RECEIVABLE FROM OFFICER

     At December 31, 1997, the Company has received a $135,000 subscription
receivable from an officer for the exercise of Common Stock options which bears
interest at 8% commencing on February 14, 1998.  The note is full recourse, is
secured by 45,000 shares of the Company's Common Stock and is due upon the
earlier of March 15, 1999 or 30 days after such shares are eligible for public
sale.

COMMON STOCK WARRANTS

     In connection with entering into the Agreement (Note 4) during June 1997,
the Company granted warrants to a bank to purchase 4,310 shares of Common Stock
at an exercise price of $8.14 per share, exercisable for a five-year period. 
Pursuant to SFAS No. 123, the Company valued these warrants and recorded
interest expense of $22,000 during the year ended December 31, 1997.

     In December 1997, the Company issued warrants to a public relations firm to
purchase 1,968 shares of Common Stock at an exercise price of $12.21 per share,
exercisable for a five-year period.  Pursuant to SFAS No. 123, the Company
valued these warrants and recorded sales and marketing expense of $20,000 as the
approximate value of the services rendered during the year ended December 31,
1997.

     In 1997, pursuant to receiving personal guarantees from certain
shareholders for the Agreement (Note 4), the Company issued warrants to purchase
11,740 shares of Common Stock at $7.89 per share.  The warrants are exercisable
over a ten-year period.  Pursuant to SFAS No. 123, the Company valued these
warrants and recorded interest expense of $58,000 for the year ended December
31, 1997.

     All of the aforementioned warrants are currently exercisable as of December
31, 1997 and have a weighted average exercise price of $8.42 per share.  The
Company has granted rights to certain warrant holders with respect to the
registration of such shares underlying the warrants with the Securities and
Exchange Commission.

<PAGE>

                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                            NOTES TO FINANCIAL STATEMENTS
                                     (CONTINUED)

     During February 1998, certain stockholders repaid the Company's outstanding
line of credit of $1,100,000 plus accrued interest (Note 4).  In connection with
this repayment, the Company issued warrants to purchase 23,659 shares of Common
Stock at an exercise price of $7.89 per share.  Pursuant to SFAS No. 123, the
Company valued these warrants and recorded interest expense of $80,000 during
the three months ended March 31, 1998.

STOCK OPTIONS

     The 1997 Stock Option Plan (the "1997 Plan") authorized the Board of 
Directors to grant to employees, directors and consultants up to 200,000 
incentive and non-qualified stock options to purchase Common Stock.  Options 
under the 1997 Plan may be granted at prices no less than 100% of the 
estimated fair value of the shares on the date of grant as determined by the 
Board of Directors provided, however, that the exercise price of an option 
granted to a 10% shareholder shall not be less than 110% of the estimated 
fair value on the date of grant.  Options vest annually over a four year 
period and are exercisable for a maximum period of ten years after the date 
of grant.  The 1997 Plan provides for acceleration of vesting upon certain 
events.  During 1996, options to purchase 173,500 shares of Common Stock were 
granted prior to the commencement of the 1997 Plan with a weighted average 
fair value of $0.76 per share.

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
                                                                                        WEIGHTED
                                                                                        AVERAGE
                                                                                        EXERCISE
                                                       AVAILABLE FOR     OPTIONS         PRICE
                                                           GRANT        OUTSTANDING    PER SHARE
                                                       -------------    -----------   -----------
          <S>                                          <C>             <C>            <C>
          Balance at January 1, 1997                            -        173,500        $  2.40
            Shares authorized                             200,000              -              -
            Options granted (weighted average
               fair value of $1.52 per share)            (115,800)       115,800           6.00
          Options exercised                                     -        (81,250)          1.75
                                                       --------------  ------------   ------------

          Balance at December 31, 1997                     84,200        208,050         $ 4.65
                                                       --------------  ------------   ------------
                                                       --------------  ------------   ------------

</TABLE>

The following table summarizes information concerning stock options outstanding
as of December 31, 1997:

<TABLE>
<CAPTION>
                            OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
       -------------------------------------------------------------     ------------------------
                  
                                                          WEIGHTED                       WEIGHTED
                                        WEIGHTED          AVERAGE                        AVERAGE
          EXERCISE                      AVERAGE           EXERCISE                       EXERCISE
           PRICE                       REMAINING           PRICE                          PRICE
            PER         NUMBER        CONTRACTUAL           PER             NUMBER         PER
           SHARE      OUTSTANDING     LIFE (YEARS)         SHARE          EXERCISABLE     SHARE
       ------------   -----------    -------------       ----------      -------------  ---------
       <S>            <C>            <C>                 <C>             <C>            <C>
         $   3.00         93,500           3.81            $   3.00          3,500       $  3.00
             6.00        114,550           9.44                6.00              -             -
                        --------       --------            --------       --------      --------
                         208,050           6.91            $   4.65          3,500       $  3.00
                        --------       --------            --------       --------      --------
                        --------       --------            --------       --------      --------
</TABLE>

<PAGE>

                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                            NOTES TO FINANCIAL STATEMENTS
                                     (CONTINUED)

FAIR VALUE DISCLOSURES

     Had compensation cost for the Company's option plan been determined based
on the fair value at the grant dates, as prescribed in SFAS 123, the Company's
net loss would have been as follows:

<TABLE>
<CAPTION>
                                       DECEMBER 31,
                                           1997
                                     ----------------
     <S>                             <C>
     NET LOSS:
       Reported                      $  (1,747,000)
       Pro forma net loss            $  (1,763,000)
</TABLE>

     The fair value of each option is estimated on the date of grant using 
the minimum value method with the following assumptions used for grants 
during 1997: annual dividend yield of 0.0%; volatility of 0%; risk-free 
interest rates of 5.4% to 5.9% and a weighted average expected option term of 
one year.

     The pro forma amounts reflect compensation expenses related to the 1997 and
1996 option grants only.  In future years, the annual compensation expense will
increase due to the expense associated with future grants.

NOTE 8 - SUBSEQUENT EVENTS:

MERGER WITH YAHOO! INC.

     On June 10, 1998, the Company consummated an Agreement and Plan of Merger
(the "Plan") with Yahoo! Inc., ("Yahoo!") a publicly-held company, upon which
the Company's stockholders exchanged all of their shares of Common Stock and
options to purchase Common Stock for 393,591 shares of Yahoo! Common Stock, and
options to purchase 61,126 shares of Yahoo! Common Stock in a business
combination to be accounted for as a purchase.

CONVERTIBLE NOTES PAYABLE

     On April 14, 1998, the Company entered into an agreement with certain
stockholders and a private investor to issue up to $2,000,000 of
non-interest-bearing convertible secured notes due on January 14, 1999.  A
portion of the available borrowings was used to repay $1,328,000 of debt from
certain stockholders (Note 4).  On April 14, 1998, the Company issued $1,500,000
of the maximum $2,000,000 commitment.  The balance of the commitment is at the
Company's option.  The notes are secured by a security interest in collateral as
defined in the general security agreement and the property covered by the patent
and security agreements.  The notes are convertible at the option of the holder
into Series A convertible Preferred Stock at a price of $7.61 per share (See
Preferred Stock in Note 8).  Each share of Series A Preferred Stock is
convertible into one share of Common Stock.  However, the notes will
automatically convert into Common Stock upon acquisition of the Company by
Yahoo!, at a price of $7.61 per share.

VENDOR PAYABLES

     During April 1998, the Company agreed to convert $75,000 in accounts
payable into shares of Series A Preferred Stock at a price of $7.61 per share. 
Additionally, certain other accounts payable and services were exchanged for
warrants to purchase an aggregate of 4,998 shares of Common Stock at an exercise
price of $12.21 per share.

<PAGE>
                                     VIAWEB INC.
                           (A DEVELOPMENT STAGE ENTERPRISE)
                            NOTES TO FINANCIAL STATEMENTS
                                     (CONTINUED)

PREFERRED STOCK

     Under the Company's Amended and Restated Articles of Incorporation, the
Company is authorized to issue 300,000 shares of Preferred Stock, of which
272,667 shares have been designated as Series A.  At December 31, 1997, no
shares were issued or outstanding.  The rights, preferences and privileges with
respect to the Series A Preferred Stock are as follows:

     DIVIDENDS

     Holders of Series A Preferred Stock are entitled to receive dividends when,
as and if declared by the Board of Directors.  There have been no dividends
declared to date.

     CONVERSION

     Each share of Series A Preferred Stock is convertible at the option of the
holder into one share of Common Stock subject to adjustment for dilution.  Such
conversion is automatic upon 1) an effective underwritten public offering where
the Company's valuation is greater than $25,000,000, or 2) an acquisition or
merger of the Company where the Company's valuation is greater than $15,000,000
and the selling shareholders retain less than 50% of the voting stock of the
surviving entity.

     LIQUIDATION

     In the event of a liquidation, dissolution or winding up of the Company,
excluding a merger transaction, the holders of Series A Preferred Stock are
entitled to a per share distribution, in preference to holders of Common Stock,
equal to the conversion price of the Company's Convertible Notes (Note 4) which
is currently set at $7.61 per share.  Should the Company's legally available
assets be insufficient to satisfy the liquidation preference, the funds will be
distributed ratably among the Series A Preferred Stockholders.

     VOTING

     The holders of Series A Preferred Stock have one vote per share and the
right to vote on issues concerning Preferred Stock rights and issuances of
superior preferred securities.

AMENDMENTS TO ARTICLES OF INCORPORATION

     The Company's Amended and Restated Articles of Incorporation authorize the
issuance of 2,500,000 shares of $0.01 par value Common Stock.

<PAGE>
          (b)  PRO FORMA FINANCIAL INFORMATION.


                 UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

     The following unaudited pro forma condensed financial statements give
effect to the acquisition of Viaweb Inc. ("Viaweb") by Yahoo! Inc. ("Yahoo!")
in a transaction to be accounted for as a purchase in accordance with APB
Opinion No. 16 (the "Acquisition").  Under the purchase method of accounting,
the purchase price is allocated to the assets acquired and liabilities assumed
based on their estimated fair values at the date of the Acquisition.  Estimates
of the fair values of the assets and liabilities of Viaweb have been combined
with the recorded values of the assets and liabilities of Yahoo! in the
unaudited pro forma condensed financial statements.  The pro forma adjustments
are preliminary and based on management's estimates and preliminary third-party
appraisals of the fair values of the tangible assets acquired.  Changes to
adjustments included in the unaudited pro forma condensed financial statements
are expected as valuations and appraisals of assets and liabilities are
completed and as additional information becomes available.  Changes based on the
final results of valuations and appraisals are not expected to be material.  In
addition, the results of operations of Viaweb subsequent to March 31, 1998 will
affect the allocation of the purchase price.  Accordingly, actual amounts will
differ from those in the unaudited pro forma condensed financial statements.

     The unaudited pro forma condensed balance sheet has been prepared to
reflect the Acquisition as if it occurred on March 31, 1998.  The unaudited pro
forma condensed statements of operations reflect the results of operations of
Yahoo! and Viaweb for the year ended December 31, 1997 and the three months
ended March 31, 1998 as if the Acquisition occurred on January 1, 1997.

     The unaudited pro forma condensed financial statements are presented for 
illustrative purposes only and are not necessarily indicative of the combined 
financial position or results of operations in future periods or the results 
that actually would have been realized had Yahoo! and Viaweb been a combined 
company during the specified periods.  The unaudited pro forma condensed 
financial statements, including the notes thereto, are qualified in their 
entirety by reference to, and should be read in conjunction with, the 
historical consolidated financial statements of Yahoo!, included in its 
Annual Report on Form 10-K for the year ended December 31, 1997 and quarterly 
report from Form 10-Q for the three months ended March 31, 1998 and the 
financial statements of Viaweb included elsewhere in this Form 8-K.

<PAGE>

<TABLE>
<CAPTION>
                                         UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
                                                    AS OF MARCH 31, 1998
                                                       (IN THOUSANDS)
                                                                     HISTORICAL
                                                             -------------------------
                                                               YAHOO!          VIAWEB
                                                              MARCH 31,       MARCH 31,           PRO FORMA
                                                                1998            1998             ADJUSTMENTS           PRO FORMA
                                                             ----------       ---------          -----------           ---------
<S>                                                          <C>              <C>                <C>                   <C>
ASSETS
Current assets:
  Cash and cash equivalents                                  $   44,977        $    106          $        -          $   45,083
  Short-term investments in marketable securities                71,920               -                   -              71,920
  Accounts receivable, net                                       12,978              49                   -              13,027
  Prepaid expenses and other current assets                       4,764             222                   -               4,986
                                                             ----------        --------          ----------          ----------

       Total current assets                                     134,639             377                   -             135,016

Long-term investments in marketable securities                    7,647               -                   -               7,647
Property and equipment, net                                       8,007             172                   -               8,179
Other assets                                                     10,112              12               4,264  (D)         14,388


       Total                                                 $  160,405        $    561          $    4,264          $  165,230
                                                             ----------        --------          ----------          ----------
                                                             ----------        --------          ----------          ----------

LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
  Notes payable                                              $        -        $  1,228          $   (1,228) (B)     $        -
  Accounts payable                                                4,906             370                   -               5,276
  Accrued expenses and other current liabilities                 18,238             188               1,750  (A)         20,176
  Deferred revenue                                               10,102               8                   -              10,110
                                                             ----------        --------          ----------          ----------

       Total current liabilities                                 33,246           1,794                 522              35,562

Minority interests in consolidated subsidiaries                     473               -                   -                 473


Shareholders' equity (deficit)                                  126,686          (1,233)             46,809  (A)        129,195
                                                                                                      1,228  (B)
                                                                                                          5  (C)
                                                                                                    (44,300) (D)
                                                             ----------        --------          ----------          ----------

       Total                                                 $  160,405        $    561          $    4,264          $  165,230
                                                             ----------        --------          ----------          ----------
                                                             ----------        --------          ----------          ----------
</TABLE>

   See Accompanying Notes to Unaudited Pro Forma Condensed Financial Statements.

<PAGE>

<TABLE>
<CAPTION>
                                   UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
                                              YEAR ENDED DECEMBER 31, 1997
                                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                     HISTORICAL
                                                           -------------------------------
                                                              YAHOO!             VIAWEB
                                                            YEAR ENDED         YEAR ENDED
                                                           DECEMBER 31,       DECEMBER 31,         PRO FORMA
                                                               1997               1997            ADJUSTMENTS       PRO FORMA
                                                           ------------       ------------        -----------       ---------
<S>                                                        <C>                <C>                 <C>               <C>
Net revenues                                                 $   67,411         $      343          $       -      $   67,754
Cost of revenues                                                  9,372                268                  -           9,640
                                                             ----------         ----------          ---------      ----------

       Gross profit                                              58,039                 75                  -          58,114
                                                             ----------         ----------          ---------      ----------

Operating expenses:

  Sales and marketing                                            43,930                863                  -          44,793
  Product development                                            11,138                321              1,421 (E)      12,880
  General and administrative                                      6,472                528                  -           7,000
  Other non-recurring costs                                      25,095                  -                  -          25,095
                                                             ----------         ----------          ---------      ----------

       Total operating expenses                                  86,635              1,712              1,421          89,768
                                                             ----------         ----------          ---------      ----------

Loss from operations                                            (28,596)            (1,637)            (1,421)        (31,654)
Interest income (expense), net                                    4,982               (110)                 -           4,872
Minority interests in operations of consolidated 
subsidiaries                                                        727                  -                  -             727
                                                             ----------         ----------          ---------      ----------

       Net loss                                              $  (22,887)        $   (1,747)         $  (1,421)     $  (26,055)
                                                             ----------         ----------          ---------      ----------

Basic and diluted net loss per share                         $    (0.53)                                           $    (0.59) (F)
                                                             ----------                                            ----------
Shares used in computing basic and diluted
  net loss per share                                             43,583                                                43,977
                                                             ----------                                            ----------
</TABLE>

   See Accompanying Notes to Unaudited Pro Forma Condensed Financial Statements.

<PAGE>

<TABLE>
<CAPTION>
                                  UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
                                           THREE MONTHS ENDED MARCH 31, 1998
                                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                       HISTORICAL
                                                         -------------------------------
                                                            YAHOO!             VIAWEB
                                                         THREE MONTHS       THREE MONTHS
                                                             ENDED              ENDED
                                                           MARCH, 31          MARCH, 31          PRO FORMA
                                                             1998               1998            ADJUSTMENTS          PRO FORMA
                                                           ---------          ---------         -----------          ---------
<S>                                                      <C>                <C>                 <C>                  <C>
Net revenues                                               $   30,206        $       290        $         -          $  30,496
Cost of revenues                                                3,917                 94                  -              4,011
                                                           ----------        -----------        -----------          ---------

       Gross profit                                            26,289                196                  -             26,485
                                                           ----------        -----------        -----------          ---------

Operating expenses:
  Sales and marketing                                          16,096                237                  -             16,333
  Product development                                           4,534                170                355  (E)         5,059
  General and administrative                                    1,992                151                  -              2,143
                                                           ----------        -----------        -----------          ---------

       Total operating expenses                                22,622                558                355             23,535
                                                           ----------        -----------        -----------          ---------

Income (loss) from operations                                   3,667               (362)              (355)             2,950
Interest income (expense), net                                  1,446               (105)                 -              1,341
Minority interests in operations of consolidated
subsidiaries                                                      243                  -                  -                243
                                                           ----------        -----------        -----------          ---------

Income (loss) before income taxes                               5,356               (467)              (355)             4,534
Provision for income taxes                                      1,071                  -                  -              1,071
                                                           ----------        -----------        -----------          ---------

       Net income (loss)                                   $    4,285        $      (467)       $      (355)         $   3,463
                                                           ----------        -----------        -----------          ---------

Net income per share:
  Basic                                                    $     0.10                                                $    0.08 (F)
                                                           ----------                                                ---------
  Diluted                                                  $     0.08                                                $    0.06 (F)
                                                           ----------                                                ---------

Weighted average common shares and equivalents
  used in per share calculation:
     Basic                                                     43,052                                                   43,446
                                                           ----------                                                ---------
     Diluted                                                   53,374                                                   53,814
                                                           ----------                                                ---------
</TABLE>

   See Accompanying Notes to Unaudited Pro Forma Condensed Financial Statements.

<PAGE>

             NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS


BASIS OF PRESENTATION:

     Effective June 10, 1998, Yahoo! acquired Viaweb in exchange for acquisition
consideration consisting of (i) 393,591 shares of Common Stock issued in
exchange for all outstanding shares of Viaweb Common Stock, and (ii) options to
purchase 61,126 shares of Yahoo! Common Stock in exchange for all outstanding
options to purchase Viaweb Common Stock.  The Acquisition will be accounted for
as a purchase.  Under the purchase method of accounting, the purchase price is
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at June 5, 1998, the date of the acquisition.  Estimates
of the fair values of the assets and liabilities of Viaweb have been combined
with the recorded values of the assets and liabilities of Yahoo! in the
unaudited pro forma condensed financial statements.

PRO FORMA ADJUSTMENTS (IN THOUSANDS):

(A)  To record the consideration issued by Yahoo! to consummate the
     Acquisition.  Acquisition consideration consisted of the following:

<TABLE>
<S>                                                                  <C>
Yahoo! Common Stock and options to purchase Yahoo! Common Stock      $   46,809
Acquisition expenses                                                      1,750
                                                                     ----------

                                                                     $   48,559
                                                                     ----------
                                                                     ----------
</TABLE>

(B)  To reflect the conversion, effective upon the Acquisition, of $1,228 of
     Viaweb convertible notes payable into Viaweb Common Stock.  Interest
     associated with the convertible notes was not material for any period
     presented.

(C)  To eliminate the historical stockholders' deficit of Viaweb.

(D)  To record the excess of the acquisition price over the fair value of assets
     and liabilities of $48,564.  The book value of tangible assets acquired and
     liabilities are assumed to approximate fair value.
<TABLE>

              <S>                                                          <C>
              Total purchase price                                         $  48,559
              Fair value of tangible assets acquired                            (561)
              Fair value of liabilities assumed                                  566
                                                                           ---------

                                                                           $  48,564
                                                                           ---------
                                                                           ---------

              The purchase price is allocated based on preliminary 
              estimates, as follows:

              In-process research and development                          $  44,300
              Acquired technology and other intangible assets 
                  (estimated useful life of three years)                       4,264
                                                                           ---------

                                                                           $  48,564
                                                                           ---------
                                                                           ---------
</TABLE>

<PAGE>

            NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

          Management estimates, based on preliminary third-party appraisals,
          that $44,300 of the purchase price represents purchased in-process
          research and development that has not yet reached technological
          feasibility and has no alternative future use.  This amount will be
          expensed as a non-recurring charge upon consummation of the
          acquisition.  This amount has been reflected as a reduction to
          shareholders' equity and has not been included in the pro forma
          combined statement of income due to its non-recurring nature.

(E)  To record amortization of purchased technology and other intangible
     assets over a useful life of three years.

(F)  Basic pro forma earnings per share is computed using the weighted average
     number of Yahoo! common shares outstanding during the period plus shares
     of Common Stock assumed to be issued as part of the acquisition.  Diluted
     pro forma earnings per share is computed using the weighted average
     number of common and common equivalent shares outstanding during the
     period plus shares of Common Stock and common equivalent shares assumed
     to be issued as part of the acquisition.  Common equivalent shares
     consist of the incremental common shares issuable upon the exercise of
     stock options and warrants (using the treasury stock method).  Common
     equivalent shares are excluded from the computation if their effect is
     antidilutive.  Shares and options issued pursuant to the Acquisition are
     assumed outstanding at the beginning of the period.

          (c)  EXHIBITS.
<TABLE>
<S>                      <C>
               2.1       Agreement and Plan of Merger dated June 4, 1998 by and
                         among Yahoo! Inc., XY Acquisition Corporation, and
                         Viaweb Inc.

</TABLE>


<PAGE>
                                      SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                   YAHOO! INC.


Date:  June 12, 1998               By:  /s/GARY VALENZUELA
                                      -----------------------------------
                                      Gary Valenzuela
                                      Senior Vice President, Finance and
                                      Administration, and Chief Financial
                                      Officer


<PAGE>

                                     YAHOO! INC.

                                  INDEX TO EXHIBITS


<TABLE>
<CAPTION>

Exhibit Number                        Description
- --------------                        -----------
<S>            <C>
     2.1       Agreement and Plan of Merger dated June 4, 1998 by and among
               Yahoo! Inc., XY Acquisition Corporation, and Viaweb Inc.
</TABLE>




<PAGE>

                            AGREEMENT AND PLAN OF MERGER

                              DATED AS OF JUNE 4, 1998

                                       AMONG

                                    YAHOO! INC.,

                             XY ACQUISITION CORPORATION

                                        AND

                                    VIAWEB INC.



<PAGE>



                                 TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                           Page
                                                                           ----
<S>                                                                        <C>
ARTICLE I - THE MERGER  . . . . . . . . . . . . . . . . . . . . . . . . . .   2
     Section 1.1 Effective Time of the Merger . . . . . . . . . . . . . . .   2
     Section 1.2 Closing  . . . . . . . . . . . . . . . . . . . . . . . . .   2
     Section 1.3 Effects of the Merger  . . . . . . . . . . . . . . . . . .   2
     Section 1.4 Directors and Officers . . . . . . . . . . . . . . . . . .   2
ARTICLE II - CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . .   3
     Section 2.1 Conversion of Capital Stock  . . . . . . . . . . . . . . .   3
     Section 2.2 Escrow Agreement . . . . . . . . . . . . . . . . . . . . .   5
     Section 2.3 Dissenting Shares  . . . . . . . . . . . . . . . . . . . .   5
     Section 2.4 Exchange of Certificates . . . . . . . . . . . . . . . . .   6
     Section 2.5 Distributions with Respect to Unexchanged Shares . . . . .   7
     Section 2.6 No Fractional Shares . . . . . . . . . . . . . . . . . . .   7
     Section 2.7 Tax Consequences . . . . . . . . . . . . . . . . . . . . .   7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF TARGET. . . . . . . . . . .   7
     Section 3.1 Organization of Target . . . . . . . . . . . . . . . . . .   8
     Section 3.2 Target Capital Structure . . . . . . . . . . . . . . . . .   8
     Section 3.3 Authority; No Conflict; Required Filings and Consents  . .  10
     Section 3.4 Financial Statements; Absence of Undisclosed Liabilities .  11
     Section 3.5 Tax Matters  . . . . . . . . . . . . . . . . . . . . . . .  11
     Section 3.6 Absence of Certain Changes or Events . . . . . . . . . . .  13
     Section 3.7 Title and Related Matters  . . . . . . . . . . . . . . . .  15
     Section 3.8 Proprietary Rights . . . . . . . . . . . . . . . . . . . .  15
     Section 3.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . .  18
     Section 3.10 Bank Accounts . . . . . . . . . . . . . . . . . . . . . .  20
     Section 3.11 Contracts . . . . . . . . . . . . . . . . . . . . . . . .  20
     Section 3.12 Orders, Commitments and Returns . . . . . . . . . . . . .  22
     Section 3.13 Compliance With Law . . . . . . . . . . . . . . . . . . .  22
     Section 3.14 Labor Difficulties; No Discrimination . . . . . . . . . .  22
     Section 3.15 Trade Regulation  . . . . . . . . . . . . . . . . . . . .  23
     Section 3.16 Insider Transactions  . . . . . . . . . . . . . . . . . .  23
     Section 3.17 Employees, Independent Contractors and Consultants  . . .  23
     Section 3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . .  23
     Section 3.19 Litigation  . . . . . . . . . . . . . . . . . . . . . . .  24
     Section 3.20 Governmental Authorizations and Regulations . . . . . . .  24
     Section 3.21 Subsidiaries  . . . . . . . . . . . . . . . . . . . . . .  24
     Section 3.22 Compliance with Environmental Requirements  . . . . . . .  24
     Section 3.23 Corporate Documents . . . . . . . . . . . . . . . . . . .  25
     Section 3.24 No Brokers  . . . . . . . . . . . . . . . . . . . . . . .  25
     Section 3.25 Advertisers, Customers and Suppliers  . . . . . . . . . .  25
     Section 3.26 Target Action . . . . . . . . . . . . . . . . . . . . . .  26
     Section 3.27 Offers  . . . . . . . . . . . . . . . . . . . . . . . . .  26


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<PAGE>

                                  TABLE OF CONTENTS
                                     (CONTINUED)

                                                                           Page
                                                                           ----
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     Section 3.28 Information Statement . . . . . . . . . . . . . . . . . .  26
     Section 3.29 Accounts Receivable . . . . . . . . . . . . . . . . . . .  26
     Section 3.30 Disclosure  . . . . . . . . . . . . . . . . . . . . . . .  26
     Section 3.31 Target Disclosure Schedule  . . . . . . . . . . . . . . .  27
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB . . . . . .  27
     Section 4.1 Organization of Acquiror and Sub . . . . . . . . . . . . .  27
     Section 4.2 Acquiror Capital Structure . . . . . . . . . . . . . . . .  27
     Section 4.3 Authority; No Conflict; Required Filings and Consents  . .  28
     Section 4.4 Commission Filings; Financial Statements . . . . . . . . .  29
     Section 4.5 Absence of Certain Changes or Events . . . . . . . . . . .  30
     Section 4.6 Compliance with Laws . . . . . . . . . . . . . . . . . . .  30
     Section 4.7 Interim Operations of Sub  . . . . . . . . . . . . . . . .  30
     Section 4.8 Disclosure . . . . . . . . . . . . . . . . . . . . . . . .  30
     Section 4.9 Shareholders Consent . . . . . . . . . . . . . . . . . . .  30
     Section 4.10 Litigation  . . . . . . . . . . . . . . . . . . . . . . .  30
     Section 4.11 Investigation . . . . . . . . . . . . . . . . . . . . . .  31
ARTICLE V - PRECLOSING COVENANTS OF TARGET  . . . . . . . . . . . . . . . .  31
     Section 5.1 Approval of Target Stockholders  . . . . . . . . . . . . .  31
     Section 5.2 Advice of Changes  . . . . . . . . . . . . . . . . . . . .  32
     Section 5.3 Operation of Business  . . . . . . . . . . . . . . . . . .  32
     Section 5.4 Access to Information  . . . . . . . . . . . . . . . . . .  35
     Section 5.5 Satisfaction of Conditions Precedent . . . . . . . . . . .  35
     Section 5.6 Other Negotiations . . . . . . . . . . . . . . . . . . . .  35
ARTICLE VI - PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB . . . . . .  36
     Section 6.1 Advice of Changes  . . . . . . . . . . . . . . . . . . . .  36
     Section 6.2 Reservation of Acquiror Common Stock . . . . . . . . . . .  36
     Section 6.3 Satisfaction of Conditions Precedent . . . . . . . . . . .  36
     Section 6.4 Nasdaq National Market Listing . . . . . . . . . . . . . .  36
     Section 6.5 Stock Options  . . . . . . . . . . . . . . . . . . . . . .  36
     Section 6.6 Registration of Shares Issued in the Merger  . . . . . . .  37
     Section 6.7 Procedures for Sale of Shares Under Registration Statement  41
     Section 6.8 Certain Employee Benefit Matters . . . . . . . . . . . . .  42
     Section 6.9 Indemnification  . . . . . . . . . . . . . . . . . . . . .  42
     Section 6.10 Tax Treatment . . . . . . . . . . . . . . . . . . . . . .  42
ARTICLE VII - OTHER AGREEMENTS  . . . . . . . . . . . . . . . . . . . . . .  43
     Section 7.1 Confidentiality  . . . . . . . . . . . . . . . . . . . . .  43
     Section 7.2 No Public Announcement . . . . . . . . . . . . . . . . . .  43
     Section 7.3 Regulatory Filings; Consents; Reasonable Efforts . . . . .  43
     Section 7.4 Further Assurances . . . . . . . . . . . . . . . . . . . .  43
     Section 7.5 Escrow Agreement . . . . . . . . . . . . . . . . . . . . .  43


                                         -ii-
<PAGE>

                                  TABLE OF CONTENTS
                                     (CONTINUED)

                                                                           Page
                                                                           ----
<S>                                                                        <C>
     Section 7.6 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . .  44
     Section 7.7 Blue Sky Laws  . . . . . . . . . . . . . . . . . . . . . .  44
     Section 7.8 Other Filings  . . . . . . . . . . . . . . . . . . . . . .  44
     Section 7.9 Target Stock Options . . . . . . . . . . . . . . . . . . .  44
ARTICLE VIII - CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . .  45
     Section 8.1 Conditions to Each Party's Obligation to Effect the Merger  45
     Section 8.2 Additional Conditions to Obligations of Acquiror and Sub .  45
     Section 8.3 Additional Conditions to Obligations of Target . . . . . .  46
ARTICLE IX - TERMINATION AND AMENDMENT  . . . . . . . . . . . . . . . . . .  47
     Section 9.1 Termination  . . . . . . . . . . . . . . . . . . . . . . .  47
     Section 9.2 Effect of Termination  . . . . . . . . . . . . . . . . . .  48
     Section 9.3 Fees and Expenses  . . . . . . . . . . . . . . . . . . . .  48
ARTICLE X - ESCROW AND INDEMNIFICATION  . . . . . . . . . . . . . . . . . .  49
     Section 10.1 Indemnification . . . . . . . . . . . . . . . . . . . . .  49
     Section 10.2 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . .  49
     Section 10.3 Damage Threshold  . . . . . . . . . . . . . . . . . . . .  49
     Section 10.4 Escrow Periods  . . . . . . . . . . . . . . . . . . . . .  50
     Section 10.5 Claims Upon Escrow Fund . . . . . . . . . . . . . . . . .  50
     Section 10.6 Valuation . . . . . . . . . . . . . . . . . . . . . . . .  50
     Section 10.7 Objections to Claims  . . . . . . . . . . . . . . . . . .  50
     Section 10.8 Resolution of Conflicts . . . . . . . . . . . . . . . . .  51
     Section 10.9 Stockholders' Agents  . . . . . . . . . . . . . . . . . .  51
     Section 10.10 Actions of the Stockholders' Agents  . . . . . . . . . .  52
     Section 10.11 Claims . . . . . . . . . . . . . . . . . . . . . . . . .  52
ARTICLE XI - MISCELLANEOUS  . . . . . . . . . . . . . . . . . . . . . . . .  53
     Section 11.1 Survival of Representations and Covenants . . . . . . . .  53
     Section 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . .  53
     Section 11.3 Interpretation  . . . . . . . . . . . . . . . . . . . . .  54
     Section 11.4 Counterparts  . . . . . . . . . . . . . . . . . . . . . .  55
     Section 11.5 Entire Agreement; No Third Party Beneficiaries  . . . . .  55
     Section 11.6 Governing Law . . . . . . . . . . . . . . . . . . . . . .  55
     Section 11.7 Assignment  . . . . . . . . . . . . . . . . . . . . . . .  55
     Section 11.8 Amendment . . . . . . . . . . . . . . . . . . . . . . . .  55
     Section 11.9 Extension; Waiver . . . . . . . . . . . . . . . . . . . .  55
     Section 11.10 Specific Performance . . . . . . . . . . . . . . . . . .  55


                                        -iii-
<PAGE>

                                  TABLE OF CONTENTS
                                     (CONTINUED)


EXHIBITS
- --------
EXHIBIT A     -     VOTING AGREEMENT
EXHIBIT B-1   -     NONCOMPETITION AGREEMENT (I)
EXHIBIT B-2   -     NONCOMPETITION AGREEMENT (II)
EXHIBIT C     -     STOCKHOLDER AGREEMENT
EXHIBIT D     -     ESCROW AGREEMENT
EXHIBIT E     -     TARGET OPTION ACKNOWLEDGEMENT AGREEMENT
EXHIBIT F     -     SUBJECT MATTER OF OPINION OF COUNSEL TO TARGET
EXHIBIT G     -     SUBJECT MATTER OF OPINION OF COUNSEL TO ACQUIROR
</TABLE>

                                         -iv-
<PAGE>

                            AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER dated as of June 4, 1998 (this
"AGREEMENT"), is entered into by and among Yahoo! Inc., a California corporation
("ACQUIROR"), XY Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Acquiror ("SUB"), and Viaweb Inc., a Delaware
corporation ("TARGET").

                                      RECITALS:

     A.   The Boards of Directors of Acquiror, Sub and Target deem it advisable
and in the best interests of each corporation and the respective stockholders
that Acquiror and Target combine in order to advance the long-term business
interests of Acquiror and Target;

     B.   The combination of Acquiror and Target shall be effected by the terms
of this Agreement through a transaction in which Sub will merge with and into
Target, Target will become a wholly-owned subsidiary of Acquiror and the
stockholders of Target will become shareholders of Acquiror (the "MERGER");

     C.   For Federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "CODE");

     D.   As a condition and inducement to Acquiror's willingness to enter into
this Agreement, certain Target stockholders (including Paul Graham, Trevor
Blackwell, Robert Morris, Mark Nitzberg, Frederick Egan, Harris Fishman, Omar
Khudari, Alan Docter, Julian Weber and Mark Kristoff) holding no less than 90%
of the issued and outstanding voting stock of the Target have, concurrently with
the execution of this Agreement, executed and delivered Voting Agreements in the
form attached hereto as EXHIBIT A (the "VOTING AGREEMENTS"), pursuant to which
such stockholders have, among other things, agreed to vote their shares of
Target capital stock in favor of the Merger and to grant Acquiror irrevocable
proxies to vote such shares;

     E.   As a further condition and inducement to Acquiror's willingness to
enter into this Agreement, certain employees of Target who are also stockholders
and/or optionholders of Target (including Paul Graham, Trevor Blackwell, Robert
Morris, Mark Nitzberg, Frederick Egan and Harris Fishman) have, concurrently
with the execution of this Agreement executed and delivered Noncompetition
Agreements in the forms attached hereto as EXHIBITS B-1 AND B-2 (the
"NONCOMPETITION AGREEMENTs"), which agreements shall only become effective at
the Effective Time (as defined in Section 1.1 below).

     F.   As a further condition and inducement to Acquiror's willingness to
enter into this Agreement, certain stockholders of Target have executed and
delivered to Acquiror Stockholders Agreements in the form attached hereto as
EXHIBIT C (the "STOCKHOLDERS AGREEMENTS").


<PAGE>

     NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:

                                      ARTICLE I

                                      THE MERGER

     Section 1.1    EFFECTIVE TIME OF THE MERGER.  Subject to the provisions of
this Agreement, a certificate of merger (the "Certificate of Merger") in such
mutually acceptable form as is required by the relevant provisions of the
Delaware General Corporation Law ("Delaware Law") shall be duly executed and
delivered by the parties hereto and thereafter delivered to the Secretary of
State of the State of Delaware for filing on the Closing Date (as defined in
Section 1.2).  The Merger shall become effective upon the due and valid filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware or at such time thereafter as is provided in the Certificate of Merger
(the "EFFECTIVE TIME").

     Section 1.2    CLOSING.  The closing of the Merger (the "CLOSING") will
take place at 10:00 a.m. EDT, on June 10, 1998 or such later date as is agreed
upon by Acquiror and Target, which shall be no later than the second business
day after satisfaction or waiver of the latest to occur of the conditions set
forth in Article VIII (other than the delivery of the officers' certificates
referred to therein) (the "Closing Date"), at the offices of Hale and Dorr LLP,
60 State Street, Boston, Massachusetts, unless another date, time or place is
agreed to in writing by Acquiror and Target.

     Section 1.3    EFFECTS OF THE MERGER.

               (a)  At the Effective Time (i) the separate existence of Sub
shall cease and Sub shall be merged with and into Target (Sub and Target are
sometimes referred to herein as the "CONSTITUENT CORPORATIONS" and Target
following consummation of the Merger is sometimes referred to herein as the
"SURVIVING CORPORATION"), (ii) the Certificate of Incorporation of Sub shall be
the Certificate of Incorporation of the Surviving Corporation and (iii) the
Bylaws of Sub as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation.

               (b)  At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of Delaware Law.  Without limiting the
generality of the foregoing, at and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of a
public as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations.

     Section 1.4    DIRECTORS AND OFFICERS.  The directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall be the initial officers of the


                                         -2-
<PAGE>

Surviving Corporation, in each case until their respective successors are duly
elected or appointed.

                                      ARTICLE II

                               CONVERSION OF SECURITIES

     Section 2.1    CONVERSION OF CAPITAL STOCK.  At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock, $0.001 par value, of Target ("TARGET COMMON STOCK") or
capital stock of Sub:

               (a)  CAPITAL STOCK OF SUB.  Each issued and outstanding share of
the capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, no par value, of the Surviving Corporation.

               (b)  CANCELLATION OF ACQUIROR-OWNED AND TARGET-OWNED STOCK.  Any
shares of Target Common Stock that are owned by Acquiror, Sub, Target or any
other direct or indirect wholly-owned Subsidiary (as defined below) of Acquiror
or Target shall be canceled and retired and shall cease to exist and no stock of
Acquiror or other consideration shall be delivered in exchange.  As used in this
Agreement, the word "SUBSIDIARY" means, with respect to any other party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization or a majority of the profit interests in
such other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one or
more of its Subsidiaries.

               (c)  EXCHANGE RATIO.

                    (i)    Subject to Sections 2.2 and 2.4, each issued and
outstanding share of Target Common Stock (other than shares to be canceled in
accordance with Section 2.1(b) and any Dissenting Shares as defined in and to
the extent provided in Section 2.3) shall be converted into the right to receive
a fraction of a fully paid and nonassessable share of Acquiror Common Stock (as
defined in Section 4.2) equal to the "EXCHANGE RATIO" as defined in and
determined in accordance with the provisions of this Section 2.1(c).  All such
shares of Target Common Stock, when so converted, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares of
Acquiror Common Stock and any cash in lieu of fractional shares of Acquiror
Common Stock to be issued or paid in consideration therefor upon the surrender
of such certificate in accordance with Section 2.4, without interest.


                                         -3-
<PAGE>

                    (ii)   The "EXCHANGE RATIO" for the conversion of the
Target Common Stock shall be determined by DIVIDING (x) 454,734 by (y) the sum
of (A) the total number of shares of Target Common Stock issued and outstanding
at the Effective Time, PLUS (B) the total number of shares of Target Common
Stock issuable upon exercise for cash of Target Options (as defined in Section
2.1(d)) outstanding at the Effective Time, whether vested or unvested, PLUS (C)
the total number of shares of Target Common Stock issuable upon exercise of the
Target Warrants, PLUS (D) the total number of shares of Target Common Stock
issuable upon conversion of all outstanding convertible debt of Target, PLUS (E)
the total number of shares of Target Common Stock issuable upon cancellation of
all outstanding Professional Obligations (as defined in Section 2.1(f)).

                    (iii)  If, between the date of this Agreement and the
Effective Time, the outstanding shares of Acquiror Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, split-up, stock dividend or stock combination, then the
Exchange Ratio shall be correspondingly adjusted.  The Exchange Ratio shall not
change as a result of fluctuations in the market price of Acquiror Common Stock
between the date of this Agreement and the Effective Time.

               (d)  TARGET STOCK OPTIONS.  At the Effective Time, all then
outstanding options, whether vested or unvested, ("TARGET OPTIONS") to  purchase
Target Common Stock issued under Target's 1997 Stock Option Plan (the "TARGET
OPTION PLAN") or otherwise that by their terms survive the Closing will be
assumed by Acquiror in accordance with Section 6.5.  All of the Target Options
issued and outstanding as of the date of this Agreement are listed on Schedule
2.1(d) attached hereto.  An updated Schedule 2.1(d) of Target Options shall be
delivered by Target to Acquiror on the Closing Date.

               (e)  CONVERTIBLE NOTES.  Simultaneously with the Effective Time,
all then outstanding convertible notes of Target ("TARGET CONVERTIBLE NOTES")
shall be converted into Target Common Stock.  All of the Target Convertible
Notes issued and outstanding as of the date of this Agreement are listed on
Schedule 2.1(e) attached hereto.  An updated Schedule 2.1(e) of Target
Convertible Notes shall be delivered by Target to Acquiror on the Closing Date.

               (f)  PROFESSIONAL OBLIGATIONS.  Simultaneously with the Effective
Time, certain then outstanding obligations of Target to Harris Fishman and Hale
and Dorr LLP (the "PROFESSIONAL OBLIGATIONS") shall be converted into Target
Common Stock.  All of the Professional Obligations issued and outstanding as of
the date of this Agreement are listed on Schedule 2.1(f) attached hereto.  An
updated Schedule 2.1(f) of Professional Obligations shall be delivered by Target
to Acquiror on the Closing Date.

               (g)  TARGET WARRANTS.  Prior to or simultaneously with the
Effective Time, all then issued and outstanding warrants to acquire shares of
Target Common Stock ("TARGET WARRANTS") shall be exercised in full.  All of the
Target Warrants issued and outstanding as of the date of this Agreement are
listed on Schedule 2.1(g) attached hereto.  An updated Schedule 2.1(g) of Target
Warrants shall be delivered by Target to Acquiror on the Closing Date.  Any
Target Warrants that remain unexercised following the Effective Time shall be
cancelled.


                                         -4-
<PAGE>

     Section 2.2    ESCROW AGREEMENT.  At the Effective Time or such later time
as determined in accordance with Section 2.3(b), Acquiror will, on behalf of the
holders of Target Common Stock and of Target Options, deposit in escrow
certificates and/or Target Options representing a total of 68,210 shares of
Acquiror Common Stock and/or rights to acquire shares of Acquiror Common Stock,
as the case may be.  Such shares and options shall be held in escrow on behalf
of the persons who are the holders of Target Common Stock and/or Target Options
immediately prior to the Effective Time (collectively, the "FORMER TARGET
STOCKHOLDERS"), on a pro rata basis, in accordance with each such Former Target
Stockholders' percentage ownership ("PRO RATA PORTION") of Target Common Stock
(or rights to acquire shares of Target Common Stock upon the exercise of Target
Options) immediately prior to the Effective Time.  Such shares and options
(together, the "ESCROW SHARES") shall be held as security for the Former Target
Stockholders' indemnification obligations under Article X and pursuant to the
provisions of an escrow agreement (the "ESCROW AGREEMENT") to be executed
pursuant to Section 7.5.

     Section 2.3    DISSENTING SHARES.

               (a)  Notwithstanding any provision of this Agreement to the
contrary, any shares of Target Common Stock held by a holder who has exercised
such holder's dissenter's rights in accordance with Section 262 of Delaware Law
and who, as of the Effective Time, has not effectively withdrawn or lost such
dissenter's rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive Acquiror Common Stock pursuant to Section 2.1, but
the holder of the Dissenting Shares shall only be entitled to such rights as are
granted by Section 262 of Delaware Law.

               (b)  Notwithstanding the provisions of Section 2.3(a), if any
holder of shares of Target Common Stock who demands his dissenter's rights with
respect to such shares under Section 2.1 shall effectively withdraw or lose
(through failure to perfect or otherwise) his rights to receive payment for the
fair market value of such shares under Delaware Law, then, as of the later of
the Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Acquiror
Common Stock and payment for fractional shares as provided in Section 2.1(c) and
2.6, without interest, upon surrender of the certificate or certificates
representing such shares; PROVIDED that if such holder effectively withdraws or
loses his right to receive payment for the fair market value of such shares
after the Effective Time, then, at such time Acquiror will deposit in escrow
certificates representing such holder's Pro Rata Portion of the Escrow Shares.

               (c)  Target shall give Acquiror (i) prompt notice of any written
demands for payment with respect to any shares of capital stock of Target
pursuant to Section 262 of Delaware Law, withdrawals of such demands, and any
other instruments served pursuant to Delaware Law and received by the Target and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for dissenter's rights under Delaware Law.  Target shall not,
except with the prior written consent of Acquiror, voluntarily make any payment
with respect to any demands for dissenter's rights with respect to Target Common
Stock or offer to settle or settle any such demands.


                                         -5-
<PAGE>

     Section 2.4    EXCHANGE OF CERTIFICATES.

               (a)  From and after the Effective Time, each holder of an
outstanding certificate or certificates ("CERTIFICATES") which represented
shares of Target Common Stock immediately prior to the Effective Time shall have
the right to surrender each Certificate to Acquiror (or at Acquiror's option, an
exchange agent to be appointed by Acquiror), and receive in exchange for all
Certificates held by such holder a certificate representing the number of whole
shares of Acquiror Common Stock (other than the Escrow Shares) into which the
Target Common Stock evidenced by the Certificates so surrendered shall have been
converted pursuant to the provisions of Article II of this Agreement.  The
surrender of Certificates shall be accompanied by duly completed and executed
Letters of Transmittal in such form as may be reasonably specified by Acquiror.
Until surrendered, each outstanding Certificate which prior to the Effective
Time represented shares of Target Common Stock shall be deemed for all corporate
purposes to evidence ownership of the number of whole shares of Acquiror Common
Stock into which the shares of Target Common Stock have been converted but
shall, subject to applicable dissenter's rights under Delaware Law and Section
2.3, have no other rights.  Subject to dissenter's rights under Delaware Law and
Section 2.3, from and after the Effective Time, the holders of shares of Target
Common Stock shall cease to have any rights in respect of such shares and their
rights shall be solely in respect of the Acquiror Common Stock into which such
shares of Target Common Stock have been converted.  From and after the Effective
Time, there shall be no further registration of transfers on the records of
Target of shares of Target Common Stock outstanding immediately prior to the
Effective Time.

               (b)  If any shares of Acquiror Common Stock are to be issued in
the name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition to the
issuance of such shares that (i) the Certificate(s) so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and (iii)
the person requesting such transfer shall pay Acquiror, or its exchange agent,
any transfer or other taxes payable by reason of the foregoing or establish to
the satisfaction of Acquiror that such taxes have been paid or are not required
to be paid.  Notwithstanding the foregoing, neither Acquiror or Target shall be
liable to a holder of shares of Target Common Stock for shares of Acquiror
Common Stock issuable to such holder pursuant to the provisions of Article II of
the Agreement that are delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.

               (c)  In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, Acquiror shall issue in
exchange for such lost, stolen or destroyed Certificate the shares of Acquiror
Common Stock issuable in exchange therefor pursuant to the provisions of Article
II of the Agreement.  The Board of Directors of Acquiror may in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificate to provide to Acquiror an indemnity
agreement against any claim that may be made against Acquiror with respect to
the Certificate alleged to have been lost, stolen or destroyed.


                                         -6-
<PAGE>

     Section 2.5    DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.  No
dividends or other distributions declared or made after the Effective Time with
respect to Acquiror Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Acquiror Common Stock represented thereby and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section 2.6
below until the holder of record of such Certificate shall surrender such
Certificate.  Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Acquiror Common
Stock to which such holder is entitled pursuant to Section 2.6 below and the
amount of dividends or other distributions with a record date after the
Effective Time previously paid with respect to such whole shares of Acquiror
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Acquiror Common Stock.

     Section 2.6    NO FRACTIONAL SHARES.  No certificate or scrip representing
fractional shares of Acquiror Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of Acquiror.
Notwithstanding any other provision of this Agreement, each holder of shares of
Target Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Acquiror Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Acquiror Common Stock multiplied by $104.66 (the "REFERENCE STOCK
PRICE").

     Section 2.7    TAX CONSEQUENCES.  It is intended by the parties hereto that
the Merger shall constitute a "reorganization" within the meaning of Section 368
of the Code.  The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations.

                                    ARTICLE III

                      REPRESENTATIONS AND WARRANTIES OF TARGET

     Target represents and warrants to Acquiror and Sub that the statements
contained in this Article III are true and correct, except as set forth in the
disclosure schedule delivered by Target to Acquiror on or before the date of
this Agreement (the "TARGET DISCLOSURE SCHEDULE").  The Target Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article III.


     Section 3.1    ORGANIZATION OF TARGET.  Target is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power to own, lease and operate its
property and to carry on its business as now being conducted, and is duly
qualified or licensed to do business and is in good standing as a foreign
corporation


                                         -7-
<PAGE>

in each jurisdiction in which the nature of its business or ownership or leasing
of properties makes such qualification or licensing necessary and where the
failure to be so qualified or licensed is reasonably likely to result in a
material adverse effect on the business, as presently conducted, assets
(including intangible assets), liabilities, condition (financial or otherwise),
prospects, property or results of operations (a "MATERIAL ADVERSE EFFECT") of
Target.  The Target Disclosure Schedule contains a true and complete listing of
the locations of all sales offices, manufacturing facilities, and any other
offices or facilities of Target and a true and complete list of all states in
which Target maintains any employees.  The Target Disclosure Schedule contains a
true and complete list of all states in which Target is duly qualified or
licensed to transact business as a foreign corporation.

     Section 3.2    TARGET CAPITAL STRUCTURE.

               (a)  The authorized capital stock of Target consists of 2,500,000
shares of Target Common Stock and 300,000 shares of Target Preferred Stock, of
which 272,667 shares are designated as Series A Preferred Stock.  As of the date
of this Agreement, there are (i) 1,066,000 shares of Target Common Stock issued
and outstanding, all of which are validly issued, fully paid and nonassessable;
(ii) Target Warrants to purchase up to 47,248 shares of Target Common Stock;
(iii) 47,248 shares of Target Common Stock reserved for future issuance upon
exercise of the Target Warrants; (iv) Target Convertible Notes convertible into
up to 197,108 shares of Target Common Stock upon the consummation of the Merger;
(v) 197,108 shares of Target Common Stock reserved for issuance upon conversion
of Target Convertible Notes; (vi) 203,050 shares of Target Common Stock reserved
for future issuance pursuant to Target Options granted and outstanding under the
Target Option Plan or otherwise; (vii) 9,855 shares of Common Stock reserved for
issuance in cancellation of the Professional Obligations; and (viii) no shares
of Target Preferred Stock are issued and outstanding.  The issued and
outstanding shares of Target Common Stock are held of record by the stockholders
of Target as set forth and identified in the stockholder list attached as
Schedule 3.2(a) to the Target Disclosure Schedule.  The issued and outstanding
Target Options are held of record by the option holders as set forth and
identified in Schedule 2.1(d) of the Target Disclosure Schedules.  The issued
and outstanding Target Warrants are held of record by the warrantholders as set
forth and identified in Schedule 2.1(g) of the Target Disclosure Schedule.  The
issued and outstanding Target Convertible Notes are held of record by the
noteholders as set forth and identified in Schedule 2.1(e) of the Target
Disclosure Schedule.  The Professional Obligations are owed to the organizations
set forth in Schedule 2.1(f) of the Target Disclosure Schedule.  All shares of
Target Common Stock subject to issuance as specified above, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable.  All shares of Target Common Stock subject to issuance upon the
exercise of Target Options and Target Warrants or upon the conversion of Target
Convertible Notes, upon issuance on the terms and conditions specified in the
instrument pursuant to which they are issuable, will be duly authorized, validly
issued, fully paid and nonassessable.  None of the issued and outstanding shares
of Target Common Stock are subject to contractual rights to repurchase upon the
termination of the employment of the holder thereof with Target or its
affiliates.  All outstanding shares of Target Common Stock and outstanding
Target Options, Target Warrants and Target Convertible Notes (collectively
"TARGET


                                         -8-
<PAGE>

SECURITIES") were issued in compliance with applicable federal and state
securities laws.  Except as set forth in the Target Disclosure Schedule, there
are no obligations, contingent or otherwise, of Target to repurchase, redeem or
otherwise acquire any shares of Target Common Stock or make any investment (in
the form of a loan, capital contribution or otherwise) in any other entity.  An
updated Schedule 3.2(a) reflecting changes permitted by this Agreement in the
capitalization of Target between the date hereof and the Effective Time shall be
delivered by Target to Acquiror on the Closing Date.

               (b)  Except as set forth in this Section 3.2, there are no equity
securities of any class or series of Target, or any security exchangeable into
or exercisable for such equity securities, issued, reserved for issuance or
outstanding.  Except as set forth in this Section 3.2, there are no options,
warrants, equity securities, calls, rights, commitments or agreements of any
character to which Target is a party or by which it is bound obligating Target
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of Target or obligating Target to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement.  Except as provided in this
Agreement and the other Transaction Documents (as defined in Section 3.3(a)) or
any transaction contemplated hereby or thereby, there are no voting trusts,
proxies or other agreements or understandings with respect to the voting of the
shares of capital stock of Target.

               (c)  All Target Options have been issued in accordance with the
terms of the Target Option Plan and pursuant to the standard forms of option
agreement previously provided to Acquiror or its representatives.  Except as
contemplated by this Agreement, no option will by its terms require an
adjustment in connection with the Merger. Neither the consummation of
transactions contemplated by this Agreement or the other Transaction Documents
nor any action taken by Target in connection with such transactions will result
in (i) any acceleration of vesting in favor of any optionee under any Target
Option; (ii) any additional benefits for any optionee under any Target Option;
or (iii) the inability of Acquiror after the Effective Date to exercise any
right or benefit held by Target prior to the Effective Time with respect to any
Target Option assumed by Acquiror, including, without limitation, the right to
repurchase an optionee's unvested shares on termination of such optionee's
employment.  The assumption by Acquiror of Target Options in accordance with
Section 6.5 hereunder will not (i) give the optionees additional benefits which
they did not have under their options prior to such assumption (after taking
into account the existing provisions of the options, such as their respective
exercise prices and vesting schedules) and (ii) constitute a breach of the
Target Plan or any agreement entered into pursuant to such plan.

     Section 3.3    AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

               (a)  Target has all requisite corporate power and authority to
enter into this Agreement and all Transaction Documents to which it is or will
become a party and to consummate the transactions contemplated by this Agreement
and such Transaction Documents.  The execution and delivery of this Agreement
and such Transaction Documents and the consummation of the transactions
contemplated by this Agreement and such Transaction Documents have been duly
authorized by all necessary corporate action on the part of Target,


                                         -9-
<PAGE>

subject only to the approval of the Merger by Target's stockholders under the
provisions of Delaware Law and Target's Certificate of Incorporation.  This
Agreement has been and such Transaction Documents have been or, to the extent
not executed as of the date hereof, will be duly executed and delivered by
Target.  This Agreement and each of the Transaction Documents to which Target is
a party constitutes, and each of the Transaction Documents to which Target will
become a party when executed and delivered by Target will constitute, assuming
the due authorization, execution and delivery by the other parties hereto and
thereto, the valid and binding obligation of Target, enforceable against Target
in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in equity.  For purposes
of this Agreement, "TRANSACTION DOCUMENTS" means all documents or agreements
required to be delivered by any party under this Agreement including the
Certificate of Merger, the Escrow Agreement, the Voting Agreements, the
Stockholders Agreements and the Noncompetition Agreements.

               (b)  The execution and delivery by Target of this Agreement and
the Transaction Documents to which it is or will become a party does not and the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents to which it is or will become a party will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Target, (ii) result in any violation
or breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Target is a party or by which it or
any of its properties or assets may be bound, or (iii) conflict or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would not have a
Material Adverse Effect on Target.

               (c)  No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("GOVERNMENTAL
ENTITY") is required by or with respect to Target in connection with the
execution and delivery of this Agreement or of any other Transaction Document to
which it is or will become a party or the consummation of the transactions
contemplated by this Agreement or such Transaction Document or the continuation
of the business activities of Target following consummation of the Merger
without a Material Adverse Change (as defined in Section 3.6(a)), except for
(i) the filing of the Certificate of Merger with the Delaware Secretary of
State, (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, could be expected to
have a Material Adverse Effect on Target.

     Section 3.4    FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.


                                         -10-
<PAGE>

               (a)  Target has delivered to Acquiror copies of Target's
unaudited balance sheet as of April 30, 1998 (the "MOST RECENT BALANCE SHEET")
and unaudited statements of operations, stockholders' deficit and cash flow for
the four-month period then-ended and for the period from inception (August 31,
1995) to April 30, 1998 (together with the Most Recent Balance Sheet, the
"TARGET INTERIM UNAUDITED FINANCIALS") and the audited balance sheets as of
December 31, 1996 and 1997 and the related statements of operations,
stockholders' equity (deficit) and cash flows for the years ended December 31,
1996 and 1997 and for the period from inception (August 31, 1995) to
December 31, 1997, as audited by Arthur Andersen LLP, together with the report
of Arthur Andersen LLP thereon (collectively with the Target Interim Unaudited
Financials, the "TARGET FINANCIAL STATEMENTS").

               (b)  The Target Financial Statements are complete and in
accordance with the books and records of Target and present fairly in all
material respects the financial position, results of operations and cash flows
of Target as of their historical dates and for the periods indicated, except
that the Target Interim Unaudited Financials are subject to normal and
reasonable year-end adjustments and do not include footnotes.  The Target
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods (except
as may be expressly indicated therein or on the face of the schedules or notes
to such Target Financial Statements).

               (c)  Target has no material debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and whether due or
to become due, that is not reflected or reserved against in the Most Recent
Balance Sheet, except for those that may have been incurred after the date of
the Most Recent Balance Sheet.  Except as set forth on the Target Disclosure
Schedule, all debts, liabilities, and obligations incurred after the date of the
Most Recent Balance Sheet were incurred in the ordinary course of business and
do not exceed $10,000 on an individual basis.

     Section 3.5    TAX MATTERS.

               (a)  For purposes of this Section 3.5 and other provisions of
this Agreement relating to Taxes, the following definitions shall apply:

                    (i)    The term "TAXES" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal income taxes and state income taxes), payroll and employee withholding
taxes, unemployment insurance, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, ozone depleting chemicals taxes, transfer taxes, workers'
compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which are required to be paid, withheld or collected,
(B) any liability for the payment


                                         -11-
<PAGE>

of amounts referred to in (A) as a result of being a member of any affiliated,
consolidated, combined or unitary group, or (C) any liability for amounts
referred to in (A) or (B) as a result of any obligations to indemnify another
person.

                    (ii)   The term "RETURNS" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.

               (b)  All material Returns required to be filed by or on behalf of
Target have been duly filed on a timely basis and such Returns are true,
complete and correct.  All Taxes shown to be payable on such Returns or on
subsequent assessments with respect thereto, and all payments of estimated Taxes
required to be made by or on behalf of Target under Section 6655 of the Code or
comparable provisions of state, local or foreign law, have been paid in full on
a timely basis or have been accrued on the Most Recent Balance Sheet, and no
other Taxes are payable by Target with respect to items or periods covered by
such Returns (whether or not shown on or reportable on such Returns).  Target
has withheld and paid over all Taxes required to have been withheld and paid
over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party.  There are no liens on any of the assets of
Target with respect to Taxes, other than liens for Taxes not yet due and payable
or for Taxes that Target is contesting in good faith through appropriate
proceedings and for which appropriate reserves have been established on the Most
Recent Balance Sheet or liens that are otherwise permitted by Section 3.7.
Target has not at any time been (i) a member of an affiliated group of
corporations filing consolidated, combined or unitary income or franchise tax
returns, or (ii) a member of any partnership or joint venture for a period for
which the statue of limitations for any Tax potentially applicable as a result
of such membership has not expired.

               (c)  The amount of Target's liability for unpaid Taxes (whether
actual or contingent) for all periods through the date of the Most Recent
Balance Sheet does not, in the aggregate, exceed the amount of the current
liability accruals for Taxes reflected on the Most Recent Balance Sheet, and the
Most Recent Balance Sheet reflects proper accrual in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods
of all liabilities for Taxes payable after the date of the Most Recent Balance
Sheet attributable to transactions and events occurring prior to such date.  No
liability for Taxes has been incurred (or prior to Closing will be incurred)
since such date other than in the ordinary course of business.

               (d)  Acquiror has been furnished by Target with true and complete
copies of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of Target
relating to Taxes, and (ii) all federal and state income or franchise tax
Returns and state sales and use tax Returns for or including Target for all
periods since the inception of Target.  Target does not do business in or derive
income from any state other than states for which Returns have been duly filed
and furnished to Acquiror.


                                         -12-
<PAGE>

               (e)  The Returns of or including Target have never been audited
by a government or taxing authority, nor is any such audit in process, pending
or, to Target's knowledge, threatened (either in writing or verbally, formally
or informally).  No deficiencies exist or have been asserted (either in writing
or verbally, formally or informally), and Target has not received notice (either
in writing or verbally, formally or informally)  that it has not filed a Return
or paid Taxes required to be filed or paid.  Target is neither a party to any
action or proceeding for assessment or collection of Taxes, nor has such event
been asserted or threatened (either in writing or verbally, formally or
informally) against Target or any of its assets.  No waiver or extension of any
statute of limitations is in effect with respect to Taxes or Returns of Target.
Target has disclosed on its federal and state income and franchise tax Returns
all positions taken therein that could give rise to a substantial understatement
penalty within the meaning of Code Section 6662 or comparable provisions of
applicable state tax laws.

               (f)  Target is not, nor has it ever been, a party to any tax
sharing agreement.

               (g)  Target is not, nor has it been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Target is not a "consenting corporation" under Section 341(f) of the Code.
Target has not entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a nondeductible
expense to Target pursuant to Section 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code.  Target has not
agreed to, nor is it required to make any adjustment under Code Section 481(a)
by reason of, a change in accounting method.  Target is not, nor has it been, a
"reporting corporation" subject to the information reporting and record
maintenance requirements of Section 6038A and the regulations thereunder.
Target is in compliance with the terms and conditions of any applicable tax
exemptions, agreements or orders of any foreign government to which it may be
subject or which it may have claimed, and the transactions contemplated by this
Agreement will not have any adverse effect on such compliance.

     Section 3.6    ABSENCE OF CERTAIN CHANGES OR EVENTS.  Except as set forth
in the Target Disclosure Schedule, since December 31, 1997, Target has not:

               (a)  suffered any material adverse change in its business, as
presently conducted, assets (including intangible assets), liabilities,
condition (financial or otherwise), prospects, property or results of operations
("MATERIAL ADVERSE CHANGE").

               (b)  suffered any damage, destruction or loss, whether covered by
insurance or not, that has resulted, or could be reasonably expected to result,
in a Material Adverse Effect on Target;

               (c)  granted or agreed to make any increase in the compensation
payable or to become payable by Target to its officers or employees;


                                         -13-
<PAGE>

               (d)  declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of the capital stock of Target or
declared any direct or indirect redemption, retirement, purchase or other
acquisition by Target of such shares;

               (e)  issued any shares of capital stock of Target or any
warrants, rights, options or entered into any commitment relating to the shares
of Target, except for the issuance of shares of Target capital stock pursuant to
the exercise of Target Options and Target Warrants or the conversion of the
Target Convertible Notes or the cancellation of all or a portion of the
Professional Obligations listed in the Target Disclosure Schedule;

               (f)  made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates adopted therein;

               (g)  sold, leased, abandoned or otherwise disposed of any real
property or any machinery, equipment or other operating property with an
individual net book value of $2,500 or more;

               (h)  sold, assigned, transferred, licensed or otherwise disposed
of any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright) invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other intangible asset;

               (i)  permitted or allowed any of its property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind (except those permitted under Section 3.7);

               (j)  made any capital expenditure or commitment individually in
excess of $10,000;

               (k)  paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets to, or entered into any agreement or
arrangement with, any of its Affiliates (as defined in Section 3.16), officers,
directors or stockholders or any affiliate or associate of any of the foregoing;
or
               (l)  agreed to take any action described in this Section 3.6 or
which would constitute a material breach of any of the representations contained
in this Agreement.

     Section 3.7    TITLE AND RELATED MATTERS.  Target has good and marketable
title to all the properties, interests in properties and assets, real and
personal, used in or necessary for the operation of the business of Target, free
and clear of all mortgages, liens, pledges, charges or encumbrances of any kind
or character, except (i) the lien of current taxes not yet due and payable,
(ii) such imperfections of title and encumbrances, if any, that are not material
in character, amount or extent and that do not materially detract from the value
or materially interfere with the present use of the property subject thereto or
affected thereby and (iii) the security interest granted to the holders of the
Target Convertible Notes, which security interest


                                         -14-
<PAGE>

shall be released at or prior to the Effective Time.  The equipment of Target
used in the operation of its business is, taken as a whole, (i) adequate for the
business conducted by Target and (ii) in good operating condition and repair,
ordinary wear and tear excepted.  All real or personal property leases to which
Target is a party are valid, binding, enforceable and effective in accordance
with their respective terms.  To the knowledge of Target, 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.  The Target
Disclosure Schedule contains a description of all personal property with an
individual net book value in excess of $6,000 as of April 30, 1998 and real
property leased or owned by Target as of such date, describing its interest in
said property.  True and correct copies of Target's real property and personal
property leases have been provided to Acquiror or its representatives.

     Section 3.8    PROPRIETARY RIGHTS.

               (a)  Target owns all right, title and interest in and to, or
otherwise has the right to use, or is licensed to use, all patents, patent
rights, copyrights, technology, software, software tools, know-how, processes,
inventions, ideas, algorithms, trade secrets, trademarks, service marks, trade
names, Internet domain names and other proprietary rights used in or necessary
for the conduct of Target's business as conducted to the date of this Agreement
and proposed by Target to be conducted, including, without limitation, the
technology, information, databases, data lists, data compilations, and all
proprietary rights developed or discovered or used in connection with or
contained in all versions and implementations of Target's World Wide Web sites
or any product or technology which has been or is being distributed, licensed,
used or sold by Target or currently is under development by Target
(collectively, including such Web site, the "TARGET PRODUCTS"), free and clear
of all liens, claims and encumbrances (including without limitation linking,
licensing and distribution rights) (all of which are referred to as "TARGET
PROPRIETARY RIGHTS").  The Target Products, including all software used in
connection with Target's Web-based services, are free from material defects and
perform in substantial accordance with all published specifications.  In
addition, Target is not aware of any legal restrictions or impediments that
would prevent Target from incorporating those features identified on Schedule
3.8(a) of the Target Disclosure Schedule into a release version of the product.
The Target Disclosure Schedule contains an accurate and complete (i) description
of all patents and patent applications, trademarks (with separate listings of
registered and unregistered trademarks), trade names, Internet domain names and
registered copyrights in or related to the Target Products or otherwise included
in the Target Proprietary Rights and all applications and registrations
therefor, including the jurisdictions in which each such Target Proprietary
Right has been issued or registered or in which any such application of such
issuance and registration has been filed, (ii) list of all licenses and other
agreements with third parties (the "THIRD PARTY LICENSES") relating to any
patents, patent rights, copyrights, trade secrets, software, inventions, ideas,
algorithms, technology, know-how, processes or other proprietary rights that
Target is licensed or otherwise authorized by such third parties to license,
use, market, distribute or incorporate in Target Products (such patents, patent
rights, copyrights, trade secrets, software, inventions, ideas, algorithms,
technology, know-how, processes or other proprietary rights are collectively
referred to as the "THIRD PARTY TECHNOLOGY"), (iii) list of all licenses and
other agreements with third parties relating to any material information,
compilations, data lists or


                                         -15-
<PAGE>

databases that Target is licensed or otherwise authorized by such third parties
to license, use, market, disseminate distribute or incorporate in Target
Products.  Target represents and warrants that (i) Target has provided to
Acquiror copies of any and all standard forms of click-wrap agreement, merchant
agreement and other customer agreements and copies of any agreements that
materially deviate from such standard form agreements, (ii) all such agreements
with Target customers are valid and binding obligations of the parties to such
agreements, and (iii) Target has complete and accurate records indicating that
all such Target customers have assented to the terms of such agreements and has
provided to Acquiror evidence of such records.  Target has not engaged in any
distribution of any software licensed through Free Software Foundation, Inc. (or
any similar organization) in a manner that would require disclosure to any third
party of software source code developed or modified by Target.  To the knowledge
of Target, all of Target's patents, patent rights, copyrights, trademark, trade
name or Internet domain name registrations related to or in the Target Products
are valid and in full force and effect; and consummation of the transactions
contemplated by this Agreement will not alter or impair any such rights.  No
claims have been asserted or, to its knowledge, threatened against Target (and
Target is not aware of any claims which could be asserted or threatened against
Target or which have been asserted or threatened against others relating to
Target Proprietary Rights or Target Products) by any person challenging Target's
use, possession, manufacture, license, sale or distribution of Target Products
under any Target Proprietary Rights (including, without limitation, the Third
Party Technology) or challenging or questioning the validity or effectiveness of
any material license or agreement relating thereto (including, without
limitation, the Third Party Licenses) or alleging a violation of any person's or
entity's privacy, personal or confidentiality rights.  To the knowledge of
Target, there is no valid basis for any claim of the type specified in the
immediately preceding sentence which could in any material way relate to or
interfere with the continued enhancement, exploitation, licensing and use by
Target of any of the Target Products.  None of the Target Products nor the
license and use or exploitation of any Target Proprietary Rights in Target's
current business infringes on the rights of or constitutes misappropriation of
any proprietary information or intangible property right of any third person or
entity, including without limitation any patent, patent right, trade secret,
copyright, trademark or trade name, and Target has not been sued or named in any
suit, action or proceeding which involves a claim of such infringement,
misappropriation or unfair competition; PROVIDED, HOWEVER, that the foregoing
representation as to the license, use or exploitation by Target of any of the
Third Party Technology licensed to Target under the Third Party Licenses
identified in Section 3.8(a) of the Target Disclosure Schedule is made to the
knowledge of Target only.

               (b)  Except as set forth in the Target Disclosure Schedule,
Target has not granted any third party any right to manufacture, reproduce,
license, use, distribute or market any of the Target Products or any
adaptations, translations, or derivative works based on the Target Products or
any portion thereof.

               (c)  All material designs, drawings, specifications, source code,
object code, scripts, documentation, flow charts, diagrams, data lists,
databases, compilations and information incorporating, embodying or reflecting
any of the Target Products at any stage of their development (the "TARGET
COMPONENTS") were written, developed and created solely and exclusively by
employees of Target without the assistance of any third party or entity or were


                                         -16-
<PAGE>

created by third parties who assigned ownership of their rights to Target by
means of valid and enforceable consultant confidentiality and invention
assignment agreements, copies of which have been delivered to Acquiror.  Target
has at all times used commercially reasonable efforts customary in its industry
to treat the Target Proprietary Rights related to the applicable Target Products
and Target Components as containing trade secrets and has not disclosed or
otherwise dealt with such items in such a manner as intended or reasonably
likely to cause the loss of such trade secrets by release into the public
domain.
               (d)  To Target's knowledge, no employee, contractor or consultant
of Target is in violation in any material respect of any term of any written
employment contract, patent disclosure agreement or any other written contract
or agreement relating to the relationship of any such employee, consultant or
contractor with Target or, to Target's knowledge, any other party because of the
nature of the business conducted by Target or proposed to be conducted by
Target.  The Target Disclosure Schedule lists all employees, contractors and
consultants who have participated in any way in the development of the Target
Products or the Target Proprietary Rights.

               (e)  Each person presently or previously employed by Target
(including independent contractors, if any) with access authorized by Target to
confidential information has executed a confidentiality and non-disclosure
agreement pursuant to the form of agreement previously provided to Acquiror or
its representatives.  To the knowledge of Target, such confidentiality and
non-disclosure agreements constitute valid and binding obligations of Target and
such person, enforceable in accordance with their respective terms.

               (f)  No product liability or warranty claims have been
communicated in writing to or threatened against Target.

               (g)  To Target's knowledge, there is no material unauthorized
use, disclosure, infringement or misappropriation of any Target Proprietary
Rights, or any Third Party Technology to the extent licensed by or through
Target, by any third party, including any employee or former employee of Target.
Target has not entered into any agreement to indemnify any other person against
any charge of infringement of any Target Proprietary Rights.

               (h)  All use, disclosure or appropriation of confidential
information not otherwise protected by patents, patent applications or copyright
("CONFIDENTIAL INFORMATION") owned by Target by or to a third party as
applicable has been pursuant to the terms of a written agreement between Target
and such third party.  All use, disclosure or appropriation of Confidential
Information not owned by Target has been made pursuant to the terms of a written
agreement between Target and the owner of such Confidential Information, or is
otherwise lawful.

     Section 3.9    EMPLOYEE BENEFIT PLANS.

               (a)  The Target Disclosure Schedule lists, with respect to Target
and any trade or business (whether or not incorporated) which is treated as a
single employer with Target (an "ERISA AFFILIATE") within the meaning of Section
414(b), (c), (m) or (o) of the Code, (i) all


                                         -17-
<PAGE>

material employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) each loan to
a non-officer employee, loans to officers and directors and any stock option,
stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code Section 125) or dependent care
(Code Section 129), life insurance or accident insurance plans, programs or
arrangements, (iii) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (iv) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of Target and that do not generally apply to all employees, and (v) any current
or former employment or executive compensation or severance agreements, written
or otherwise, for the benefit of, or relating to, any present or former
employee, consultant or director of Target as to which (with respect to any of
items (i) through (v) above) any potential liability is borne by Target
(together, the "TARGET EMPLOYEE PLANS").

               (b)  Target has delivered or made available to Acquiror or its
representatives a copy of each of the Target Employee Plans which have been
reduced to writing, a summary of any unwritten plan and related plan documents
(including trust documents, insurance policies or contracts, employee booklets,
summary plan descriptions and other authorizing documents, and, to the extent
still in its possession, any material employee communications relating thereto)
and has, with respect to each Target Employee Plan which is subject to ERISA
reporting requirements, provided copies of any Form 5500 reports filed for the
last three plan years.  Any Target Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
a favorable determination letter as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has applied to the Internal Revenue Service for such
a determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination.  Target has also furnished
Acquiror with the most recent Internal Revenue Service determination letter
issued with respect to each such Target Employee Plan, and nothing has occurred
since the issuance of each such letter which could reasonably be expected to
cause the loss of the tax-qualified status of any Target Employee Plan subject
to Code Section 401(a).

               (c)  (i) None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person except as
required by applicable law; (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Target Employee Plan; which could reasonably be expected to have,
in the aggregate, a Material Adverse Effect on Target, (iii) each Target
Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), except as would not have, in the
aggregate, a Material Adverse Effect on Target, and Target and each subsidiary
or ERISA Affiliate have performed all material obligations required to be
performed by them under, are not in any material respect in default, under or
violation of, and have no knowledge of any material default or violation by any
other party to, any of the Target Employee Plans; (iv) neither Target nor any
subsidiary or ERISA Affiliate is subject to


                                         -18-
<PAGE>

any material liability or penalty under Sections 4976 through 4980 of the Code
or Title I of ERISA with respect to any of the Target Employee Plans; (v) all
material contributions required to be made by Target or any subsidiary or ERISA
Affiliate to any Target Employee Plan have been made on or before their due
dates and a reasonable amount has been accrued for contributions to each Target
Employee Plan for the current plan years; (vi) with respect to each Target
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) no
Target Employee Plan is covered by, and neither Target nor any subsidiary or
ERISA Affiliate has incurred or expects to incur any material liability under
Title IV of ERISA or Section 412 of the Code.  With respect to each Target
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, Target has prepared in good faith and timely
filed all requisite governmental reports (which were true and correct as of the
date filed) and has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Target Employee Plan except as would not give rise, in
the aggregate, to a Material Adverse Effect on Target.  No suit, administrative
proceeding, action or other litigation has been brought, or to the best
knowledge of Target is threatened, against or with respect to any such Target
Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor.  Neither Target nor any ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation under, any
"multi-employer plan" as defined in Section 3(37) of ERISA.

               (d)  With respect to each Target Employee Plan, Target has
complied with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
proposed regulations thereunder and (ii) the applicable requirements of the
Family Leave Act of 1993 and the regulations thereunder, except with respect to
both clauses (i) and (ii) to the extent that such failure to comply would not,
in the aggregate, have a Material Adverse Effect on Target.

               (e)  Except as set forth in the Target Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or other service provider of Target or
any other ERISA Affiliate to severance benefits or any other payment (including,
without limitation, unemployment compensation, golden parachute or bonus),
except as expressly provided in this Agreement, or (ii) accelerate the time of
payment or vesting of any such benefits, or (iii) increase or accelerate any
benefits or the amount of compensation due any such employee or service
provider.

               (f)  There has been no amendment to, written interpretation or
announcement (whether or not written) by Target or other ERISA Affiliate
relating to, or change in participation or coverage under, any Target Employee
Plan which would materially increase the expense of maintaining such Plan above
the level of expense incurred with respect to that Plan for the most recent
fiscal year included in the Target Financial Statements.


                                         -19-
<PAGE>

     Section 3.10   BANK ACCOUNTS.  The Target Disclosure Schedule sets forth
the names and locations of all banks, trusts, companies, savings and loan
associations, and other financial institutions at which Target maintains
accounts of any nature and the names of all persons authorized to draw thereon
or make withdrawals therefrom.

     Section 3.11   CONTRACTS.

               (a)  Except as set forth on the Target Disclosure Schedule:

                    (i)    Target has no agreements, contracts or commitments
that provide for the sale, licensing, distribution, marketing, promotion or
resale by Target of any Target Products or Target Proprietary Rights.  The
description included in the Target Disclosure Schedule for each of Target's
merchant agreements shall include the name of the merchant party, the date of
the agreement and a brief description of the version of Target's standard
merchant agreement into which such merchant party shall have entered, if any.
Without limiting the foregoing, Target has not granted to any third party
(including, without limitation, OEMs and site-license customers) any rights to
reproduce, manufacture or distribute any of the Target Products, nor has Target
granted to any third party any exclusive rights of any kind (including, without
limitation, exclusivity with regard to categories of advertisers on Target's
World Wide Web site, territorial exclusivity or exclusivity with respect to
particular versions, implementations or translations of any of the Target
Products), nor has Target granted any third party any right to market any of the
Target Products under any private label or "OEM" arrangements, nor has Target
granted any license of any Target trademarks or servicemarks.

                    (ii)   Target has no Third Party Licenses.

                    (iii)  Target has no agreements, contracts or commitments
that provide for fixed and/or contingent payments or expenditures by or to
Target (including, without limitation, any advertising or revenue sharing
arrangement) in excess of $15,000 over the term of such agreement, contract or
commitment.

                    (iv)   Target has no outstanding sales or advertising
contract, commitment or proposal (including, without limitation, insertion
orders, slotting agreements or other agreements under which Target has allowed
third parties to advertise on or otherwise be included in Target's World Wide
Web sites) that Target currently expects to result in any loss to Target in
excess of $15,000 upon completion or performance thereof.

                    (v)    Target has no currently effective collective
bargaining or union agreements, contracts or commitments.

                    (vi)   Target is not restricted by agreement from competing
with any person or from carrying on its business anywhere in the world.

                    (vii)  Target has not guaranteed any obligations of other
persons or made any agreements to acquire or guarantee any obligations of other
persons.


                                         -20-
<PAGE>

                    (viii) Target has no outstanding loan or advance to any
person; nor is it party to any line of credit, standby financing, revolving
credit or other similar financing arrangement of any sort which would permit the
borrowing by Target of any sum.

                    (ix)   Target has no agreements pursuant to which Target
has agreed to manufacture for, supply to or distribute to any third party any
Target Products or Target Components.

     True and correct copies of each document or instrument listed on the Target
Disclosure Schedule pursuant to this Section 3.11(a) (the "MATERIAL CONTRACTS")
have been provided to Acquiror or its representatives.

               (b)  All of the Material Contracts listed on the Target
Disclosure Schedule are valid, binding, in full force and effect, and
enforceable by Target in accordance with their respective terms. No Material
Contract contains any liquidated damages, penalty or similar provision.  To the
knowledge of Target, no party to any such Material Contract intends to cancel,
withdraw, modify or amend such contract, agreement or arrangement.

               (c)  Target is not in material default under or in material
breach or violation of, nor, to Target's knowledge, is there any valid basis for
any claim of material default by Target under, or material breach or violation
by Target of, any Material Contract.  To Target's knowledge, no other party is
in default under or in breach or violation of, nor is there any valid basis for
any claim of default by any other party under or any breach or violation by any
other party of, any Material Contract.

               (d)  Except as specifically indicated on the Target Disclosure
Schedule, none of the Material Contracts provides for indemnification by Target
of any third party.  No claims have been made or threatened that would require
indemnification by Target, and Target has not paid any amounts to indemnify any
third party as a result of indemnification requirements of any kind.

     Section 3.12   ORDERS, COMMITMENTS AND RETURNS.  All accepted advertising
arrangements for Target Products entered into by Target for, and all material
agreements, contracts, or commitments for the purchase of supplies by Target,
were made in the ordinary course of business.  To the knowledge of Target, no
outstanding purchase or outstanding lease commitment of Target is in excess of
the normal, ordinary and usual requirements of the business.  There are no oral
contracts or arrangements for the sale of advertising or any other product or
service by Target.

     Section 3.13   COMPLIANCE WITH LAW.  Target and the operation of its
business are in compliance in all material respects with all applicable laws and
regulations. Neither Target nor, to Target's knowledge, any of its employees has
directly or indirectly paid or delivered any fee, commission or other sum of
money or item of property, however characterized, to any finder, agent,
government official or other party in the United States or any other country,
that was or is in violation of any federal, state, or local statute or law or of
any statute or law of any other country having jurisdiction.  Target has not
participated directly or indirectly in any boycotts or


                                         -21-
<PAGE>

other similar practices affecting any of its customers.  Target has complied in
all material respects at all times with any and all applicable federal, state
and foreign laws, rules, regulations, proclamations and orders relating to the
importation or exportation of its products.

     Section 3.14   LABOR DIFFICULTIES; NO DISCRIMINATION.

               (a)  Target is not engaged in any unfair labor practice and is
not in material violation of any applicable laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours.
There is no unfair labor practice complaint against Target actually pending or,
to the knowledge of Target, threatened before the National Labor Relations
Board. There is no strike, labor dispute, slowdown, or stoppage actually pending
or, to the knowledge of Target, threatened against Target.  To the knowledge of
Target, no union organizing activities are taking place with respect to the
business of Target.  No grievance, nor any arbitration proceeding arising out of
or under any collective bargaining agreement is pending and, to the knowledge of
Target, no claims therefor exist.  No collective bargaining agreement that is
binding on Target restricts it from relocating or closing any of its operations.
Target has not experienced any material work stoppage or other material labor
difficulty.

               (b)  There is and has not been any claim against Target, or to
Target's knowledge, threatened against Target, based on actual or alleged race,
age, sex, disability or other harassment or discrimination, or similar tortuous
conduct, nor to the knowledge of Target, is there any valid basis for any such
claim.

               (c)  There are no pending claims against Target or any of its
Subsidiaries under any workers compensation plan or policy or for long term
disability.  Neither Target nor any of its subsidiaries has any material
obligations under COBRA with respect to any former employees or qualifying
beneficiaries thereunder.  There are no proceedings pending or, to the knowledge
of Target, threatened, between Target and any of their respective employees,
which proceedings have or could reasonably be expected to have a Material
Adverse Effect on Target.

     Section 3.15   TRADE REGULATION.  All of the prices charged by Target in
connection with the marketing or sale of any products or services have been in
compliance with all applicable laws and regulations.  No claims have been
communicated or threatened in writing against Target with respect to wrongful
termination of any dealer, distributor or any other marketing entity,
discriminatory pricing, price fixing, unfair competition, false advertising, or
any other violation of any laws or regulations relating to anti-competitive
practices or unfair trade practices of any kind, and to Target's knowledge, no
specific situation, set of facts, or occurrence provides any basis for any such
claim.

     Section 3.16   INSIDER TRANSACTIONS.  To the knowledge of Target, no
affiliate ("AFFILIATE") as defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), of Target has any interest in any
equipment or other property, real or personal, tangible or intangible,
including, without limitation, any Target Proprietary Rights or any creditor,
supplier, customer, manufacturer, agent, representative, or distributor of
Target Products; PROVIDED, HOWEVER, that no such Affiliate or other person shall
be deemed to have such an interest solely by virtue of the ownership of less
than 1% of the outstanding stock or debt


                                         -22-
<PAGE>

securities of any publicly-held company, the stock or debt securities of which
are traded on a recognized stock exchange or quoted on the Nasdaq National
Market.

     Section 3.17   EMPLOYEES, INDEPENDENT CONTRACTORS AND CONSULTANTS.  The
Target Disclosure Schedule lists and describes all past and all currently
effective written or, to Target's knowledge, oral:  (i) employment agreements
and other material agreements concluded with individual employees to which
Target is a party; and (ii) independent contractor or consulting agreements with
independent contractors or consultants performing services in connection with
the development of Target Products or Target Proprietary Rights.  True and
correct copies of all such written agreements have been provided to Acquiror or
its representatives.  All independent contractors have been properly classified
as independent contractors for the purposes of federal and applicable state tax
laws, laws applicable to employee benefits and other applicable law.  All
salaries and wages paid by Target are in compliance in all material respects
with applicable federal, state and local laws.  Also shown on the Target
Disclosure Schedule are the names, positions and salaries or rates of pay,
including bonuses, of all persons presently employed by Target.

     Section 3.18   INSURANCE.  The Target Disclosure Schedule contains a list
of the principal policies of fire, liability and other forms of insurance
currently held by Target, which policies or their predecessors have been in
effect since 1997, and all claims made by Target under such policies.  To the
knowledge of Target, Target has not done anything, either by way of action or
inaction, that might invalidate such policies in whole or in part. There is no
claim 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 Target is otherwise in compliance with the terms of such policies and bonds
in all material respects.  Target has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.

     Section 3.19   LITIGATION.  There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Target,
threatened against Target or any of its properties or any of its officers or
directors (in their capacities as such).  There is no judgment, decree or order
against Target, or, to the knowledge of Target, any of its respective directors
or officers (in their capacities as such) relating to the business of Target.
To Target's knowledge, no circumstances exist that could reasonably be expected
to result in a claim against Target as a result of the conduct of Target's
business (including, without limitation, any claim of infringement of any
intellectual property right).

     Section 3.20   GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS.  Target has
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which Target currently operates or holds any interest in any of its
properties or (ii) that is required for the operation of Target's business or
the holding of any such interest, and all of such authorizations are in full
force and effect, except where the failure to obtain or have any such Target
authorizations could not reasonably be expected to have a Material Adverse
Effect on Target.


                                         -23-
<PAGE>

     Section 3.21   SUBSIDIARIES.  Target has no Subsidiaries.  Target does not
own or control (directly or indirectly) any capital stock, bonds or other
securities of, and does not have any proprietary interest in, any other
corporation, general or limited partnership, firm, association or business
organization, entity or enterprise, and Target does not control (directly or
indirectly) the management or policies of any other corporation, partnership,
firm, association or business organization, entity or enterprise.

     Section 3.22   COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS.  To the
knowledge of Target, no permits, licenses or other authorizations are required
for the conduct of its business as currently conducted under federal, state or
local laws applicable to Target and relating to pollution or protection of the
environment, including laws or provisions relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or hazardous or
toxic materials, substances, or wastes into air, surface water, groundwater, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials, substances, or wastes or which are intended to
assure the safety of employees, workers or other persons.  Target is not aware
of, nor has Target received written notice of, any conditions, circumstances,
activities, practices, incidents, or actions which may form the basis of any
claim, action, suit, proceeding, hearing, or investigation of, by, against or
relating to Target, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, release or threatened release into the environment, of any
pollutant, contaminant, or hazardous or toxic substance, material or waste, or
relating to the safety of employees, workers or other persons.

     Section 3.23   CORPORATE DOCUMENTS.  Target has furnished to Acquiror or
its representatives: (a) copies of its Certificate of Incorporation and Bylaws,
as amended to date; (b) its minute book containing all records required to be
set forth of all proceedings, consents, actions, and meetings of the
stockholders, the board of directors and any committees thereof; (c) all
material permits, orders, and consents issued by any regulatory agency with
respect to Target, or any securities of Target, and all applications for such
permits, orders, and consents; and (d) the stock transfer books of Target
setting forth all transfers of any capital stock.  The corporate minute books,
stock certificate books, stock registers and other corporate records of Target
are complete and accurate in all material respects, and the signatures appearing
on all documents contained therein are the true signatures of the persons
purporting to have signed the same.  All actions reflected in such books and
records were duly and validly taken in compliance with the laws of the
applicable jurisdiction.

     Section 3.24   NO BROKERS.  Except for the fees of Broadview Associates,
neither Target nor, to Target's knowledge, any Target stockholder is obligated
for the payment of fees or expenses of any broker or finder in connection with
the origin, negotiation or execution of this Agreement or the other Transaction
Documents or in connection with any transaction contemplated hereby or thereby.
Target has provided to Acquiror or its representatives a true and complete copy
of its engagement letter, and all other agreements relating to the Merger, with
Broadview Associates.


                                         -24-
<PAGE>

     Section 3.25   ADVERTISERS, CUSTOMERS AND SUPPLIERS.  As of the date
hereof, no advertiser or other customer which individually accounted for more
than 5% of Target's gross revenues during the 1997 fiscal year, and no supplier
of Target, has canceled or otherwise terminated, or made any written threat to
Target to cancel or otherwise terminate its relationship with Target, or has at
any time on or after December 31, 1997 decreased materially its services or
supplies to Target in the case of any such supplier, or its usage of the
services or products of Target in the case of such customer, and to Target's
knowledge, no such supplier or customer intends to cancel or otherwise terminate
its relationship with Target or to decrease materially its services or supplies
to Target or its usage of the services or products of Target, as the case may
be.  From and after the date hereof, no customer which individually accounted
for more than 5% of Target's gross revenues during the 1997 fiscal year, has
canceled or otherwise terminated, or made any written threat to Target to cancel
or otherwise terminate, for any reason, including without limitation the
consummation of the transactions contemplated hereby, its relationship with
Target, and to Target's knowledge, no such customer intends to cancel or
otherwise terminate its relationship with Target or to decrease materially its
usage of the services or products of Target.  Target has not knowingly breached,
so as to provide a benefit to Target that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier or Target.

     Section 3.26   TARGET ACTION.  The Board of Directors of Target, by
unanimous written consent or at a meeting duly called and held, has by the
unanimous vote of all directors (i) determined that the Merger is fair and in
the best interests of Target and its stockholders, (ii) approved the Merger and
this Agreement in accordance with the provisions of Delaware Law, and
(iii) directed that this Agreement and the Merger be submitted to Target
stockholders for their approval and resolved to recommend that Target
stockholders vote in favor of the approval of this Agreement and the Merger.

     Section 3.27   OFFERS.  Target has suspended or terminated, and has the
legal right to terminate or suspend, all negotiations and discussions of
Acquisition Transactions (as defined in Section 5.6) with parties other than
Acquiror.

     Section 3.28   INFORMATION STATEMENT.  The information supplied by Target
for inclusion in the information statement to be sent to the stockholders of
Target in connection with the meeting of Target stockholders to consider the
Merger (the "TARGET STOCKHOLDERS MEETING") or in connection with any written
consent of stockholders of Target (such information statement as amended or
supplemented is referred to herein as the "INFORMATION STATEMENT") shall not, on
the date the Information Statement is first mailed to Target stockholders, at
the time of the Target Stockholders Meeting, or written consent of stockholders
and at the Effective Time, contain any statement which is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they are made, not false or misleading.  If at any time prior to the
Effective Time any event or information should be discovered by Target which
should be set forth in an amendment to the Information Statement, Target shall
promptly inform Acquiror and Sub and shall communicate such information to the
Target stockholders in an appropriate manner.  Notwithstanding the foregoing,
Target makes no representation, warranty or covenant


                                         -25-
<PAGE>

with respect to any information supplied by Acquiror or Sub which is contained
in any of the foregoing documents.

     Section 3.29   ACCOUNTS RECEIVABLE.  Subject to any reserves set forth in
the Most Recent Balance Sheet, the accounts receivable shown on the Most Recent
Balance Sheet represent and will represent bona fide claims against debtors for
sales and other charges, and are not subject to discount except for normal cash
and immaterial trade discounts.  The amount carried for doubtful accounts and
allowances in the Most Recent Balance Sheet is sufficient to provide for any
losses which may be sustained on realization of the receivables.

     Section 3.30   DISCLOSURE.  No statements by Target contained in this
Agreement, its exhibits and schedules nor in any of the certificates or
documents, including any of the Transaction Documents, delivered or required to
be delivered by Target to Acquiror or Sub under Section 8.2 of this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.

     Section 3.31   TARGET DISCLOSURE SCHEDULE.  Notwithstanding anything to the
contrary contained in this Agreement, any information disclosed in one section
of the Target Disclosure Schedule shall, should the existence of the information
be relevant to any other section of the Target Disclosure Schedule and should
such relevancy be reasonably apparent on the face of such disclosure without
reference to extrinsic documentation to an objective third party reviewing such
disclosure, be deemed to be disclosed in all sections of the Target Disclosure
Schedule where such information shall be relevant.  The disclosure of any
required information shall not be deemed  to constitute an acknowledgment that
such information is required to be disclosed in connection with the
representations and warranties made by Target in this Agreement or that it is
material, nor shall such information be deemed to establish a standard of
materiality for purposes of this Agreement.

                                      ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB

     Acquiror and Sub represent and warrant to Target that the statements
contained in this Article IV are true and correct.

     Section 4.1    ORGANIZATION OF ACQUIROR AND SUB.  Each of Acquiror and its
Subsidiaries, including Sub, is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power to own, lease and operate
its property and to carry on its business as now being conducted and is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed would have a
Material Adverse Effect on Acquiror.

     Section 4.2    ACQUIROR CAPITAL STRUCTURE.  The authorized capital stock 
of Acquiror consists of 225,000,000 shares of Common Stock, par value of 
$0.00067 per share ("ACQUIROR COMMON STOCK"), and 10,000,000 shares of 
Preferred Stock, par value $0.00067 per share 

                                         -26-
<PAGE>

("ACQUIROR PREFERRED STOCK"), of which there were issued and outstanding as 
of the close of business on June 1, 1998, 46,376,329 shares of Acquiror 
Common Stock and no shares of Acquiror Preferred Stock.  There are no other 
outstanding shares of capital stock or voting securities of Acquiror other 
than shares of Acquiror Common Stock issued after June 1, 1998 under the 
Yahoo! Inc. 1996 Employee Stock Purchase Plan (the "ESPP") or upon the 
exercise of options issued under the Yahoo! Inc. 1995 Stock Plan and the 
Yahoo! Inc. 1996 Director Stock Option Plan.  The authorized capital stock of 
Sub consists of 1,000 shares of Common Stock, all of which are issued and 
outstanding and are held by Acquiror.  All outstanding shares of Acquiror and 
Sub have been duly authorized, validly issued, fully paid and are 
nonassessable and free of any liens or encumbrances other than any liens or 
encumbrances created by or imposed upon the holders thereof.  As of the close 
of business on June 1, 1998, Acquiror has reserved an aggregate of 11,603,522 
shares of Common Stock for issuance to employees, directors and independent 
contractors upon exercise of outstanding options to acquire shares of 
Acquiror Common Stock issued under the Acquiror stock option plans and no 
shares of Common Stock for issuance upon exercise of outstanding warrants.  
Other than as contemplated by this Agreement or under the ESPP, and except as 
described in this Section 4.2, there are no other options, warrants, calls, 
rights, commitments or agreements to which Acquiror or Sub is a party or by 
which either of them is bound obligating Acquiror or Sub to issue, deliver, 
sell, repurchase or redeem, or cause to be issued, delivered, sold, 
repurchased or redeemed, any shares of the capital stock of Acquiror or Sub 
or obligating Acquiror or Sub to grant, extend or enter into any such option, 
warrant, call, right, commitment or agreement.  The shares of Acquiror Common 
Stock to be issued pursuant to the Merger (including shares of Acquiror 
Common Stock issued upon exercise of Target Options and Target Warrants 
assumed by Acquiror) have been reserved for issuance and will be duly 
authorized, validly issued, fully paid, and non-assessable and issued in 
compliance with all applicable federal or state securities laws.

     Section 4.3    AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

               (a)  Each of Acquiror and Sub has all requisite corporate power
and authority to enter into this Agreement and the other Transaction Documents
to which it is or will become a party and to consummate the transactions
contemplated by this Agreement and such Transaction Documents.  The execution
and delivery of this Agreement and such Transaction Documents and the
consummation of the transactions contemplated by this Agreement and such
Transaction Documents have been duly authorized by all necessary corporate
action on the part of Acquiror and Sub.  This Agreement has been and such
Transaction Documents have been or, to the extent not executed as of the date
hereof, will be duly executed and delivered by Acquiror and Sub.  This Agreement
and each of the Transaction Documents to which Acquiror or Sub is a party
constitutes, and each of the Transaction Documents to which Acquiror or Sub will
become a party when executed and delivered by Acquiror or Sub will constitute,
the valid and binding obligation of Acquiror or Sub, enforceable in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered in
a proceeding at law or in equity.


                                         -27-
<PAGE>

               (b)  The execution and delivery by Acquiror or Sub of this
Agreement and the Transaction Documents to which it is or will become a party
does not, and consummation of the transactions contemplated by this Agreement or
the Transaction Documents to which it is or will become a party will not, (i)
conflict with, or result in any violation or breach of any provision of the
Articles of Incorporation or Bylaws of Acquiror or Sub, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which Acquiror or Sub
is a party or by which either of them or any of their properties or assets may
be bound, or (iii) conflict or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Acquiror or Sub or any of their properties or assets, except in
the case of (ii) and (iii) for any such conflicts, violations, defaults,
terminations, cancellations or accelerations which would not have a Material
Adverse Effect on Acquiror and its Subsidiaries, taken as a whole.

               (c)  No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Acquiror or Sub in connection with the execution and delivery
of this Agreement or the Transaction Documents to which it is or will become a
party or the consummation of the transactions contemplated hereby or thereby,
except for (i) the filing of the Certificate of Merger with the Delaware
Secretary of State, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country, and (iii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, could be expected to have a Material Adverse Effect on
Acquiror and its Subsidiaries, taken as a whole.

     Section 4.4    COMMISSION FILINGS; FINANCIAL STATEMENTS.

               (a)  Acquiror has filed with the Commission and made available to
Target or its representatives all forms, reports and documents required to be
filed by Acquiror with the Securities and Exchange Commission (the "Commission")
since December 31, 1997 (collectively, the "ACQUIROR COMMISSION REPORTS").  The
Acquiror Commission Reports constitute all of the documents required to be filed
by the Acquiror under Section 13 of the Exchange Act with the Commission since
December 31, 1997.  The Acquiror Commission Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended, (the "SECURITIES ACT"), and the Exchange
Act, as the case may be, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such Acquiror Commission
Reports or necessary in order to make the statements in such Acquiror Commission
Reports, in the light of the circumstances under which they were made, not
misleading.

               (b)  Each of the financial statements (including, in each case,
any related notes) contained in the Acquiror Commission Reports, including any
Acquiror Commission


                                         -28-
<PAGE>

Reports filed after the date of this Agreement until the Closing, complied or
will comply as to form in all material respects with the applicable published
rules and regulations of the Commission with respect thereto, was prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q of the Commission) and fairly presented the consolidated
financial position of Acquiror and its Subsidiaries as at the respective dates
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount.

     Section 4.5    ABSENCE OF CERTAIN CHANGES OR EVENTS.  Since December 31,
1997, Acquiror and its Subsidiaries have conducted their business in the
ordinary course and, since such date, there has not been (i) any Material
Adverse Change with respect to Acquiror and any of its Subsidiaries, taken as a
whole; or (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to Acquiror or any of its Subsidiaries having a Material
Adverse Effect on Acquiror and its Subsidiaries, taken as a whole.

     Section 4.6    COMPLIANCE WITH LAWS.  Acquiror has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which would not have a Material Adverse Effect
on Acquiror and its Subsidiaries, taken as a whole.

     Section 4.7    INTERIM OPERATIONS OF SUB.  Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.

     Section 4.8    DISCLOSURE.  No statements by Acquiror contained in this
Agreement, its exhibits and schedules, or any of the certificates or documents,
including any of the Transaction Documents, required to be delivered by Acquiror
or Sub to Target under this Agreement contain any untrue statement of material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.

     Section 4.9    SHAREHOLDERS CONSENT.  No consent or approval of the
shareholders of Acquiror is required or necessary for Acquiror to enter into
this Agreement or the Transaction Documents or to consummate the transactions
contemplated hereby and thereby.

     Section 4.10   LITIGATION.  Except as otherwise disclosed in the Acquiror
Commission Reports, (i) there is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Acquiror or any of its
subsidiaries, threatened against Acquiror or any of its properties or any of its
officers or directors (in their capacities as such), which, if determined
adversely to Acquiror, would have a Material Adverse Effect on Acquiror and its
Subsidiaries, taken as a whole, and (ii) there is no judgment, decree or order
against Acquiror, or, to the


                                         -29-
<PAGE>

knowledge of Acquiror, any of its respective directors or officers (in their
capacities as such) relating to the business of Acquiror, the presence of which
would have Material Adverse Effect with respect Acquiror and its Subsidiaries,
taken as a whole.  To Acquiror's knowledge, no circumstances exist that could
reasonably be expected to result in a claim against Acquiror as a result of the
conduct of Acquiror's business (including, without limitation, any claim of
infringement of any intellectual property right) that would have a Material
Adverse Effect with respect to Acquiror.

     Section 4.11   INVESTIGATION.  Acquiror is knowledgeable about the industry
in which the Target operates and is experienced in the acquisition and
management of businesses.  Acquiror has conducted a full due diligence
investigation of the Target and has received answers to all inquiries it has
made respecting the Target; PROVIDED that the foregoing shall in no way restrict
or qualify the indemnification rights of Acquiror pursuant to Article X hereof ,
except with respect to the Target Financial Statements to the extent described
in Article X.  To the knowledge of Acquiror, none of the representations or
warranties in Article III, as qualified by the appropriate Target Disclosure
Schedule, is untrue or incorrect in any material respect.  Target acknowledges
that it shall bear the burden of proof in connection with any assertion that
Acquiror shall have had knowledge prior to the date hereof of any untruthfulness
or inaccuracy of any of Target's representations and warranties set forth
herein.

                                      ARTICLE V

                            PRECLOSING COVENANTS OF TARGET

     During the period from the date of this Agreement until the Effective Time,
Target covenant and agree as follows:

     Section 5.1    APPROVAL OF TARGET STOCKHOLDERS.  Prior to the Closing Date
and at the earliest practicable date following the date hereof, Target will
solicit written consents from its stockholders seeking, or hold a stockholders'
meeting (the "TARGET STOCKHOLDERS' MEETING") for the purpose of seeking,
approval of this Agreement, the Merger and related matters.  If Target holds a
stockholders' meeting, the Board of Directors will solicit proxies from Target's
stockholders to vote such stockholders' shares at the Target Stockholders'
Meeting.  In soliciting such written consent or proxies, the Board of Directors
of Target will recommend to the stockholders of Target that they approve this
Agreement and the Merger and shall use its reasonable efforts to obtain the
approval of the stockholders of Target entitled to vote on or consent to this
Agreement and the Merger in accordance with Delaware Law and Target's
Certificate of Incorporation.  Target will prepare as soon as reasonably
practicable the Information Statement in form and substance reasonably
acceptable to Acquiror, with respect to the solicitation of written consents
and/or proxies from the stockholders of Target to approve this Agreement, the
Merger and related matters.  The Information Statement shall be in such form and
contain such information so as to permit compliance by Acquiror with the
requirements of Section 4(2) and/or Regulation D under the Securities Act in
connection with the issuance of shares of Acquiror Common Stock in the Merger
and will comply in all material respects with all applicable requirements of law
and the rules and regulations promulgated thereunder.  Within


                                         -30-
<PAGE>

two business days after the execution of this Agreement, Target will distribute
the Information Statement to the stockholders of Target. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Information Statement, Target will promptly inform the Acquiror of such
occurrence and cooperate in making any appropriate amendment or supplement,
and/or mailing to stockholders of Target, such amendment or supplement.  The
Information Statement will include the recommendation of the Board of Directors
of Target in favor of adoption and approval of this Agreement and approval of
the Merger.

     Section 5.2    ADVICE OF CHANGES.  Target will promptly advise Acquiror in
writing of any event occurring subsequent to the date of this Agreement which
would render any representation or warranty of Target contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect.

     Section 5.3    OPERATION OF BUSINESS.  During the period from the date of
this Agreement and continuing until the earlier of the termination of the
Agreement or the Effective Time, Target agrees (except to the extent that
Acquiror shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and taxes when due, subject to good faith
disputes over such debts or taxes, to pay or perform other obligations when due,
and, to the extent consistent with such business, use all reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
to the end that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time.  Target shall promptly notify Acquiror of any event or
occurrence not in the ordinary course of business of Target.  Except as
expressly contemplated by this Agreement, Target shall not, without the prior
written consent of Acquiror:

               (a)  Accelerate, amend or change the period of exercisability or
the vesting schedule of options granted under any employee stock plan or
agreements or authorize cash payments in exchange for any Target Option or any
options granted under any of such plans except as specifically required by the
terms of such plans or any related agreements or any such agreements in effect
as of the date of this Agreement and disclosed in the Target Disclosure
Schedule;

               (b)  Declare 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 such party, or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service by such party;

               (c)  Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into shares of its capital stock, or
subscriptions, rights, warrants or options to acquire, or other


                                         -31-
<PAGE>

agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than (i) the issuance of (A)
shares of Target Common Stock issuable upon exercise of Target Options or Target
Warrants, which are outstanding on the date of this Agreement, (B) shares of
Target Common Stock issuable upon conversion of Target Convertible Notes or (C)
shares of Target Common Stock issuable upon cancellation of outstanding
Professional Obligations, or (ii) the repurchase of shares of Common Stock from
terminated employees pursuant to the terms of outstanding stock restriction or
similar agreements;

               (d)  Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire or
agree to acquire any assets;

               (e)  Sell, lease, license or otherwise dispose of any of its
properties or assets which are material, individually or in the aggregate, to
the business of Target, except in the ordinary course of business;

               (f)  (i) Increase or agree to increase the compensation payable
or to become payable to its officers or employees, except for increases in
salary or wages of non-officer employees in accordance with past practices, (ii)
grant any additional severance or termination pay to, or enter into any
employment or severance agreements with, officers, (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement, with
any non-officer employee, except in accordance with past practices, (iv) enter
into any collective bargaining agreement, or (v) establish, adopt, enter into or
amend in any material respect any bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;

               (g)  Revalue any of its assets, including writing down the value
of inventory or writing off notes or accounts receivable;

               (h)  Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others;

               (i)  Amend or propose to amend its Certificate of Incorporation
or Bylaws;

               (j)  Incur or commit to incur any capital expenditures in excess
of $25,000 in the aggregate or in excess of $5,000 as to any individual matter;

               (k)  Lease, license, sell, transfer or encumber or permit to be
encumbered any asset, Target Proprietary Right or other property associated with
the business of Target (including sales or transfers to Affiliates of Target);

               (l)  Enter into any lease or contract for the purchase or sale of
any property, real or personal except in the ordinary course of business;


                                         -32-
<PAGE>

               (m)  Fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has maintained up to
the date of this Agreement, subject only to ordinary wear and tear;

               (n)  Change accounting methods;

               (o)  Amend or terminate any material contract, agreement or
license to which it is a party except in the ordinary course of business;

               (p)  Loan any amount to any person or entity, or guaranty or act
as a surety for any obligation;

               (q)  Waive or release any material right or claim, except in the
ordinary course of business;
               (r)  Make or change any Tax or accounting election, change any
annual accounting period, adopt or change any accounting method, file any
amended Return, enter into any closing agreement, settle any Tax claim or
assessment relating to Target, surrender any right to claim refund of Taxes,
consent to any extension or waiver of the limitation period applicable to any
Tax claim or assessment relating to Target, or take any other action or omit to
take any action, if any such action or omission would have the effect of
increasing the Tax liability of Target or Acquiror;

               (s)  take any action, or fail to take any action, would cause
there to be a Material Adverse Change with respect to Target;

               (t)  Enter into any agreement in which the obligation of Target
exceeds $25,000 or shall not terminate or be subject to termination for
convenience within 180 days following execution;

               (u)  Enter into any agreement not in the ordinary course of
business (including without limitation any material licenses to information or
databases, any OEM agreements, any exclusive agreements of any kind, or any
agreements providing for obligations that would extend beyond six months of the
date of this Agreement); or

               (v)  Take, or agree in writing or otherwise to take, any of the
actions described in Sections (a) through (u) above, or any action which is
reasonably likely to make any of Target's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on the
date made (to the extent so limited) or as of the Effective Time.

     In the event that the Closing Date shall not occur on or before June 12,
1998, Acquiror agrees that it will consider in good faith reasonable increases
in or deviations from the limitations set forth in this Section 5.3 in order to
permit the business of Target to continue in its ordinary course consistent with
past practice, and specifically will agree to modifications to subsection (h) to
permit the issuance of Target Convertible Notes in a principal amount not to
exceed $100,000


                                         -33-
<PAGE>

and an increase in the capital expenditure limits contemplated by subsection (j)
to $50,000 in the aggregate and $15,000 in any individual case.

     Section 5.4    ACCESS TO INFORMATION.  Until the Closing, Target shall
allow Acquiror and its agents reasonable free access during normal business
hours upon reasonable notice to its files, books, records, and offices,
including, without limitation, any and all information relating to taxes,
commitments, contracts, leases, licenses, and personal property and financial
condition.  Until the Closing, Target shall cause its accountants to cooperate
with Acquiror and its agents in making available all financial information
requested, including without limitation the right to examine all working papers
pertaining to all financial statements prepared or audited by such accountants.
No information or knowledge obtained in any investigation pursuant to this
Section shall effect or be deemed to modify any representation or warranty
contained in this Agreement or its exhibits and schedules.  All such access
shall be subject to the terms of the Confidentiality Agreement (as defined in
Section 7.1).

     Section 5.5    SATISFACTION OF CONDITIONS PRECEDENT.  Target will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Sections 8.1 and 8.2, and Target will use its best
efforts to cause the transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties which may be necessary or reasonably
required on its part in order to effect the transactions contemplated by this
Agreement.  Target shall use its best efforts to obtain any and all consents
necessary with respect to those Material Contracts listed on Schedule 5.5 of the
Target Disclosure Schedule in connection with the Merger (the "MATERIAL
CONSENTS").

     Section 5.6    OTHER NEGOTIATIONS.  Target will not, directly or
indirectly, through any of its officers, directors, employees, agents and
Affiliates take any action to solicit, initiate, seek, encourage or support any
inquiry, proposal or offer from, furnish any information to, or participate in
any negotiations with, any corporation, partnership, person or other entity or
group (other than Acquiror) regarding any acquisition of Target, any merger or
consolidation with or involving Target, or any acquisition of any material
portion of the stock or assets of Target or any material license of Target
Proprietary Rights (any of the foregoing being referred to in this Agreement as
an "ACQUISITION TRANSACTION") or enter into an agreement concerning any
Acquisition Transaction with any party other than Acquiror.  If between the date
of this Agreement and the termination of this Agreement pursuant to Section 9.1,
Target receives from a third party any offer or indication of interest regarding
any Acquisition Transaction, or any request for information regarding any
Acquisition Transaction, Target shall (i) notify Acquiror immediately (orally
and in writing) of such offer, indication of interest or request, including the
identity of such party and the full terms of any proposal therein, and (ii)
notify such third party of Target's obligations under this Agreement.


                                         -34-
<PAGE>

                                      ARTICLE VI

                  PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB

     Section 6.1    ADVICE OF CHANGES.  Acquiror and Sub will promptly advise
Target in writing of any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of Acquiror or Sub
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect.

     Section 6.2    RESERVATION OF ACQUIROR COMMON STOCK.  Acquiror shall
reserve for issuance, out of its authorized but unissued capital stock, the
maximum number of shares of Acquiror Common Stock as may be issuable upon
consummation of the Merger, including shares of Acquiror Common Stock that will
be issued upon exercise of Target Options assumed by Acquiror.

     Section 6.3    SATISFACTION OF CONDITIONS PRECEDENT.  Acquiror and Sub will
use their best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Sections 8.1 and 8.3, and Acquiror and Sub will
use their best efforts to cause the transactions contemplated by this Agreement
to be consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all filings
with, and give all notices to, third parties which may be necessary or
reasonably required on its part in order to effect the transactions contemplated
hereby.

     Section 6.4    NASDAQ NATIONAL MARKET LISTING.  Acquiror shall cause the
shares of Acquiror Common Stock issuable to the stockholders of Target in the
Merger, including shares of Acquiror Common Stock issuable upon exercise of
Acquiror Options, to be authorized for listing on the Nasdaq National Market.

     Section 6.5    STOCK OPTIONS.

               (a)  At the Effective Time, each outstanding Target Option under
the Target Option Plan or otherwise, whether vested or unvested, shall be
assumed by Acquiror and deemed to constitute an option (a "ACQUIROR OPTION") to
acquire, on the same terms and conditions as were applicable under the Target
Option, the same number of shares of Acquiror Common Stock as the holder of such
Target Option would have been entitled to receive pursuant to the Merger had
such holder exercised such option in full immediately prior to the Effective
Time (rounded down to the nearest whole number), at a price per share (rounded
up to the nearest whole cent) equal to (i) the aggregate exercise price for the
shares of Target Common Stock otherwise purchasable pursuant to such Target
Option divided by (ii) the number of full shares of Acquiror Common Stock deemed
purchasable pursuant to such Acquiror Option in accordance with the foregoing;
PROVIDED, HOWEVER, that, in the case of any Target Option to which Section 422
of the Code applies ("INCENTIVE STOCK OPTIONS"), the option price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code.  The term, exercisability, vesting schedule, acceleration
events, status as an "incentive stock option" under Section 422 of the Code, if
applicable, and all of the other terms of the option shall otherwise remain
unchanged.


                                         -35-
<PAGE>

               (b)  As soon as practicable after the Effective Time, Acquiror
shall deliver to the participants in the Target Option Plan and other option
holders appropriate notice setting forth such participants' rights pursuant
thereto and stating that the grants pursuant to the Target Option Plan or
otherwise shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 6.5 after giving effect to the Merger).
Acquiror shall comply with the terms of the Target Option Plan and use best
efforts to ensure, to the extent required by, and subject to the provisions of,
such Target Option Plan and Sections 422 and 424(a) of the Code, that Target
Options which qualified as incentive stock options prior the Effective Time
continue to qualify as incentive stock options after the Effective Time.

               (c)  Acquiror shall on or prior to the Effective Time take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Acquiror Common Stock for delivery upon exercise of Target Options assumed in
accordance with this Section 6.5.  Acquiror shall use its best efforts to file a
registration statement on Form S-8 (or any successor or other appropriate forms
that Acquiror is eligible to use) under the Securities Act or another
appropriate form with respect to the shares of Acquiror Common Stock subject to
such options within two (2) business days following the Closing Date and shall
use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options remain
outstanding.

     Section 6.6    REGISTRATION OF SHARES ISSUED IN THE MERGER.

               (a)  REGISTRABLE SHARES.  For purposes of this Agreement,
"REGISTRABLE SHARES" shall mean the shares of Acquiror Common Stock issued in
the Merger, including any and all Escrow Shares, but excluding shares of
Acquiror Common Stock issued in the Merger that have been sold or otherwise
transferred by the stockholders of Target who initially received such shares in
the Merger or by the holder of the Target Warrants prior to the effective date
of the Registration Statement (as defined below) (collectively, the "HOLDERS")
and excluding shares of Acquiror Common Stock issuable upon exercise of Target
Options (the issuance of which will be registered on Form S-8); PROVIDED,
HOWEVER, that a distribution of shares of Acquiror Common Stock issued in the
Merger without additional consideration, to underlying beneficial owners (such
as the general and limited partners, stockholders or trust beneficiaries of a
Holder) shall not be deemed such a sale or transfer for purposes of this Section
6.6 and such underlying beneficial owners shall be entitled to the same rights
under this Section 6.6 as the initial Holder from which the Registrable Shares
were received and shall be deemed Holders for the purposes of this Section 6.6.

               (b)  REQUIRED REGISTRATION.  Acquiror shall use its best efforts
to prepare and file with the Commission a registration statement on Form S-3 (or
such successor or other appropriate form that Acquiror is eligible to use) under
the Securities Act with respect to the Registrable Shares (the "Registration
Statement") within two (2) business days following the Closing Date  and to
effect all such registrations, qualifications and compliances (including,
without limitation, obtaining appropriate qualifications under applicable state
securities or "blue sky" laws and compliance with any other applicable
governmental requirements or regulations)


                                         -36-
<PAGE>

as any selling Holder may reasonably request and that would permit or facilitate
the sale of Registrable Shares (provided however that Acquiror shall not be
required in connection therewith to qualify to do business or to file a general
consent to service of process in any such state or jurisdiction), in each case
so that such Registration Statement and all other such registrations,
qualifications and compliances may become effective no later than 10 days after
the Closing Date, or as soon as practicable thereafter in the event such
Registration Statement becomes subject to review by the Commission Staff.  The
Acquiror does not have any knowledge of any reason, event or state of facts
which would prevent it from filing such Registration Statement within two (2)
business days after the Closing Date or which would prevent the Commission from
declaring such Registration Statement effective in the ordinary course
thereafter.

               (c)  EFFECTIVENESS.

                    (i)    Acquiror will use its best efforts to maintain the
effectiveness of the Registration Statement and other applicable registrations,
qualifications and compliances for up to the later to occur of (A) one (1) year
from the Closing Date or (B) such time as each Holder shall be permitted to sell
all of the remaining Registrable Shares in one three-month period under Rule 144
or (C) such time as all of the Registrable Shares shall have been sold or
otherwise disposed of by the Holders (the "REGISTRATION EFFECTIVE PERIOD"), and
from time to time will amend or supplement the Registration Statement and the
prospectus contained therein as and to the extent necessary to comply with the
Securities Act, the Exchange Act and any applicable state securities statute or
regulation, subject to the following limitations and qualifications.

                    (ii)   Following the date on which the Registration
Statement is first declared effective, the Holders will be permitted (subject in
all cases to Section 6.7 below) to offer and sell Registrable Shares during the
Registration Effective Period in the manner described in the Registration
Statement provided that the Registration Statement remains effective and has not
been suspended.

                    (iii)  Notwithstanding any other provision of this Section
6.6 but subject to Section 6.7, Acquiror shall have the right at any time to
require that all Holders suspend further open market offers and sales of
Registrable Shares whenever, and for so long as, in the reasonable judgment of
Acquiror after consultation with counsel there is or may be in existence
material undisclosed information or events with respect to Acquiror (the
"SUSPENSION RIGHT").  In the event Acquiror exercises the Suspension Right, such
suspension will continue for the period of time reasonably necessary for
disclosure to occur at a time that is not detrimental to Acquiror and its
stockholders or until such time as the information or event is no longer
material, each as determined in good faith by Acquiror after consultation with
counsel (the "SUSPENSION PERIOD").  Acquiror will use all reasonable efforts to
minimize the length of the Suspension Period and cause the termination of the
Suspension Period to occur as quickly as reasonably practicable.  The parties
agree that the one-year component of the Registration Effective Period
contemplated by subparagraph (c)(i)(A) above shall be extended for a period of
time equal to the Suspension Period, PROVIDED that in no case will the one-year
component be extended to a date later than 18 months following the Closing Date
and PROVIDED FURTHER that in no event will the Registration Effective Period be
extended for any reason beyond the time at which each Holder


                                         -37-
<PAGE>

shall be permitted to sell all of such Holder's remaining Registrable Shares in
one three-month period under Rule 144.

               (d)  EXPENSES.  The Acquiror shall bear all costs and expenses
for purposes of complying with this Section 6.6 including, without limitation,
printing expenses (including a reasonable number of prospectuses for circulation
by the selling Holders), legal fees and disbursements of counsel for Acquiror,
"blue sky" expenses, accounting fees and filing fees, but shall not include
underwriting commissions or similar charges, legal fees and disbursements of
counsel for the selling Holders.

               (e)  INDEMNIFICATION.

                    (i)    To the extent permitted by law, Acquiror will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder, its officers, directors, stockholders or
partners and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, 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 (collectively a "Violation"):  (A) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (B) 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 (C) any violation or
alleged violation by Acquiror of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and Acquiror will pay to each such
Holder (and its officers, directors, stockholders or partners), underwriter or
controlling person, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 6.6(e)(i) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of Acquiror; nor shall Acquiror 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) a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in the
Registration Statement by any such Holder, or (b) a Violation that would not
have occurred if such Holder had delivered to the purchaser the version of the
Prospectus most recently provided by Acquiror to the Holder as of the date of
such sale.

                    (ii)   To the extent permitted by law, each selling Holder
will indemnify and hold harmless Acquiror, each of its directors, each of its
officers who has signed the Registration Statement, each person, if any, who
controls Acquiror within the meaning of the Securities Act, any underwriter, any
other Holder selling securities pursuant to the Registration Statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may


                                         -38-
<PAGE>

become subject, under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation (which includes
without limitation the failure of the Holder to comply with the prospectus
delivery requirements under the Securities Act, and the failure of the Holder to
deliver the most current prospectus provided by Acquiror prior to such sale), in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in the Registration Statement or such Violation is
caused by the Holder's failure to deliver to the purchaser of the Holder's
Registrable Shares a prospectus (or amendment or supplement thereto) that had
been made available to the Holder by Acquiror; and each such Holder will pay any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 6.6(e)(ii) in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 6.6(e)(ii) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld.  The aggregate
indemnification and contribution liability of each Holder under this Section
6.6(e)(ii) shall not exceed the net proceeds received by such Holder in
connection with sale of shares pursuant to the Registration Statement.

                    (iii)  Each person entitled to indemnification under this
Section 6.6(e) (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting therefrom, PROVIDED that counsel for the
Indemnifying Party who conducts the defense of such claim or any litigation
resulting therefrom shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may participate
in such defense at such party's expense, and PROVIDED FURTHER that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6.6 unless the
Indemnifying Party is materially prejudiced thereby.  No Indemnifying Party, in
the defense of any such claim or litigation, shall (except with the consent of
each Indemnified Party) consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.  Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.

                    (iv)   To the extent that the indemnification provided for
in this Section 6.6(e) is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to herein, 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, liability,
claim, damage or expense 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


                                         -39-
<PAGE>

omissions which resulted in such loss, liability, claim, damage or expense, 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 untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

               (f)  CURRENT PUBLIC INFORMATION.  Until the earlier of the second
anniversary of the Closing Date (or, if any Holder is an affiliate of Acquiror,
the third anniversary of the Closing Date) or the date all shares of Acquiror
Common Stock subject to this Section 6.6 have been sold, Acquiror will timely
file all reports required to be filed by it under the Exchange Act, and the
rules and regulations adopted by the Commission thereunder, all to the extent
required to enable such Holders to sell their shares pursuant to Rule 144 and
the Registration Statement.  Upon written request, Acquiror will deliver to such
holders a written statement as to whether it has compiled with such
requirements.

     Section 6.7    PROCEDURES FOR SALE OF SHARES UNDER REGISTRATION STATEMENT.

               (a)  NOTICE AND APPROVAL.  If any Holder shall propose to sell
any Registrable Shares pursuant to the Registration Statement, it shall notify
Acquiror of its intent to do so (including the proposed manner and timing of all
sales) at least two (2) full trading days prior to such sale, and the provision
of such notice to Acquiror shall conclusively be deemed to reestablish and
reconfirm an agreement by such Holder to comply with the registration provisions
set forth in this Agreement.  Unless otherwise specified in such notice, such
notice shall be deemed to constitute a representation that any information
previously supplied by such Holder expressly for inclusion in the Registration
Statement (as the same may have been superseded by subsequent such information)
is accurate as of the date of such notice.  At any time within such two (2)
trading-day period, Acquiror may refuse to permit the Holder to resell any
Registrable Shares pursuant to the Registration Statement; provided, however,
that in order to exercise this right, Acquiror must deliver a certificate in
writing to the Holder to the effect that a delay in such sale is necessary
because a sale pursuant to the Registration Statement in its then-current form
without the addition of material, non-public information about Acquiror, could
constitute a violation of the federal securities laws.  Notwithstanding the
foregoing, Acquiror will ensure that in any event the Holders shall have at
least twenty (20) trading days (prorated for partial quarters) available to sell
Registrable Shares during each calendar quarter (or portion thereof) during the
Registration Effective Period.

               (b)  DELIVERY OF PROSPECTUS.  For any offer or sale of any of the
Registrable Shares by a Holder in a transaction that is not exempt under the
Securities Act, the Holder, in addition to complying with any other federal
securities laws, shall deliver a copy of the final prospectus (or amendment of
or supplement to such prospectus) of Acquiror covering the Registrable Shares in
the form furnished to the Holder by Acquiror to the purchaser of any of the
Registrable Shares on or before the settlement date for the purchase of such
Registrable Shares.


                                         -40-
<PAGE>

               (c)  COPIES OF PROSPECTUSES.  Subject to the provisions of this
Section 6.7, when a Holder entitled to sell gives notice of its intent to sell
Registrable Shares pursuant to the Registration Statement, Acquiror shall,
within two (2) trading days following a request from such Holder, furnish to
such Holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not as of the date
of delivery to the Holder include 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 or incomplete in the light of the
circumstances then existing.

     Section 6.8    CERTAIN EMPLOYEE BENEFIT MATTERS.  From and after the
Effective Time, employees of Target at the Effective Time will be provided with
employee benefits by the Surviving Corporation or Acquiror which in the
aggregate are no less favorable to such employees than those provided from time
to time by Acquiror to similarly situated employees.  If any employee of Target
becomes a participant in any employee benefit plan, program, policy or
arrangement of Acquiror, such employee shall be given credit for all service
prior to the Effective Time with Target to the extent permissible under such
plan, program, policy or arrangement.  All Target Options assumed by Acquiror at
the Effective Time pursuant to the terms of Section 6.5(a) shall remain
outstanding following the Effective on the same terms and conditions as prior to
the Effective Time, subject to the adjustments contemplated by such Section 6.5.
Employees of Target as of the Effective Time shall be permitted to participate
in the ESPP commencing on the first enrollment date following the Effective
Time, subject to compliance with the eligibility and other provisions of such
plan.

     Section 6.9    INDEMNIFICATION.  The Acquiror shall not, for a period of
six years after the Effective Time, take any action to alter or impair any
exculpatory or indemnification provisions now existing in the Certificate of
Incorporation or By-laws of Target for the benefit of any individual who served
as a director or officer of Target at any time prior to the Effective Time,
except for any changes which may be required to conform with changes in
applicable law and any changes which do not affect the application of such
provisions to acts or omissions of such individuals prior to the Effective Time.

     Section 6.10   TAX TREATMENT.  Acquiror and its Subsidiaries will not take,
or cause Target to take, any action after the Effective Time which reasonably
could be expected to cause the Merger to fail to qualify as a reorganization
under the provisions of Section 368(a) of the Code.

                                     ARTICLE VII

                                   OTHER AGREEMENTS

     Section 7.1    CONFIDENTIALITY.  Each party acknowledges Acquiror and
Target have previously executed a Mutual Non-Disclosure Agreement dated
February 19, 1998 (the "CONFIDENTIALITY AGREEMENT"), which agreement shall
continue in full force and effect in accordance with its terms.


                                         -41-
<PAGE>

     Section 7.2    NO PUBLIC ANNOUNCEMENT.  The parties have agreed upon the
form and substances of a joint press release announcing the consummation of the
Merger, which shall be issued at a time and in a manner mutually agreed upon.
Other than such joint press release, the parties shall make no public
announcement concerning this Agreement, their discussions or any other
memoranda, letters or agreements between the parties relating to the Merger;
PROVIDED, HOWEVER, that either of the parties, but only after reasonable
consultation with the other, may make disclosure if required under applicable
law.

     Section 7.3    REGULATORY FILINGS; CONSENTS; REASONABLE EFFORTS.  Subject
to the terms and conditions of this Agreement, Target and Acquiror shall use
their respective best efforts to (i) make all necessary filings with respect to
the Merger and this Agreement under the Exchange Act and applicable blue sky or
similar securities laws and obtain required approvals and clearances with
respect thereto and supply all additional information requested in connection
therewith; (ii) make merger notification or other appropriate filings with
federal, state or local governmental bodies or applicable foreign governmental
agencies and obtain required approvals and clearances with respect thereto and
supply all additional information requested in connection therewith;
(iii) obtain all consents, waivers, approvals, authorizations and orders
required in connection with the authorization, execution and delivery of this
Agreement and the consummation of the Merger; and (iv) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable, but no later than
June 11, 1998.

     Section 7.4    FURTHER ASSURANCES.  Prior to and following the Closing,
each party agrees to cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by any other party to better evidence
and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.

     Section 7.5    ESCROW AGREEMENT.  On or before the Effective Date, Acquiror
shall, and the parties hereto shall exercise their best efforts to cause the
Escrow Agent (as defined in Section 10.2) and the Stockholders' Agents (as
defined in Section 10.9) to enter into an Escrow Agreement in the form attached
hereto as EXHIBIT D.

     Section 7.6    FIRPTA.  Target shall, prior to the Closing Date, provide
Acquiror with a properly executed Foreign Investment and Real Property Tax Act
of 1980 ("FIRPTA") FIRPTA Notification Letter which states that shares of
capital stock of Target do not constitute "United States real property
interests" under Section 897(c) of the Code, for purposes of satisfying
Acquiror's obligations under Treasury Regulation Section 1.1445-2(c)(3).  In
addition, simultaneously with delivery of such FIRPTA Notification Letter,
Target shall provide to Acquiror, as agent for Target, a form of notice to the
Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2), along with written authorization for Acquiror
to deliver such notice form to the Internal Revenue Service on behalf of Target
upon the Closing of the Merger.


                                         -42-
<PAGE>

     Section 7.7    BLUE SKY LAWS.  Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger.  Target shall use its best efforts to assist Acquiror as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Acquiror Common Stock in
connection with the Merger.

     Section 7.8    OTHER FILINGS.  As promptly as practicable after the date of
this Agreement, Target and Acquiror will prepare and file any other filings
required under the Exchange Act, the Securities Act or any other Federal,
foreign or state securities or blue sky laws relating to the Merger and the
transactions contemplated by this Agreement (the "OTHER FILINGS").  The Other
Filings will comply in all material respects with all applicable requirements of
law and the rules and regulations promulgated thereunder.  Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Other Filing, Target or Acquiror, as the case may be, will promptly inform the
other of such occurrence and cooperate in making any appropriate amendment or
supplement, and/or mailing to stockholders of Target, such amendment or
supplement.

     Section 7.9    TARGET STOCK OPTIONS.  Target and Acquiror agree that prior
to the Closing Date, Target shall cause all of the holders of Target Options to
enter into an acknowledgement in the form attached hereto as EXHIBIT E (the
"TARGET OPTION ACKNOWLEDGEMENT AGREEMENT") to provide that the holder of the
Target Option shall acknowledge such holder's obligations under this Agreement
and the Escrow Agreement and shall authorize Acquiror to place the portion of
such options into the Escrow Fund (as defined in Section 10.2) in the manner
contemplated by Sections 2.2 and 10.2 and shall further authorize the
Stockholders' Agents to administer the Escrow Fund on such holders' behalf.

                                     ARTICLE VIII

                                 CONDITIONS TO MERGER

     Section 8.1    CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:

               (a)  STOCKHOLDER APPROVAL.  The stockholders of Target entitled
to vote on or consent to this Agreement and the Merger in accordance with the
Delaware Law and Target's Certificate of Incorporation shall have approved this
Agreement and the Merger.

               (b)  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 or limiting or restricting
conduct or operation of the business of Acquiror after the Merger shall have
been issued, nor shall any proceeding brought by a domestic administrative
agency or commission or other domestic Governmental Entity or other third party,
seeking any of the foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation or order


                                         -43-
<PAGE>

enacted, entered, enforced or deemed applicable to the Merger which makes the
consummation of the Merger illegal.

               (c)  TAX OPINION.  Target shall have received the opinion dated
the Closing Date of Hale and Dorr LLP, counsel to Target, to the effect that the
Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code.  In rendering
such opinion, counsel shall be entitled to rely upon, among other things,
reasonable assumptions as well as representations of Acquiror, Sub and Target.

     Section 8.2    ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND SUB.
The obligations of Acquiror and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Acquiror and Sub:

               (a)  REPRESENTATIONS AND WARRANTIES.  The representations and
warranties of Target set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except for changes
contemplated by this Agreement; and Acquiror shall have received a certificate
signed on behalf of Target by the chief executive officer and the chief
financial officer of Target to such effect.

               (b)  PERFORMANCE OF OBLIGATIONS OF TARGET.  Target shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date; and Acquiror shall have
received a certificate signed on behalf of Target by the chief executive officer
and the chief financial officer of Target to such effect.

               (c)  ESCROW AGREEMENT.  The Escrow Agent and Stockholders' Agents
shall have executed and delivered to Acquiror the Escrow Agreement and such
agreement shall remain in full force and effect.

               (d)  STOCKHOLDER'S AGREEMENTS.  Each stockholder of Target who is
receiving shares of Acquiror Common Stock in the Merger shall have executed and
delivered to Acquiror the Stockholders Agreement, and such agreements shall
remain in full force and effect.

               (e)  OPTION ACKNOWLEDGEMENT AGREEMENT.  Each holder of a Target
Option on the Closing Date shall have executed and delivered to Acquiror the
Target Option Acknowledgement Agreement, and such acknowledgement shall remain
in full force and effect.

               (f)  ANCILLARY AGREEMENTS.  Each of the Noncompetition Agreements
executed and delivered concurrently with the execution of this Agreement shall
remain in full force and effect.

               (g)  OPINION OF TARGET'S COUNSEL.  Acquiror shall have received
an opinion dated the Closing Date of Hale and Dorr LLP, counsel to Target, as to
the matters in the form attached hereto as EXHIBIT F.


                                         -44-
<PAGE>

               (h)  BOARD RESIGNATIONS.  Target shall have received written
letters of resignation from each of the current members of the Target Board of
Directors and from each of the officers of Target.

               (i)  CONVERSION OF CONVERTIBLE NOTES.  The holders of each of the
issued and outstanding Target Convertible Notes and Target shall have taken all
necessary action to convert all of such indebtedness into shares of Target
Common Stock, and the security interest on the assets of Target relating to such
indebtedness shall have been terminated and released in full.

               (j)  EXERCISE OF TARGET WARRANTS.  The holders of each of the
issued and outstanding Target Warrants shall have taken all necessary action to
cause the exercise of all of such warrants in full and Target shall have caused
the issuance of all of the shares of Target Common Stock underlying such
warrants.

               (k)  AMENDMENTS TO PROMISSORY NOTES.  Each of Mssrs. Egan,
Blackwell and Nitzberg shall executed amendments in the form previously agreed
to by the parties to their respective secured promissory notes evidencing
indebtedness to Target.

     Section 8.3    ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET.  The
obligation of Target to effect the Merger is subject to the satisfaction of each
of the following conditions, any of which may be waived, in writing, exclusively
by Target:

               (a)  REPRESENTATIONS AND WARRANTIES.  The representations and
warranties of Acquiror and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except to
the extent such representations speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and Target shall have
received a certificate signed on behalf of Acquiror by the chief executive
officer and the chief financial officer of Acquiror to such effect.

               (b)  PERFORMANCE OF OBLIGATIONS OF ACQUIROR AND SUB.  Acquiror
and Sub shall have performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the Closing Date;
and Target shall have received a certificate signed on behalf of Acquiror by the
chief executive officer and the chief financial officer of Acquiror to such
effect.
               (c)  OPINION OF ACQUIROR'S COUNSEL.  Target shall have received
an opinion dated the Closing Date of Venture Law Group, A Professional
Corporation, counsel to Acquiror, as to the matters attached hereto as EXHIBIT
G.

               (d)  PAYMENT OF CERTAIN EXPENSES.  Acquiror shall have agreed to
pay on behalf of Target the accrued fees of Arthur Andersen LLP in an amount not
to exceed $30,000.


                                         -45-
<PAGE>

                                      ARTICLE IX

                              TERMINATION AND AMENDMENT

     Section 9.1    TERMINATION.  This Agreement may be terminated at any time
prior to the Effective Time:

               (a)  by mutual written consent of Acquiror and Target;

               (b)  by either Acquiror or Target, by giving written notice to
the other party, if a court of competent jurisdiction or other Governmental
Entity shall have issued a nonappealable final order, decree or ruling or taken
any other action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, except, if such party relying on
such order, decree or ruling or other action shall not have complied with its
respective obligations under Sections 5.5 or 6.3 of this Agreement, as the case
may be;

               (c)  by Acquiror or Target, by giving written notice to the other
party, if the other party is in material breach of any representation, warranty,
or covenant of such other party contained in this Agreement, which breach shall
not have been cured, if subject to cure, within 10 business days following
receipt by the breaching party of written notice of such breach by the other
party;

               (d)  by Acquiror, by giving written notice to Target, if the
Closing shall not have occurred on or before June 26, 1998 by reason of the
failure of any condition precedent under Section 8.1 or 8.2 (unless the failure
results primarily from a breach by Acquiror of any representation, warranty, or
covenant of Acquiror contained in this Agreement or Acquiror's failure to
fulfill a condition precedent to closing or other default);

               (e)  by Target, by giving written notice to Acquiror, if the
Closing shall not have occurred on or before June 26, 1998 by reason of the
failure of any condition precedent under Section 8.1 or 8.3 (unless the failure
results primarily from a breach by Target of any representation, warranty, or
covenant of Target contained in this Agreement or Target's failure to fulfill a
condition precedent to closing or other default); or

               (f)  by Acquiror, by giving written notice to Target, if the
required approvals of the stockholders of Target contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the required
consents or votes upon a vote taken by written consent or at a meeting of
stockholders, duly convened therefor or at any adjournment thereof.

     Section 9.2    EFFECT OF TERMINATION.  In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Acquiror,
Target, Sub or their respective officers, directors, stockholders or Affiliates,
except as set forth in Section 9.3 and further except to the extent that such
termination results from the willful breach by any such party of any of its
representations, warranties or covenants set forth in this Agreement.



                                         -46-
<PAGE>

     Section 9.3    FEES AND EXPENSES.

               (a)  Except as set forth in this Section 9.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated.  Target has submitted a budget to Acquiror for
completion of the Merger.  Target shall use its best efforts to consummate the
Merger within such budget and shall not enter into any agreement inconsistent
with such budget.

               (b)  If the Merger is consummated, all legal, accounting,
investment banking, broker's and finder's fees and expenses incurred by Target
or its stockholders in connection with the Merger shall be deemed expenses of
the stockholders of Target to the extent such fees and expenses exceed $150,000
(excluding fees payable to Broadview Associates, which amount is set forth on
Schedule 9.3(b) hereto and which shall be paid by the Acquiror) and shall be
borne by the stockholders of Target to such extent and will not become
obligations of Target.  Except as otherwise contemplated by Section 8.3(d),
Target will make arrangements for the payments of such fees acceptable to
Acquiror.  Any such fees and expenses in excess of $150,000 incurred by Target
shall be recoverable from the Escrow Fund (as defined in Section 10.2) as
Damages (as defined in Section 10.1) without regard to the damage threshold as
contemplated by Section 10.3.  The payment by Acquiror of certain of such fees
in the manner contemplated by Section 8.3(d) shall in no way increase or
otherwise affect the $150,000 expense limitation provided for in this Section.

                                      ARTICLE X

                              ESCROW AND INDEMNIFICATION

     Section 10.1   INDEMNIFICATION.  From and after the Effective Time and
subject to the limitations contained in Section 10.2, the Former Target
Stockholders will, severally and pro rata, in accordance with their Pro Rata
Portion, indemnify and hold Acquiror harmless against any loss, expense,
liability or other damage, including attorneys' fees, to the extent of the
amount of such loss, expense, liability or other damage (collectively "DAMAGES")
that Acquiror has incurred by reason of the breach or alleged breach by Target
of any representation, warranty, covenant or agreement of Target contained in
this Agreement that occurs or becomes known to Acquiror during the Escrow Period
(as defined in Section 10.4 below).  Such indemnification shall be the
Acquiror's sole and exclusive remedy for any such breach by Target, except for
cases fraud on the part of Target.  Acquiror acknowledges that, with respect to
the evaluation of  the Target Financial Statements for purposes of making any
claim under this Section 10.1 for a breach of the representations set forth in
Section 3.4(b), Acquiror and its independent public accountants, Price
Waterhouse, have had the opportunity to review Target's accounting policies and
methods and underlying assumptions inherent in the Target Financial Statements
and, accordingly, Acquiror shall be required to consistently apply the
accounting policies, methods and assumptions in the audited Target Financial
Statements.

     Section 10.2   ESCROW FUND.  As security for the indemnities in Section
10.1, as soon as practicable after the Effective Date, the Escrow Shares shall
be deposited with Chase Trust


                                         -47-
<PAGE>

Company of California (or such other institution selected by Acquiror with the
reasonable consent of Target) as escrow agent (the "ESCROW AGENT"), such deposit
to constitute the Escrow Fund (the "ESCROW FUND") and to be governed by the
terms set forth in this Article X and in the Escrow Agreement.  Notwithstanding
the foregoing, the indemnification obligations of each Former Target Stockholder
pursuant to this Article X shall be limited to the amount and assets deposited
by such Former Target Stockholder and present in the Escrow Fund and Acquiror
shall not be entitled to pursue any claims for indemnification under this
Article X or otherwise against any Former Target Stockholder directly or
personally and the sole recourse of Acquiror shall be to make claims against the
Escrow Fund in accordance with the terms of the Escrow Agreement (except for
cases involving fraud on the part of Target).

     Section 10.3   DAMAGE THRESHOLD.  Notwithstanding the foregoing, the Former
Target Stockholders shall have no liability under Section 10.1 and Acquiror may
not receive any shares from the Escrow Fund unless and until an Officer's
Certificate or Certificates (as defined in Section 10.5 below) for an aggregate
amount of Acquiror's Damages in excess of $125,000 has been delivered to the
Stockholders' Agents and to the Escrow Agent; PROVIDED, HOWEVER, that after an
Officer's Certificate or Certificates for an aggregate of $125,000 in Damages
has been delivered, Acquiror shall be entitled to receive Escrow Shares equal in
value to the full amount of Damages identified in such Officer's Certificate or
Certificates.

     Section 10.4   ESCROW PERIODS.  The Escrow Fund shall commence on the
Closing Date and terminate eighteen (18) months from the Closing Date (the
period from the Closing to such date referred to as the "ESCROW PERIOD"),
PROVIDED, HOWEVER, that the number of Escrow Shares, which, in the reasonable
judgment of Acquiror, subject to the objection of the Stockholders' Agents (as
defined in Section 10.8) and the subsequent resolution of the matter in the
manner provided in Section 10.8, are necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate theretofore delivered to the Escrow Agent
and the Stockholders' Agents prior to termination of the Escrow Period with
respect to Damages incurred or litigation pending prior to expiration of the
Escrow Period, shall remain in the Escrow Fund until such claims have been
finally resolved.

     Section 10.5   CLAIMS UPON ESCROW FUND.  Upon receipt by the Escrow Agent
on or before the last day of the Escrow Period of a certificate signed by any
appropriately authorized officer of Acquiror (an "OFFICER'S CERTIFICATE"):

                    (i)    Stating the aggregate amount of Acquiror's Damages
or an estimate thereof, in each case to the extent known or determinable at such
time, and,

                    (ii)   Specifying in reasonable detail the individual items
of such Damages included in the amount so stated, the date each such item was
paid or properly accrued or arose, and the nature of the misrepresentation,
breach or claim to which such item is related, the Escrow Agent shall, subject
to the provisions of Sections 10.3, 10.7 and 10.8 hereof, deliver to Acquiror
out of the Escrow Fund, as promptly as practicable, Escrow Shares having a value
equal to such Damages all in accordance with the Escrow Agreement and Section
10.6 below. Amounts paid or distributed from the Escrow Fund shall be paid or
distributed pro rata among


                                         -48-
<PAGE>

the Holders (as defined in the Escrow Agreement) based upon their respective
percentage interests therein at the time in the form (Acquiror Common Stock or
options  to acquire Acquiror Common Stock or cash) contributed by each such
Holder.

     Section 10.6   VALUATION.  For the purpose of compensating Acquiror for its
Damages pursuant to this Agreement, the value per share of the Escrow Shares
shall be the Reference Stock Price.

     Section 10.7   OBJECTIONS TO CLAIMS.  At the time of delivery of any
Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's
Certificate shall be delivered to the Stockholders' Agents (as defined in
Section 10.9 below) and for a period of thirty (30) days after such delivery,
the Escrow Agent shall make no delivery of Escrow Shares pursuant to Section
10.4 unless the Escrow Agent shall have received written authorization from the
Stockholders' Agents to make such delivery.  After the expiration of such thirty
(30) day period, the Escrow Agent shall make delivery of the Escrow Shares in
the Escrow Fund in accordance with Section 10.5, PROVIDED that no such delivery
may be made if the Stockholders' Agents shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent and to Acquiror prior to the expiration of such
thirty (30) day period.

     Section 10.8   RESOLUTION OF CONFLICTS.

               (a)  In case the Stockholders' Agents shall so object in writing
to any claim or claims by Acquiror made in any Officer's Certificate, Acquiror
shall have thirty (30) days to respond in a written statement to the objection
of the Stockholders' Agents.  If after such thirty (30) day period there remains
a dispute as to any claims, the Stockholders' Agents and Acquiror shall attempt
in good faith for thirty (30) days to agree upon the rights of the respective
parties with respect to each of such claims.  If the Stockholders' Agents and
Acquiror should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to the Escrow Agent.
The Escrow Agent shall be entitled to rely on any such memorandum and shall
distribute the Escrow Shares from the Escrow Fund in accordance with the terms
of the memorandum.

               (b)  If no such agreement can be reached after good faith
negotiation, either Acquiror or the Stockholders' Agents may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by three arbitrators.  Within fifteen (15) days
after such written notice is sent, Acquiror (on the one hand) and the
Stockholders' Agents (on the other hand) shall each select one arbitrator, and
the two arbitrators so selected shall select a third arbitrator.  The decision
of the arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 10.8, the Escrow Agent shall be entitled
to act in accordance with such decision and make or withhold payments out of the
Escrow Fund in accordance with such decision.


                                         -49-
<PAGE>

               (c)  Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction.  Any such arbitration shall be held in
Santa Clara or San Mateo County, California under the commercial rules then in
effect of the American Arbitration Association.

     Section 10.9   STOCKHOLDERS' AGENTS.

               (a)  Omar Khudari and Alan Docter shall be constituted and
appointed as agents (the "STOCKHOLDERS' AGENTS") for and on behalf of the Former
Target Stockholders to give and receive notices and communications, to authorize
delivery to Acquiror of the Escrow Shares or other property from the Escrow Fund
in satisfaction of claims by Acquiror, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Stockholders' Agents for the accomplishment of the foregoing.  All actions of
the Stockholders' Agents shall be taken jointly, not individually.  Such agency
may be changed by the holders of a majority in interest of the Escrow Shares
from time to time upon not less than ten (10) days' prior written notice to
Acquiror.  No bond shall be required of the Stockholders' Agents, and the
Stockholders' Agents shall receive no compensation for services.  Notices or
communications to or from the Stockholders' Agents shall constitute notice to or
from each of the Former Target Stockholders.

               (b)  The Stockholders' Agents shall not be liable for any act
done or omitted hereunder as Stockholders' Agent while acting in good faith and
in the exercise of reasonable judgment, and any act done or omitted pursuant to
the advice of counsel shall be conclusive evidence of such good faith.  The
Former Target Stockholders shall severally and pro rata, in accordance with
their Pro Rata Portion, indemnify the Stockholders' Agents and hold them
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Stockholders' Agents and arising out
of or in connection with the acceptance or administration of their duties
hereunder under this Agreement or the Escrow Agreement.

               (c)  The Stockholders' Agents shall have reasonable access to
information about Target and Acquiror and the reasonable assistance of Target's
and Acquiror's officers and employees for purposes of performing their duties
and exercising their rights under this Article X, PROVIDED that the
Stockholders' Agents shall treat confidentially and not disclose any nonpublic
information from or about Target or Acquiror to anyone (except on a need to know
basis to individuals who agree to treat such information confidentially).

     Section 10.10  ACTIONS OF THE STOCKHOLDERS' AGENTS.  A decision, act,
consent or instruction of the Stockholders' Agents shall constitute a decision
of all of the Former Target Stockholders for whom shares of Acquiror Common
Stock otherwise issuable to them are deposited in the Escrow Fund and shall be
final, binding and conclusive upon each such Former Target Stockholder, and the
Escrow Agent and Acquiror may rely upon any decision, act, consent or
instruction of the Stockholders' Agents as being the decision, act, consent or
instruction of each and every such Former Target Stockholder.  The Escrow Agent
and Acquiror


                                         -50-
<PAGE>

are hereby relieved from any liability to any person for any acts done by them
in accordance with such decision, act, consent or instruction of the
Stockholders' Agents.

     Section 10.11  CLAIMS.  In the event Acquiror becomes aware of a
third-party claim which Acquiror believes may result in a demand against the
Escrow Fund, Acquiror shall notify the Stockholders' Agents of such claim, and
the Stockholders' Agents and the Former Target Stockholders for whom shares of
Acquiror Common Stock otherwise issuable to them are deposited in the Escrow
Fund shall be entitled, at their expense, to participate in any defense of such
claim. Acquiror shall have the right to settle any such claim; PROVIDED,
HOWEVER, that Acquiror may not affect the settlement of any such claim without
the consent of the Stockholders' Agents, which consent shall not be unreasonably
withheld.  In the event that the Stockholders' Agents have consented to any such
settlement, the Stockholders' Agents shall have no power or authority to object
to the amount of any claim by Acquiror against the Escrow Fund for indemnity
with respect to such settlement, unless such claim is in an amount in excess of
any amount consented to by the Stockholders' Agents.

                                      ARTICLE XI

                                    MISCELLANEOUS

     Section 11.1   SURVIVAL OF REPRESENTATIONS AND COVENANTS.  All
representations, warranties, covenants and agreements of Target contained in
this Agreement shall survive the Closing and any investigation at any time made
by or on behalf of Acquiror until the end of the Escrow Period.  If Escrow
Shares or other assets are retained in the Escrow Fund beyond expiration of the
period specified in the Escrow Agreement, then (notwithstanding the expiration
of such time period) the representation, warranty, covenant or agreement
applicable to such claim shall survive until, but only for purposes of, the
resolution of the claim to which such retained Escrow Shares or other assets
relate.  All representations, warranties, covenants and agreements of Acquiror
contained in this Agreement shall terminate as of the Effective Time, provided
that the covenants and agreements contained in Sections 6.5, 6.6, 6.7 and 9.3
and Article X shall survive the Closing and shall continue in full force and
effect.

     Section 11.2   NOTICES.  All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or two business days after being mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

     (a)  if to Acquiror or Sub:


          Yahoo! Inc.
          3420 Central Expressway
          Santa Clara, CA  95051
          Attention:  Chief Executive Officer
          Fax No:  (408) 731-3510
          Telephone No:  (408) 731-3300


                                         -51-
<PAGE>

          with a copy at the same address to the attention of the General
          Counsel and Secretary and with a copy to:

          Venture Law Group
          A Professional Corporation
          2800 Sand Hill Road
          Menlo Park, California  94025
          Attention:  Steven Tonsfeldt
          Fax No:  (650) 233-8386
          Telephone No:  (650) 854-4488

     (b)  if to Target, to:

          Viaweb Inc.
          56 John F. Kennedy Street
          Cambridge, MA  02138
          Attention:  President
          Fax No: (617) 354-2624
          Telephone No: (617) 876-2692


          with copies to:

          Hale and Dorr LLP
          60 State Street
          Boston, MA  02109
          Attention:  Paul V. Rogers
          Fax No:  (617) 526-5000
          Telephone No:  (617) 526-6000

          Omar Khudari
          16 Belfry Terrace
          Lexington, MA  02421
          Fax No:  (781) 862-8809
          Telephone No:  (617) 747-3982

          Alan Docter
          100 Worth Avenue
          Suite 715
          Palm Beach, FL  33480
          Fax No:  (561) 659-5643
          Telephone No:  (561) 832-7515


                                         -52-
<PAGE>

     Section 11.3   INTERPRETATION.  When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated.  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.  Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation."  The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
References to the "knowledge of Target" or "Target's knowledge" or any similar
expression shall mean the actual knowledge, after reasonable inquiry, of Omar
Khudari, Frederick Egan, Harris Fishman, Paul Graham, Edward L. Steinart, David
Parker and Mark Nitzberg and any other individual who is an executive officer or
director of Target.

     Section 11.4   COUNTERPARTS.  This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.

     Section 11.5   ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.  This
Agreement (including the documents and the instruments referred to herein), the
Confidentiality Agreement, and the Transaction Documents (a) constitute the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) are not intended to confer upon any person other than the parties hereto
(including without limitation any Target employees) any rights or remedies
hereunder.

     Section 11.6   GOVERNING LAW.  This Agreement shall be governed and
construed in accordance with the laws of the State of California without regard
to any applicable conflicts of law.

     Section 11.7   ASSIGNMENT.  Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.  Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.

     Section 11.8   AMENDMENT.  This Agreement may be amended by the parties
hereto, at any time before or after approval of matters presented in connection
with the Merger by the stockholders of Target, but after any such stockholder
approval, no amendment shall be made which by law requires the further approval
of stockholders without obtaining such further approval.  This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.

     Section 11.9   EXTENSION; WAIVER.  At any time prior to the Effective Time,
the parties hereto may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or the other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations or warranties
contained herein or in any document delivered pursuant hereto and


                                         -53-
<PAGE>

(iii) waive compliance with any of the agreements or conditions 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 a written instrument signed on behalf
of such party.

     Section 11.10  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 injunctive relief 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.





                              [SIGNATURE PAGE FOLLOWS]



                                         -54-
<PAGE>

     IN WITNESS WHEREOF, Acquiror, Sub and Target have caused this Agreement and
Plan of Reorganization to be signed by their respective officers thereunto duly
authorized as of the date first written above.

                                       YAHOO! INC.




                                       By: /s/ Timothy Koogle
                                          ------------------------------------
                                          Name:   Timothy Koogle
                                          Title:  President & CEO



                                       XY ACQUISITION CORPORATION



                                       By: /s/ Timothy Koogle
                                          ------------------------------------
                                          Name:   Timothy Koogle
                                          Title:  President & CEO



                                       VIAWEB INC.



                                       By: /s/ Paul Graham
                                          ------------------------------------
                                          Name:   Paul Graham
                                          Title:  President






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