VERIO INC, S-1/A, 1998-04-27

VERIO INC
S-1/A, 1998-04-27
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998

REGISTRATION NO. 333-47099
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
VERIO INC.
(Exact name of Registrant as specified in its charter)
---------------------

<TABLE>
<S> <C> <C>
DELAWARE 7375 84-1339720
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

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

VERIO INC.
8005 SOUTH CHESTER STREET
SUITE 200
ENGLEWOOD, COLORADO 80112
(303) 645-1900
(Address, including zip code, and telephone number, including area code of
Registrant's principal executive offices)
---------------------

JUSTIN L. JASCHKE
CHIEF EXECUTIVE OFFICER
VERIO INC.
8005 SOUTH CHESTER STREET, SUITE 200
ENGLEWOOD, COLORADO 80112
(303) 645-1900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------

Copies to:

<TABLE>
<S> <C> <C>
GAVIN B. GROVER, ESQ. CARLA HAMRE DONELSON, ESQ. JONATHAN A. SCHAFFZIN, ESQ.
MORRISON & FOERSTER LLP GENERAL COUNSEL CAHILL GORDON & REINDEL
425 MARKET STREET VERIO INC. 80 PINE STREET
SAN FRANCISCO, CALIFORNIA 94105 8005 SOUTH CHESTER STREET NEW YORK, NEW YORK 10005
(415) 268-7000 SUITE 200 (212) 701-3000
ENGLEWOOD, COLORADO 80112
(303) 645-1900
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), please check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

<TABLE>
<CAPTION>
============================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF NUMBER OF SHARES OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE(2)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share..... 5,750,000 $20.00 $115,000,000 33,925
============================================================================================================================
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act.

(2) A registration fee of $29,500 was previously paid, and an amount of $4,425
is being paid herewith.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2

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

SUBJECT TO COMPLETION, DATED APRIL 27, 1998

PROSPECTUS

5,000,000 SHARES

[VERIO LOGO]

COMMON STOCK
------------------

All of the shares of Common Stock (the "Shares") offered hereby are being
sold by Verio Inc. (the "Company" or "Verio"). Prior to the Offering, there has
been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $18.00 and
$20.00 per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price. The Common Stock
has been approved for listing on the Nasdaq National Market under the symbol
"VRIO," subject to official notification of issuance.

Nippon Telegraph and Telephone Corporation ("NTT") has agreed to purchase
directly from the Company shares of Common Stock (the "NTT Shares") concurrently
with and conditioned upon the consummation of the Offering in an aggregate
amount of up to 12.5% of the Company's fully diluted Common Stock after giving
effect to the Offering and the sale of the NTT Shares, up to a maximum
investment of $100.0 million, at a 3.25% discount to the Price to Public. See
"Business -- NTT Strategic Relationship."

The Company has filed a registration statement on Form S-4 with the
Securities and Exchange Commission with respect to exchange offers for its 1997
Notes (as defined) and its 1998 Notes (as defined). See "Additional
Information."

PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS DISCUSSED UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 9.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=========================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- ---------------------------------------------------------------------------------------------------------
Total(3) $ $ $
=========================================================================================================
</TABLE>

(1) For information regarding indemnification of the Underwriters see
"Underwriting."

(2) Before deducting expenses payable by the Company, estimated at
$1,250,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase
up to an aggregate of 750,000 additional shares of Common Stock solely to
cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively.

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

The Shares are being offered by the several Underwriters named herein,
subject to prior sale, when, as and if accepted by them and subject to certain
conditions. It is expected that certificates for the Shares offered hereby will
be available for delivery on or about , 1998 at the offices of Smith
Barney Inc., 333 West 34th Street, New York, New York 10001.

SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1998.
<PAGE> 3

[NETWORK MAP]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

2
<PAGE> 4

PROSPECTUS SUMMARY

The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information, including the Company's Consolidated
Financial Statements and notes thereto and the Unaudited Pro Forma Condensed
Combined Financial Statements and notes thereto, each as contained herein.
Unless otherwise indicated, the information in this Prospectus (i) assumes an
initial public offering price of $19.00 per share, (ii) assumes that the
Underwriters' over-allotment option will not be exercised, (iii) gives effect to
the conversion of the Company's Series A, Series B, Series C and Series D-1
Preferred Stock, (iv) gives effect to the filing of the Company's amended
Certificate of Incorporation, which will occur prior to the consummation of the
Offering, and (v) gives effect to the NTT Investment (as defined). Unless the
context otherwise requires, references herein to (i) "Verio" or the "Company"
are to Verio Inc., a Delaware corporation (formerly known as World-Net Access,
Inc.), and its subsidiaries, and (ii) the "Verio ISPs" are to those Internet
service providers in which Verio has a direct or indirect equity investment,
including subsidiaries and minority investments. Information concerning those
entities in which the Company does not have a majority interest has been
provided by those entities and is believed by the Company to be accurate. Verio
and the Verio logo are trademarks of the Company. This Prospectus may contain
trademarks, trade names and service marks of other parties. Capitalized terms
used in this Prospectus, which are not otherwise defined herein, have the
respective meanings ascribed to them in "Glossary of Terms." See "Risk
Factors -- Forward-Looking Statements" for certain information relating to
statements contained in this Prospectus that are not historical facts.

THE COMPANY

Verio is a leading national provider of Internet connectivity and enhanced
Internet services to small and medium sized businesses. Since its inception in
March 1996, the Company has rapidly established a national presence through the
acquisition, integration, and growth of local Internet service providers
("ISPs") with a business customer focus. Verio believes that small and medium
sized businesses represent an attractive target market for the provision of
Internet services due to this market's low current penetration levels and
customer churn rates, and the expanding Internet needs of these businesses.
Because of their limited internal technical resources, small and medium sized
businesses also typically require hands-on local support and highly reliable
turnkey solutions for mission critical applications. Verio further believes that
these needs currently are underserved by both the national and local ISPs. While
national ISPs lack the local presence to provide customized, hands-on service,
local ISPs typically lack the scale and resources required to provide dedicated,
high-capacity Internet access, around-the-clock support and tailored product
offerings at competitive prices.

The Company believes it has a unique competitive advantage in serving small
and medium sized business customers through the combination of the technical
competency, hands-on support and entrepreneurial culture of locally based ISPs
with the quality and economic efficiency of Verio's national network,
operational infrastructure and financial strength. Verio has quickly built
critical mass by acquiring the stock or assets of, or making significant
investments in, over 35 ISPs that provide a comprehensive range of Internet
connectivity and enhanced products and services to over 100,000 customer
accounts in 36 of the top 50 Metropolitan Statistical Areas ("MSAs") in the
country, with combined revenues of approximately $25.0 million for the three
months ended December 31, 1997. The Company integrates and optimizes the
operations of its ISPs by consolidating their operations into regional operating
units with centralized regional management, connecting their local networks to
Verio's high-speed, highly reliable national backbone, and providing them with
Verio's integrated national support services.

Total ISP revenues in the United States are projected to grow from $3.3
billion in 1996 to $18.3 billion in 2000, according to International Data
Corporation ("IDC"). Industry analysts have reported that small and medium sized
businesses represent a potential market of over seven million customers in the
United States, and use of the Internet by this market segment is expected to
grow substantially from its current low level of market penetration. IDC
predicts that dedicated connections to the Internet for small and medium sized
businesses will grow from approximately 90,000 in 1996 to just under 800,000 in
2000, representing a 73% compounded annual growth rate. Small and medium sized
businesses generally seek an ISP with locally based personnel who are readily
available to respond in-person to technical issues, who can assist in developing
and implementing the customer's effective use of the Internet, and with whom
they can establish a stable and
3
<PAGE> 5

long-term relationship. In addition, they are increasingly reliant on enhanced
product offerings that address their specific business needs on a cost-effective
basis, allowing them to compete with larger companies. For example, IDC
estimates Web hosting revenues from small and medium sized businesses will grow
from $84 million in 1996 to over $3.4 billion in 2000, representing 95% of the
total Web hosting market.

The rapid development and growth of the Internet has resulted in a highly
fragmented industry of over 4,000 national and local ISPs in the United States,
with no dominant ISP serving the needs of small and medium sized businesses.
Independent regional and local ISPs have successfully captured approximately
one-half of this market, despite the substantially greater resources of the
national providers. However, rising costs and increasing demands from business
customers have made it more difficult for the small ISP to meet its customer's
demands on a cost-effective basis. Facing these competitive pressures, Verio
believes that independent regional and local ISPs will continue to be attracted
to and benefit from the consolidation opportunity provided by Verio.

The goal of the Company is to be the premier, full-service national
provider of Internet connectivity and enhanced Internet services to small and
medium sized businesses. Key elements of the Company's strategy in accomplishing
this goal are to: (a) continue its role as the leading consolidator of
independent ISPs by acquiring additional local and regional ISPs focused on the
Company's target market; (b) integrate the operations of its ISPs and capture
operational economies of scale by leveraging its national infrastructure and
support services; (c) develop and offer additional high-margin enhanced services
to increase revenues from existing and future customers; and (d) build customer
loyalty and gain market share by expanding the Company's local technical,
distribution and service capabilities and establishing national Verio brand name
recognition.

Verio owns and operates a national network, providing a high bandwidth,
highly reliable data transmission path connecting Verio's customers to the
Internet. The Company's national network architecture is based on a combination
of Asynchronous Transfer Mode ("ATM") and clear channel circuits operating at
DS-3 and OC-3 speeds. The network interconnects more than 15 national nodes and
over 180 local points of presence ("POPs") across the United States. The Company
believes that aggregating the bandwidth and capacity requirements of each Verio
ISP onto one national network provides operational control and efficiency,
reduces costs, provides redundancy, and results in a higher quality service,
thereby addressing some of the most significant challenges that an ISP faces in
supporting its customers. The reliability of the national network is the result
of many factors, including but not limited to redundant routers and other
critical hardware, carrier class facilities at POP locations (such as back up
power, fire suppression and climate control), and redundant telecommunications
lines. Verio's national infrastructure incorporates several other elements
critical to maintaining the highest quality Internet service, such as peering
relationships with other national ISPs, sophisticated network management tools,
and a comprehensive range of national services to support its regional
operations. These services include 7-day X 24-hour customer technical support,
financial information management through a central, standardized accounting
system, a sophisticated billing and collections system, and national marketing
and product development programs. The Company continues to rollout its national
infrastructure and support services to its ISPs. Of the over 35 ISPs acquired to
date, 16 now invoice their customers through Verio's national billing service,
23 take advantage of Verio's customer technical support, 27 are linked to
Verio's national backbone, 19 utilize Verio's national accounting system, and
the network operations of 18 of these ISPs are monitored by Verio's national
Network Operations Center ("NOC").

Verio believes that a critical factor in the successful implementation of
its business strategy is the quality of its management team and Board of
Directors. The Company's senior management team and Board of Directors have
previously successfully executed similar consolidation strategies and have
considerable experience in the management and growth of recurring revenue-based
telecommunications businesses. Management believes that its experience in the
deployment of similar systems and services in other emerging telecommunications
industries can be leveraged to significantly improve the quality of services
currently available in the Internet service industry.

4
<PAGE> 6

RECENT DEVELOPMENTS

Since December 31, 1997, the Company has completed the acquisition of all
of the remaining equity (each, a "Buyout") of 10 of the ISPs in which Verio did
not initially acquire 100% ownership. Verio is in the process of integrating the
ISPs it has acquired in each region into regional operating units to capture and
promote operational and management efficiencies and economies of scale. On March
12, 1998, the Company announced the consolidation of the Verio ISPs' operations
and marketing efforts under the Verio brand name.

The Company continues to evaluate additional ISPs for investment or
acquisition. Since December 31, 1997, the Company has acquired five ISPs, of
which two expand the Company's Midwest presence, one joined the Northern
California Region, one joined the Northeast operations, and one is located in
Florida and is the Company's first acquisition in the Southeast region. As a
result of these further acquisitions, the Company now serves 36 of the top 50
MSAs in the U.S. The Company also has executed a definitive agreement to acquire
one additional ISP in the Northeast region. The Company believes that
consummation of this acquisition is probable. Accordingly, financial information
for this acquisition is reflected in the pro forma financial statements
contained herein. Nonetheless, there can be no assurance that all of the closing
conditions will be satisfied or that the Company will consummate this
acquisition. In addition, the Company has executed non-binding letters of intent
to acquire two additional ISPs which, if acquired, would further enhance the
Company's market presence in the Midwest and Southeast regions.

Mark D. Johnson, who served as the Company's President, Chief Operating
Officer and a director of the Company, died on March 9, 1998. While Mr. Johnson
played an important role in overseeing the Company's operations, the Company
does not expect that his death will adversely affect the Company's operations,
growth or financial prospects because of the strength of the Company's core
management team. Justin Jaschke, Verio's Chief Executive Officer, has been
appointed to serve as President of the Company and has assumed Mr. Johnson's
responsibilities on behalf of the Company while Verio conducts an executive
search to fill the positions that were held by Mr. Johnson.

On March 25, 1998, the Company consummated the sale of $175.0 million
principal amount of 10 3/8% Senior Notes due 2005 (the "1998 Notes"). In
connection with the sale of the 1998 Notes, the Company repurchased the $50.0
million principal amount of the Company's 13 1/2% Senior Notes due 2004 (the
"1997 Notes") held by Brooks Fiber Properties, Inc. ("Brooks") (the
"Refinancing") for an aggregate net purchase price of approximately $54.5
million, plus accrued interest. See "Certain Transactions."

On March 31, 1998, the Company signed a long-term agreement with Qwest
Communications Corporation ("Qwest") to purchase long haul capacity and
ancillary services on Qwest's planned 16,285 mile MacroCapacity(SM) Fiber
Network. Over the first seven years of the agreement, Verio has committed to
purchase, and Qwest has committed to provide, not less than $100.0 million of
capacity and services at agreed upon prices. See "Management's Discussion and
Analysis of Financial Condition and Result of Operations -- Costs and Expenses"
and "Business -- Verio National Network." The Company will have the right to
prepay its commitment under the agreement. The Company also may order capacity
and services in excess of the commitment level, and after the seven-year
commitment term, at the agreed upon prices.

On April 6, 1998, Verio signed a credit agreement providing for a $57.5
million revolving credit financing facility (the "Bank Facility"). The Chase
Manhattan Bank serves as agent for the lenders in the Bank Facility. The Company
has drawn no funds to date under the Bank Facility.

On April 7, 1998, the Company executed agreements establishing a strategic
relationship with NTT. These agreements provide for an investment by NTT or one
of its affiliates in the Company (the "NTT Investment"), concurrent with and
conditioned upon the consummation of the Offering, for up to 12.5% of the
Company's fully diluted Common Stock (up to a maximum investment of $100.0
million) at a 3.25% discount to the Price to Public. Verio also executed a
commercial services agreement with NTT's U.S. affiliate, NTT America, Inc. ("NTT
America"), under which Verio is designated as the preferred provider of Internet
access and related services to customers of NTT America on a reseller basis.
Verio and NTT will connect their backbones and establish a peering and transit
relationship. In conjunction with its equity investment, NTT will

5
<PAGE> 7

be entitled to designate one member to serve on the Company's Board of
Directors. See "Business -- NTT Strategic Relationship" and "Principal
Stockholders -- NTT Investment."

The Company's headquarters is located at 8005 South Chester Street, Suite
200, Englewood, Colorado 80112. The Company's phone number is (303) 645-1900.

THE OFFERING

Common Stock offered by the
Company............................. 5,000,000 shares.

Common Stock to be outstanding after
the Offering........................ 31,819,913 shares(1).

Use of Proceeds..................... The Company will receive approximately
$87.6 million of net proceeds (after
deducting the Underwriters' discounts
and commissions and estimated expenses
related to the Offering) from the
Offering. The Company also will receive
approximately $87.3 million in cash
from the sale of the NTT Shares (based
upon an assumed initial public offering
of 5,000,000 shares of Common Stock at
an assumed Price to Public of $19.00
per share). The net combined proceeds
received by the Company are expected to
be used to further the Company's
acquisition and investment strategy, to
continue the development and
implementation of the national
backbone, customer care center, network
operations center and billing and
accounting services, and to fund the
Company's general working capital
requirements. See "Use of Proceeds."

Proposed Nasdaq National Market
Symbol.............................. VRIO
- ---------------

(1) Includes (i) 1,294,266 shares of Common Stock outstanding at April 24, 1998;
(ii) 18,561,667 shares of Common Stock issuable upon conversion of the
Series A, B and C Preferred Stock outstanding at April 24, 1998; (iii)
2,214,513 shares of Common Stock issuable upon conversion of the Series D-1
Preferred Stock issued in connection with acquisitions and Buyouts completed
as of April 24, 1998; and (iv) 4,749,467 shares of Common Stock to be sold
by the Company to NTT for approximately $87.3 million, (based upon an
assumed initial public offering of 5,000,000 shares of Common Stock at an
assumed Price to Public of $19.00 per share), concurrently with the
Offering. Excludes (i) up to 9,200,000 shares of Common Stock that,
effective upon the consummation of the Offering, will be reserved for
issuance under the Company's employee stock option plans, of which 4,063,340
shares were issuable upon exercise of outstanding options as of April 24,
1998 at a weighted average exercise price of $10.05 per share, (ii)
2,112,480 shares of Common Stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $.01 per share, (iii)
3,000,000 shares of Common Stock reserved for issuance under the Company's
1998 Employee Stock Purchase Plan and (iv) 300,000 shares of Common Stock
reserved for issuance under the Company's 1998 Non-Employee Director Stock
Incentive Plan. See Notes to Consolidated Financial Statements.

6
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA
(dollars in thousands, except per share amounts)

The summary historical consolidated financial data as of and for the period
from inception (March 1, 1996) to December 31, 1996 and as of and for the year
ended December 31, 1997 have been derived from the audited Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.

The information set forth below should be read in conjunction with the
Unaudited Pro Forma Condensed Combined Financial Statements and the historical
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere in this Prospectus. Results of operations for the year ended December
31, 1997 are not necessarily indicative of results of operations for future
periods. The Company's development and expansion activities, including
acquisitions, during the periods shown below may significantly affect the
comparability of this data from one period to another. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)(2)
----------------------------------- ---------------
PERIOD FROM
INCEPTION YEAR ENDED YEAR ENDED
(MARCH 1, 1996) TO DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 1997 1997
------------------ ------------ ---------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue............................... $ 2,365 $ 35,692 $ 88,265
Total costs and expenses.................... 8,645 75,981 146,126
-------- ---------- -----------
Loss from operations........................ $ (6,280) $ (40,289) $ (57,861)
======== ========== ===========
Net loss attributable to common
stockholders.............................. $ (5,145) $ (46,329) $ (64,131)
======== ========== ===========
Loss per common share -- basic and
diluted................................... $ (5.29) $ (40.47) $ (2.90)
======== ========== ===========
Weighted average common shares outstanding--
basic and diluted......................... 971,748 1,144,685 22,090,352
OTHER DATA:
EBITDA(3)................................... $ (5,611) $ (29,665) $ (31,950)
Capital expenditures(4)..................... 3,430 14,547 14,547
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
QUARTERLY STATEMENT OF OPERATIONS DATA:
Total revenue........................................... $ 4,414 $ 8,249 $ 9,624 $ 13,405
Total costs and expenses................................ 10,006 17,103 20,365 28,507
------- ------- -------- ----------
Loss from operations.................................... $(5,592) $(8,854) $(10,741) $ (15,102)
======= ======= ======== ==========
Net loss attributable to common stockholders............ $(4,677) $(8,120) $(12,762) $ (20,770)
======= ======= ======== ==========
OTHER DATA:
EBITDA(3)............................................... $(4,346) $(6,306) $ (7,798) $ (11,215)
======= ======= ======== ==========
</TABLE>

7
<PAGE> 9

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(1) AS ADJUSTED(5)
---------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 72,586 $155,304 $330,186
Restricted cash and securities.......................... 40,554 27,822 27,822
Goodwill, net........................................... 83,216 152,241 152,241
Total assets............................................ 246,471 394,997 569,879
Long-term debt and capital lease obligations, net of
current portions...................................... 142,321 272,694 272,694
Redeemable preferred stock.............................. 97,249 -- --
Stockholders' equity (deficit).......................... (27,001) 85,704 260,586
</TABLE>

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

(1) Pro forma for the Completed and Proposed Acquisitions (as defined in the
Company's Unaudited Pro Forma Condensed Combined Financial Statements) as if
they had occurred on December 31, 1997 for balance sheet purposes and on
January 1, 1997 for statement of operations data purposes, for the
conversion of the Preferred Stock into Common Stock upon completion of the
Offering, and for the proceeds from the sale of the 1998 Notes and the
application of the proceeds therefrom to effect the Refinancing and to
reflect the extraordinary charge of approximately $10.1 million for the loss
on early extinguishment of $50.0 million of the 1997 Notes. See "Unaudited
Pro Forma Condensed Combined Financial Statements."

(2) Pro forma interest expense, including amortization of debt issuance costs,
assuming that the 1998 Notes had been issued on January 1, 1997 and after
giving effect to the Refinancing, totaled $27.3 million for the year ended
December 31, 1997.

(3) EBITDA represents earnings (loss) from operations before interest, taxes,
depreciation, amortization and provision for loss on write-offs of
investments in ISPs and fixed assets. The primary measure of operating
performance is net earnings (loss). Although EBITDA is a measure commonly
used in the Company's industry, it should not be construed as an alternative
to net earnings (loss), determined in accordance with generally accepted
accounting principles ("GAAP"), as an indicator of operating performance or
as an alternative to cash flows from operating activities, determined in
accordance with GAAP. In addition, the measure of EBITDA presented herein by
the Company may not be comparable to other similarly titled measures of
other companies.

(4) Excludes equipment and leasehold improvements acquired in business
acquisitions.

(5) As adjusted to give effect to (i) the Offering after deducting the
Underwriters' discounts and commissions and estimated expenses, and (ii) the
sale of 4,749,467 shares of Common Stock to NTT for approximately $87.3
million (based upon an assumed initial public offering of 5,000,000 shares
of Common Stock at an assumed Price to Public of $19.00 per share),
concurrently with the Offering.

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RISK FACTORS

Prospective purchasers of the Shares should carefully consider the
following risk factors, as well as the other information contained in this
Prospectus before making an investment in the Shares. This Prospectus contains
statements which constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The safe
harbor provisions provided in Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") do not apply to forward-looking
statements made in connection with an initial public offering. These statements
appear in a number of places in this Prospectus and include statements regarding
the intent, belief or current expectations of the Company, its directors or its
officers primarily with respect to the future operating performance of the
Company. Prospective purchasers of the Shares are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those in the forward-looking statements as a result of various factors. The
accompanying information contained in this Prospectus, including the information
set forth below, identifies important factors that could cause such differences.
See "-- Forward-Looking Statements" below.

HISTORY OF LOSSES; NO ASSURANCE OF PROFITABILITY

The Company was formed in March 1996. The Company has incurred net losses
since its inception, and management expects to incur significant additional
losses as the Company continues its investment and acquisition program as well
as the building of its national network operations. Prospective investors have
limited operating and financial data about the Company upon which to base an
evaluation of the Company's performance and an investment in the Shares offered
hereby. For the period from inception to December 31, 1996 and the year ended
December 31, 1997, the Company reported net losses of $5.1 million and $46.3
million, respectively. From inception through December 31, 1997, the Company
reported cumulative cash used by operating activities of $37.6 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company expects to generate negative operating cash flow for at
least the next several years while it continues to acquire and invest in ISPs.
The extent to which the Company experiences negative cash flow will depend upon
a number of factors including the number and size of its acquisitions and
investments, the ability to generate increasing revenues and cash flow, the
amount of expenditures incurred at the corporate and national level, and any
potential adverse regulatory developments. The Company will be dependent on
various financing sources to fund its growth as well as continued losses from
operations. There can be no assurance that the Company will achieve or sustain
positive operating cash flow or generate net income in the future. To achieve
profitability, the Company must, among other things, develop and market products
and services which are accepted on a broad commercial basis. Given the Company's
limited operating history, there can be no assurance that the Company will ever
achieve broad commercial acceptance or profitability. See "-- Competition;
Pricing Fluctuation," "-- Dependence on the Internet; Uncertain Adoption of
Internet as Medium of Commerce and Communications" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

SUBSTANTIAL INDEBTEDNESS; EFFECT OF FINANCIAL LEVERAGE

The Company has indebtedness that is substantial in relation to its
stockholders' equity and cash flow. As of December 31, 1997, the Company had an
aggregate of approximately $142.3 million of long-term indebtedness outstanding,
representing 67% of total capitalization. After giving effect to the recent sale
of $175.0 million of the Company's 1998 Notes, the Offering and the NTT
Investment, long term indebtedness would represent 51% of total capitalization.
In addition, the Company recently signed the Bank Facility providing for $57.5
million of revolving credit. See "-- Requirements for Additional Capital." As a
result of the substantial indebtedness of the Company, fixed charges of the
Company are expected to exceed its earnings for the foreseeable future.
Substantial leverage poses the risk that the Company may not be able to generate
sufficient cash flow to service its indebtedness, or to adequately fund its
operations. The Company has experienced a substantial decrease in EBITDA, from
negative $5.6 million in the 1996 Period (as defined) to

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negative $29.7 million in 1997. EBITDA as a percentage of revenue improved from
negative 237% to negative 83% from the 1996 Period to the year ended December
31, 1997. However, there can be no assurance that this trend will continue, or
that the Company will be able to increase its revenue and leverage the
investments it has made in national services and systems, the national network,
and the operating overhead of the Verio ISPs, to achieve sufficient cash flow to
meet its debt service obligations. In particular, there can be no assurance that
the Company's operating cash flow will be sufficient to pay the $13.5 million in
annual interest (beginning in June 2000 following the termination of the
interest escrow arrangement for the 1997 Notes) on the $100.0 million principal
amount of 1997 Notes outstanding after the Refinancing, to pay the $18.2 million
in annual interest on the 1998 Notes, or to meet its debt service obligations
under the Bank Facility, if drawn upon. The leveraged nature of the Company also
could limit the ability of the Company to effect future financings or may
otherwise restrict the Company's operations and growth.

REQUIREMENTS FOR ADDITIONAL CAPITAL

The Company's operations have required and will continue to require
substantial capital for investments in ISP operations, including the acquisition
of or investments in additional ISPs, the deployment of the Company's national
network and infrastructure and the funding of capital expenditures for expansion
of services and operating losses. The Company may need additional amounts to
fund its operating losses and those of the Verio ISPs, which amounts cannot be
determined. Over the longer term, it is likely that the Company will require
substantial additional funds to continue to fund the Company's investment and
acquisition program as well as product development, marketing, sales and
customer support capabilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

The Company expects to meet its additional capital needs with the proceeds
from sales or issuance of equity securities, credit facilities and other
borrowings, lease financings, and sales of additional debt securities. The
failure to raise and generate sufficient funds may require the Company to delay
or abandon some of its planned future expansion or expenditures, which could
have a material adverse effect on the Company's growth and its ability to
compete in the Internet industry. No assurance can be given that the Company
will have sufficient cash flow available to maintain its current or future
growth plans or operations.

FLUCTUATIONS IN OPERATING RESULTS

The Company's operating results have fluctuated in the past and may in the
future fluctuate significantly depending upon a variety of factors, including
the incurrence of capital costs and the introduction of value-added enhanced
services and new services by the Company. Additional factors that may contribute
to variability of operating results include: the pricing and mix of services
offered by the Company; the Company's customer retention rate; changes in
pricing policies and product offerings by the Company's competitors; growth in
demand for network and Internet access services; the incurrence of one-time
costs associated with regional consolidation; and general telecommunications
services' performance and availability. The Company has also experienced
seasonal variation in Internet use and, therefore, revenue streams may fluctuate
accordingly. In response to competitive pressures, the Company may take certain
pricing or marketing actions that could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"-- Competition; Pricing Fluctuation." As a result, variations in the timing and
amounts of revenues could have a material adverse effect on the Company's
quarterly operating results. Due to the foregoing factors, the Company believes
that period-to-period comparisons of its operating results are not necessarily
meaningful and that such comparisons cannot be relied upon as indicators of
future performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

COMPETITION; PRICING FLUCTUATION

regional and local ISPs, long distance and local exchange telecommunications
companies, cable television companies, direct broadcast satellite and wireless
communications providers, and on-line service providers. The Company believes
that a reliable national network, knowledgeable salespeople and the quality of
technical support currently are the primary competitive factors in the Company's
targeted market, and that price is usually secondary to these factors.

The Company's current primary competitors include other ISPs with a
significant national presence which focus on business customers, such as UUNet,
GTE Internetworking (formerly BBN), PSINet, Concentric Network and DIGEX. While
the Company believes that its level of local service and support and target
market focus distinguish it from these competitors, some of these competitors
have a significantly greater market presence, brand recognition, and financial,
technical and personnel resources than the Company, and have extensive
coast-to-coast Internet backbones. The Company also competes with unaffiliated
regional and local ISPs in its targeted geographic regions.

All of the major long distance companies (also known as interexchange
carriers or IXCs), including AT&T, MCI, and Sprint, offer Internet access
services and compete with the Company. The recent sweeping reforms in the
federal regulation of the telecommunications industry have created greater
opportunities for local exchange carriers ("LECs"), including the Regional Bell
Operating Companies ("RBOCs"), to enter the Internet connectivity market. In
order to address the Internet connectivity requirements of the current business
customers of long distance and local carriers, the Company believes that there
is a move toward horizontal integration through acquisitions of, joint ventures
with, and the wholesale purchase of connectivity from, ISPs. The
WorldCom/MFS/UUNet consolidation, the NETCOM/ICG merger, the Intermedia/DIGEX
merger and GTE's acquisition of BBN are indicative of this trend. Accordingly,
Verio expects that it will experience increased competition from the traditional
telecommunications carriers. Many of these telecommunications carriers, in
addition to their substantially greater network coverage, market presence, and
financial, technical and personnel resources, also have large existing
commercial customer bases. Furthermore, telecommunications providers may have
the ability to bundle Internet access with basic local and long distance
telecommunications services. Such bundling of services may have an adverse
effect on the Company's ability to compete effectively with the
telecommunications providers and may result in pricing pressure on the Company
that would have an adverse effect on the Company's business, financial condition
and results of operations.

Many of the major cable companies have announced that they are exploring
the possibility of offering Internet connectivity, relying on the viability of
cable modems and economical upgrades to their networks. MediaOne Group and TCI
have recently announced trials to provide Internet cable service to their
residential customers in select areas. Several announcements also have recently
been made by other alternative service companies approaching the Internet
connectivity market with various wireless terrestrial and satellite-based
service technologies. These include Hughes Network System's DirecPC that
provides high-speed data through direct broadcast satellite technology; CAI
Wireless System's announcement of an MMDS wireless cable operator launching data
services via 2.5 to 2.7 GHz and high-speed wireless modem technology;
Cellularvision's announcement that it is offering Internet access via high-speed
wireless LMDS technology; and Winstar, which currently offers high-speed
Internet access to business customers over the 38 GHz spectrum.

The predominant on-line service providers, including America Online,
CompuServe, Microsoft Network, and Prodigy, have all entered the Internet access
business by engineering their current proprietary networks to include Internet
access capabilities. The Company competes to a lesser extent with these on-line
service providers.

Recently, there have been several announcements regarding the planned
deployment of broadband services for high speed Internet access by cable and
telephone companies through new technologies such as cable modems and xDSL.
While these providers have initially targeted the residential consumer, it is
likely that their target markets will expand to encompass the Company's target
markets, which may significantly affect the pricing of the Company's service
offerings.

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As a result of an increase in the number of competitors, and vertical and
horizontal integration in the industry, the Company currently encounters and
expects to encounter significant pricing pressure and other competition in the
future. Advances in technology as well as changes in the marketplace and the
regulatory environment are constantly occurring, and the Company cannot predict
the effect that ongoing or future developments may have on the Company or the
pricing of its products and services. See "-- Fluctuations in Operating
Results," "-- Dependence on the Internet; Uncertain Adoption of Internet as a
Medium of Commerce and Communications" and "-- Potential Liability for
Information Disseminated Over Network; Regulatory Matters."

MANAGEMENT OF GROWTH; INTEGRATION OF ACQUISITIONS AND INVESTMENTS

The Company is currently experiencing a period of rapid expansion with the
acquisition and integration of its ISPs. The rapid growth of the Company's
business and its product and service offerings has placed, and is likely to
continue to place, a significant strain on the Company's managerial, operating,
financial and other resources. The Company's future performance will depend, in
part, upon its ability to manage its growth effectively, which will require that
the Company implement additional management information systems capabilities,
further develop its operating, administrative and financial and accounting
systems and controls, improve coordination between engineering, accounting,
finance, marketing and operations, and hire and train additional personnel.
Failure by the Company to develop adequate operational and control systems or to
attract and retain highly qualified management, financial, technical, sales and
marketing and customer care personnel could materially adversely affect the
Company's ability to integrate the ISPs it has acquired and continues to
acquire. While the Company anticipates that it will recognize various economies
and efficiencies of scale as a result of the Buyouts and the integration of the
businesses of the ISPs it has acquired, the process of consolidating the
businesses and implementing the strategic integration of the Company and its
ISPs, even if successful, may take a significant period of time, will place a
significant strain on the Company's resources, and could subject the Company to
additional expenses during the integration process. Furthermore, the Company's
performance will depend on the internal growth generated through ISP operations.
As a result, there can be no assurance that the Company will be able to
integrate the ISPs it has acquired successfully or in a timely manner in
accordance with its strategic objectives. Failure to integrate its ISPs or to
manage effectively the growth of the Company would have a material adverse
effect on the Company's business, financial condition and results of operations.

DEPENDENCE UPON IMPLEMENTATION OF NETWORK INFRASTRUCTURE; ESTABLISHMENT AND
MAINTENANCE OF PEERING RELATIONSHIPS

The Company's success will depend upon its ability to complete the
implementation of and to continue to expand its national network infrastructure
and support services in order to supply sufficient geographic reach, capacity,
reliability and security at an acceptable cost. The continued development and
expansion of the Company's national network will require that it enter into
additional agreements, on acceptable terms and conditions, with the various
providers of infrastructure capacity and equipment and support services. No
assurance can be given that any or all of the requisite agreements can be
obtained on satisfactory terms and conditions. See "Business -- Verio National
Network -- Peering Relationships."

In addition, the establishment and maintenance of peering relationships
with other ISPs is necessary in order to exchange traffic with other ISPs
without having to pay transit costs. The basis on which the large national ISPs
make peering available or impose settlement charges is evolving as the provision
of Internet access and related services has expanded and the dominance of a
small group of national ISPs has driven corporate peering policies. Recently,
companies that have previously offered peering have cut back or eliminated
peering relationships and are establishing new, more restrictive criteria for
peering. Furthermore, if increasing requirements associated with maintaining
peering with the major national ISPs develop, the Company may have to comply
with those additional requirements in order to continue to maintain its peering
relationships. The Company also anticipates that future expansions and
adaptations of its network infrastructure may be necessary in order to respond
to growth in the number of customers served, increased demands to transmit
larger amounts of data and changes to its customers' product and service
requirements. The

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expansion and adaptation of the Company's network infrastructure will require
substantial financial, operational and managerial resources. There can be no
assurance that the Company will be able to expand or adapt its network
infrastructure to meet the industry's evolving standards or its customers'
growing demands and changing requirements on a timely basis, at a commercially
reasonable cost, or at all, or that the Company will be able to deploy
successfully any expanded and adapted network infrastructure. Failure to
maintain peering relationships or establish new ones, if necessary, would cause
the Company to incur additional operating expenditures which would have a
material adverse effect on the Company's business, financial condition and
results of operations.

CHALLENGES OF GROWTH BY ACQUISITIONS

The Company's business strategy is dependent, in part, upon its ability to
continue to successfully identify and acquire ISPs that meet the Company's
investment criteria. The Company is continuing to seek and evaluate qualified
ISP candidates in order to optimize its market presence in the regions it
currently serves, and to expand its focus to encompass the remaining top 50 MSAs
not currently served by Verio. In pursuing these opportunities, the Company may
compete with other communications companies with similar acquisition strategies,
many of which may be larger and have greater financial and other resources than
the Company. Competition for independent ISPs is based on a number of factors,
including price, terms and conditions, size and access to capital, ability to
offer cash, stock, or other forms of consideration and other matters. No
assurance can be given that the Company will be able to successfully identify
suitable ISPs or, once identified, will be able to consummate an acquisition of
or an investment in those targeted ISPs on terms and conditions acceptable to
the Company. See "Business -- The Verio Strategy" and "-- Competition; Pricing
Fluctuation." Further, the Company's ability to consummate transactions with
ISPs that it identifies will require significant financial resources. Failure to
raise and generate sufficient funds may require the Company to delay or abandon
some of its planned future expansion or expenditures, which could have a
material adverse effect on the Company's growth. See "-- Requirements for
Additional Capital."

DEPENDENCE ON KEY PERSONNEL

The Company is highly dependent upon the efforts of its senior management
team, the loss of any of whom could impede the achievement of product
development and marketing objectives and could have a material adverse effect on
the Company. The Company currently is conducting an executive search to fill the
President and Chief Operating Officer roles previously held by Mr. Johnson. The
Company believes that its future success will depend in large part on its
ability to attract and retain qualified technical and marketing personnel for
whom there is intense competition in the areas of the Company's activities.
There can be no assurance that the Company will be able to attract and retain
the personnel necessary for the development and integration of its business.
Delays in hiring such personnel could delay the achievement of development and
marketing objectives. The loss of the services of key personnel or the failure
to attract additional personnel as required could have a material adverse effect
on the Company's business, financial condition and results of operations.

RISK OF SYSTEM FAILURE

The Company's operations are dependent upon its ability to protect its
network infrastructure against damage from fire, earthquakes, floods, power
loss, telecommunications failures and similar events or to construct networks
that are not vulnerable to the effects of such events. Significant portions of
the Company's computer equipment, including components critical to the operation
of its Internet backbone, are located at the Company's facility in Englewood,
Colorado and the Company's NOC located in Dallas, Texas. Despite precautions
taken by and planned by the Company, the occurrence of a natural disaster or
other unanticipated problem at the Company's NOC or at a number of the Company's
national nodes could cause interruptions in the services provided by the
Company. The failure of a local POP would result in interruption of service to
the customers served by such POP until necessary repairs were effected or
replacement equipment were installed. Additionally, failure of the Company's
telecommunications providers to provide the data communications capacity
required by the Company as a result of natural disaster, operational disruption
or for any other reason could cause interruptions in the services provided by
the Company. Any damage or failure that causes

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interruptions in the Company's operations could have a material adverse effect
on the Company's business, financial condition and results of operations.

SECURITY RISKS

Despite the implementation of security measures by the Company, networks
are vulnerable to unauthorized access, computer viruses and other disruptive
problems. ISPs have in the past experienced, and may in the future experience,
interruptions in service as a result of the accidental or intentional actions of
Internet users, current and former employees or others. Unauthorized access
could also potentially jeopardize the security of confidential information
stored in the computer systems of the Company and its customers, which may
result in liability of the Company to its customers and also may deter potential
subscribers. Although the Company intends generally to continue to implement
industry-standard security measures, such measures have been circumvented in the
past, and there can be no assurance that measures implemented by the Company
will not be circumvented in the future. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to the Company's customers which could have a material
adverse effect on the Company's business, financial condition and results of
operations.

DEPENDENCE ON THE INTERNET; UNCERTAIN ADOPTION OF INTERNET AS A MEDIUM OF
COMMERCE AND COMMUNICATIONS

The Company's products and services are targeted toward users of the
Internet, which has experienced rapid growth. As is typical in the case of a new
and rapidly evolving industry characterized by rapidly changing technology,
evolving industry standards and frequent new product and service introductions,
demand and market acceptance for recently introduced products and services are
subject to a high level of uncertainty. In addition, critical issues concerning
the commercial use of the Internet remain unresolved and may impact the growth
of Internet use, especially in the business market targeted by the Company.
Despite growing interest in the many commercial uses of the Internet, many
businesses have been deterred from purchasing Internet access services for a
number of reasons, including, among others, inconsistent quality of service,
lack of availability of cost-effective, high-speed options, a limited number of
local access points for corporate users, inability to integrate business
applications on the Internet, the need to deal with multiple and frequently
incompatible vendors, inadequate protection of the confidentiality of stored
data and information moving across the Internet, and a lack of tools to simplify
Internet access and use. In particular, numerous published reports have
indicated that a perceived lack of security of commercial data, such as credit
card numbers, has significantly impeded commercial exploitation of the Internet
to date, and there can be no assurance that encryption or other technologies
will be developed that satisfactorily address these security concerns. Published
reports have also indicated that capacity constraints caused by growth in the
use of the Internet may, unless resolved, impede further development of the
Internet to the extent that users experience delays, transmission errors and
other difficulties. Further, the adoption of the Internet for commerce and
communications, particularly by those individuals and enterprises which have
historically relied upon alternative means of commerce and communication,
generally requires the understanding and acceptance of a new way of conducting
business and exchanging information. In particular, enterprises that have
already invested substantial resources in other means of conducting commerce and
exchanging information may be particularly reluctant or slow to adopt a new
strategy that may make their existing personnel and infrastructure obsolete.

The Company is also at risk as a result of fundamental technological
changes in the way Internet solutions may be marketed and delivered. Integrating
technological advances may require substantial time and expense, and there can
be no assurance that the Company will succeed in adapting its network
infrastructure. While the Company believes that its plan of combining the scale
and scope of a national operation with the local presence of its ISP operations
offers significant advantages for commerce and communication over the Internet,
there can be no assurance that commerce and communication over the Internet will
become widespread, or that the Company's offered Internet access and
communications services will become widely adopted for these purposes. The
failure of the market for business-related Internet solutions to continue to
develop would adversely impact the Company's business, financial condition and
results of operations.

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In addition, new technologies or industry standards have the potential to
replace or provide lower cost alternatives to the Company's existing products
and services. The adoption of such new technologies or industry standards could
render the Company's existing products and services obsolete and unmarketable.
For example, the Company's services rely on the continued widespread commercial
use of Transmission Control Protocol/Internet Protocol ("TCP/IP"). Alternative
open and proprietary protocol standards that compete with TCP/IP, including
proprietary protocols developed by IBM and Novell, Inc., have been or are being
developed. If the market for Internet access services fails to develop, develops
more slowly than expected, or becomes saturated with competitors, or if the
Internet access and services offered by the Company and its ISPs are not broadly
accepted, the Company's business, operating results and financial condition will
be materially adversely affected.

POTENTIAL LIABILITY FOR INFORMATION DISSEMINATED OVER NETWORK; REGULATORY
MATTERS

The law relating to liability of on-line service providers and ISPs for
information carried on or disseminated through their networks is currently
unsettled. A number of lawsuits have sought to impose such liability for
defamatory speech and infringement of copyrighted materials. Although some
courts have ruled that the 1996 Telecommunications Act immunizes ISPs from
liability for defamatory material carried on their facilities, there can be no
assurance that other courts will take a similar approach. In one case, a state
court held that an on-line service provider could be found liable for defamatory
materials provided through its service, on the ground that the service provider
exercised active editorial control over postings to its service. Other courts
have held that on-line service providers and ISPs may, under certain
circumstances, be subject to damages for copying or distributing copyrighted
materials. Although the Supreme Court has declared the Communications Decency
Act ("CDA") to be unconstitutional as it applies to the transmission of indecent
on-line communications to minors, state and federal statutes continue to
prohibit the on-line distribution of obscene materials. The imposition upon ISPs
or Web server hosts of potential liability for materials carried on or
disseminated through their systems could require the Company to implement
measures to reduce its exposure to such liability. Such measures may require the
expenditure of substantial resources or the discontinuation of certain product
or service offerings, any of which could have a material adverse effect on the
Company's business, operating results and financial condition.

Although the Company is not currently subject to direct regulation by the
Federal Communications Commission (the "FCC") or any other federal or state
agency, changes in the regulatory environment relating to the Internet
connectivity market, including regulatory changes which directly or indirectly
affect telecommunications costs or increase the likelihood or scope of
competition from the RBOCs or other telecommunications companies, could affect
the prices at which the Company may sell its services. For example, proposed
regulations at the FCC would require discounted Internet connectivity rates for
schools and libraries. Also, the FCC is considering whether ISPs should be
required to pay access charges to local telephone companies for each minute that
dial up users spend connected to ISPs through telephone company switches, and
some telephone companies have requested similar relief from state regulatory
commissions. The imposition of access charges would affect the Company's costs
of serving dial up customers and could have a material adverse effect on the
Company's business, operating results and financial condition.

DEPENDENCE UPON SUPPLIERS; LIMITED SOURCES OF SUPPLY

The Company relies on other companies to supply certain key components of
its network infrastructure, including telecommunications services and networking
equipment which, in the quantities and quality demanded by the Company, are
available only from limited sources. For example, the Company currently relies
on Cisco Systems to supply routers critical to the Company's network, and the
Company could be adversely affected if routers from Cisco were to become
unavailable on commercially reasonable terms. Qwest, Sprint, MCI and MFS, which
are competitors of the Company, are the Company's primary providers of data
communications facilities and network capacity. The Company also is dependent
upon LECs, which often are competitors of the Company, to provide
telecommunications services and lease physical space to the Company for routers,
modems and other equipment. The Company has from time to time experienced delays
in receiving telecommunications services, which can lead to the loss of
customers or prospective customers.

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There can be no assurance that, on an ongoing basis, the Company will be able to
obtain such services on the scale and within the time frames required by the
Company at a commercially reasonable cost, or at all. Failure to obtain or to
continue to make use of such services would have a material adverse effect on
the Company's business, operating results and financial condition.

FINANCIAL INFORMATION CONCERNING COMPLETED AND PROBABLE ACQUISITIONS

The regional ISPs targeted by the Company for acquisition typically do not
have audited financial statements and have varying degrees of internal controls
and detailed financial information. The pro forma financial information in this
Prospectus includes financial information concerning certain completed and
probable acquisitions for which audited financial statements are not presently
available. These companies are included in the "Unaudited Pro Forma Condensed
Combined Financial Statements." While the Company believes such information to
be reliable, the Company has only recently acquired certain of the companies and
is in the process of performing its due diligence investigations of the other
companies. There can be no assurance that the Company's due diligence
investigations and subsequent audit will not reveal matters of significance,
including with respect to liabilities, contingent or otherwise, of these
companies.

ANTI-TAKEOVER PROVISIONS

Certain provisions of Delaware law and the Company's Certificate of
Incorporation (the "Certificate of Incorporation") and Bylaws (the "Bylaws") may
have the effect of delaying, deterring or preventing a future takeover or change
in control of the Company unless such takeover or change in control is approved
by the Company's Board of Directors. Such provisions also may render the removal
of directors and management more difficult. Such provisions could limit the
price that certain investors might be willing to pay in the future for shares of
the Company's Common Stock. These provisions of Delaware law and the Company's
Certificate of Incorporation and Bylaws may also have the effect of discouraging
or preventing certain types of transactions involving an actual or threatened
change of control of the Company (including unsolicited takeover attempts), even
though such a transaction may offer the Company's stockholders the opportunity
to sell their stock at a price above the prevailing market price. The Company's
Certificate of Incorporation places certain restrictions on who may call a
special meeting of stockholders. In addition, the Company's Board of Directors
has the authority to issue up to 12,500,000 shares of undesignated preferred
stock (the "Undesignated Preferred Stock") and to determine the price, rights,
preferences, and privileges of those shares without any further vote or actions
by the stockholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any
Undesignated Preferred Stock that may be issued in the future. The issuance of
such shares of Undesignated Preferred Stock, while potentially providing
desirable flexibility in connection with possible acquisitions and serving other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or may discourage a third party from attempting to
acquire, a majority of the outstanding voting stock of the Company. In addition,
the Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law (the "DGCL"), which will prohibit the Company
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder unless the business combination is approved in
a prescribed manner. The application of Section 203 of the DGCL also could have
the effect of delaying or preventing a change of control of the Company. In
addition, the Company's Certificate of Incorporation provides that upon
consummation of the Offering the Board of Directors will be divided into three
classes of directors serving staggered terms and all stockholder actions must be
effected at a duly called meeting and not by a consent in writing. The
classification provision and the prohibition on stockholder action by written
consent could have the effect of discouraging a third party from making a tender
offer or otherwise attempting to gain control of the Company. Additionally,
certain federal regulations require prior approval of certain transfers of
control which could also have the effect of delaying, deferring or preventing a
change of control. See "Description of Capital Stock -- Anti-Takeover
Provisions."

16
<PAGE> 18

DIVIDEND POLICY; RESTRICTION ON PAYMENT OF DIVIDENDS

The Company does not anticipate paying cash dividends in the foreseeable
future. See "Dividend Policy." The Company's ability to pay dividends is limited
by covenants imposed under the indenture, dated June 24, 1997, under which the
1997 Notes were issued (the "1997 Indenture"), the indenture, dated March 25,
1998, under which the 1998 Notes were issued (the "1998 Indenture"), and the
Bank Facility. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

DILUTION

The public offering price may be substantially higher than the tangible
book value of the outstanding Common Stock. Purchasers of Shares in the Offering
will therefore experience immediate and substantial dilution in tangible book
value per share, and the existing stockholders will receive a material increase
in the tangible book value per share of their shares of Common Stock. The
dilution to new investors will be $13.97 per Share after giving effect to the
NTT Investment based upon an assumed initial public offering of 5,000,000 shares
of Common Stock at an assumed Price to Public of $19.00 per share.

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market will develop or
be sustained. The offering price has been determined by negotiations between the
Company and the Underwriters and there can be no assurance that the prices at
which the Common Stock will sell in the public market after the Offering will
not be lower than the price at which the Common Stock is sold in the Offering.
See "Underwriting." Historically, the market prices for securities of emerging
companies in the telecommunications industry have been highly volatile. The
trading price of the Common Stock after the Offering could be subject to wide
fluctuations in response to numerous factors, including, but not limited to,
quarterly variations in operating results, competition, announcements of
technological innovations or new products by the Company or its competitors,
product enhancements by the Company or its competitors, regulatory changes, any
differences in actual results and results expected by investors and analysts,
changes in financial estimates by securities analysts and other events or
factors. In addition, the stock market has experienced volatility that has
affected the market prices of equity securities of many companies and that often
has been unrelated to the operating performance of such companies. These broad
market fluctuations may adversely affect the market price of the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering and the NTT Investment, there will be
outstanding 31,819,913 shares of Common Stock (or 32,569,913 shares if the
Underwriters' over-allotment option is exercised in full) of which 26,819,913
will be "restricted shares." The 5,000,000 shares (or up to 5,750,000 shares if
the Underwriters' over-allotment option is exercised in full) of Common Stock
sold in the Offering will be freely tradeable without further restriction or
further registration under the Securities Act, except for shares purchased by an
affiliate (as such term is defined in the Securities Act) of the Company, which
will be subject to the limitations of Rule 144 ("Rule 144") under the Securities
Act. Subject to certain contractual limitations, holders of restricted shares
generally will be entitled to sell these shares in the public securities market
without registration either pursuant to Rule 144 (or Rule 145, as applicable) or
any other applicable exemption under the Securities Act.

Within 90 days of the date of this Prospectus, the Company intends to file
one or more registration statements under the Securities Act to register shares
of Common Stock reserved for issuance under its equity incentive plans. As of
April 24, 1998, options to purchase approximately 4,063,340 shares were
outstanding under the Company's stock option plans.

17
<PAGE> 19

otherwise dispose of, directly or indirectly, or announce an offering of, any
shares of Common Stock or any securities convertible into, or exchangeable for
shares of Common Stock for a period of six months from the date of this
Prospectus, without the prior written consent of Smith Barney Inc., except under
limited circumstances. An additional 12,000 shares of Common Stock issuable upon
exercise of outstanding options, will become saleable after the six-month
lock-up period.

In addition, NTT has agreed not to offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce an offering of, any
NTT Shares for a period of six months from the date of the consummation of the
NTT Investment without the prior written consent of Smith Barney Inc.

In connection with the Buyouts and acquisitions that involved the issuance
of shares of Series D-1 Preferred Stock, the Company has entered into market
standoff agreements with the holders of the Series D-1 Preferred Stock so
issued, which restrictions expire in one-third increments on the six, twelve,
and eighteen month anniversaries of the date of this Prospectus. Following the
six-month, twelve-month and eighteen-month lock-up periods, approximately
738,171, 738,171 and 738,171 additional shares of Common Stock, respectively,
will become immediately saleable, subject to the limitations imposed by Rule 144
which could be applicable to certain holders of such Common Stock.

Sales of a substantial amount of Common Stock in the public market, or the
perception that such sales may occur, could adversely affect the market price of
the Common Stock prevailing from time to time in the public market and could
impair the Company's ability to raise additional capital through the sale of its
equity securities. See "Shares Eligible for Future Sale."

YEAR 2000 COMPLIANCE

Currently, many computer systems and software products are coded to accept
only two digit entries in the date code field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. 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. The
Company and third parties with which the Company does business rely on numerous
computer programs in their day to day operations. The Company is evaluating the
Year 2000 issue as it relates to the Company's internal computer systems and
third party computer systems with which the Company interacts. The Company
expects to incur internal staff costs as well as consulting and other expenses
related to these issues; these costs will be expensed as incurred. In addition,
the appropriate course of action may include replacement or an upgrade of
certain systems or equipment at a substantial cost to the Company. There can be
no assurance that the Year 2000 issues will be resolved in 1998 or 1999. The
Company may incur significant costs in resolving its Year 2000 issues. If not
resolved, this issue could have a significant adverse impact on the Company's
business, operating results and financial condition.

DISCRETIONARY AUTHORITY OVER USE OF NET PROCEEDS

FORWARD-LOOKING STATEMENTS

The statements contained in this Prospectus that are not historical fact
are "forward-looking statements" (as such term is defined in the Reform Act),
which can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," or "anticipates" or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy that involve risks and uncertainties. The safe harbor provisions
provided in Section 27A of the Securities Act and Section 21E of the Exchange
Act do not apply to forward-looking statements made in connection with an
initial public offering. Management wishes to caution the reader that these
forward-looking statements such as the timing, costs and
18
<PAGE> 20

scope of its acquisition of, or investments in, existing ISPs, the revenue and
profitability levels of the ISPs in which it invests, the anticipated reduction
in operating costs resulting from the integration and optimization of those
ISPs, and other matters contained above and herein in this Prospectus regarding
matters that are not historical facts, are only predictions. No assurance can be
given that the future results indicated, whether expressed or implied, will be
achieved. While sometimes presented with numerical specificity, these
projections and other forward-looking statements are based upon a variety of
assumptions relating to the business of the Company, which, although considered
reasonable by the Company, may not be realized. Because of the number and range
of the assumptions underlying the Company's projections and forward-looking
statements, many of which are subject to significant uncertainties and
contingencies that are beyond the reasonable control of the Company, some of the
assumptions inevitably will not materialize and unanticipated events and
circumstances may occur subsequent to the date of this Prospectus. These
forward-looking statements are based on current expectations, and the Company
assumes no obligation to update this information. Therefore, the actual
experience of the Company and results achieved during the period covered by any
particular projections or forward-looking statements may differ substantially
from those projected. Consequently, the inclusion of projections and other
forward-looking statements should not be regarded as a representation by the
Company or any other person that these estimates and projections will be
realized, and actual results may vary materially. There can be no assurance that
any of these expectations will be realized or that any of the forward-looking
statements contained herein will prove to be accurate.

USE OF PROCEEDS

The Company will receive approximately $87.6 million of net proceeds (after
deducting the Underwriters' discounts and commissions and estimated expenses
related to the Offering) from the Offering. The Company also will receive
approximately $87.3 million in cash from the sale of the NTT Shares based upon
an assumed initial public offering of 5,000,000 shares of Common Stock at an
assumed Price to Public of $19.00 per share. The combined net proceeds are
expected to be used to further the Company's acquisition and investment
strategy, to continue the development and implementation of the national
backbone, customer care center, network operations center and billing and
accounting services, and to fund the Company's general working capital
requirements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of the Company's anticipated funding
requirements.

Management will retain a significant amount of discretion over the
application of the net proceeds of the Offering. Because of the number and
variability of factors that determine the Company's use of the net proceeds of
the Offering, there can be no assurance that such applications will not vary
substantially from the Company's current intentions. Pending such utilization,
the Company intends to invest the net proceeds of the Offering in investment
grade obligations of corporations, financial institutions and U.S. Government
Securities. See "Risk Factors -- Discretionary Authority Over Use of Net
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

DIVIDEND POLICY

The Company has never declared or paid any dividends on its Common Stock
and does not expect to pay dividends in the foreseeable future. The Company's
current policy is to retain all of its earnings to finance future growth and
acquisitions. Furthermore, the terms of the 1997 Indenture, the 1998 Indenture
and the Bank Facility place limitations on the Company's ability to pay
dividends. Future dividends, if any, will be at the discretion of the Board and
will depend upon, among other things, the Company's operations, capital
requirements and surplus, general financial condition, contractual restrictions
and such other factors as the Board may deem relevant. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

19
<PAGE> 21

CAPITALIZATION
(dollars in thousands)

The following table sets forth at December 31, 1997 (i) the actual
capitalization of the Company, (ii) the pro forma capitalization adjusted for
the Completed and Proposed Acquisitions and Buyouts, and the conversion of all
the outstanding Preferred Stock into Common Stock upon the completion of the
Offering, and (iii) the pro forma capitalization adjusted to reflect the
Offering, the proceeds from the 1998 Notes, the Refinancing, and the NTT
Investment. This table should be read in conjunction with the Selected
Consolidated Financial Data, the Unaudited Pro Forma Condensed Combined
Financial Statements and the Historical Consolidated Financial Statements and
notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(1) AS ADJUSTED(2)
---------- ------------ --------------
<S> <C> <C> <C>
Cash and cash equivalents................................ $ 72,586 $155,304 $330,186
Restricted cash and securities........................... 40,554 27,822 27,822
======== ======== ========
Long-term debt and capital lease obligations, net of
current portions....................................... 142,321 272,694 272,694
-------- -------- --------
Redeemable preferred stock(3):
Series A, par value $0.001 per share; 6,100,000 shares
authorized: 6,033,333 shares outstanding............ 18,080 -- --
Series B, par value $0.001 per share; 10,117,000 shares
authorized: 10,028,334 shares outstanding........... 59,193 -- --
Series C, par value $0.001 per share; 2,500,000 shares
authorized and outstanding.......................... 19,976 -- --
-------- -------- --------
97,249 -- --
-------- -------- --------
Stockholders equity (deficit):
Preferred stock, Series D-1, par value $0.001 per
share; 3,000,000 shares authorized: 680,000 shares
outstanding (2,384,000 shares pro forma)(3)......... 10,200 -- --
Common stock, par value $0.001 per share; 35,133,000
shares authorized; 1,254,533 shares outstanding
historical; 22,200,200 shares pro forma; 31,949,667
shares pro forma -- as adjusted and additional paid
in capital(4)....................................... 1,598 134,607 309,489
Warrants............................................... 12,675 12,675 12,675
Accumulated deficit.................................... (51,474) (61,578) (61,578)
-------- -------- --------
Total stockholders' equity (deficit)........... (27,001) 85,704 260,586
-------- -------- --------
Total capitalization........................... $212,569 $358,398 $533,280
======== ======== ========
</TABLE>

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

(1) Pro forma for (i) the Completed and Proposed Acquisitions as if they had
occurred on December 31, 1997, (ii) the conversion of the Preferred Stock
into Common Stock upon completion of the Offering, (iii) 1,704,000 shares of
Series D-1 Preferred Stock that as of December 31, 1997 were proposed and
assumed to be issued in connection with acquisitions and Buyouts completed
or proposed subsequent to December 31, 1997 as if they had occurred on
December 31, 1997 and (iv) the proceeds from the 1998 Notes and the
application of the proceeds therefrom to effect the Refinancing and to
reflect the extraordinary charge of approximately $10.1 million for the loss
on early extinguishment of $50.0 million of the 1997 Notes. See "Unaudited
Pro Forma Condensed Combined Financial Statements."

(2) As adjusted to give effect to (i) the Offering after deducting the
Underwriter's discounts and commissions and estimated expenses, and (ii) the
sale of 4,749,467 shares of Common Stock to NTT for approximately $87.3
million (based upon an assumed initial public offering of 5,000,000 shares
of Common Stock at an assumed Price to Public of $19.00 per share)
concurrently with the Offering.

(3) All of the shares of the Company's Preferred Stock are convertible into
Common Stock on a one-for-one basis, subject to certain anti-dilution
adjustments. The shares of Series A, B and C Preferred Stock are subject to
mandatory redemption beginning on October 10, 2004, and are subject to
mandatory conversion into Common Stock upon consummation of the Offering.

(4) Includes 1,704,000 shares of Series D-1 Preferred Stock that as of December
31, 1997 were proposed and assumed to be issued in connection with
acquisitions and Buyouts, all of which have been assumed to have been
converted to Common Stock for pro forma and pro forma as adjusted purposes.
Does not include 2,237,050 shares of Common Stock reserved for issuance
pursuant to outstanding stock options as of December 31, 1997, or 2,112,480
shares of Common Stock issuable upon exercise of outstanding warrants.

20
<PAGE> 22

DILUTION

The net tangible book value (deficit) of the Company at December 31, 1997,
after giving effect to the conversion of the Preferred Stock into Common Stock
which will occur upon completion of the Offering, was ($22.6) million or ($1.11)
per share of Common Stock. "Net tangible book value" per share represents total
tangible assets of the Company less total liabilities, divided by the total
number of shares of Common Stock outstanding. After giving effect to (i) the
sale of 5,000,000 shares of Common Stock offered hereby at an assumed Price to
Public of $19.00 per share, after deducting the underwriting discounts and
commissions and estimated offering expenses, and (ii) the sale of 4,749,467
shares of Common Stock pursuant to the NTT Investment (based upon an assumed
initial public offering of 5,000,000 shares of Common Stock at an assumed Price
to Public of $19.00 per share), the pro forma net tangible book value of the
Company as of December 31, 1997 would be $152.2 million or $5.03 per share. This
represents an immediate increase in net tangible book value of $6.14 per share
to existing stockholders and an immediate dilution of $13.97 per share to
purchasers of Common Stock in the Offering.

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $19.00
Net tangible book value (deficit) per share before the
Offering(1)............................................ $(1.11)
Increase per share attributable to new investors in the
Offering and the NTT Investment........................ 6.14
------
Net tangible book value per share after the Offering........ 5.03
------
Dilution per share to investors in the Offering............. $13.97
======
</TABLE>

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

(1) Based on 20,496,200 shares of Common Stock outstanding as of December 31,
1997 after giving effect to the conversion of all outstanding Preferred
Stock.

The following table summarizes, on a pro forma basis as of December 31,
1997, the actual number of shares of Common Stock purchased from the Company,
the actual total consideration paid and the average price paid per share by the
existing stockholders (assuming conversion of the Preferred Stock into Common
Stock upon completion of the Offering), by NTT and by new investors purchasing
shares of Common Stock in the Offering (at an assumed initial public offering
price of $19.00 per share before deducting underwriting discounts and
commissions and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 20,496,200 67.8% $121,722,385 40.0% $ 5.94
New investors in the
Offering.................... 5,000,000 16.5 95,000,000 31.3 19.00
NTT........................... 4,749,467 15.7 $ 87,307,077 28.7 18.38
---------- ------ ------------ ------
Total............... 30,245,667 100.0% $304,029,462 100.0%
========== ====== ============ ======
</TABLE>

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

(1) Excludes (i) up to 9,200,000 shares of Common Stock that, effective upon
consummation of the Offering, will be reserved for issuance under the
Company's employee stock option plans, of which 4,063,340 shares were
issuable upon exercise of outstanding options as of April 24, 1998 at a
weighted average exercise price of $10.05 per share, (ii) 2,112,480 shares
of Common Stock issuable upon exercise of outstanding warrants at a weighted
average exercise price of $.01 per share, (iii) 3,000,000 shares of Common
Stock reserved for issuance under the Company's 1998 Employee Stock Purchase
Plan, and (iv) 300,000 shares of Common Stock reserved for issuance under
the Company's 1998 Non-Employee Director Stock Incentive Plan. See Notes to
Consolidated Financial Statements.

21
<PAGE> 23

SELECTED CONSOLIDATED FINANCIAL DATA
(dollars in thousands, except per share amounts)

The selected historical consolidated financial data as of and for the
period from inception (March 1, 1996) to December 31, 1996 and as of and for the
year ended December 31, 1997 have been derived from the audited Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.

The information set forth below should be read in conjunction with the
Unaudited Pro Forma Condensed Combined Financial Statements and the historical
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere in this Prospectus. Results of operations for the year ended December
31, 1997 are not necessarily indicative of results of operations for future
periods. The Company's development and expansion activities, including
acquisitions, during the periods shown below significantly affect the
comparability of this data from one period to another. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)(2)
-------------------------------- ---------------
PERIOD FROM
INCEPTION
(MARCH 1, 1996) YEAR ENDED YEAR ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
--------------- ------------ ---------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Dedicated connectivity........................ $ 1,100 $ 16,383 $ 46,330
Dial-up connectivity.......................... 1,139 7,093 16,725
Enhanced services and other................... 126 12,216 25,210
-------- ---------- -----------
Total revenue......................... 2,365 35,692 88,265
Costs and expenses:
Internet services operating costs............. 974 15,974 38,145
Selling, general and administrative and
other...................................... 7,002 49,383 82,070
Depreciation and amortization................. 669 10,624 25,911
-------- ---------- -----------
Total costs and expenses................... 8,645 75,981 146,126
-------- ---------- -----------
Loss from operations....................... (6,280) (40,289) (57,861)
Other income (expense):
Interest income............................... 593 6,080 6,147
Interest expense.............................. (115) (11,826) (12,417)
Equity in losses of affiliates................ -- (1,958) --
Minority interests.............................. 680 1,924 --
-------- ---------- -----------
Net loss.............................. (5,122) (46,069) (64,131)
Accretion of redeemable preferred stock to
liquidation value............................. (23) (260) --
-------- ---------- -----------
Net loss attributable to common
stockholders........................ $ (5,145) $ (46,329) $ (64,131)
======== ========== ===========
Loss per common share -- basic and diluted(3)... $ (5.29) $ (40.47) $ (2.90)
======== ========== ===========
Weighted average common shares
outstanding -- basic and diluted.............. 971,748 1,144,685 22,090,352
======== ========== ===========
OTHER DATA:
EBITDA(4)....................................... $ (5,611) $ (29,665) $ (31,950)
Capital expenditures(5)......................... 3,430 14,547 14,547
Cash flows information:
Net cash used by operating activities......... (2,326) (35,323)
Net cash used by investing activities......... (9,123) (120,329)
Net cash provided by financing activities..... 77,916 161,772
</TABLE>

22
<PAGE> 24

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
AS OF ----------------------------------------
DECEMBER 31, PRO FORMA
1996 ACTUAL PRO FORMA(1) AS ADJUSTED(6)
------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $66,467 $ 72,586 $155,304 $330,186
Restricted cash and securities.............. -- 40,554 27,822 27,822
Goodwill, net............................... 8,736 83,216 152,241 152,241
Total assets................................ 82,628 246,471 394,997 569,879
Long-term debt and capital lease
obligations, net of discount.............. 106 142,321 272,694 272,694
Redeemable preferred stock.................. 76,877 97,249 -- --
Stockholders' equity (deficit).............. (4,055) (27,001) 85,704 260,586
</TABLE>

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

(1) Pro forma for the Completed and Proposed Acquisitions as if they had
occurred on December 31, 1997 for balance sheet purposes and on January 1,
1997 for statement of operations data purposes, for the conversion of the
Preferred Stock into Common Stock upon completion of the Offering, and for
the proceeds from the sale of the 1998 Notes and the application of the
proceeds therefrom to effect the Refinancing and to reflect the
extraordinary charge of approximately $10.1 million for the loss on early
extinguishment of $50.0 million of the 1997 Notes. See "Unaudited Pro Forma
Condensed Combined Financial Statements."

(3) The Company paid no cash dividends on its Common Stock during the period
from inception (March 1, 1996) to December 31, 1996 and the year ended
December 31, 1997.

(4) EBITDA represents earnings (loss) from operations before interest, taxes,
depreciation, amortization and provision for loss on write-offs of
investments in ISPs and fixed assets. The primary measure of operating
performance is net earnings (loss). Although EBITDA is a measure commonly
used in the Company's industry, it should not be construed as an alternative
to net earnings (loss), determined in accordance with generally accepted
accounting principles ("GAAP"), as an indicator of operating performance or
as an alternative to cash flows from operating activities, determined in
accordance with GAAP. In addition, the measure of EBITDA presented herein by
the Company may not be comparable to other similarly titled measures of
other companies.

(5) Excludes equipment and leasehold improvements acquired in business
acquisitions.

(6) As adjusted to give effect to (i) the Offering after deducting the
Underwriters' discounts and commissions and estimated expenses, and (ii) the
sale of 4,749,467 shares of Common Stock to NTT for approximately $87.3
million (based upon an initial public offering of 5,000,000 shares of Common
Stock at an assumed Price to Public of $19.00 per share), concurrently with
the Offering.

23
<PAGE> 25

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

The following discussion and analysis is based on the historical and pro
forma results of the Company and includes a number of ISPs acquired at various
times. See "Unaudited Pro Forma Condensed Combined Financial Statements" for the
basis of presentation and those business acquisitions included therein.
Investments in ISP affiliates in which Verio acquires a minority interest are
accounted for at cost. Investments in ISP affiliates in which Verio acquires a
majority interest through the acquisition of net assets, common stock or
convertible preferred stock, and exercises significant control over the
operations are accounted for using the purchase method of accounting and,
accordingly, the financial results of these ISPs have been consolidated with
those of the Company. Certain statements set forth below constitute
"forward-looking statements" within the meaning of the Reform Act. The safe
harbor provisions provided in Section 27A of the Securities Act and Section 21E
of the Exchange Act do not apply to forward-looking statements made in
connection with an initial public offering. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. See "Risk Factors -- Forward-
Looking Statements."

OVERVIEW

Verio is a leading national provider of Internet connectivity and enhanced
Internet services to small and medium sized businesses. Since its inception in
March 1996, the Company has rapidly established a national presence through the
acquisition, integration, and growth of local ISPs with a business customer
focus. Verio believes that small and medium sized businesses represent an
attractive target market for the provision of Internet services due to this
market's low current penetration levels and customer churn, and the expanding
Internet needs of these businesses. The Company believes it has a unique
competitive advantage in serving small and medium sized business customers
through the combination of the technical competency, hands-on support and
entrepreneurial culture of locally based ISPs with the quality and economic
efficiency of Verio's national network, operational infrastructure and financial
strength. Verio has quickly built critical mass by acquiring the stock or assets
of, or making significant investments in, over 35 ISPs that provide a
comprehensive range of Internet connectivity and enhanced products and services
to over 100,000 customer accounts in 36 of the top 50 MSAs in the country, with
combined revenues of approximately $25.0 million for the three months ended
December 31, 1997.

From March 1996 through September 1997, Verio's strategy was to acquire 51%
to 100% of a large regional ISP, and a minority interest in smaller ISPs within
each region. Verio now seeks to acquire 100% of new ISPs, and is in the process
of bringing its ownership interest in its existing ISPs to 100%. Upon achieving
100% ownership of its ISPs in a region, Verio then consolidates the management
teams, network operations, and marketing efforts within that region. While some
one-time costs are incurred in these consolidation efforts, Verio believes that
the combined organizations will be able to increase revenues faster and more
cost effectively. In addition, 100% ownership facilitates the introduction of
the Verio brand name, a suite of nationwide product offerings, and the
transition of all ISPs onto Verio's national network and financial systems.

In conjunction with the consolidation of its regional operations, as of
December 31, 1997, the Company had completed the Buyout of four of its initially
non-wholly owned ISPs. Since then, the Company has completed ten additional
Buyouts and currently expects to complete the Buyouts of the two remaining ISPs
in which it did not initially acquire 100% ownership during the remainder of
1998. Verio has incurred costs of approximately $43.2 million, in the aggregate,
in 1998 in connection with the Buyouts, which were paid with a combination of
cash, preferred stock and options to acquire preferred stock of Verio. As a
result of its acquisitions, and the limited amount of fixed assets required to
operate an ISP, Verio has recorded significant amounts of goodwill, and expects
goodwill to increase significantly during 1998.

24
<PAGE> 26

To fund its acquisitions and operations, Verio has raised approximately
$100.0 million of equity capital primarily from venture capital funds and Brooks
(recently acquired by WorldCom, Inc.). It also issued $150.0 million principal
amount of 1997 Notes to a group of institutional investors and Brooks, $100.0
million of which remain outstanding following the Refinancing. On March 25,
1998, the Company consummated the sale of $175.0 million principal amount of
1998 Notes, a portion of the proceeds of which was used to effect the
Refinancing. See "-- Liquidity and Capital Resources" and "Certain
Transactions."

RESULTS OF OPERATIONS

REVENUE

The Company derives the majority of its revenues from business customers
who purchase Internet connections and enhanced services such as Web hosting.
Verio's ISP affiliates offer a broad range of connectivity options to their
customers including dedicated, dial-up, ISDN, frame relay and point-to-point
connections. Dedicated customers typically sign a contract for one to three
years of service that provides for fixed, recurring monthly service charges, and
pay a one-time setup fee. These charges vary depending on the type of service,
the length of the contract, and local market conditions. Dial-up customers also
typically pay a one-time setup fee and recurring monthly service charges. Fees
and service charges for enhanced services vary from product to product. For
example, Web hosting customers pay a one-time setup fee and fixed monthly
service charges that vary depending on the amount of disk space and bandwidth
required. Additional sources of revenue include e-commerce, virtual private
networks, security services, co-location services, consulting and the sales of
equipment and customer circuits. Revenue related to Internet connectivity and
enhanced services is recognized as the services are provided. Amounts billed
relating to future periods are recorded as deferred revenue and amortized
monthly as services are rendered.

Currently, connectivity services provide a majority of total revenues.
However, revenues from enhanced services, especially Web hosting, are expected
to represent an increasing percentage of total revenues in future periods.
Revenue from business customers currently represents more than 80% of total
revenues and is projected to increase as a percent of total revenues. In
addition to the growth that the Company is achieving through acquisitions,
revenues are also expected to increase due to the internal growth of
consolidated ISPs. For ISPs consolidated for the entire fiscal year of 1997,
revenue increased an average of 16% quarter-over-quarter for the three quarters
ended December 31, 1997.

Period from Inception to December 31, 1996 compared to the Year Ended December
31, 1997

Total consolidated revenues were $2.4 million for the period from inception
(March 1, 1996) to December 31, 1996 (the "1996 Period"), compared to $35.7
million for the year ended December 31, 1997. Internet connectivity represented
95% and 66% of total revenue for the 1996 Period and the year ended December 31,
1997, respectively, with the balance derived from enhanced services and other,
which include Web hosting, consulting, sales of equipment and customer circuits.
The increase in enhanced services and other revenues as a percentage of total
revenues is due to a change in the revenue mix resulting from acquisitions and
increased sales of enhanced services. The increase in dedicated and dial-up
revenues and enhanced services and other revenues for the 1996 Period compared
to the year ended December 31, 1997 was primarily due to the acquisitions of
ISPs subsequent to December 31, 1996 and the longer period covered. Revenues
attributable to acquisitions completed in 1996 accounted for $2.4 million or
100% of total revenues for the 1996 Period. Of these acquisitions, revenues from
material acquisitions were $1.8 million from On-Ramp Technologies, Inc. and $.5
million from RAINet, Inc. Revenues attributable to material acquisitions
completed in 1997 accounted for $23.3 million or 65% of total revenues for the
year ended December 31, 1997. Of these acquisitions, revenues from material
acquisitions were $7.7 million from NorthWestNet, Inc. ($4.4 million in
connectivity revenue and $3.3 million in enhanced services and other revenue),
and $3.6 million from Global Enterprise Services ($2.3 million in connectivity
revenue and $1.3 million in enhanced services and other revenue). Revenues
attributable to ISPs consolidated for the entire year were 32% of total revenues
for the year ended December 31, 1997.

Three ISPs were included in the consolidated financial statements at
December 31, 1996. Twenty-two ISPs were included in the consolidated financial
statements at December 31, 1997, three of which were included in the
consolidated financial statements for the entire year ended December 31, 1997.

25
<PAGE> 27

COSTS AND EXPENSES

Internet services operating costs consist primarily of local
telecommunication expense, Internet access expense and the cost of equipment and
customer circuits sold. Local telecommunications expense represents the cost of
transporting data between the Company's POPs and a transit provider, or various
Internet access points. Internet access expense includes the cost incurred by
the Company to transport its Internet traffic and for its national network. In
some instances the Company also will pay for the local telecommunications
line(s) from the customer's location to one of the POPs. As of December 31,
1997, 25 ISP affiliates were utilizing the Verio national network for their
Internet access and paying Verio for these network services based on their
bandwidth requirements. The Company recently signed a long-term long haul
capacity agreement with Qwest in order to reduce the per unit costs of such
services. There will not be a significant effect on the results for 1998 from
this agreement due to the time required to convert from existing circuits;
however, the Company expects that the pricing advantages provided by this
agreement will substantially reduce the cost of these services in future years.
Additionally, the Company has the right to fund its minimum commitment, which
would allow the capitalization of costs (to the extent prepaid) under this
contract. Such capitalized costs would be amortized to operations over the term
of the agreement. The amount of the prepayment currently would be approximately
$60.0 million.

Selling, general and administrative and other expenses consist primarily of
salaries and related employment expenses, consulting, travel and entertainment,
rent, and utilities. Depreciation is provided over the estimated useful lives of
the assets ranging from 3 to 5 years using the straight-line method. The excess
of cost over the fair value of net assets acquired, or goodwill, is amortized
using the straight-line method over a ten-year period.

Period from Inception to December 31, 1996 compared to the Year Ended December
31, 1997

Internet services operating costs were 41% and 45% of total revenues for
the 1996 Period and the year ended December 31, 1997, respectively. Internet
services operating costs attributable to acquisitions completed in 1996
accounted for $.7 million, or 67%, of total Internet services operating costs
for the 1996 Period. Of these acquisitions, the costs from material acquisitions
were $.4 million from On-Ramp Technologies, Inc. and $.2 million from RAINet,
Inc. Internet services operating costs attributable to acquisitions completed in
1997 accounted for $8.0 million, or 50%, of total Internet services operating
costs for the year ended December 31, 1997. Of these acquisitions, the costs
from material acquisitions were $2.4 million from Global Enterprise Services,
$1.2 million from NorthWestNet, Inc. and $1.2 million from Compute Intensive
Inc. Internet services operating costs attributable to ISPs consolidated for the
entire year were 28% of total Internet services operating costs for the year
ended December 31, 1997. Internet services operating costs attributable to
corporate were 33% of total Internet services operating costs for the 1996
Period, compared to 22% of total Internet services operating costs for the year
ended December 31, 1997. This decrease is primarily due to acquisitions in late
1997 that had not yet converted to Verio's national network. The Company expects
Internet services operating costs to increase in absolute dollars but to
decrease as a percentage of total revenues over time as additional ISP
affiliates are added onto Verio's national network, as enhanced services become
a larger percentage of total revenues, and as the Capacity Agreement (as
defined) with Qwest is implemented.

Selling, general and administrative and other expenses were 296% and 138%
of revenues for the 1996 Period and the year ended December 31, 1997,
respectively. Selling, general and administrative and other expenses
attributable to acquisitions completed in 1996 accounted for $3.1 million or 44%
of total selling, general and administrative and other expenses for the 1996
Period. Corporate expenses accounted for 56% of total selling, general and
administrative and other expenses for the 1996 Period. Selling, general and
administrative and other expenses attributable to acquisitions completed in 1997
accounted for $19.5 million or 40% of total selling, general and administrative
and other expenses for the year ended December 31, 1997. Of these acquisitions,
the expenses from material acquisitions were $4.9 million from NorthWestNet,
Inc., $4.3 million from Compute Intensive Inc., and $3.2 million from Global
Enterprise Services. Selling, general and administrative and other expenses
attributable to ISPs consolidated for the entire year, and to corporate
expenses, were 22% and 38% of total selling, general and administrative and
other expenses for the year ended December 31, 1997, respectively. For the 1996
Period, selling, general and administrative and other expenses

26
<PAGE> 28

relating to operations, engineering and customer care were 63% of total selling,
general and administrative and other expenses compared to 66% for the year ended
December 31, 1997, as a result of the Company's decision to emphasize the
quality of its engineering and technical support for its customers. Sales and
marketing expenses were 22% of total selling, general and administrative and
other expenses compared to 17% for the 1996 Period, primarily as a result of the
Company's hiring and training of additional sales personnel during the year
ended December 31, 1997. Executive and finance expenses were 12% of total
selling, general and administrative and other expenses compared to 20% for the
1996 Period.

The Company expects selling, general and administrative expenses to
continue to increase in absolute dollars but to decrease as a percentage of
total revenues as the Company acquires additional ISPs, allowing it to spread
its corporate overhead over a larger revenue base, as its scaleable systems
reduce the incremental costs of additional revenues, as sales force productivity
increases with experience, and as indirect selling channels are expanded. The
anticipated increases in absolute dollar terms will be primarily due to
increased personnel resulting from acquisitions, and additional expenditures in
sales and marketing. Depreciation and goodwill amortization are expected to
continue to increase significantly as a result of the Company's acquisition and
investment strategies. Also, the Company will continue to have non-recurring
expenses related to its strategy of acquiring and regionalizing groups of ISPs.

OTHER EXPENSES

During the year ended December 31, 1997, the Company recognized equity in
losses of affiliates in the amount of $1,958,000, representing losses of those
affiliates in excess of the equity of the common shareholders of the affiliates.
See Note 1 to the Consolidated Financial Statements of the Company.

Interest expense increased from $115,000 in the 1996 Period to $11.8
million for the year ended December 31, 1997 primarily as a result of the
completion of the $150.0 million placement of the 1997 Notes on June 24, 1997.
Interest expense is expected to increase in 1998, reflecting a full year's
interest on the 1997 Notes that remain outstanding and interest on the 1998
Notes.

INCOME TAXES

As of December 31, 1997, the Company had a net operating loss carryforward
for federal income tax purposes of approximately $49.9 million which is
available to offset future federal taxable income, if any, through 2011. The
utilization of a portion of the net operating loss carryforwards may be limited
under Section 382 of the Internal Revenue Code. No tax benefit for such losses
has been recorded by the Company in 1996 or 1997 due to uncertainties regarding
the utilization of the loss carryforward.

27
<PAGE> 29

QUARTERLY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue:
Dedicated connectivity..................... $ 1,954 $ 3,852 $ 4,314 $ 6,263
Dial-up connectivity....................... 1,106 1,564 1,644 2,779
Enhanced services and other................ 1,354 2,833 3,666 4,363
------- ------- -------- --------
Total revenue...................... 4,414 8,249 9,624 13,405
Costs and expenses:
Internet services operating costs.......... 2,042 3,433 4,029 6,470
Selling, general and administrative and
other................................... 6,718 11,122 13,393 18,150
Depreciation and amortization.............. 1,246 2,548 2,943 3,887
------- ------- -------- --------
Total costs and expenses................ 10,006 17,103 20,365 28,507
------- ------- -------- --------
Loss from operations.................... $(5,592) $(8,854) $(10,741) $(15,102)
======= ======= ======== ========
EBITDA....................................... $(4,346) $(6,306) $ (7,798) $(11,215)
======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C>
Total revenue................................ 100% 100% 100% 100%
Costs and expenses:
Internet services operating costs.......... 46% 42% 42% 48%
Selling, general and administrative and
other................................... 152% 135% 139% 135%
Depreciation and amortization.............. 28% 31% 31% 29%
Total costs and expenses................ 227% 207% 212% 213%
Loss from operations.................... (127%) (107%) (112%) (113%)

EBITDA....................................... (98%) (76%) (81%) (84%)
</TABLE>

The Company's operating results have fluctuated in the past and may in the
future fluctuate significantly depending upon a variety of factors, including
the incurrence of capital costs and costs associated with the Buyouts and the
introduction of value-added enhanced services and new services by the Company.
Additional factors that may contribute to variability of operating results
include: the pricing and mix of services offered by the Company; customer
retention rate; changes in pricing policies and product offerings by the
Company's competitors; growth in demand for network and Internet access
services; one-time costs associated with regional consolidation; and general
telecommunications services' performance and availability. The Company also has
experienced seasonal variation in Internet use and, therefore, revenue streams
may fluctuate accordingly. As a result, variations in the timing and amounts of
revenues could have a material adverse effect on the Company's quarterly
operating results. Due to the foregoing factors, the Company believes that
period-to-period comparisons of its operating results are not necessarily
meaningful and that such comparisons cannot be relied upon as indicators of
future performance.

LIQUIDITY AND CAPITAL RESOURCES

The Company's business and acquisition strategy has required and will
continue to require substantial capital for investments in ISPs, capital
expenditures for expansion of services, operating losses and working capital.

28
<PAGE> 30

Net cash used by operating activities was $35.3 million during the year
ended December 31, 1997, which includes a decrease of $.1 million in working
capital. Net cash used by investing activities was $120.3 million during the
year ended December 31, 1997, which includes the investment of restricted cash
totalling $46.6 million from the proceeds of the 1997 Notes, and approximately
$64.0 million for acquisitions. Net cash provided by financing activities was
$161.8 million during the year ended December 31, 1997, primarily from the sale
of 2,500,000 shares of Series C Preferred Stock for gross proceeds of
approximately $20.0 million and issuance of the 1997 Notes for gross proceeds of
approximately $150.0 million.

Since inception, the Company has financed itself primarily through the
private sale of Preferred Stock and debt and, to a lesser extent, Common Stock.
In 1996, the Company raised approximately $79.2 million (gross) through the
issuance of Common Stock, Series A Preferred Stock and Series B Preferred Stock.
In June 1996, the Company sold 6,033,333 shares of Series A Preferred Stock and
in December 1996, the Company sold 10,000,000 shares of Series B Preferred Stock
for gross proceeds of approximately $18.1 million and approximately $60.0
million, respectively. During the course of 1996, 1,090,000 shares of Common
Stock were sold for gross proceeds of approximately $1.1 million. In 1997, an
additional 164,533 shares of Common Stock were issued for approximately
$508,000. In May 1997, the Company completed the sale of 2,500,000 shares of
Series C Preferred Stock for gross proceeds of approximately $20.0 million. In
December 1997, the Company issued 680,000 shares of Series D-1 Preferred Stock
to fund a portion of the acquisition cost of one ISP. Each share of Preferred
Stock is convertible into Common Stock on a one-for-one basis.

On June 24, 1997, the Company completed the placement of $150.0 million
principal amount of the 1997 Notes and attached warrants (the "Warrants"). One
hundred fifty thousand units were issued, each consisting of $1,000 principal
amount of the 1997 Notes and eight Warrants, with each Warrant entitling the
holder thereof to purchase 1.76 shares of the Company's Common Stock at a price
of $.01 per share, for a total of 2,112,480 shares of Common Stock. The Warrants
and the 1997 Notes were separated on December 15, 1997. The 1997 Notes mature on
June 15, 2004. Interest on the 1997 Notes, at the annual rate of 13 1/2%, is
payable semi-annually in arrears on June 15 and December 15 of each year.
Concurrent with the completion of the sale of the 1997 Notes, the Company was
required to deposit funds into an escrow account in an amount that together with
interest would be sufficient to fund the first five interest payments on the
1997 Notes. Upon consummation of the sale of the 1998 Notes and the Refinancing,
that portion of the escrowed amount attributable to the principal amount of the
1997 Notes refinanced was released to the Company. The 1997 Notes are redeemable
at the option of the Company commencing June 15, 2002. The 1997 Notes are senior
unsecured obligations of the Company ranking pari passu in right of payment with
all existing and future unsecured and senior indebtedness. The 1997 Notes impose
significant limitations on the Company's ability to incur additional
indebtedness unless the Company's Consolidated Pro Forma Interest Coverage Ratio
(as defined) is greater than or equal to 1.8 to 1.0 prior to June 30, 1999, or
2.5 to 1.0 on or after that date. The Company is also limited in its ability to
pay dividends or make Restricted Payments (as defined), to engage in businesses
other than the Internet service business, and to place liens on its assets for
the benefit of persons other than the noteholders, among other restrictions. If
a Change of Control (as defined in the 1997 Indenture) occurs, the Company is
required to make an offer to purchase all of the Notes then outstanding at a
price equal to 101% of the principal amount, plus accrued and unpaid interest.

On March 25, 1998, the Company completed the placement of $175.0 million
principal amount of the 1998 Notes. The 1998 Notes mature on April 1, 2005.
Interest on the 1998 Notes, at the annual rate of 10 3/8%, is payable
semi-annually in arrears on April 1 and October 1 of each year, commencing
October 1, 1998. The 1998 Notes are redeemable at the option of the Company
commencing April 1, 2002. The 1998 Notes are senior unsecured obligations of the
Company ranking pari passu in right of payment with all existing and future
unsecured and senior indebtedness. The 1998 Notes contain terms that are
substantially similar to the 1997 Notes. The Company used approximately $54.5
million of the proceeds plus accrued interest to effect the Refinancing. As a
result of the Refinancing, the Company was refunded approximately $13.3 million
from the escrow account for the 1997 Notes, of which approximately $1.9 million
was used to pay accrued and unpaid interest on the $50.0 million principal
amount of 1997 Notes repurchased from Brooks.

On April 6, 1998, Verio entered into the Bank Facility with a group of
commercial lending institutions that committed to provide a $57.5 million
revolving credit facility secured by the stock of the ISPs that Verio
29
<PAGE> 31

owns currently or may own in the future and the Capacity Agreement. The Chase
Manhattan Bank serves as agent for the Bank Facility. The Bank Facility requires
no payments of principal until its maturity on December 31, 1999. The terms of
the Bank Facility provide for borrowings at LIBOR + 3%, with a 1% decrease in
that rate if the Company has completed a public equity offering of $50.0 million
or more. If the Company has not completed such an offering by December 31, 1998,
or by June 30, 1999, there will be a 2% increase in the rate on each such date.
There is a commitment fee of 1/2% per annum on the undrawn amount of the Bank
Facility and a one-time fee of 1/2% on any amounts drawn. The last $3.0 million
of the Bank Facility cannot be drawn except for the payment of interest.

The Bank Facility sets forth covenants restricting, among other things, the
Company's ability to borrow, to guarantee the debt of others, and to make
borrowings at the subsidiary level. The Company is also limited in its ability
to enter into transactions with affiliates, create liens on its assets, and make
certain investments. In particular, Indebtedness (less cash) may not exceed 2.35
times annualized pro forma revenues for the most recent fiscal quarter.
Dividends and certain types of investments are prohibited, as are liens incurred
for borrowed money. Borrowings under the Bank Facility would be required to be
paid down with the proceeds of new Indebtedness (as defined), certain asset
sales, Excess Cash Flow (as defined), or the net proceeds from insurance claims.

On April 7, 1998, the Company entered into agreements establishing a
strategic relationship with NTT pursuant to which the Company agreed to sell to
NTT, concurrently with and conditioned upon consummation of the Offering, a
number of shares of Common Stock equal to the lesser of (i) 12.5% of the total
number of outstanding shares of Common Stock, on a fully diluted and fully
converted basis (taking into account the Offering and the NTT Investment) or
(ii) the quotient of $100.0 million divided by 96.75% of the Price to Public in
the Offering. See "Business -- NTT Strategic Relationship" and "Principal
Stockholders -- NTT Investment."

As of December 31, 1997, the Company had approximately $72.6 million in
cash and cash equivalents (excluding restricted cash). The Company's business
plan currently anticipates investments of approximately $175.0 million in 1998
for capital expenditures, ISP acquisitions, operating losses and working
capital. The Company's anticipated expenditures are inherently uncertain and
will vary widely based on many factors including the operating performance and
working capital requirements of the Company and its existing ISP affiliates, the
number and size of additional ISPs acquired or invested in by the Company, the
cost of such additional acquisitions and investments, the operating performance
and working capital requirements of the Company's ISP affiliates including any
additional ISP affiliates and capital expenditure requirements of the Company
and any existing or additional ISPs. Accordingly, the Company may need
significant amounts in excess of its plan, and no assurance can be given as to
the actual amounts of the Company's expenditures and additional capital
requirements.

The Company expects to meet its capital needs with cash on hand, proceeds
from the sale, or issuance of capital stock, credit facilities (including the
Bank Facility), and lease financing. There can be no assurance that the Company
will have sufficient resources to fund its investment programs, particularly if
operating losses continue to increase. EBITDA decreased from negative $5.6
million in the 1996 Period to negative $29.7 million in 1997 despite an increase
in revenues from $2.4 million in the 1996 Period to $35.7 million for the year
ended December 31, 1997. EBITDA as a percentage of revenues improved from
negative 237% to negative 83% from the 1996 Period to the year ended December
31, 1997. The Company incurred $49.4 million in selling, general and
administrative expenses in 1997 as it invested in scaleable systems, hiring and
sales training, and network improvements, that it expects will result in
incremental revenue at reduced incremental costs. As a result, the Company
expects EBITDA as a percentage of revenue to improve during 1998. Although the
Company is seeking to reduce EBITDA losses as a percentage of revenues over
time, there can be no assurance that the Company will be able to do so, or that
the rate of any reduction in EBITDA losses will be as rapid as is being sought
by the Company. At December 31, 1997, on a pro forma or adjusted basis, the
Company had $57.5 million more in unrestricted cash than in long term debt and
capital leases. See "Summary Consolidated Financial Data". However, the Company
intends to use a significant portion of its cash for acquisitions, and will have
to increase revenues without a commensurate increase in costs to generate
sufficient cash to enable it to meet its debt service obligations as described
above. In the near term, the Company intends to use its excess cash and the Bank
Facility which provides for up to $57.5 million in credit

30
<PAGE> 32

until it matures on December 31, 1999. Over the longer term, the Company will be
dependent on increased operating cash flows, and, to the extent cash flow is not
sufficient, the availability of additional financing, to meet its debt service
obligations. There can be no assurance that the Company will be able to service
its indebtedness. Insufficient funding may require the Company to delay or
abandon some of its planned future expansion or expenditures, which could have a
material adverse effect on the Company's growth and its ability to compete. In
addition, the Company's operating flexibility with respect to certain business
activities is limited by covenants associated with its indebtedness. There can
be no assurance that such covenants will not adversely affect the Company's
ability to finance its future operations or capital needs or to engage in
business activities that may be in the interest of the Company.

FORWARD-LOOKING STATEMENTS

The statements included in the discussion and analysis above that are not
historical fact are "forward-looking statements" (as such term is defined in the
Reform Act), which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. The safe harbor
provisions provided in Section 27A of the Securities Act and Section 21E of the
Exchange Act do not apply to forward-looking statements made in connection with
an initial public offering. Management cautions the reader that these
forward-looking statements addressing the timing, costs and scope of its
acquisition of, or investments in, existing ISPs, the revenue and profitability
levels of the ISPs in which it invests, the anticipated reduction in operating
costs resulting from the integration and optimization of those ISPs, and other
statements regarding matters that are not historical facts, are only
predictions. No assurance can be given that future results indicated, whether
expressed or implied, will be achieved. While sometimes presented with numerical
specificity, these projections and other forward-looking statements are based
upon a variety of assumptions relating to the business of the Company, which,
although considered reasonable by the Company, may not be realized. Because of
the number and range of the assumptions underlying the Company's projections and
forward-looking statements, many of which are subject to significant
uncertainties and contingencies that are beyond the reasonable control of the
Company, some of the assumptions will not materialize and unanticipated events
and circumstances may occur subsequent to the date of this report. These
forward-looking statements are based on current expectations, and the Company
assumes no obligation to update this information. Therefore, the actual
experience of the Company and results achieved during the period covered by any
particular projections or forward-looking statements may differ substantially
from those projected. Consequently, the inclusion of projections and other
forward-looking statements should not be regarded as a representation by the
Company, or any other person, that these estimates and projections will be
realized and actual results may vary materially. There can be no assurance that
any of these expectations will be realized or that any of the forward-looking
statements contained herein will prove to be accurate.

31
<PAGE> 33

BUSINESS

OVERVIEW

Verio is a leading national provider of Internet connectivity and enhanced
Internet services to small and medium sized businesses. Since its inception in
March 1996, the Company has rapidly established a national presence through the
acquisition, integration, and growth of local ISPs with a business customer
focus. Verio believes that small and medium sized businesses represent an
attractive target market for the provision of Internet services due to this
market's low current penetration levels and customer churn rates, and the
expanding Internet needs of these businesses. Because of their limited internal
technical resources, small and medium sized businesses also typically require
hands-on local support and highly reliable turnkey solutions for mission
critical applications. Verio further believes that these needs currently are
underserved by both the national and local ISPs. While national ISPs lack the
local presence to provide customized, hands-on service, local ISPs typically
lack the scale and resources required to provide dedicated, high-capacity
Internet access, around-the-clock support and tailored product offerings at
competitive prices.

The Company believes it has a unique competitive advantage in serving small
and medium sized business customers through the combination of the technical
competency, hands-on support and entrepreneurial culture of locally based ISPs
with the quality and economic efficiency of Verio's national network,
operational infrastructure and financial strength. Verio has quickly built
critical mass by acquiring the stock or assets of, or making significant
investments in, over 35 ISPs that provide a comprehensive range of Internet
connectivity and enhanced products and services to over 100,000 customer
accounts in 36 of the top 50 MSAs in the country, with combined revenues of
approximately $25.0 million for the three months ended December 31, 1997. The
Company integrates and optimizes the operations of its ISPs by consolidating
their operations into regional operating units with centralized regional
management, connecting their local networks to Verio's high-speed, highly
reliable national backbone, and providing them with Verio's integrated national
support services.

INDUSTRY BACKGROUND

Internet connectivity and enhanced Internet services represent two of the
fastest growing segments of the telecommunications services market. Total ISP
revenues in the United States are projected to grow from $3.3 billion in 1996 to
$18.3 billion in 2000, according to IDC, an independent company that prepares
market studies relating to the Internet. The availability of Internet
connectivity, advancements in technologies required to navigate the Internet,
and the proliferation of content and applications available over the Internet
have attracted a rapidly growing number of users. Businesses are increasingly
recognizing that the Internet can significantly enhance communications among
geographically distributed offices and employees as well as with customers and
suppliers. In addition, the Internet presents a compelling profit opportunity
for businesses as it enables them to reduce operating costs, access valuable
information and reach new markets. As a result, businesses increasingly are
utilizing the Internet for mission critical applications such as sales, customer
service and project coordination. IDC estimates that U.S. corporate dedicated
access revenues will grow from $1.1 billion in 1996 to $5.6 billion in 2000,
representing a 50% compounded annual growth rate. There can be no assurance that
the bases for these projections or the results generated thereby will be
realized.

In addition to Internet connectivity, business customers increasingly are
seeking a variety of enhanced products and applications to take full advantage
of the Internet. For example, a growing number of businesses are implementing
secured virtual private networks ("VPNs") over the Internet as a more economical
option

32
<PAGE> 34

than dedicated private networks. Technological advances such as increases in
microprocessor speeds, the introduction of innovative software tools and the
development of higher bandwidth data networking technology have led to rapid
innovation and development of enhanced Internet services. The principal enhanced
services being offered by business-oriented ISPs today include Web hosting,
security, e-commerce, virtual private networks (sometimes called "intranets" and
"extranets"), and advanced Internet applications such as voice and fax, video
conferencing and data storage and retrieval solutions. According to IDC,
enhanced services is the fastest growing segment of the Internet services market
and is expected to grow from $126 million in 1996 to over $7 billion in 2000. As
business users of the Internet adopt enhanced services, they also require
additional bandwidth to support their expanded use of the Internet. The Company
expects this trend to continue as high-bandwidth enhanced services continue to
be developed, improve and proliferate and as Internet usage continues to expand.

Industry analysts have reported that small and medium sized businesses
represent a potential market of over seven million customers in the U.S., and
use of the Internet by this market segment is expected to grow substantially
from its current low level of market penetration. IDC predicts that dedicated
connections to the Internet for small and medium sized businesses will grow from
approximately 90,000 in 1996 to just under 800,000 in 2000, representing a 73%
compounded annual growth rate. Small and medium sized businesses generally seek
an ISP with locally based personnel who are readily available to respond
in-person to technical issues, who can assist in developing and implementing the
customer's effective use of the Internet, and with whom they can establish a
stable and long-term relationship. In addition, they are increasingly reliant on
enhanced product offerings that address their specific business needs on a
cost-effective basis, allowing them to compete with larger companies. For
example, IDC estimates Web hosting revenues from small and medium sized
businesses will grow from $84 million in 1996 to over $3.4 billion in 2000,
representing 95% of the total Web hosting market.

The rapid development and growth of the Internet has resulted in a highly
fragmented industry of over 4,000 national and local ISPs in the United States,
with no dominant ISP serving the needs of small and medium sized businesses. The
large national ISPs have primarily focused on the large business or consumer
markets and lack the local presence to provide the customized, hands-on service
required by small and medium sized businesses. The Company believes that
independent local and regional ISPs generally have been more adept at serving
small and medium sized businesses, and that these ISPs are often the source of
innovative Internet products and services. As a result, independent regional and
local ISPs have successfully captured approximately one-half of this market,
despite the substantially greater resources of the national providers. However,
rising costs and increasing demands from business customers are making it more
difficult for the small ISP to meet its customer's demands on a cost-effective
basis. Facing these competitive pressures, Verio believes that independent
regional and local ISPs will continue to be attracted to and benefit from the
consolidation opportunity provided by Verio.

THE VERIO SOLUTION

Verio is a leading provider of Internet connectivity and enhanced Internet
services to small and medium sized businesses. The Company's business strategy
of combining national scale with local presence was specifically developed to
serve the needs of this market sector. Verio has taken a leading role in
consolidating the fragmented, independent ISP industry, rapidly establishing its
national presence through the acquisition, integration, and growth of
established, well-regarded regional and local ISPs with a business customer
focus. The Company believes it has a unique competitive advantage in serving
small and medium sized business customers. Verio's combination of national scale
with local presence provides distinct and significant value to these customers,
which the Company expects will result in long-term customer loyalty and an
expanding customer base. Verio intends to enhance this value as it continues to
develop, both internally and through strategic vendor relationships, an
expanding array of enhanced, higher margin product and service offerings to
continue to address the business needs of its customers. The Company further
believes that the small and medium sized business market is more attractive than
the consumer or large business market segments for Internet services, in large
part due to the stability of the customer relationship resulting from the
customer's reliance on its service provider's hands-on technical support and
ability to provide a turnkey Internet solution based on customized products and
services designed for the customer's particular business needs. The

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<PAGE> 35

Company's market research indicates that Verio's local presence, providing
around-the-clock, hands-on technical support and tailored Internet service
solutions combined with its high speed, highly reliable national backbone, will
be significant factors in the purchase decision for the small and medium sized
business customer, as well as being a critical factor driving customer loyalty.

THE VERIO STRATEGY

Continue Consolidation Through Acquisitions. Verio has rapidly established
a national presence and critical customer mass by acquiring the stock or assets
of, or making significant investments in, established, well-regarded independent
ISPs in selected regions throughout the U.S. The Company intends to continue its
consolidation strategy, acquiring additional business-focused ISPs to deepen and
broaden its market presence and to expand its strength in targeted product areas
such as Web hosting. Given the increasing competitive pressures facing the
independent local and regional ISPs, Verio believes that these ISPs will
continue to be attracted to and benefit from the consolidation opportunity
provided by Verio. As part of its integration strategy, the Company now seeks to
acquire 100% of new ISP affiliates and has effected the Buyouts of all but two
of the ISPs in which it did not initially acquire 100% ownership. See "-- ISP
Ownership Structure." The Company's decentralized regional management structure
and equity incentive programs that are tied to regional performance foster
continued entrepreneurial culture, local responsiveness and internal growth.

Integrate Operations and Capture Economies of Scale. The Company integrates
and optimizes the operations of the ISPs it acquires by consolidating their
operations into regional operating units with centralized regional management,
connecting their local networks to Verio's high-speed, highly reliable national
backbone, and providing them with Verio's integrated national support services.
These services include national network transit, 7-day X 24-hour network
monitoring and management, customer technical support, a sophisticated billing
and collections system, financial information management through a central,
standardized accounting system, and national marketing and product development
programs. Through this integration of its national infrastructure with its local
ISP operations, the Company believes that it has achieved a significant degree
of operational control and efficiency and has improved the quality, consistency,
and scalability of its services. The Company also has leveraged its national
scale to establish peering relationships, to obtain favorable national
purchasing contracts and to establish strategic relationships with key hardware,
software and telecommunications providers. These providers view Verio as a
powerful distribution channel. For example, Verio has entered into an agreement
with Microsoft whereby Verio is offered as an "in the box" Web hosting program
for Microsoft's FrontPage product and for Microsoft's Small Business Server
Referral program, which facilitates small businesses' entry to the Internet
using Verio's network. In addition, Verio has negotiated advantageous volume
purchase agreements with key vendors such as Cisco and Raptor. In addition,
Verio has established public or private peering relationships with nearly all of
the major national ISPs, as well as with over 90 smaller domestic and
international networks. Furthermore, the Company's scale also allows it to
support a high quality national network and invest in leading edge systems for
network management, billing, customer service, and financial information.

Develop and Offer Enhanced Products and Services to Increase
Revenues. Small and medium sized businesses are purchasing an increasing number
of enhanced products and services as these businesses deploy mission critical
applications on the Internet. As a result, the Company believes that it will be
able to derive incremental revenue from these customers by selling an expanding
array of enhanced services and additional bandwidth to support these services.
The Company accelerated its ability to provide sophisticated Web hosting on a
national scale through its acquisition of Internet Servers, Inc. ("iServer").
While Internet connectivity
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<PAGE> 36

and Web hosting constitute the predominant services offered by Verio today, a
number of additional high-margin enhanced services are being offered by the
Company. These additional services include VPN, security services, electronic
commerce, intranet services and other advanced Internet applications. Verio
encourages continued innovation within its regional operations, and supports the
identification and transfer of products, services and "best practices" among its
regional operations. In addition, the Company's product development groups are
focused on additional services to be developed both internally, through
acquisition, and in conjunction with strategic partners. Verio has entered into,
and expects to continue to enter into, relationships with selected Internet
hardware, software, service and distribution companies to enhance the Company's
ability to deliver cost-effective solutions to its customers, to gain early
access to new technology, to cooperatively market and sell these new products,
and to gain access to their distribution channels for the purpose of lead
generation and customer acquisition.

Build Customer Loyalty and Brand Name Recognition. The Company's goal is to
achieve national recognition as the leading provider of Internet services to
small and medium sized businesses by rebranding its ISPs under the Verio name.
The Company intends to leverage its local presence by continuing to expand and
enhance local technical, distribution and customer support capabilities. By
combining the quality of local service offered through the Company's regional
operations with the Company's national backbone and support services, the
Company expects to generate increased customer loyalty and expanding market
share at the local level while enhancing its national brand. In conjunction with
the consolidation of its ISPs into integrated regional operating units, the
Company has branded these regional operations under the Verio name, with a
regional or local geographical identifier to emphasize its local presence. As
the Company continues to expand, its acquisition strategy will be to continue to
identify and select ISPs that have developed a strong local presence through
quality service, hands-on customer support, local market knowledge and an
entrepreneurial culture.

THE VERIO ORGANIZATION

To date, the Company has pursued a regional acquisition strategy, acquiring
independent, locally based ISPs in selected geographic regions. In each region,
the Company typically sought a larger regional ISP to serve as the focal point
for the region and as the vehicle for integrating and optimizing the networks
and operations in that region. The Company also has invested in smaller ISPs to
increase its local presence and market share. Having established a presence in
each of its initially targeted regions, the Company has expanded its target
markets to encompass all of the top 50 MSAs and is continuing to add
incrementally to its presence within its existing regions. It is also in the
process of consolidating most of the Verio ISP operations within each region
into single, integrated operating units.

The Company conducts its operations with both a national and regional
approach. As of April 24, 1998, the Company had acquired the stock or assets of,
or invested in, ISPs in nine regions of the country, and now has operations in:
the Pacific Northwest, serving the primary MSAs in Washington, Oregon and Idaho;
Northern California, serving the greater Bay Area, Stockton and Sacramento;
Southern California, serving the Los Angeles area, Orange County and San Diego;
Texas and Louisiana, serving all of the major cities in Texas as well as New
Orleans; the Mid-Atlantic, serving the Washington DC, Baltimore, Richmond and
the I-95 corridor; the Northeast, serving the major MSAs from New Jersey to
Boston and Upstate New York; the Midwest, serving Chicago, Detroit, Ann Arbor,
Kansas City, St. Louis, Milwaukee, Omaha, Tulsa and Des Moines; and the
Southeast, where the Company has recently completed its first acquisition of an
ISP, serving the Miami and Fort Lauderdale areas. In addition, the Company has
funded a start-up operation in the Rocky Mountain region, which is in the early
stages of establishing a presence in the Denver area and along the Front Range.
Verio also has substantially increased its national Web hosting presence with
its acquisition of iServer, based on which Verio has established a national
operating division through which it can offer Web hosting services to ISP
customers throughout its regions. The Company is now focusing its efforts on
seeking greater coverage in the Midwest and establishing its presence in the
Southeast. The Company has executed a definitive agreement to acquire an
additional ISP in the Northeast region. The Company believes that consummation
of this acquisition is probable. Accordingly, financial information for this
acquisition is reflected in the pro forma financial statements contained herein.
Nonetheless, there can be no assurance that all of the closing conditions will
be satisfied or that the Company will consummate this acquisition. In

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<PAGE> 37

addition, the Company has executed non-binding letters of intent to acquire two
additional ISPs which, if consummated, would further enhance the Company's
market presence in the Midwest and Southeast regions.

The following chart identifies, by operating region, the 37 ISPs acquired
or invested in by Verio, or from which Verio has acquired significant assets, as
of April 24, 1998. It also includes the additional ISP subject to a definitive
acquisition agreement as of April 24, 1998, the consummation of which the
Company believes is probable. The chart provides certain summary information
concerning Verio's revenues for the three months ended December 31, 1997 as if
all such ISPs (other than one ISP in which the Company holds a minority
interest) had been owned by the Company at such date.

<TABLE>
<CAPTION>
REVENUE FOR THE
THREE MONTHS ENDED
OPERATING REGION TOP 50 MSAS SERVED ACQUISITIONS DECEMBER 31, 1997(1)
---------------- ------------------ ------------ --------------------
(IN THOUSANDS)
<S> <C> <C> <C>
VERIO NORTHWEST $ 5,667
- Seattle, WA - NorthWestNet, Inc.
- Portland, OR - Access One, Inc.
- RAINet, Inc.
- Internet Engineering
Associates, Inc.
- Pacific Rim Network, Inc.
- Structured Network
Systems, Inc.
VERIO NORTHERN CALIFORNIA 2,411
- San Francisco - Aimnet Corporation
- Sacramento - CCnet Inc.
- San Jose - West Coast Online, Inc.
- Oakland - NSNet, Inc.
VERIO SOUTHERN CALIFORNIA 2,892
- Los Angeles - Compute Intensive Inc.
- San Diego - ATMnet
- Riverside/San
Bernardino
- Orange County
VERIO TEXAS/GULF SOUTH 4,283
- Houston, TX - On-Ramp Technologies, Inc.
- Dallas, TX - Signet Partners, Inc.
- San Antonio, TX - National Knowledge
- Ft. Worth, TX Networks, Inc.
- New Orleans, LA - Communique, Inc.
- Sesquinet
VERIO MID-ATLANTIC 1,800
- Washington, DC - Clark Internet Services,
- Baltimore, MD Inc.
- Monumental Network
Systems, Inc.
- Internet Online, Inc.(2)
VERIO NORTHEAST 3,282
- New York, NY - Global Enterprise Services
- Boston, MA - Pioneer Global
- Philadelphia, PA Telecommunications, Inc.
- Pittsburgh, PA - ServiceTech, Inc.
- Hartford, CT - Surf Network, Inc.
- Newark, NJ - PREPnet
- Buffalo/Niagara, NY - Wingnet
- Providence, RI - LI Net, Inc.
- Nassau/Suffolk, NY - Matrix Online Media Inc.
- Bergen/Passaic, NJ (d/b/a SpaceLab)(3)
</TABLE>

36
<PAGE> 38

<TABLE>
<CAPTION>
REVENUE FOR THE
THREE MONTHS ENDED
OPERATING REGION TOP 50 MSAS SERVED ACQUISITIONS DECEMBER 31, 1997(1)
---------------- ------------------ ------------ --------------------
(IN THOUSANDS)
<S> <C> <C> <C>
VERIO MIDWEST 3,071
- Chicago, IL - Verio Chicago(4)
- St. Louis, MO - Global Internet Network
- Detroit, MI Services, Inc.
- Kansas City, MO - RustNet, Inc.
- Milwaukee/Waukesha, WI - Branch Information
Services, Inc.
- STARnet, L.L.C.
- Computing Engineers Inc.
(d/b/a Worldwide Access)
VERIO ROCKY MOUNTAIN 49
- Denver, CO - Verio Colorado(5)
- Salt Lake City, UT
VERIO SOUTHEAST 393
- Miami, FL - Florida Internet
- Fort Lauderdale, FL Corporation
VERIO WEB HOSTING 1,155
- National Product - Internet Servers, Inc.
Offering
Total: $25,003
=======
</TABLE>

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

(1) These amounts reflect the revenues of all of the Verio ISPs in each region
(other than Internet Online, in which the Company holds a minority
interest) for the three months ended December 31, 1997, including one ISP
which is subject to a definitive acquisition agreement (the consummation of
which the Company believes is probable).

(2) Verio currently owns approximately 33% of the fully diluted equity of this
ISP. The revenue of this ISP for the three months ended December 31, 1997,
which was approximately $459,000, is not included in the revenue
information provided above.

(3) Verio and Matrix Online Media, Inc. (d/b/a SpaceLab) have executed a
definitive agreement pursuant to which Verio expects to acquire 100% of the
stock of this ISP. The Company believes that consummation of this
acquisition is probable, and closing is expected to occur prior to
consummation of the Offering subject to satisfaction of certain closing
conditions. Accordingly, the revenue information presented above includes
the revenue of this ISP for the three months ended December 31, 1997.

(4) Funded as a start up to oversee Midwest operations and initiate operations
in Chicago.

(5) Funded as a start up to oversee Rocky Mountain operations and initiate
operations in the primary Colorado business centers. Verio Rocky Mountain
(d/b/a Verio Colorado) is owned 69% by Verio, and therefore is consolidated
for financial reporting purposes.

PRODUCTS AND SERVICES

The Company currently offers, through its regional ISP operations, a
comprehensive range of Internet connectivity and enhanced products and services.
The specific products offered in each market are determined by the needs of the
market and local telco tariffs. The Company intends to continue to develop a
broad range of enhanced products and services independently, through
acquisition, and through strategic relationships with key vendors.

Connectivity Services. Verio offers a variety of connectivity solutions,
which include Internet access and third-party software and hardware
implementations and configuration services, which are offered in bundled and
unbundled packages. Internet access currently includes ISDN, frame relay, leased
line access, dial-up and xDSL connectivity. The Company is participating in
trials for the deployment of new access technologies, such as wireless access.
The Company also offers a full range of customer premise equipment ("CPE")
hardware required to connect to the Internet, including routers, CSU/DSUs,
servers and other products as needed. Verio's regional operating units are able
to take advantage of the Company's national purchasing and leasing relationships
with a variety of partners in order to realize improved hardware pricing, lower
cost leasing

37
<PAGE> 39

arrangements and bundled service offerings. Verio also offers a selection of
software products including browsers, electronic mail, news and other solutions
that permit customers to navigate and utilize the Internet. Additionally, Verio
provides turnkey configuration solutions encompassing such services as domain
name server ("DNS") support, telco line provisioning, IP address space
assignment, router set-up, e-mail configuration, router security configuration
and other set-up services.

Enhanced Services. The Company believes that its small and medium sized
business customers will continue to increase their use of the Internet as a
business tool and, as a result, will require an expanding range of enhanced
services. The Company currently offers a variety of enhanced services. In
addition, the Company's national marketing group is focused on developing new
enhanced services through both internal development, acquisition and strategic
relationships with software, hardware and content providers. The Company's
current and planned enhanced services offerings include the following:

- Web Hosting and Co-location. Web hosting offers business customers a
presence on the Internet, enabling them to take advantage of the
marketing, customer service, internal company information dissemination
("intranets") and other benefits offered by such presence. Verio offers
its customers Web hosting services on a national basis as well as through
local data centers. The services include the full range of Web hosting,
Web design, Web site maintenance and ongoing consulting services through
a combination of internal efforts and the use of independent partners.
The Company also offers Web site co-location, where a customer-owned Web
server is located at a Verio POP for higher reliability. This solution
allows the customer to own its own Web server without having to maintain
and manage the data center environment. The Company's acquisition of
Utah-based iServer gives the Company access to proprietary Web server
technology, an extensive network of Web hosting resellers and over 25,000
hosted Web sites. The Company believes it will be able to leverage
iServer's proprietary "virtual server" technology across its regional
operations to accelerate the growth and increase the profitability of its
Web hosting product line. In addition to offering Web hosting services,
the Company has established national Web hosting and co-location services
by operating high-end, highly reliable data centers positioned close to
major network access points. The Company is consolidating the majority of
its Web hosting capability into its regional data centers across the
country, strategically located near the Company's public and private
peering points. The Company also intends to implement emerging content
distribution technologies such as content replication ("mirroring") and
caching for enhanced end user performance. Currently, the Company
supports over 35,000 domains and provides hosting services to over 1,600
resellers.

- Security. Security solutions are a vital component for most businesses
connected to the Internet. These solutions, which include firewalls,
packet filter and proxy servers, give the customer (i) an ability to
prevent intruders from accessing its corporate network, (ii)
authentication of users attempting to gain access, and (iii) encryption
services, providing secured transmission of company data through the
Internet. The Company currently offers a comprehensive set of firewall
products from Raptor, including the sophisticated Eagle Firewall(TM) and
the more simplified products known as The Wall(TM). The Company also
offers proxy server solutions such as the Microsoft Proxy Server.
Additionally, the Company offers a "managed" security solution that
provides ongoing detection and prevention of intrusions. The Company
plans to expand its security product line with new solutions that
simplify, reduce cost, or offer greater functionality as they become
commercially available.

- Virtual Private Network ("VPN"). Many companies today have private data
communication networks, which are often referred to as wide area networks
("WANs") and built on expensive leased lines, to transfer proprietary
data between office locations. The Internet offers companies a cost-
effective replacement alternative to WANs through VPNs, which are meant
to provide secure transmission of private Internet Protocol ("IP")
traffic through the Internet. Additionally, many companies require that
their employees have remote access to these private networks from home or
while traveling. VPN products are available in hardware, software, and
firewall formats. VPN products are also the basis for offering intranet
and extranet services. Intranets are corporate/organizational networks
that rely on Internet-based technologies to provide secure links between
corporate offices. Extranets expand the network to selected business
partners through secured links on the Internet.

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<PAGE> 40

Increasingly, companies are finding that intranets and extranets can
enhance corporate productivity more easily and less expensively than
proprietary systems. The Company currently offers its customers a number
of VPN solutions, including Raptor's VPN products, and is in the process
of evaluating additional products to meet the needs of customers.

- National Roaming. Employees of small and medium businesses are
increasingly dependent on accessing their e-mail while on the road.
Currently, many users either cannot do so because of the limitations of
their local ISP, or they are required to pay expensive long distance
access charges. The Company is in the process of implementing a national
dial-up access roaming product to enable dial-up business customers to
access the Internet locally as they travel throughout the country and
abroad.

- Electronic Commerce Solutions. Electronic commerce provides users the
ability to sell products and services on the Internet. The Company
currently provides e-commerce capability to over 500 customers by
providing the three principle functions of electronic commerce: secure
socket layer, shopping cart support, and transaction processing
capability. Secure socket layer ("SSL") is provided through its Premier
Business Partner relationship with Verisign for digital certificates. The
Company supports a large variety of shopping carts, including Shop Site
by Icentral, and provides support for third party transaction processing
through Cybercash and AuthorizeNet. The e-commerce solutions are packaged
according to the complexity of the individual customer's needs. The
Company also intends to provide enhanced e-commerce hosting environments,
as well as to make use of third party software development partners to
provide certain turnkey e-commerce applications, such as an on-line
catalogs.

- Professional Services. The Company's target customers typically do not
have the internal resources or personnel to design and maintain Internet
services. As more businesses utilize the Internet for mission critical
applications, the Company expects its customers to rely on their ISP for
support of many of their information technology applications. As a
result, the Company believes it will be increasingly important for ISPs
to offer onsite, technical consulting to customers. The Company currently
offers a full complement of professional services to its customers,
including network and system design, Web content creation, security
system needs analysis and implementation, virtual private network design
and implementation, and other Internet-related consulting projects. The
Company intends to invest in additional professional services
capabilities as they are required to provide customers with turnkey
Internet solutions.

- Enhanced Products and Services. Customers are increasingly seeking to
tailor the use of the Internet to their business. Verio intends to serve
these needs through the packaging and configuration of third party
applications, such as IP telephony (which permits users to make voice
calls on the Internet), Internet faxing, Internet audio and video
conferencing solutions, and other applications that may be developed. As
businesses commit to using the Internet, the Company believes that the
advanced applications product category will continue to expand, offering
additional revenue opportunities. For example, the Company currently
provides mail list services to customers that have a need to send out
hundreds of thousands of e-mail messages to their customers, suppliers
and prospects.

Verio has and intends to continue to enter into agreements with Internet
companies to leverage their products, brand names, distribution channels and
other assets. Verio believes that its existing Internet product and service
partners have been attracted to the Company because of its broad geographic
coverage, ability to influence purchase decisions of its business customers, and
the ability of the Verio sales forces to sell complex Internet solutions. The
Company has established strategic relationships with software providers such as
Microsoft, Oracle and Raptor, and equipment providers such as Cisco and
Farallon, and intends to expand its strategic relationships with additional
providers of key products and services. These relationships provide the Company
with benefits including preferred pricing, access to the latest products,
co-marketing with the vendors, tailored product training and access to the
vendor's distribution channels to generate leads for new customers.

39
<PAGE> 41

SALES AND MARKETING

Verio offers its products and services through a consultative sales
approach which makes use of local technical talent to understand customer
applications and provide bundled Internet applications solutions consisting of
hardware, software, access and value-added services. Verio believes that this
localized approach will allow it to provide end-to-end customer solutions and
ongoing support. Verio has significant distribution capabilities both through a
direct sales force and indirect channels. The direct sales forces offer a core
base of technically competent, locally based and experienced Internet sales
representatives. Verio is focusing efforts on expanding the direct sales force,
further developing indirect channels and optimizing lead generation techniques
to reduce the cost of new customer acquisitions.

The Company currently provides Internet services to over 100,000 customer
accounts. Over 6,000 of these customer accounts receive dedicated connectivity
services from Verio, and over 14,000 represent Web hosting or Web site server
co-location services provided by Verio. Through the Company's Web services, over
35,000 domains (e.g. yourcompany.com) are hosted. The over 80,000 remaining
accounts are provided dial-up connectivity services, the majority of which are
used for business purposes.

Direct Sales. Verio has a direct sales force of more than 150 individuals.
These local sales representatives have a strong Internet technical background
and understand the local telecommunications tariffs as well as the needs of
their local business community. Additionally, these representatives are familiar
with local companies to assist in implementing customized solutions such as Web
page content development. Because they are locally based, these sales
representatives are able to meet face-to-face with prospective customers to
discuss their Internet needs and technical requirements and develop tailored
solutions. The Company has developed programs at the national level to attract
and train high quality, motivated sales representatives that have the necessary
technical skills, consultative sales experience and knowledge of their local
markets. These programs include technical sales training, consultative selling
techniques, sales compensation plan development, and sales representative
recruiting profile identification. Through the effective use of these
initiatives, Verio plans to continue to expand its direct sales force. At the
local level, direct marketing techniques are being employed to target customer
segments that would achieve substantial benefit from the business applications
afforded by the Internet. Some direct marketing tactics include direct mail,
telemarketing, seminars and trade show participation. The Company works with key
vendors to assist in these direct marketing efforts. Verio co-markets with these
vendors through direct mail programs, joint seminar development and joint trade
show involvement.

Resellers and Indirect Sales. The Company has an authorized reseller and
referral program that permits the regional operating units to adapt a formal
indirect distribution program to their markets. The Company believes indirect
channels are a significant contributor to its growth. The Company already has
over 1,700 formal and informal reseller arrangements established. The authorized
reseller program offers reseller partners the ability to share in the on-going
revenue stream of customers they bring to Verio. Reseller partners include
system integrators, value-added resellers and other companies that have an
established relationship with the prospective customer base, and have a sales
force capable of selling Internet services as a part of the reseller's suite of
services. Referral partners, including organizations such as Web designers,
advertising agencies or property managers, are another source of customer leads.
The referral program targets organizations that are less capable of or
interested in selling Internet services or where Internet services fall outside
their core business interests. The benefits of these programs to Verio include
greater market reach without fixed overhead costs and the ability to use the
partners to assist in the delivery of complete solutions to meet customer needs.
In addition to local resellers, Verio is working with several national companies
to expand its indirect sales capability.

Branding. The Company has recently announced the consolidation of the
operations and marketing efforts of all of its ISPs under the Verio brand name,
with a regional or local geographical identifier to emphasize its local
presence. The Company has undertaken national public relations efforts to raise
the awareness and visibility of Verio in its target market.

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<PAGE> 42

VERIO NATIONAL NETWORK

Overview. Verio owns and operates a national network, providing a high
bandwidth, highly reliable data transmission path connecting Verio's customers
to the Internet, which the Company believes is adequate for the provision of
current and future planned access and enhanced services needs. The Company's
national network interconnects more than 15 national nodes and over 180 local
POPs across the United States. The Company believes that aggregating the
bandwidth and capacity requirements of its regional operations onto one national
network provides operational control and efficiency, reduces costs, provides
redundancy, and results in a higher quality service, thereby addressing some of
the most significant challenges that an ISP faces in supporting its customers.
Verio's national infrastructure also incorporates several other elements
critical to maintaining the highest quality Internet service, including a high
capacity and reliable national network, peering relationships with other
national ISPs, sophisticated network management tools and engineering support
services. The reliability of the national network is the result of many factors,
including but not limited to redundant routers and other critical hardware,
carrier class facilities at POP locations (such as back up power, fire
suppression and climate control), and redundant telecommunications lines.

Network Infrastructure. As of April 1998, the national network carried
traffic for 27 of the ISPs acquired to date. The remaining ISPs' traffic will be
added as growth drives the need for additional capacity, as private and public
peering is implemented and as their current transit contracts expire.

Following is a diagram of the Company's national network as of April 1998:

[MAP]

41
<PAGE> 43

Currently, the national network architecture includes a presence at
selected national exchange points and redundant network nodes to link the
Company's regional networks to the national network. As of April 1998, Verio's
network included connectivity at MAE West, MAE East and the NY NAP, each of
which is a major national exchange point for ISPs. The Company also has a
presence at the Palo Alto Internet Exchange (PAIX), NASA Ames and a number of
other regional connecting points, including Seattle, Washington; Portland,
Oregon; Sacramento and San Diego, California; Denver, Colorado; Dallas and
Houston, Texas; Chicago, Illinois; Ann Arbor, Michigan; Philadelphia,
Pennsylvania; and Boston, Massachusetts. Each of these Verio locations features
leading router technology. The equipment is located in facilities leased from a
variety of telecommunications providers, including MCI, Sprint, MFS, Brooks and
others. These access points are linked, using a nationwide, high-speed DS-3 (45
Mbps) and OC-3 (155 Mbps) ATM, and DS-3 and OC-3 clear line network
infrastructure, utilizing capacity leased from a variety of national telco
providers, including Sprint, MCI, WorldCom and Qwest. The ATM portion of the
network relies on Sprint's 4-fiber ring SONET network. Sprint's SONET
architecture is designed to survive multiple failures with near instant
restoration to full capacity, thereby providing highly reliable performance.
This combination of clear channel circuits, ATM and router architecture provides
reliability to the network through path diversity and redundancy. Verio's
regional operating units either co-locate at these access nodes or lease
connectivity from a local service provider such as an RBOC or other LEC to
connect to the Verio equipment.

Work has begun to add national access nodes to serve additional parts of
the Midwest, Southern California, Texas, the Northeast and the Southeast which
the Company currently plans to put on-line during the remainder of 1998.
Multiple national access nodes facilitate connection to Verio's national network
by its regional operations. The Company plans to add additional private peering
points and access nodes as it acquires more ISPs and expands operations, and to
further increase network capacity as the need for additional bandwidth arises.

The national network is planned to allow for rapid expansion of bandwidth
through scaleable design supported by multiple local access and interexchange
carriers to provide the required bandwidth. The Company has begun the migration
of selected links from ATM to clear line. It is anticipated that the Company
will require nationwide OC-3 capacity in late 1998 to handle its projected
traffic requirements. The Company anticipates the potential need to exceed OC-3
speeds in 1999.

On March 31, 1998, the Company entered into a 15-year Capacity and Services
Agreement (the "Capacity Agreement") with Qwest, under which the Company will
have access to long haul capacity and ancillary services on Qwest's planned
16,285 mile MacroCapacity(SM) Fiber Network. Over the first seven years of the
term of the Capacity Agreement (the "Commitment Term"), the Company must
purchase, and Qwest must provide, not less than $100.0 million, in the
aggregate, of such capacity and services (the "Commitment"), at agreed upon
prices. The amount of capacity represented by the minimum Commitment would
satisfy less than 50% of the Company's currently projected long haul capacity
requirements over the Commitment Term. However, the Company has the right to
order capacity and services in excess of the Commitment level, and after the
expiration of the Commitment Term, at the same agreed upon prices. The Company
also currently is party to a number of other long haul capacity agreements with
additional telecommunication providers. These agreements are for various terms
(of up to 5 years), and have varied pricing. Verio anticipates that it will
satisfy a substantial portion of its capacity and ancillary services needs under
the Capacity Agreement, because it believes that the agreed upon pricing levels
will significantly reduce the per unit costs that it otherwise would pay under
its other existing long haul capacity agreements.

The Company believes that the currently installed Cisco routers will be
sufficient to support its traffic routing needs up to and including OC-3 speeds.
To handle the routing at speeds higher than OC-3, new technology will be
required. The Company is investigating and testing various options to support
these higher speeds and bandwidth requirements. Verio's options include
switching, higher capacity and faster routers, or hybrid routing and switching
solutions.

Peering Relationships. By implementing its own national network and
establishing peering relationships with other national ISPs, the Company
believes it can lower the cost of its Internet transit and increase the
performance and reliability of its network operations. Peering is the Internet
practice under which ISPs

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<PAGE> 44

exchange each other's traffic without the payment of settlement charges. The
basis on which the large national ISPs make peering available or impose
settlement charges is evolving as the provision of Internet access and related
services has expanded and the dominance of a small group of national ISPs has
driven industry peering practice. Recently, companies that have previously
offered peering have cut back or eliminated peering relationships and are
establishing new, more restrictive criteria for peering. The Company believes
that substantial traffic volume and national scale will continue to be the focal
criteria necessary to establish and maintain peering relationships. As a result,
it has become increasingly important for companies seeking to take advantage of
peering to have significant traffic, a national network and monitoring
capability.

The Company has established public or private peering relationships with
nearly all of the major national ISPs, as well as with over 90 smaller domestic
and international networks. Some large network providers now prefer to peer at
private exchange points rather than at national exchange points. This preference
represents the desire to accomplish the exchange of high bandwidth traffic in a
more efficient manner rather than to risk congestion and equipment failure at
public exchange points. The Company has moved its GTE Internetworking and DIGEX
public peering points to private peering locations and is in the process of
moving its MCI public peering points to private peering locations. Verio also is
evaluating additional private peering proposals from other national ISPs. The
Company currently anticipates that, as Verio's traffic grows, more peering
relationships can be obtained. However, no assurance can be given that peering
relationships will continue to be made available to the Company. Even if these
relationships are not maintained or established, Verio believes that it will be
more economical for Verio to maintain an exchange point transit agreement than
to pay other national ISPs for transit. See "Risk Factors -- Dependence upon
Implementation of Network Infrastructure; Establishment and Maintenance of
Peering Relationships."

National Network Management. The Company considers world-class network
management an essential capability for network monitoring and expansion,
maintaining high customer satisfaction and improving network quality. The
Company has established a 7-day X 24-hour NOC to allow continuous monitoring of
the network and to provide a single point of contact for real-time network
status information and customer technical problem resolution. The NOC is
designed to provide real-time alarming, event correlation, traffic management
and forecasting, and distributed notification of the network events and network
status. The Company utilizes many leading edge systems to provide the NOC
capabilities. The Company currently monitors the national network and the local
networks of approximately 18 of the ISPs it has acquired. The Company plans to
provide network and customer monitoring throughout its regional operations by
the end of 1998.

Engineering Support Services. The Company has negotiated national level
telecommunications contracts with LECs, such as MFS/WorldCom, providing
favorable terms for local transport. The Company plans to expand national
purchasing and leasing benefits as well as technical planning and support to
improve the performance, reliability and economics of its regional networks.
National level purchasing benefits include both cost and vendor performance
issues as well as the provisioning of spare equipment and additional technical
support from the suppliers. National level distribution agreements have been
negotiated with a number of additional national-scope suppliers. The Company's
relationships with Sprint and MCI provide discounted services including leased
line, local access and long distance. Co-location agreements have also been
established with companies such as Sprint, MCI, Brooks, MFS/WorldCom and Digital
Equipment Corporation. The Company is pursuing additional vendor and
telecommunication relationships in an effort to reduce the cost of equipment and
improve network quality.

Technical Planning and Support. The national engineering team provides
engineering support for routing configurations, telecommunications management
and pricing, development of local networks and purchasing and contract
negotiation. The national engineering team also works with the regional
engineering teams to nationalize certain network elements, improve performance
and reduce network costs. Support includes Internet protocol addressing support,
training and technology. This effort of sharing ideas and best practices among
the national team and the regions is intended to enhance the engineering talent
available locally and to share best practices nationally.

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NATIONAL SUPPORT SERVICES

In addition to its national network and network monitoring capability,
Verio has developed and implemented three critical national support services
designed to increase operational efficiencies and enhance the quality,
consistency and scalability of the Company's services. These support services
include 7-day X 24-hour customer technical support and service, financial
information management through a central, standardized accounting system, and a
sophisticated billing and collections system. The strategy of creating a
partnership between local support teams and Verio's established national support
services enables the Company to capture economies of scale, improve quality and
responsiveness, and increase productivity, while allowing local personnel to
focus on relationships with customers.

Customer Technical Support. Verio's customer care combines the
responsiveness and on-site capabilities of local ISP presence with the scale
economies of a national customer support center in order to deliver customer
care to businesses. While local, independent ISPs bring the benefits of
understanding customer needs and providing hands-on support demanded by their
customers, they lack the ability to cost-effectively scale internal resources to
independently support their growing customer base. The Company's national
customer support center (located in Dallas, Texas) enables Verio to provide
7-day X 24-hour responsiveness while maintaining the ability to provide on-site
installation assistance, hands-on troubleshooting and access to local experts
who understand the customer's business. The Company is currently providing
customer care services to 23 of the ISPs it has acquired and will offer services
to all of the Verio regional operations as the national customer support center
continues to expand throughout 1998. The support center team is utilizing a
leading customer support trouble ticketing and workflow management system
offered by the Vantive Corporation. The system offers the Company the ability to
track, route, and report on customer issues and provides significant benefit in
ensuring quality and timely care to customers. Based on information received
through the trouble ticketing system, as well as through the centralized billing
and collections system, the Company is able to monitor network reliability and
outage experiences. To date, this information, as well as the low churn rates
among the Company's dedicated connectivity customers, reflects that the outages
experienced by the Company's customers, for the most part, are minor and
attributable to expected, ordinary course of business service interruptions,
telco capacity demands, and the customer's hardware and software functionality
issues. While the Company and its ISPs do not provide general service warranties
and have not instituted a uniform policy relating to the provision or extent of
service credits, the Company and its ISPs have provided and continue to provide
credits for outages resulting from network failures in certain circumstances. To
date, these credits have been immaterial. The Company will continue to monitor
outage experiences, and would expect to record appropriate reserves if the level
of outage credits becomes material.

Financial Information Management. The Company is in the process of
converting all of its acquired ISP operations to the PeopleSoft(TM) financial
reporting system and the ADP payroll/human resources system, in order to provide
a central, standardized accounting system. Currently, 19 of the ISPs acquired to
date are utilizing the financial reporting system and eight are utilizing the
payroll human resources system. These systems enable Verio to cost effectively
increase the productivity and quality of administrative support by standardizing
operational systems such as payroll, payables, purchasing and financial
reporting. These enhancements are part of the Company's initiative to implement
continuous improvement methodology and to create a learning organization.

Billing and Collections. The Company has implemented the Kenan Systems' EC
Arbor billing solution which offers high quality, flexibility,
cost-effectiveness and scalability. Kenan is a leading billing solutions
provider to the telecommunications industry, providing accurate, timely, and
easy-to-understand invoicing. This system currently serves 16 of the ISPs
acquired to date. The Company is aggressively rolling out this billing platform
to all of its regional operations and will continue on the path toward
centralized management of billing operations.

NTT STRATEGIC RELATIONSHIP

On April 7, 1998, the Company entered into agreements establishing a
strategic relationship with NTT. These agreements provide for an investment by
NTT or one of its affiliates in the Company, concurrent with

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<PAGE> 46

and conditioned upon the consummation of the Offering, for up to 12.5% of
Company's fully diluted Common Stock (after giving effect to the Offering and
the issuance of the NTT Shares) up to a maximum investment of $100.0 million, at
a 3.25% discount to the Price to Public. In connection with the NTT Investment,
NTT will be entitled to designate one member to serve on the Company's Board of
Directors. See "Principal Stockholders -- NTT Investment."

In addition, the Company and NTT America entered into a three year Outside
Service Provider Agreement (the "OSP Agreement"), which will take effect upon
the closing of the NTT Investment. Pursuant to the OSP Agreement, the Company
will be designated as the preferred provider of Internet access and related
services to customers of NTT America on a reseller basis. Verio and NTT will
connect their backbones and establish a peering and transit relationship. During
the term of the OSP Agreement, NTT America will pay the Company for the services
provided by the Company at predetermined rates reflective of the strategic
relationship between the parties. Within 30 days after the consummation of the
Offering, NTT America and the Company have agreed to establish certain working
groups to develop the details for implementation of the specific technical and
administrative aspects arising under the OSP Agreement.

ISP OWNERSHIP STRUCTURE

While the Company now typically seeks to acquire 100% of new ISPs, the
Company's early acquisition strategy was to rapidly build mass and scale by
acquiring less than 100% of its ISPs. In each case where the Company acquired
less than 100% of an ISP initially, it obtained the right to acquire the
remaining equity in the future at a price based on either agreed upon revenue
multiples or the fair market value of the ISP. As part of its integration
strategy, the Company has effected the Buyouts of all but two of the ISPs in
which it did not initially acquire 100% ownership through the use of cash on
hand and the issuance of equity. Verio currently expects to effect the Buyouts
of the remaining two non-wholly owned ISPs during the remainder of 1998.
However, there can be no assurance that the Company will be able to complete
these additional Buyouts at the times, or on the terms and conditions, that it
currently contemplates.

As the Company completes the Buyouts, in general, the ISPs in each region
are consolidated into integrated regional operating subsidiaries which are
wholly owned by the Company. In certain instances, some of the ISPs may continue
to exist as separate, indirect, wholly owned subsidiaries of Verio, but operated
as part of the particular integrated operating region.

COMPETITION

The market for Internet connectivity and related services is extremely
competitive. The Company anticipates that competition will continue to intensify
as the use of the Internet grows. The tremendous growth and potential market
size of the Internet access market has attracted many new start-ups as well as
existing businesses from different industries. Current and prospective
competitors include, in addition to other national, regional and local ISPs,
long distance and local exchange telecommunications companies, cable television
companies, direct broadcast satellite and wireless communications providers, and
on-line service providers. The Company believes that a reliable national
network, knowledgeable salespeople and the quality of technical support
currently are the primary competitive factors in the Company's target market,
and that price is usually secondary to these factors.

ISPs. According to Boardwatch magazine's directory of Internet Service
Providers, there are currently over 4,000 ISPs in the United States, consisting
of national, regional and local providers. The Company's current primary
competitors include other ISPs with a significant national presence which focus
on business customers, such as UUNet, GTE Internetworking (formerly BBN),
PSINet, Concentric Network and DIGEX. While the Company believes that its level
of local service and support and target market focus distinguish it from these
competitors, some of these competitors have significantly greater market
presence, brand recognition, and financial, technical and personnel resources
than the Company, and have extensive coast-to-coast Internet backbones. The
Company also competes with unaffiliated regional and local ISPs in its targeted
geographic regions.

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Telecommunications Carriers. All of the major long distance companies (also
known as interexchange carriers or IXCs), including AT&T, MCI, and Sprint, offer
Internet access services and compete with the Company. The recent sweeping
reforms in the federal regulation of the telecommunications industry have
created greater opportunities for LECs, including the RBOCs, to enter the
Internet connectivity market. In order to address the Internet connectivity
requirements of the current business customers of long distance and local
carriers, the Company believes that there is a move toward horizontal
integration through acquisitions of, joint ventures with, and the wholesale
purchase of connectivity from, ISPs. The WorldCom/MFS/UUNet consolidation, the
NETCOM/ICG merger, the Intermedia/DIGEX merger and GTE's acquisition of BBN are
indicative of this trend. Accordingly, Verio expects that it will experience
increased competition from the traditional telecommunications carriers. Many of
these telecommunications carriers, in addition to their substantially greater
network coverage, market presence, and financial, technical and personnel
resources, also have large existing commercial customer bases. Furthermore,
telecommunications providers may have the ability to bundle Internet access with
basic local and long distance telecommunications services. Such bundling of
services may have an adverse effect on the Company's ability to compete
effectively with the telecommunications providers and may result in pricing
pressure on the Company that would have an adverse effect on the Company's
business, financial condition and results of operations. The Company believes
that its local presence and its strong technical and data-oriented sales force
is an important feature distinguishing it from the centralized voice-oriented
sales approach typified by the current Internet connectivity services offered by
the IXCs and LECs.

Cable Companies, Direct Broadcast Satellite and Wireless Communications
Companies. Many of the major cable companies have announced that they are
exploring the possibility of offering Internet connectivity, relying on the
viability of cable modems and economical upgrades to their networks. MediaOne
Group and TCI have recently announced trials to provide Internet cable service
to their residential customers in select areas. However, the cable companies are
faced with large-scale upgrades of their existing plant equipment and
infrastructure in order to support connections to the Internet backbone via
high-speed cable access devices. Additionally, their current subscriber base and
market focus is residential which requires that they partner with
business-focused providers or undergo massive sales and marketing and network
development efforts in order to target the business sector. Several
announcements also have recently been made by other alternative service
companies approaching the Internet connectivity market with various wireless
terrestrial and satellite-based service technologies. These include Hughes
Network System's DirecPC product that provides high-speed data through direct
broadcast satellite technology; CAI Wireless System's announcement of an MMDS
wireless cable operator launching data services via 2.5 to 2.7 GHz and
high-speed wireless modem technology; Cellularvision's announcement that it is
offering Internet access via high-speed wireless LMDS technology; and Winstar,
which currently offers high-speed internet access to business customers over the
38 GHz spectrum.

On-line Service Providers. The predominant on-line service providers,
including America Online, CompuServe, Microsoft Network, and Prodigy, have all
entered the Internet access business by engineering their current proprietary
networks to include Internet access capabilities. The Company competes to a
lesser extent with these on-line service providers.

Recently, there have been several announcements regarding the planned
deployment of broadband services for high speed Internet access by cable and
telephone companies through new technologies such as cable modems and xDSL.
While these providers have initially targeted the residential consumer, it is
likely that their target markets will expand to encompass the Company's targeted
markets, which may significantly affect the pricing of the Company's service
offerings.

PROPERTIES

The Company's corporate headquarters is located in Englewood, Colorado
where the Company leases approximately 39,200 square feet of office space. The
Company's lease agreement, which commenced February 1, 1998, is for a term of
five years. The Company also has executed a lease covering 12,600 square feet of
space in the InfoMart in Dallas, Texas, where the Company maintains its network
operations center and customer support center. That lease expires on June 30,
2002. The Company also leases space, typically
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less than 200 square feet, in various geographic locations to house network
infrastructure and telecommunications equipment. Operational functions are
principally located in the offices of its regional operations. The Verio ISPs
typically are party to lease agreements for administrative office space
sufficient for their respective personnel, as well as smaller site leases to
house their network equipment.

EMPLOYEES

As of March 31, 1998, the Company employed approximately 958 people,
including full-time and part-time employees at its corporate headquarters in
Colorado, its network operations and customer support center in Texas and at its
controlled ISPs. The Company considers its employee relations to be good. None
of the employees of the Company is covered by a collective bargaining agreement.

TRADEMARKS AND TRADE NAMES

The Company filed for federal trademark protection of "Verio" on November
29, 1996. This application is pending and the Company has no assurance that it
will be granted. Trademark protections for the Verio mark also have been applied
for in the European Economic Community, as well as in Japan. Additionally,
corporate name reservations for the name "Verio Inc." have been filed in all
fifty states. In conjunction with the consolidation of its ISPs into regional
operating entities, the ISPs have migrated to the Verio brand name, with a
regional or local geographical identifier appended.

LEGAL PROCEEDINGS

The Company is not currently party to any material legal proceedings.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages as of April 24, 1998, and
positions of the officers and directors of the Company. Their respective
backgrounds are described below.

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Steven C. Halstedt(3)(4)............................. 52 Chairman of the Board
Justin L. Jaschke(3)(4).............................. 40 Chief Executive Officer, Director
James C. Allen(2).................................... 51 Director
Trygve E. Myhren(1)(2)(4)............................ 61 Director
Paul J. Salem........................................ 34 Director
Stephen W. Schovee(1)(2)............................. 38 Director
George J. Still, Jr.(4).............................. 40 Director
Sean G. Brophy....................................... 39 Vice President of Corporate Development
James F. B. Browning................................. 43 Vice President of Network Operations
Chris J. DeMarche.................................... 41 Chief Technical Officer
Carla Hamre Donelson................................. 42 Vice President, General Counsel and
Secretary
Peter B. Fritzinger.................................. 40 Chief Financial Officer
Deb Mayfield Gahan................................... 43 Vice President of Finance and
Administration
James M. Kieffer..................................... 36 Vice President of Customer Operations
John R. Viviani...................................... 43 Vice President of Sales and Marketing
</TABLE>

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

(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Executive Committee
(4) Member of Finance Committee

Mark D. Johnson, who served as the Company's President, Chief Operating
Officer and a director of the Company, died on March 9, 1998. While Mr. Johnson
played an important role in overseeing the Company's operations, the Company
does not expect that his death will adversely affect the Company's operations,
growth or financial prospects, because of the strength of the Company's core
management team. On March 18, 1998, Mr. Jaschke was appointed to serve as the
Company's President while the Company conducts an executive search to seek a
replacement for the positions that were held by Mr. Johnson. See
"Summary -- Recent Developments."

All of the officers identified above serve at the discretion of the Board
of Directors of the Company. There are no family relationships between any
persons identified above. The following are brief biographies of the persons
identified above.

Steven C. Halstedt has served as Chairman of the Board of Directors of
Verio since the Company's inception in March 1996. Mr. Halstedt is a co-founder
of The Centennial Funds. Mr. Halstedt has 17 years of direct venture capital
experience and serves as a general partner of each of the Centennial Holdings'
partnerships. Prior to co-founding The Centennial Funds in 1981, he was
Executive Vice President and Director of Daniels & Associates, Inc., a private
communications service company involved in cable television system operations.
Mr. Halstedt is a member of the Board of Directors of Formus Communications,
Inc., Pluto Technologies International, Inc. and V-I-A Internet, Inc. Mr.
Halstedt was recently a director of Centennial Communications Corp., Masada
Security Holdings, Inc. and Triax Communications Corp. He is also former
Chairman of the Board of OneComm Corporation ("OneComm"), PageAmerica Group,
Inc. and Orion Network Systems, Inc., all publicly traded telecommunications
companies. Mr. Halstedt received a Bachelor of Science with distinction in
management engineering from Worcester Polytechnic Institute, and earned a Master
of Business Administration from the Amos Tuck School of Business Administration
at Dartmouth College, where he was named an Edward Tuck Scholar. He attended the
University of

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Connecticut School of Law. He was a Platoon Leader and Battalion Operations
Officer in a U.S. Army Combat Engineer Battalion in Vietnam.

Justin L. Jaschke has served as Chief Executive Officer of Verio since the
Company's inception in March 1996. He is also a member of the Company's Board of
Directors. Prior to forming Verio, Mr. Jaschke served as Chief Operating Officer
for Nextel Communications ("Nextel") following its merger with OneComm in July
of 1995. Mr. Jaschke served as OneComm's President and a member of its Board of
Directors from the time that he joined that company in April 1993 until the
merger with Nextel. Mr. Jaschke currently serves as Chairman of the Board of
Directors of V-I-A Internet, Inc. and also serves on the Board of Directors of
Metricom, a leading wireless data communications provider, and on the Board of
Directors of Dobson Communications, a rural cellular and local exchange
provider. From May 1990 to April 1993, Mr. Jaschke served as President and CEO
of Bay Area Cellular Telephone Company. From November 1987 to May 1990, Mr.
Jaschke was Vice President of Corporate Development of PacTel Cellular, and from
1985 to 1987 was Director of Mergers and Acquisitions for PacTel Corporation.
Prior to that, Mr. Jaschke was a management consultant with Marakon Associates.
Mr. Jaschke received a Bachelor of Science degree summa cum laude in mathematics
from the University of Puget Sound and a Master of Science degree in management
from the Sloan School of Management at MIT.

James C. Allen has served as a director of Verio since May 1996. Mr. Allen
served as CEO of Brooks Fiber Properties, Inc. until its recent acquisition by
WorldCom. Mr. Allen has twenty-five years of experience as an entrepreneur,
operator, financier, expert witness and advisor in cable television and
broadband telecommunications. Prior to joining Brooks, he served as Chief
Financial Officer and Chief Operating Officer of David Lipscomb University from
which he holds a Bachelor of Science degree. Mr. Allen was a founder and former
President, CFO and COO of Cencom Cable Associates, which was purchased by a
subsidiary of Hallmark Cards, and a former Vice President of Operations of
Telcom Engineering, Inc., a telecommunications engineering and consulting firm
with clients in both the telephone and cable television industries. Mr. Allen
previously held positions as Vice President of Operations of United Cable
Television, Divisional Manager of Continental Telephone Corporation, and Vice
President of Finance for National Communications Service Corporation. Mr. Allen
also is a director of MetroNet Communications Corp. ("MetroNet"), an LEC.

Trygve E. Myhren has served as a director of Verio since April 1997. Mr.
Myhren is President of Myhren Media, Inc. which invests in and advises media,
communications and consumer products companies. From 1990 to 1996, Mr. Myhren
was President and a director of The Providence Journal Company. From 1975 until
1988, Mr. Myhren was an officer of American Television and Communications
Corporation (ATC), the cable television subsidiary of Time, Inc. (now
Time/Warner Cable), serving as Chairman and CEO from 1980 to 1988. Mr. Myhren
also serves on the boards of The Providence Journal Company, Advanced Marketing
Services, Peapod, Ltd., CableLabs, J.D. Edwards, Inc., Founders Funds and The
University of Denver. Previously, Mr. Myhren served as chairman of the National
Cable Television Association (NCTA), and also served on the boards of Turner
Broadcasting Systems, Continental Cablevision, Inc., Citizens Bank and several
internal Time, Inc. boards, including Home Box Office, Temple-Eastex and Time
Magazine Group. He also served on the FCC's Advisory Committee on High
Definition TV. Mr. Myhren has an undergraduate degree in political science and
philosophy from Dartmouth and a Master of Business Administration from the Amos
Tuck Graduate School at Dartmouth. He served three and one-half years as a naval
officer with the U.S. Pacific Fleet.

Paul J. Salem has served as a director of Verio since December 1996. Mr.
Salem is a Managing Director of Providence Equity Partners, Inc., and is a
partner of the general partner of Providence's private equity funds. Providence
manages over $500 million in equity and specializes in communications and media
investments. Mr. Salem has been responsible for many of Providence's investment
activities, including its investments in competitive local exchange companies,
enhanced specialized mobile radio, wireless data networks, radio representation,
telecommunications infrastructure and other areas. He is currently a director of
Interep National Radio Sales, Inc., MetroNet, Wired Ventures, Inc. and UniSite,
Inc. Prior to joining Providence, Mr. Salem worked for Morgan Stanley & Co. in
corporate finance and mergers and acquisitions. Previously, Mr. Salem spent four
years with Prudential Investment Corporation, an affiliate of Prudential
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<PAGE> 51

Insurance, where his responsibilities included private placement financings,
leveraged buyout transactions and establishing Prudential's European investment
office. Mr. Salem received a Bachelor of Arts in business from Brown University
and a Master of Business Administration from Harvard Business School.

Stephen W. Schovee has been a director of the Company since the Company's
inception in March 1996. Mr. Schovee serves as Managing Member of Telecom
Partners, L.P. and Telecom Partners II, L.P. Mr. Schovee was previously
co-founder, Chief Executive Officer and a Director of OneComm from its inception
until its merger with Nextel. Prior to that, Mr. Schovee was a Vice President of
Centennial Holdings, the manager of the Centennial Funds, a Denver based venture
capital fund with over $400 million of subscribed capital. Mr. Schovee was a
partner in two of the Centennial Funds where he focused on telecommunications
investments. Mr. Schovee is a special limited partner of Centennial Fund IV,
L.P. and Centennial Fund V, L.P. He is a director of SMR Direct, Intergram
International, and Infobeat. Mr. Schovee received a Bachelor of Science degree
in mechanical engineering from Bucknell University and a Master of Business
Administration from The Wharton School.

George J. Still, Jr. has been a director of the Company since the Company's
inception in March 1996. Mr. Still, based in Palo Alto, California, is a
Managing Partner of Norwest Venture Partners VI, L.P. and Norwest Equity
Partners V, L.P., and a General Partner of Norwest Equity Partners IV. From July
1984 until October 1989, he was a General Partner with the Centennial Funds
based in Denver, Colorado. Prior to Centennial, Mr. Still was with Ernst &
Whinney (now Ernst & Young) in San Francisco. Currently, he is a Director of
PeopleSoft, Inc. and 3Dfx Interactive, Inc., both public companies. In addition,
he serves on the board of several private companies, including Metapath Software
Corporation, Intrepid Systems, ObjectStream, Inc., and Chordiant Software.
Further, Mr. Still serves as a Director of the National Venture Capital
Association. He holds a Bachelor of Science degree in business administration
from Pennsylvania State University and a Master of Business Administration from
the Amos Tuck School at Dartmouth College.

Sean G. Brophy has served as Vice President of Corporate Development since
November 1997, and prior to that served as Vice President of Marketing and
Business Development for the Company since joining Verio in May 1996. Mr. Brophy
served as Vice President of Marketing for OneComm and then Nextel from 1994 to
1996. He worked at Northern Telecom from 1990 through 1994 in a variety of
capacities, including strategic planning and product management, where he had
global responsibilities for new products for Personal Communications Services.
Prior to that he worked at Bell Northern Research, the research and development
arm of Northern Telecom, designing telephone equipment and services ranging from
the DMS-100 to key systems. While there he was awarded patent and design
excellence awards. Mr. Brophy holds a Bachelor of Science degree in computer
engineering from McMaster University, a Master of Science degree in electrical
engineering from Carleton University and a Master of Science degree in
management from the Sloan School of Management at MIT.

James F. B. Browning was appointed Vice President of Network Operations for
the Company in January 1998, having previously served as President and CEO of
ATMnet, a company he founded in 1995 to provide integrated digital
communications services to businesses with broadband networking requirements.
Verio acquired ATMnet in November 1997. Mr. Browning has 20 years of experience
managing high technology development and operations. From 1988 to 1994, as
co-founder, he served as Chief Financial Officer and Chief Operating Officer of
VisiCom Laboratories, Inc., a systems engineering firm specializing in digital
satellite communications and operating system level software development. From
1983 to 1988, Mr. Browning served as Executive Vice President and then President
of Pacific Microcomputers, Inc., which developed and produced Single Board
Computers for use in Unix workstations and real time embedded computing
environments. Previously, Mr. Browning held financial and operational management
positions with Advanced Digital Systems and Tetra Tech, a subsidiary of
Honeywell. Mr. Browning holds a Bachelor of Science degree in accounting from
San Diego State University.

Chris J. DeMarche has been Chief Technical Officer of the Company since
joining the Company in May 1996. From 1995 to 1996, Mr. DeMarche was CTO and
Senior Vice President of Nextel, where he was credited with addressing many
critical technology issues. From 1993 to 1995, he was Senior Vice President of
Engineering and Technology at OneComm, where he was responsible for building a
national engineering team

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<PAGE> 52

and designing and implementing wireless communication networks. Mr. DeMarche
also worked in advanced technology areas at PacTel Corporation and Hughes
Aircraft Corporation and served in the U.S. Naval Submarine Force. Mr. DeMarche
received his Master of Business Administration from UCLA in 1990, his Master of
System Management from University of Southern California in 1986, and his
Bachelor of Science from the United States Naval Academy in 1978.

Carla Hamre Donelson has served as Vice President, General Counsel and
Secretary of the Company since joining Verio in October 1996 from the law firm
of Morrison & Foerster LLP, where she had practiced law since March 1987. She
served as a partner in that firm's business department from 1990 and as head of
the Denver business practice from 1993. While in private practice, Ms. Donelson
was engaged in a general corporate and transactional practice, focused primarily
on the communications and related technology industries, representing domestic
and foreign entities in numerous financing, merger, acquisition, investment, and
licensing transactions. She served as regular outside corporate counsel to
OneComm and represented OneComm in connection with a variety of its SMR
acquisitions as well as its merger with Nextel. Ms. Donelson received her
Bachelor of Arts degree in molecular biology from the University of Colorado,
her Juris Doctor degree from the University of Denver College of Law, and is a
member of the Colorado Bar Association.

Peter B. Fritzinger has served as Chief Financial Officer of the Company
since June 1997. From September 1993 until June 1997, Mr. Fritzinger served as
Chief Financial Officer of Louis Dreyfus Natural Gas Corp., an independent,
publicly held oil and gas company headquartered in Oklahoma City. From 1991 to
1993, he was Vice President-Finance and Treasurer of Louis Dreyfus Energy Corp.,
a diversified, global enterprise with investments in oil and gas reserves and
other petroleum-related industries. Mr. Fritzinger joined Louis Dreyfus Energy
Corp. from J.P. Morgan, where he was a Vice President in its corporate finance
group, having held various positions with Morgan Guaranty Trust Company of New
York since 1980. Mr. Fritzinger received his Bachelor of Arts degree in math and
psychology from Amherst College.

Deb Mayfield Gahan has served as Vice President of Finance and
Administration for the Company since joining the Company in May 1996. She brings
with her ten years of extensive start-up and telecommunications experience. From
1994 to 1996, Ms. Gahan served as Vice President of Business Services and
Controller for OneComm and then for Nextel following its acquisition of OneComm.
From 1987 to 1994, she was Director of Business Operations and Controller for
American Cellular Communications and then BellSouth Cellular Corp., a leading
provider of cellular service in 15 states. In these positions, she was
responsible for implementing cost-effective financial control systems, asset
protection, revenue assurance, financial reporting, treasury and business
process development. Ms. Gahan is a Certified Public Accountant and holds a
Master of Business Administration from Mississippi College, as well as a
Bachelor of Science in accounting from Mississippi State University.

James M. Kieffer has served as Vice President of Customer Operations for
the Company since joining the Company in July 1996. Previously, Mr. Kieffer
served as Nextel's Vice President of Customer Operations responsible for
customer care, billing, accounts receivable, and inventory management from
August 1996. Prior to OneComm's merger with Nextel, Mr. Kieffer led the
development of OneComm's customer care as Director of Customer Operations from
January 1994 to August 1995. Prior to that, Mr. Kieffer served as National
Customer Service Manager for Motorola's Land Mobile Products Sector. During his
six years with Motorola, he held several key roles while developing a
consolidated national customer care organization from March 1990 until January
1994. Prior to joining Motorola, Mr. Kieffer managed customer relations and
accounts receivable for IBM. He received his Master of Business Administration
from DePaul University and holds a Bachelor of Science in management from
Illinois State University.

John R. Viviani joined the Company in December 1997 and serves as its Vice
President of Sales and Marketing. Prior to that time, Mr. Viviani was most
recently Sales Director of Worldwide Channels for IBM Networking Hardware
Division. In that capacity, he was responsible for developing worldwide indirect
channels. Prior thereto from 1992 to 1996, Mr. Viviani implemented and directed
national sales and marketing teams responsible for launching IBM U.S. into the
internetworking solution market place and establishing the IBM Networking
division in the indirect channels. Mr. Viviani was employed by IBM since 1978,
serving as a

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<PAGE> 53

business unit executive, account executive and marketing manager. Mr. Viviani
received his Master of Business Administration from St. Thomas Aquinas College
and his Bachelor of Science degree in management and finance from Marymount
College.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board has established an Executive Committee, a Finance
Committee, a Compensation Committee and an Audit Committee. The Executive
Committee is responsible for reviewing and, where appropriate, authorizing
corporate action with respect to the conduct of the business of the Company
between Board meetings. Actions taken by the Executive Committee must be
submitted to the Board for review and ratification at the next meeting, except
in those cases when the Board has specifically delegated final decision-making
authority to the Executive Committee. The Executive Committee is composed of
Messrs. Halstedt and Jaschke. The Finance Committee is responsible for reviewing
and, where appropriate, authorizing certain corporate actions with respect to
the finances of the Company and certain acquisitions of ISPs not involving the
issuance of stock. The Finance Committee is composed of Messrs. Halstedt,
Jaschke, Still and Myhren. The Compensation Committee is responsible for
reviewing and establishing the compensation structure for the Company's officers
and directors, including salary rates, participation in incentive compensation
and benefit plans, 401(k) plans, stock option and purchase plans and other forms
of compensation. The Compensation Committee is composed of Messrs. Allen, Myhren
and Schovee.

The Board has also established an Audit Committee consisting of Messrs.
Myhren and Schovee. The Audit Committee will be comprised solely of independent
directors and will be responsible for recommending the firm to be appointed as
independent accountants to audit the Company's financial statements, discussing
the scope and results of the audit with the independent accountants, reviewing
the functions of the Company's management and independent accountants with
respect to the Company's financial statements and performing such other related
duties and functions as are deemed appropriate by the Audit Committee and the
Board.

DIRECTORS COMPENSATION

From and after the consummation of the Offering, each non-employee director
of the Company will receive an annual retainer fee of $5,000 and a fee of $1,000
for each meeting of the Board attended in person or $500 for each meeting
attended by telephone. The fee for Board committee meetings is $500 per meeting.
A director may elect to receive these payments in the form of Common Stock. In
addition, upon consummation of the Offering, each non-employee director
automatically will be granted an option to acquire 30,000 shares of Common Stock
at an exercise price per share equal to the fair market value of the Common
Stock at the date of grant. Such options will vest and become exercisable in
three equal installments on each yearly anniversary of the grant date.
Non-employee directors elected or appointed to the Board following the Offering
also will be granted automatically at the time of election or appointment an
option to acquire 30,000 shares of Common Stock with the same terms and
conditions at an exercise price equal to the then fair market value of the
Common Stock. After the initial three year vesting period for such options,
non-employee directors will receive automatic annual grants of options to
acquire an additional 3,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock at the date of grant. Such options
will vest and become exercisable on the first anniversary of the grant date. In
April 1998, the Company adopted a separate stock incentive plan under which
options may be granted and shares of Common Stock may be issued to non-employee
directors in accordance with these compensation arrangements, from and after the
consummation of the Offering. See "Stock Option and Incentive Plans -- 1998
Non-Employee Director Stock Incentive Plan."

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<PAGE> 54

EXECUTIVE COMPENSATION

The following table sets forth certain summary information for the years
ended December 31, 1997 and 1996, respectively, concerning the compensation paid
and awarded to: (a) the Company's Chief Executive Officer and (b) the Company's
four most highly compensated executive officers whose salaries and bonuses
exceeded $100,000 who were serving as executive officers as of December 31, 1997
(collectively, with the Chief Executive Officer, the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
-------------------------------- RESTRICTED SECURITIES
FISCAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) AWARDS($) OPTIONS(#) COMPENSATIONS($)
- --------------------------- ------- --------- -------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke........... 1997 175,003 66,500 85,000 -- --
Chief Executive Officer 1996 124,631(2) 44,867 -- 240,000 --

Mark D. Johnson............. 1997 113,337 50,603 -- 200,000 --
President and Chief 1996 -- -- -- -- --
Operating Officer(3)

Chris J. DeMarche........... 1997 160,004 60,800 25,000 20,000 --
Chief Technical Officer 1996 106,666(4) 38,215 -- 70,000 --

Carla Hamre Donelson........ 1997 160,004 57,760 -- 20,000 --
Vice President, General 1996 26,320(5) 13,680 50,000 60,000 42,678(7)
Counsel and Secretary

Peter B. Fritzinger......... 1997 89,443(6) 31,287 -- 75,000 70,267(8)
Chief Financial Officer 1996 -- -- -- -- --
</TABLE>

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

(1) Fiscal year 1996 covers the period from inception (March 1, 1996) to
December 31, 1996.

(2) Reflects compensation paid to Mr. Jaschke commencing with his appointment as
Chief Executive Officer in April 1996.

(3) Mr. Johnson, who served as the Company's President and Chief Operating
Officer beginning in March 1997, died on March 9, 1998. See
"Summary -- Recent Developments."

(4) Reflects compensation paid to Mr. DeMarche commencing with his appointment
as Chief Technical Officer in May 1996.

(5) Reflects compensation paid to Ms. Donelson commencing with her appointment
as Vice President, General Counsel and Secretary in October 1996.

(6) Reflects compensation paid to Mr. Fritzinger commencing with his appointment
as Chief Financial Officer in June 1997.

(7) Represents the cost to the Company of tax reimbursements.

(8) Represents the cost to the Company of providing relocation benefits.

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<PAGE> 55

STOCK OPTIONS GRANTED IN LAST FISCAL YEAR

The following table contains information concerning the grant of stock
options by Verio under the Company's stock option plans to the Named Executive
Officers during the year ended December 31, 1997.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM ($)(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE)(1) DATE 5% 10%
---- ----------- -------------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke....... -- -- -- -- -- --
Mark D. Johnson......... 200,000 13.28% 6.00 May 11, 2007 754,674 1,912,491
Chris J. DeMarche....... 20,000 1.38% 6.75 Nov. 24, 2007 84,901 215,155
Carla Hamre Donelson.... 20,000 1.38% 6.75 Nov. 24, 2007 84,901 215,155
Peter B. Fritzinger..... 75,000 5.18% 6.00 May 21, 2007 283,003 717,184
</TABLE>

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

(1) All options were granted at an exercise price per share equal to at least
the fair market value of the Common Stock on the date of grant, as
determined by the Board of Directors.

(2) The potential realizable value is calculated based on the fair market value
on the date of grant, which is equal to the exercise price of the options,
assuming that the stock appreciates in value from the date of grant
compounded annually until the end of the option term at the rate specified
(5% or 10%) and that the option is exercised and sold on the last day of the
option term for the appreciated stock price. Potential realizable value is
net of the option exercise price. The assumed rates of appreciation are
specified in the rules and regulations of the Commission and do not
represent the Company's estimate or projection of future stock price. Actual
gains, if any, resulting from stock option exercises and Common Stock
holdings are dependent on the future performance of the Common Stock and
overall stock market conditions. There can be no assurance that the amounts
reflected in this table will be achieved.

OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES

The following table sets forth certain information with respect to the
Named Executive Officers regarding the stock options exercised during the last
fiscal year, the aggregate number of unexercised options to purchase Common
Stock granted in all years and held by them as of December 31, 1997, and the
value of unexercised in-the-money options (i.e., options that had a positive
spread between the exercise price and the fair market value of the Common Stock)
as of December 31, 1997:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke.......... 60,000 1,040,000 -- 180,000 -- 2,880,000
Mark D. Johnson............ -- -- -- 200,000 -- 2,600,000
Chris J. DeMarche.......... -- -- 14,000 76,000 224,000 1,141,000
Carla Hamre Donelson....... -- -- 12,000 68,000 192,000 1,013,000
Peter B. Fritzinger........ -- -- -- 75,000 -- 975,000
</TABLE>

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

(1) The value of options at year-end is based on an assumed fair market value of
$19.00 per share of Common Stock (the mid-point of the assumed price range
per share in the Offering).

EMPLOYMENT AGREEMENTS

As a general matter, the Company does not enter into employment agreements,
and has not entered into employment agreements with any of its officers. Rather,
the employment relationships with each officer are "at will." However, in
connection with the initial employment of each officer, the Company and the
officer executed an offer letter, in which the general compensation and benefits
provided to the officer are outlined,

54
<PAGE> 56

including base salary, targeted annual bonus, option grants and employee
benefits. The base salary and targeted bonus levels for each of the officers
remains the same in 1998 as in 1997. However, upon consummation of the Offering,
the base salary for Mr. Jaschke will be increased to $260,000, which will result
in an increase in his annual targeted bonus level of 30% to 40% of his base
salary.

COMPENSATION PROTECTION AGREEMENTS

The Company has entered into compensation protection agreements (the
"Compensation Protection Agreements") with each of the Named Executive Officers
and certain additional officers (collectively, the "Protected Officers") of the
Company. Each of the Compensation Protection Agreements contain substantially
similar terms. The form of Compensation Protection Agreement has been filed as
an exhibit to the Company's Registration Statement of which this Prospectus is a
part. The Compensation Protection Agreements will be for a term of three years
from April 1, 1998 (the "Effective Date"), subject to automatic yearly
extensions. In no event will the Compensation Protection Agreements terminate
within 12 months of a Change in Control of the Company. "Change in Control"
includes the following:

(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any Person
(as defined in the Exchange Act) immediately after which such Person has
Beneficial Ownership (as defined in the Exchange Act) of 40% or more of the
combined voting power of the Company's then outstanding Voting Securities.
In determining whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition," as defined in the
Compensation Protection Agreements, do not constitute an acquisition which
would cause a Change in Control;

(b) The individuals who, as of the date the Compensation Protection
Agreements were approved by the Board, are members of the Board (the
"Incumbent Board"), cease for any reason to constitute at least a majority
of the Board (subject to certain provisos);

(c) Approval by stockholders of the Company of: (1) a merger,
consolidation or reorganization involving the Company, unless such merger,
consolidation or reorganization (each, an "event") satisfies certain
specified conditions;

(d) Any other event that at least two-thirds of the Incumbent Board
determines constitutes a Change in Control; and

(e) If a Protected Officer's employment is terminated prior to a
Change in Control and the Board determines that such termination was at the
request of a third party who has indicated an intention or taken steps to
effect a Change in Control and who subsequently effectuates a Change in
Control, or occurred in connection with, or in anticipation of, a Change in
Control which actually occurs, then a Change in Control is considered to
have occurred with respect to that Protected Officer.

Upon termination within 12 months following a Change in Control, each
Protected Officer will receive the following compensation and benefits:

(i) If a Protected Officer's employment with the Company is terminated
within 12 months following a Change in Control by the Company for Cause (as
defined in the Compensation Protection Agreements) or by reason of the
Protected Officer's Disability (as defined in the Compensation Protection
Agreements), death, retirement, or by the Protected Officer other than for
Good Reason (as defined in the Compensation Protection Agreements), then
the Company must pay to the Protected Officer the Accrued Compensation (as
defined below) due through the date of termination (the "Termination
Date"). Accrued Compensation includes base salary, reimbursement for
reasonable and necessary expenses incurred by the Protected Officer on
behalf of the Company during the period ending on the Termination Date, and
vacation pay.

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<PAGE> 57

(ii) If a Protected Officer's employment is terminated within 12
months of a Change in Control for any other reason than specified above,
the Protected Officer will receive:

(A) his or her Accrued Compensation;

(B) an amount equal to the product of a fraction, the numerator of
which is the number of days in the Company's fiscal year through the
Termination Date and the denominator of which is 365, and the bonus
amount, which will be the greater of 100% of the last annual incentive
payment paid or payable to the Protected Officer prior to the
Termination Date, and the Protected Officer's incentive target for the
fiscal year in which the Change in Control occurs (the "Bonus Amount");

(C) an amount equal to two (2) times the sum of the Protected
Officer's annual base salary in effect immediately prior to the Change
in Control, plus the Bonus Amount. However, the amount paid to Mr.
Jaschke will be three (3) times that sum;

(D) until the third anniversary of the Termination Date, the same
rights with respect to benefits provided by the Company, as were
provided to the Protected Officer as of the Effective Date, or, if
greater, at any time within 90 days preceding the date of the Change in
Control; and

(E) the immediate vesting and removal of all restrictions on any
outstanding incentive awards granted to the Protected Officer under the
Company's stock option and other stock incentive plans or arrangement.

The Compensation Protection Agreements will further provide that the
Protected Officers will not be required to mitigate the amount of any payment by
seeking employment or otherwise. Protected Officers may be entitled to
additional compensation or benefits in accordance with the Company's employee
benefit plans and other applicable programs, policies and practices then in
effect. The Compensation Protection Agreements will contain a "gross-up"
provision pursuant to which any Severance Payment, which would be subject to
certain excise taxes occurring as a result of Change in Control, would include
an additional gross-up payment resulting in the Protected Officer retaining an
additional amount equal to excise tax.

STOCK OPTION AND INCENTIVE PLANS

1996 Stock Option Plan

The 1996 Stock Option Plan was adopted and approved by the Board of
Directors in May 1996 and by the stockholders of the Company in June 1996. In
February 1998, the 1996 Stock Option Plan was amended, with the approval of the
Board, to reserve a total of 2,205,300 shares of Common Stock for issuance under
this plan. As of April 24, 1998, options to purchase 115,933 shares of Common
Stock granted under the 1996 Stock Option Plan had been exercised, options to
purchase 1,970,967 shares of Common Stock were outstanding and no additional
options to purchase shares of Common Stock remained available for grant. All
options forfeited after the amendment to the 1996 Stock Option Plan was
implemented in February 1998 result in availability under the 1998 Stock
Incentive Plan and are no longer available for grant under the 1996 Stock Option
Plan. The outstanding options were exercisable at a weighted average exercise
price of $6.55 per share. Outstanding options to purchase an aggregate of
1,340,967 shares were held by employees who are not officers or directors of the
Company. Of the 115,933 shares issued upon exercise of options, a total of
47,500 were issued upon exercise prior to their respective exercise vesting
dates, as permitted by the terms of the 1996 Stock Option Plan. As a result,
these shares are subject to repurchase by the Company at their respective
exercise prices, until the date on which they would have become exercisable. The
1996 Stock Option Plan will terminate in 2006, unless sooner terminated by the
Board of Directors.

The Board of Directors has delegated administration of the 1996 Stock
Option Plan to its Compensation Committee (the "Committee"). The Committee is
constituted to comply with the rules under Rule 16b-3 of the Exchange Act.
Awards under the 1996 Stock Option Plan may consist of (i) options to purchase
Common Stock that are designed to qualify, under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as "incentive stock options"
("Incentive Stock Options") or (ii) options to purchase Common

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<PAGE> 58

Stock that are not described in Sections 422 or 423 of the Code ("Non-Qualified
Stock Options" and, collectively with Incentive Stock Options, "Options").

The Committee has discretion to grant Incentive Stock Options to employees
and officers (including directors who are employees) of the Company or any
Affiliate (as defined in the 1996 Stock Option Plan) of the Company and
Non-Qualified Stock Options to employees, officers, directors or consultants of
the Company and its Affiliates. The Committee may set the terms of such grants,
subject to applicable restrictions in the 1996 Stock Option Plan. Incentive
Stock Option grants are subject to the following limitations: (i) the term of
any Incentive Stock Option may not be longer than ten years, provided that the
term of any Incentive Stock Option granted to an individual possessing more than
10% of the combined voting power of the Company or an Affiliate (a "10% Holder")
may not be longer than five years; (ii) the aggregate fair market value of all
shares underlying Incentive Stock Options granted to an individual that first
become exercisable in any calendar year may not exceed $100,000; and (iii) the
exercise price of Incentive Stock Options may not be less than the fair market
value of the underlying shares on the grant date, provided that the exercise
price of any Incentive Stock Option granted to a 10% Holder may not be less than
110% of the fair market value of the underlying shares on the grant date. With
respect to Non-Qualified Stock Options, the exercise price may not be less than
85% of the fair market value of the underlying shares on the grant date. As of
April 24, 1998, no such below-market grant has been made.

During an optionee's lifetime, an Incentive Stock Option is exercisable
only by the optionee and no Incentive Stock Option may be transferred by the
optionee other than by will or the laws of descent and distribution. During an
optionee's lifetime (or a transferee pursuant to a qualified domestic relation
order), a Non-Qualified Stock Option is exercisable only by the optionee and no
Non-Qualified Stock Option may be transferred by the optionee other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relation order satisfying the requirements of the prior version of Rule 16b-3
under the Exchange Act. An optionee whose continuous status as an employee,
director or consultant of the Company terminates for any reason (other than
termination because of death or disability) may exercise, in the three-month
period following such cessation (unless such Options terminate or expire sooner
by their terms), or such longer or shorter period as specified in the Option,
that portion of the optionee's Options that is exercisable at the time of such
cessation. In the event the optionee becomes disabled, the Options vested as of
the date of disability may be exercised prior to the earlier of such Option's
specified expiration date or 12 months from the date of the optionee's
disability, or such longer or shorter period as specified in the Option. In the
event the optionee dies, the Options vested as of the date of disability may be
exercised prior to the earlier of such Option's specified expiration date or 18
months from the date of the optionee's disability, or such longer or shorter
period as specified in the Option.

In the event of (i) a dissolution or liquidation of the Company, (ii) a
merger or consolidation in which the Company is not the surviving corporation,
(iii) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's outstanding common stock immediately prior to such
merger are converted into other property, whether in the form of securities,
cash or otherwise, or (iv) any other capital reorganization in which the
Company's shareholders receive less than 50% of the outstanding voting shares of
the surviving corporation: (a) any surviving corporation shall assume any
Options outstanding under the 1996 Stock Option Plan; (b) such Options shall
continue in full force and effect; or (c) the Options shall terminate if not
exercised prior to such event.

1997 California Stock Option Plan

The Company's 1997 California Stock Option Plan (the "1997 California
Plan") was adopted by the Board of Directors in February 1997, and approved by
the Company's stockholders in April 1997. In February 1998, the 1997 California
Plan was amended, with the approval of the Board, to reserve a total of 795,400
shares of Common Stock for issuance under this plan. This amendment has been
approved by the Company's stockholders. As of April 24, 1998, no options to
purchase shares of Common Stock had been exercised under the 1997 California
Plan, options to purchase 617,605 shares of Common Stock were outstanding and
options to purchase an additional 177,795 shares of Common Stock remained
available for grant. The outstanding options were exercisable at a weighted
average exercise price of $12.47 per share. Outstanding options to

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<PAGE> 59

purchase an aggregate of 507,605 shares were held by employees who are not
officers or directors of the Company.

The 1997 California Plan may be administered by the Board of Directors or
the Committee (either, the "1997 Plan Administrator"). The 1997 California Plan
provides for the granting to employees of the Company and of its subsidiaries or
parent corporations of Incentive Stock Options, and for the granting to
employees and independent contractors of Non-Qualified Stock Options. The 1997
Plan Administrator has the power to determine the terms of the Options granted,
including the exercise price, number of shares subject to the Option and the
exercisability thereof, and the form of consideration payable upon exercise.
Options granted under the 1997 California Plan are not transferable by the
optionee other than by will or by the laws of descent or distribution, and each
Option is exercisable during the lifetime of the optionee only by such optionee.
The exercise price of all Incentive Stock Options granted under the 1997
California Plan must be at least equal to the fair market value, as determined
by the Board of Directors, of the Common Stock on the grant date. The exercise
price of all Non-Qualified Stock Options granted under the 1997 California Plan
must be at least 85% of the fair market value, as determined by the 1997 Plan
Administrator, of the Common Stock on the grant date. With respect to any
participant who owns stock possessing more than 10% of the voting power or value
of all classes of the Company's outstanding capital stock, the exercise price of
any Incentive Stock Option or Non-Qualified Stock Option granted must equal at
least 110% of the fair market value of the Common Stock on the grant date and
the term of the Option must not exceed five years. The term of all other Options
granted under the 1997 California Plan may not exceed ten years. The
consideration for exercising any Option may consist of cash, check, shares of
Common Stock, a promissory note, the assignment of part of the proceeds from the
sale of shares acquired upon exercise of the Options or any combination thereof
as specified in the agreement evidencing the Option.

The 1997 California Plan provides that in the event of a merger of the
Company with or into another corporation or a consolidation, sale of
substantially all of the Company's assets or like transaction involving the
Company in which the Company's stockholders before the transaction do not retain
a majority interest in the Company, each Option may be assumed or an equivalent
Option may be substituted by a successor corporation. If the successor
corporation chooses not to assume the Options under the 1997 California Plan,
the Options not otherwise exercisable will terminate immediately prior to the
consummation of the transaction.

Unless terminated sooner, the 1997 California Plan will terminate
automatically in 2007. The Board has the authority to amend, suspend or
terminate the 1997 California Plan, subject to stockholder approval of certain
amendments and provided no such action may affect any share of Common Stock
previously issued and sold or any Option previously granted under the 1997
California Plan without the optionees consent.

1998 Stock Incentive Plan

The Company's 1998 Stock Incentive Plan (the "1998 Stock Incentive Plan"),
which was adopted by the Board of Directors in February 1998, was amended and
restated as of March 19, 1998 and has been approved by the Company's
stockholders. From and after the Offering, all further option grants will be
made solely under the 1998 Stock Incentive Plan. Initially, 165,000 shares of
Series D-1 Preferred Stock and 1,749,300 shares of Common Stock, together with
any shares of Common Stock represented by awards under the 1996 Stock Option
Plan which are forfeited, expire or are cancelled following the adoption of the
1998 Stock Incentive Plan, were reserved for issuance under the 1998 Stock
Incentive Plan. Upon and after the Offering, 6,199,300 shares of Common Stock
will be reserved for issuance under the 1998 Stock Incentive Plan, together with
(a) any shares of Common Stock available for future awards under the 1997
California Plan as of the Offering and (b) any shares of Common Stock
represented by Awards under the 1996 Stock Option Plan and the 1997 California
Plan (the "Prior Plans"), that are forfeited, expire or are cancelled following
the Offering. In connection with the adoption of the 1998 Stock Incentive Plan,
the Board determined that the Company will limit the issuance of 1998 Awards (as
defined) under the 1998 Stock Incentive Plan such that the aggregate number of
shares subject to 1998 Awards granted under the 1998 Stock Incentive Plan and
the Prior Plans will not at any time exceed 15% of the Company's outstanding
fully-diluted equity.

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As of April 24, 1998, no options to purchase shares of Common Stock had
been exercised under the 1998 Stock Incentive Plan, options to purchase
1,314,266 shares of Common Stock were outstanding, options to purchase 160,502
shares of Series D-1 Preferred Stock were outstanding (which will automatically
convert to options to acquire shares of Common Stock upon consummation of the
Offering), and options to purchase an additional 232,430 shares of Common Stock
remained available for grant prior to the consummation of the Offering. The
outstanding options were exercisable at a weighted average exercise price of
$13.71 per share. Outstanding options to purchase an aggregate of 1,059,768
shares were held by employees who are not officers or directors of the Company.

The purpose of the 1998 Stock Incentive Plan is to attract and retain the
best available personnel, to provide additional incentive to employees,
directors and consultants of the Company and its related entities and to promote
the success of the Company's business. The 1998 Stock Incentive Plan provides
for the granting to employees of Incentive Stock Options and the granting of
nonstatutory stock options, stock appreciation rights, dividend equivalent
rights, restricted stock, performance units, performance shares, and other
equity-based rights ("1998 Awards") to employees, directors and consultants of
the Company and its related entities.

With respect to 1998 Awards granted to directors or officers, the 1998
Stock Incentive Plan is administered by the Board of Directors or a committee
designated by the Board of Directors constituted to permit such 1998 Awards to
be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3
thereunder. With respect to 1998 Awards granted to other participants, the 1998
Stock Incentive Plan is administered by the Board of Directors or a committee
designated by the Board of Directors. In each case, the respective plan
administrator shall determine the provisions, terms and conditions of each 1998
Award, including, but not limited to, the 1998 Award vesting schedule,
repurchase provisions, rights of first refusal, forfeiture provisions, form of
payment (cash, shares of Common Stock, or other consideration) upon settlement
of the 1998 Award, payment contingencies and satisfaction of any performance
criteria.

Incentive Stock Options are not transferable by the optionee other than by
will or the laws of descent or distribution, and each Incentive Stock Option is
exercisable during the lifetime of the optionee only by such optionee. Other
1998 Awards shall be transferable to the extent provided in the agreement
evidencing the 1998 Award.

The exercise price of Incentive Stock Options must be at least equal to the
fair market value of the Common Stock on the date of grant, and the term of the
option must not exceed ten years. The term of other 1998 Awards will be
determined by the respective plan administrator. With respect to an employee who
owns stock possessing more than 10% of the voting power of all classes of the
Company's outstanding capital stock, the exercise price of any Incentive Stock
Option must equal at least 110% of the fair market value of the Common Stock on
the grant date and the term of the option must not exceed five years. The
exercise price or purchase price, if any, of other 1998 Awards will be such
price as determined by the Plan Administrator, but not less than 85% of the fair
market value of the stock. The consideration to be paid for the shares of Common
Stock upon exercise or purchase of a 1998 Award will be determined by the
respective plan administrator and may include cash, check, shares of Common
Stock, or the assignment of part of the proceeds from the sale of shares
acquired upon exercise or purchase of the 1998 Award.

Where the 1998 Award agreement permits the exercise or purchase of the 1998
Award for a certain period of time following the recipient's termination of
service with the Company, disability, or death, the 1998 Award will terminate to
the extent not exercised or purchased on the last day of the specified period or
the last day of the original term of the 1998 Award, whichever occurs first.

Unless terminated sooner, the 1998 Stock Incentive Plan will terminate
automatically in 2008. The Board has the authority to amend, suspend or
terminate the 1998 Stock Incentive Plan subject to stockholder approval of
certain amendments and provided no such action may affect 1998 Awards previously
granted under the 1998 Stock Incentive Plan unless agreed to by the affected
grantees.

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1998 Employee Stock Purchase Plan

The Company's 1998 Employee Stock Purchase Plan (the "Stock Purchase Plan")
was approved by the Board of Directors in February 1998 and has been approved by
the Company's stockholders. The Stock Purchase Plan was subsequently amended and
restated as of April 13, 1998. The Stock Purchase Plan is intended to qualify as
an "employee stock purchase plan" under Section 423 of the Code in order to
provide employees of the Company with an opportunity to purchase Common Stock
through payroll deductions. An aggregate of 3,000,000 shares of the Company's
Common Stock has been reserved for issuance under the Stock Purchase Plan and
available for purchase thereunder, subject to adjustment in the event of a stock
split, stock dividend or other similar change in the Common Stock or the capital
structure of the Company. All employees of the Company (and employees of
"subsidiary corporations" and "parent corporations" of the Company (as defined
by the Code) designated by the administrator of the Stock Purchase Plan) whose
customary employment is for more than five months in any calendar year and more
than 20 hours per week are eligible to participate in the Stock Purchase Plan.
Employees hired after the consummation of the Offering are eligible to
participate in the Stock Purchase Plan, subject to a six-month waiting period
after hiring. Non-employee directors, consultants, and employees subject to the
rules or laws of a foreign jurisdiction that prohibit or make impractical the
participation of such employees in the Stock Purchase Plan are not eligible to
participate in the Stock Purchase Plan.

The Stock Purchase Plan designates Purchase Periods, Accrual Periods and
Exercise Dates. Purchase Periods are generally overlapping periods of 12 months.
The initial Purchase Period will begin on the effective date of the Stock
Purchase Plan, which is the effective date of the Company's Registration
Statement relating to the Company's initial public offering of its Common Stock,
and end on May 14, 1999. Additional Purchase Periods will commence each May 15
and November 15. Accrual Periods are generally six month periods, with the
initial Accrual Period commencing on the effective date of the Stock Purchase
Plan and ending on November 14, 1998. Thereafter, Accrual Periods will commence
each May 15 and November 15. Exercise Dates are the last day of each Accrual
Period. In the event of a merger of the Company with or into another
corporation, the sale of all or substantially all of the assets of the Company,
or certain other transactions in which the stockholders of the Company before
the transaction own less than 50% of the total combined voting power of the
Company's outstanding securities following the transaction, the administrator of
the Stock Purchase Plan may elect to shorten the Purchase Period then in
progress.

On the first day of each Purchase Period, a participating employee is
granted a purchase right which is a form of option to be automatically exercised
on the forthcoming Exercise Dates within the Purchase Period during which
deductions are to be made from the pay of participants (in accordance with their
authorizations) and credited to their accounts under the Stock Purchase Plan.
When the purchase right is exercised, the participant's withheld salary is used
to purchase shares of Common Stock of the Company. The price per share at which
shares of Common Stock are to be purchased under the Stock Purchase Plan during
any Accrual Period is the lesser of (a) 85% of the fair market value of the
Common Stock on the date of the grant of the option (the commencement of the
Purchase Period) or (b) 85% of the fair market value of the Common Stock on the
Exercise Date (the last day of an Accrual Period). The participant's purchase
right is exercised in this manner on both Exercise Dates arising in the Purchase
Period unless, on the first day of any Accrual Period, the fair market value of
the Common Stock is lower than the fair market value of the Common Stock on the
first day of the Purchase Period. If so, the participant's participation in the
original Purchase Period is terminated, and the participant is automatically
enrolled in the new Purchase Period effective the same date.

Payroll deductions may range from 1% to 10% (in whole percentage
increments) of a participant's regular base pay and bonuses, exclusive of
overtime, shift-premiums or commissions. Participants may not make direct cash
payments to their accounts. The maximum number of shares of Common Stock which
any employee may purchase under the Stock Purchase Plan during an Accrual Period
is 1,250 shares. Certain additional limitations on the amount of Common Stock
which may be purchased during any calendar year are imposed by the Code.

The Stock Purchase Plan will be administered by the Board of Directors or a
committee designated by the Board, which will have the authority to terminate or
amend the Stock Purchase Plan (subject to specified

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restrictions) and otherwise to administer the Stock Purchase Plan and to resolve
all questions relating to the administration of the Stock Purchase Plan.

1998 Non-Employee Director Stock Incentive Plan

In April 1998, the Company's Board of Directors adopted the 1998
Non-Employee Director Stock Incentive Plan (the "1998 Non-Employee Director
Plan"), under which the total number of shares available for grant is equal to
300,000 shares of Common Stock, in order to provide for option grants and stock
issuances to members of the Company's Board of Directors who are not employees
of the Company, following the consummation of the Offering, in accordance with
the compensation guidelines described in "-- Directors Compensation." No awards
will be made under the 1998 Non-Employee Director Plan until consummation of the
Offering. The 1998 Non-Employee Director Plan has been approved by the Company's
stockholders.

The purposes of the 1998 Non-Employee Director Plan are to attract and
retain the best available non-employee directors, to provide them additional
incentives, and to promote the success of the Company's business. The 1998
Non-Employee Director Plan establishes two programs for the grant of awards to
non-employee directors: the Automatic Option Grant Program and the Stock Fee
Program (the "Non-Employee Director Awards").

Under the Automatic Option Grant Program, each non-employee director
serving on the Company's Board of Directors upon consummation of the Offering
automatically will be granted an option to acquire 30,000 shares of Common Stock
at an exercise price per share equal to the fair market value of the Common
Stock at the date of grant. These options will vest and become exercisable in
three equal installments on each yearly anniversary of the grant date.
Non-employee directors appointed to the Board of Directors following the
Offering also will be granted automatically at the time of election or
appointment an option to acquire 30,000 shares of Common Stock with the same
terms and conditions at an exercise price equal to the then fair market value of
the Common Stock. After the initial three year vesting period for such options,
each non-employee director will receive automatic annual grants of options to
acquire an additional 3,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock at the date of grant. Such options
will vest and become fully exercisable on the first anniversary of the grant
date.

Each automatic option grant will have a term of eight years and will be
transferable to the extent provided in the agreement evidencing the option. The
consideration for exercising an option may consist of cash, check, shares of
Common Stock, the assignment of part of the proceeds from the sale of shares
acquired upon exercise of the option or any combination thereof. In the event of
a merger of the Company with or into another corporation, a sale of
substantially all of the Company's assets, a person becoming more than a 50%
owner of the Company or a like transaction involving the Company in which the
Company's stockholders before the transaction do not retain a majority interest
in the Company, immediately prior to the transaction, one-third of the shares
subject to the options to purchase 30,000 shares of Common Stock will vest and
become exercisable and all of the shares subject to the options to purchase
3,000 shares of Common Stock will vest and become exercisable. Upon consummation
of such transaction all such options will terminate, unless they are assumed by
the successor company. In the event of a hostile takeover of the Company or
change in the majority of the Board of Directors through contested elections,
the vesting of all such options will likewise accelerate as described above, but
the options will remain exercisable according to their terms.

Under the Stock Fee Program, each non-employee director will be eligible to
apply all or any portion of the annual retainer and meeting fees otherwise
payable in cash to the non-employee director to the acquisition of shares of
Common Stock. The non-employee director must make the stock purchase election
prior to the start of the calendar year for which the election is to be in
effect. The first year for which such elections may be made is 1999. On the
first trading day following the due date for payment of a portion of the annual
retainer fee or the date of any meeting in a calendar year for which the
election is effective, the portion of the annual retainer or meeting fee subject
to such election automatically will be applied to the acquisition of shares of
Common Stock by dividing the selected dollar amount by the then fair market
value per share of the Common Stock. The number of issuable shares will be
rounded down to the next whole share.

The 1998 Non-Employee Director Plan is administered by the Board of
Directors or a committee designated by the Board of Directors (either, the "1998
Plan Administrator") constituted to permit Non-

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Employee Director Awards to be exempt from Section 16(b) of the Exchange Act in
accordance with Rule 16b-3 thereunder. The 1998 Plan Administrator shall approve
forms of the Non-Employee Director Award agreement for use under the Plan,
determine the terms and conditions of Non-Employee Director Awards, and construe
and interpret the terms of the 1998 Non-Employee Director Plan and Non-Employee
Director Awards granted pursuant thereto.

Unless terminated sooner, the 1998 Non-Employee Director Plan will
terminate automatically in 2008. The Board of Directors has the authority to
amend, suspend or terminate the 1998 Non-Employee Director Plan subject to
stockholder approval of certain amendments and provided no such action may
affect Non-Employee Director Awards previously granted under the 1998
Non-Employee Director Plan unless agreed to by the affected non-employee
directors.

401(k) PLAN

In January 1997, the Company implemented an employee savings and retirement
plan (the "401(k) Plan") covering certain of the Company's employees who have at
least one month of service with the Company and have attained the age of 21.
Pursuant to the 401(k) Plan, eligible employees may elect to reduce their
current compensation by up to the lesser of 20% of such compensation or the
statutorily prescribed annual limit ($10,000 in 1998) and have the amount of
such reduction contributed to the 401(k) Plan. The Company may make
contributions to the 401(k) Plan on behalf of eligible employees. Employees
become 20% vested in these Company contributions after one year of service, and
increase their vested percentages by an additional 20% for each year of service
thereafter. The 401(k) Plan is intended to qualify under Section 401 of the
Internal Revenue Code of 1986, as amended, so that contributions by employees or
by the Company to the 401(k) Plan, and income earned on the 401(k) Plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made. The trustee under the 401(k) Plan, at the direction of
each participant, invests the 401(k) Plan employee salary deferrals in selected
investment options. The Company made no contributions to the 401(k) Plan in 1996
or in 1997. The Company does not presently expect to make any contributions to
the 401(k) Plan during the fiscal 1998.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Chairman of the Compensation Committee is Mr. Schovee. No member of the
Compensation Committee was at any time during the fiscal year ended December 31,
1997, or at any other time, an officer or employee of the Company. No member of
the Compensation Committee of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee. See "Certain Transactions" for a description of transactions between
the Company and entities affiliated with members of the Compensation Committee.

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

The Company's Restated Certificate of Incorporation and bylaws provide that
the Company shall indemnify to the fullest extent permitted by Section 145 of
the DGCL, as it now exists or as amended, all directors and officers pursuant
thereto. The Company's Restated Certificate of Incorporation and bylaws also
authorize the Company to indemnify its employees and other agents, at its
option, to the fullest extent permitted by Section 145, as it now exists or as
amended. The Company intends to enter into agreements to indemnify its directors
and officers, in addition to indemnification provided for in the Company's
charter documents. These agreements, among other things, provide for the
indemnification of the Company's directors and officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of the Company, arising out of such person's services as a director or
officer of the Company, any subsidiary of the Company or any other company or
enterprise to which such person provides services at the request of the Company
to the fullest extent permitted by applicable law. The Company believes that
these provisions and agreements will assist the Company in attracting and
retaining qualified persons to serve as directors and officers.

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Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
or (iv) for any transaction from which the director derived an improper personal
benefit. The Company's Restated Certificate of Incorporation will provide for
the elimination of personal liability of a director for breach of fiduciary
duty, as permitted by Section 102(b)(7) of the DGCL.

The Underwriting Agreement provides for indemnification by the Underwriters
under certain circumstances of directors, officers and controlling persons of
the Company against certain liabilities, including liabilities under the
Securities Act.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions contained in the Certificate of Incorporation and
Bylaws of the Company, the DGCL, the Underwriting Agreement, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer or controlling person in connection with the
Common Stock being registered hereunder, the Company will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

The Company intends to purchase and maintain insurance on behalf of the
officers and directors insuring them against liabilities that they may incur in
such capacities or arising out of such status.

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CERTAIN TRANSACTIONS

SERIES A PURCHASE AGREEMENT

Pursuant to a Series A Preferred Stock purchase agreement by and among
Centennial Fund IV, L.P., Centennial Holdings, Inc., Telecom Partners, L.P.,
Norwest Equity Partners, V and Brooks Fiber Properties, Inc. (together, the
"Series A Purchasers") and the Company, dated as of June 25, 1996 (the "Series A
Purchase Agreement"), the Series A Purchasers made their initial investments in
the Company. The Series A Purchasers purchased, in the aggregate, 5,250,000
shares of Series A Preferred Stock for an aggregate purchase price of
$15,750,000. Pursuant to Amendment No. 1 to the Series A Stock Purchase
Agreement, dated as of July 3, 1996, the Company sold an additional 756,666
shares of Series A Preferred Stock to certain of the Series A Purchasers and to
certain additional purchasers for the aggregate purchase price of $2,270,000.
Subsequently, the Company sold an additional 26,667 shares of Series A Preferred
Stock to certain members of the Company's management for an aggregate purchase
price of $80,001. In connection with the Series A Purchase Agreement, the
Company, the Series A Purchasers and certain members of the Company's management
entered into a stockholders agreement, dated as of June 25, 1996 (the "Series A
Stockholders Agreement"), which provided the Series A Stockholders with certain
demand and piggyback registration rights. The parties to Amendment No. 1 to the
Series A Stock Purchase Agreement became parties to the Series A Stockholders
Agreement. The Series A Stockholders Agreement was replaced by the Series B
Stockholders Agreement which, in turn was replaced by the Stockholders
Agreement. See "-- Series B Purchase Agreement" and "-- Series C Purchase
Agreement."

SERIES B PURCHASE AGREEMENT

The Company, certain of the Series A Purchasers and several additional
purchasers (together, the "Series B Purchasers") entered into a Series B
Preferred stock purchase agreement, dated as of December 5, 1996 (the "Series B
Stock Purchase Agreement"), pursuant to which the Series B Purchasers acquired,
in the aggregate, 10,000,000 shares of Series B Preferred Stock for the
aggregate purchase price of $60,000,000. In connection with the Series B Stock
Purchase Agreement, the Company, the Series A Purchasers, the Series B
Purchasers and members of the Company's management entered into a stockholders
agreement, dated as of December 5, 1996 (the "Series B Stockholders Agreement").
The Series B Stockholders Agreement replaced the Series A Stockholders Agreement
and was later replaced by the Stockholders Agreement. See "-- Series C Purchase
Agreement."

SERIES C PURCHASE AGREEMENT

The Company, certain of the Series A Purchasers and certain of the Series B
Purchasers (together, the "Series C Purchasers") entered into a Series C
Preferred stock purchase agreement, dated as of May 20, 1997 (the "Series C
Stock Purchase Agreement"), pursuant to which the Series C Purchasers acquired,
in the aggregate, 2,500,000 shares of Series C Preferred Stock for the aggregate
purchase price of $20,000,000. In connection with the Series C Stock Purchase
Agreement, the Company, the Series A Purchasers, the Series B Purchasers, the
Series C Purchasers, and members of the Company's management entered into a
Stockholders Agreement (the "Stockholders Agreement"), which replaced the Series
B Stockholders Agreement. See "-- Stockholders Agreement."

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The following table sets forth the number of shares of Series A, Series B
and Series C Preferred Stock, and Common Stock purchased by the Company's
directors, five percent stockholders and their respective affiliates.

<TABLE>
<CAPTION>
COMMON SERIES A SERIES B SERIES C
HOLDERS STOCK PREFERRED PREFERRED PREFERRED
- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C>
Brooks Fiber Properties, Inc.(1)................. -- 1,666,667 2,500,000 498,304
Norwest Equity Partners V, L.P.(2)............... 270,000 1,666,667 2,083,333 281,250
Providence Equity Partners, L.P.(3).............. -- -- 2,083,333 972,360
Centennial Fund V, L.P.(4)....................... -- -- 1,627,983 674,320
Centennial Fund IV, L.P.(4)...................... 250,000 1,543,210 353,395 12,500
Centennial Entrepreneurs Fund V, L.P.(4)......... -- -- 50,350 20,855
Centennial Holdings I, LLC(4).................... 14,452 89,208 37,289 316
Justin L. Jaschke................................ 50,000 33,333 22,501 --
Estate of Mark D. Johnson........................ 60,000 -- -- --
James C. Allen................................... 25,000 -- -- --
Trygve E. Myhren................................. -- -- 10,000 --
</TABLE>

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

(1) As a result of the acquisition of Brooks by WorldCom, which resulted in
Brooks becoming a wholly owned subsidiary of WorldCom, WorldCom may be
deemed to indirectly beneficially own the shares owned by Brooks. James C.
Allen served as CEO of Brooks until the acquisition. Mr. Allen serves on the
Company's Board of Directors.

(2) George J. Still, Jr. is a general partner of Itasca Partners V. ("Itasca"),
which is the sole general partner of Norwest Equity Partners V, L.P.
("Norwest"). Mr. Still serves on the Company's Board of Directors.

(3) Paul J. Salem, a member of Providence Equity Partners LLC ("PEPLLC"), which
is the sole general partner of Providence Equity Partners, L.P.
("Providence"), serves on the Company's Board of Directors.

(4) The sole General Partner of Centennial Fund IV, L.P. ("Centennial IV") is
Centennial Holdings IV, L.P. ("Holdings IV"), the sole General Partner of
Centennial Fund V, L.P. ("Centennial V") and Centennial Entrepreneurs Fund
V, L.P. ("Centennial Entrepreneurs") is Centennial Holdings V, L.P.
("Holdings V"). Steven C. Halstedt is a general partner of Holdings IV and
Holdings V, and a unit holder of Centennial Holdings I, L.L.C. ("Holdings
LLC"). Mr. Halstedt serves as the Chairman of the Board of Directors of the
Company.

SERIES D-1 AGREEMENTS

In connection with the acquisitions of iServer and NSNet, the Company
issued a total of 797,642 shares of Series D-1 Preferred Stock to former
stockholders of iServer and NSNet. The Company has issued a total of
approximately 1,416,871 additional shares of Series D-1 Preferred Stock pursuant
to Buyouts completed as of April 24, 1998. In addition, options to acquire
164,989 shares of Series D-1 Preferred Stock were issued in connection with the
Buyout of NorthWestNet, Inc.

The Series D-1 Preferred Stock will automatically convert into Common
Stock, and the options to acquire shares of Series D-1 Preferred Stock will
automatically convert into options to acquire shares of Common Stock, upon
completion of the Offering. The recipients of the shares of Series D-1 Preferred
Stock issued in the Buyouts and the acquisition of NSNet have been granted
certain registration rights with respect to the shares of Common Stock issuable
upon conversion of the Series D-1 Preferred Stock and have agreed to certain
market standoff provisions following the Offering in the agreements pursuant to
which the Series D-1 Preferred Stock is issued (the "Series D-1 Agreements").
See "Description of Capital Stock -- Registration Rights" and "Shares Eligible
for Future Sale."

STOCKHOLDERS AGREEMENT

Pursuant to the terms of the Stockholders Agreement, the holders of the
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock (together, the "Investors") acquired certain

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registration rights with respect to the Company. At any time after the effective
date of the first registration statement filed by the Company under the
Securities Act, holders of 25% or more of the Registrable Securities (as defined
in the Stockholders Agreement) may require the Company to effect registration
under the Securities Act of their Registrable Securities, subject to the Board
of Directors' right to defer such registration for a period of up to 180 days.
In addition, if the Company proposes to register securities under the Securities
Act (other than a registration relating either to the sale of securities to
employees pursuant to a stock option, stock purchase or similar plan or a
transaction under Rule 145 of the Securities Act), then any of the Investors has
a right (subject to quantity limitations determined by underwriters if the
offering involves an underwriting) to request that the Company register such
holder's Registrable Securities. All registration expenses incurred in
connection with up to two long-form and all short-form and piggyback
registrations will be borne by the Company. Each Investor will pay for selling
expenses pro rata on the basis of the number of shares sold by such Investor.
The Company has agreed to indemnify the Investors (including the officers,
directors, partners, agents, employees and representatives, and each person
controlling such Investor within the meaning of Section 15 of the Securities
Act) against all expenses, claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue or alleged untrue statement of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any 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 any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Investor for any legal and any other expenses reasonably
incurred in connection with investigating and defending or settling any such
claim, loss, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such
Investor and stated to be specifically for use therein. This indemnification
does 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
Company.

Subject to certain exceptions, the Company has a right of first refusal to
purchase shares of Common Stock held by Management Holders (as defined in the
Stockholders Agreement) which, to the extent not purchased by the Company, are
subject to an additional right of first refusal by the Investors according to
their respective pro rata shares. In addition, transfers of Common Stock held by
Investors are subject to a right of first refusal by other Investors who also
are holders of Common Stock. Subject to certain exceptions, upon the issuance by
the Company of any Common Stock or any other equity securities, each of the
Specified Investors (as defined in the Stockholders Agreement) has the
preemptive right to purchase its pro rata share of up to 80% of the securities
so offered according to their respective pro rata interests. If any Specified
Investor declines to exercise such right in full, the remaining electing
Specified Investors are entitled to purchase such Specified Investor's
unpurchased portion of the offered securities on a pro rata basis. All
preemptive rights and rights of first refusal contained in the Stockholders
Agreement terminate upon consummation of the Offering.

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

On June 16, 1997, the Company made a loan in the amount of $100,000 to
Peter Fritzinger, which Mr. Fritzinger repaid on July 21, 1997 with interest at
the then current market rate.

OTHER TRANSACTIONS

On March 18, 1998, in response to an offer by Brooks, the Company and
Brooks reached an agreement pursuant to which the Company agreed to repurchase
the $50.0 million principal amount of the Company's 1997 Notes held by Brooks
for an aggregate net purchase price of approximately $54.5 million, plus accrued
interest. A portion of the proceeds from the sale of the 1998 Notes was used to
effect the Refinancing. See "Summary -- Recent Developments."

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<PAGE> 68

In April 1998, the Company's Board of Directors approved an additional
equity investment in V-I-A Internet, Inc. ("VIANet") in the amount of up to $8.0
million in order to preserve the Company's current ownership interest of
approximately 18% in VIANet. The Company has no right to acquire the remaining
equity of VIANet. The Board of Directors has determined that its investment in
VIANet will be the primary component of its international strategy in the near
term, but the Company also may pursue direct investments in certain
international markets where appropriate opportunities exist. The Company
believes that its indirect international strategy through VIANet is the most
effective means to leverage the Company's resources.

A number of the Company's significant stockholders (including certain of
The Centennial Funds and Norwest) are, or are expected possibly to become,
investors in VIANet. Mr. Jaschke serves as the Chairman of the Board of
Directors of VIANet and Mr. Halstedt is a member of VIANet's Board of Directors.

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<PAGE> 69

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of April 24, 1998,
and upon consummation of the Offering and the NTT Investment, with respect to
the beneficial ownership of the Company's Common Stock by (i) each stockholder
known by the Company to own beneficially more than five percent, in the
aggregate, of the outstanding shares of the Company's outstanding Common Stock,
(ii) each director and Named Executive Officer of the Company and (iii) all
executive officers and directors as a group.

<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY
NUMBER OF OWNED(1)
SHARES --------------------
BENEFICIALLY PRIOR TO AFTER
HOLDERS OWNED OFFERING OFFERING
------- ------------ -------- --------
<S> <C> <C> <C>
Brooks Fiber Properties, Inc.(2)............................ 5,369,131 23.58% 16.51%
425 Woods Mill Road South
Suite 300
Town & Country, Missouri 63017
Nippon Telegraph and Telephone Corporation(3)............... 4,749,467 -- 14.93%
Global Communications Headquarters
Tokyo Opera City Tower
20-2 Nishi-Shinjuku 3-chome
Shinjuku-ku
Tokyo 163-14, Japan
Norwest Equity Partners V, L.P.............................. 4,301,250 19.49% 13.52%
245 Lytton Avenue
Palo Alto, California 94301
Providence Equity Partners, L.P............................. 3,055,693 13.85% 9.60%
50 Kennedy Plaza
Providence, Rhode Island 02903
Centennial Fund V, L.P.(4).................................. 2,302,303 10.43% 7.24%
1428 Fifteenth Street
Denver, Colorado 80202
Centennial Fund IV, L.P.(4)................................. 2,159,105 9.78% 6.79%
1428 Fifteenth Street
Denver, Colorado 80202
Steven C. Halstedt(5)....................................... -- -- --
Justin L. Jaschke(6)........................................ 185,834 * *
Estate of Mark D. Johnson(7)................................ 130,000 * *
James C. Allen.............................................. 25,000 * *
Trygve E. Myhren(8)......................................... 20,000 * *
Paul J. Salem(9)............................................ -- -- --
Stephen W. Schovee.......................................... -- -- --
George J. Still, Jr.(10).................................... -- -- --
Chris J. DeMarche(11)....................................... 88,833 * *
Carla Hamre Donelson(12).................................... 29,917 * *
Peter B. Fritzinger(13)..................................... 40,000 * *
All executive officers and directors as a group (12
persons)(14).............................................. 512,584 2.31% 1.61%
</TABLE>

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

* Less than 1%

(1) Percentage of beneficial ownership prior to the Offering is based on (i)
1,294,266 shares of Common Stock outstanding at April 24, 1998; (ii)
18,561,667 shares of Common Stock issuable upon conversion of the Series A,
B, and C Preferred Stock outstanding at April 24, 1998; (iii) 2,214,513
shares of Common Stock issuable upon conversion of the Series D-1 Preferred
Stock issued in connection with the acquisitions and Buyouts completed as
of April 24, 1998, totalling 22,070,446 shares of capital stock

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<PAGE> 70

of the Company. Percentage of beneficial ownership after the Offering is
based on 31,819,913 total shares of capital stock outstanding, which
includes the shares of capital stock outstanding prior to the Offering
identified above plus (i) 4,749,467 shares of Common Stock to be sold by
the Company to NTT for approximately $87.3 million (based upon an assumed
initial public offering of 5,000,000 shares of Common Stock at an assumed
Price to Public of $19.00 per share) concurrently with the Offering and
(ii) 5,000,000 shares of Common Stock to be sold pursuant to the Offering.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options or warrants owned by such person that are currently exercisable or
exercisable within 60 days of April 24, 1998 are deemed outstanding;
provided, that such shares are not deemed outstanding for the purpose of
computing the percentage of ownership of any other person. Except as
indicated in the footnotes to this table and pursuant to applicable
community property laws, each of the persons named in this table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name.

(2) Includes warrants for 704,160 shares of Common Stock exercisable within 60
days. As a result of the acquisition of Brooks by WorldCom, which resulted
in Brooks becoming a wholly owned subsidiary of WorldCom, WorldCom may be
deemed to indirectly beneficially own the shares owned by Brooks.

(3) Because the percentage of beneficial ownership following the Offering
reflected in this table is based on outstanding (not fully diluted) shares
(see footnote 1), the ownership percentage shown for NTT is higher than the
maximum of 12.5% of fully diluted shares that they are permitted to
purchase in the NTT Investment.

(4) Does not include 71,205 shares of the Company's capital stock held by
Centennial Entrepreneurs. Holdings V is the sole general partner of
Centennial Entrepreneurs and may be deemed to indirectly beneficially own
such shares by virtue of its authority to make decisions regarding the
voting and disposition of shares beneficially owned by Centennial
Entrepreneurs. Centennial V disclaims beneficial ownership of the shares
held by Centennial Entrepreneurs and Centennial Entrepreneurs disclaims
beneficial ownership of the shares held by Centennial V. In addition,
Centennial V disclaims beneficial ownership of the shares held by
Centennial IV, and Centennial IV disclaims beneficial ownership of the
shares held by Centennial V.

(5) The sole General Partner of Centennial IV is Holdings IV and the sole
General Partner of Centennial V is Holdings V. Holdings IV and Holdings V
may be deemed to indirectly beneficially own the shares owned by Centennial
IV and Centennial V, respectively. Mr. Halstedt is a general partner of
Holdings IV and Holdings V and may be deemed to be the indirect beneficial
owner of the shares owned by Centennial IV and Centennial V. Mr. Halstedt
disclaims beneficial ownership of shares held by Centennial IV and
Centennial V. In addition, this amount does not include 141,265 shares of
the Company's capital stock held by Holdings LLC, of which Mr. Halstedt is
a unit holder. Centennial Holdings, Inc. ("Holdings Inc."), of which Mr.
Halstedt is an officer and director, is the sole Managing Member of
Holdings LLC and may be deemed to beneficially own shares directly
beneficially owned by Holdings LLC. However, Mr. Halstedt, acting alone,
does not have voting or investment power with respect to any of the shares
directly held by either Holdings Inc. or Holdings LLC, and as a result, Mr.
Halstedt disclaims beneficial ownership of the shares held by Holdings LLC.

(6) Includes options for 20,000 shares of Common Stock exercisable within 60
days.

(7) Includes options exercisable for 70,000 shares of Common Stock exercisable
within 60 days.

(8) Includes options exercisable for 10,000 shares of Common Stock exercisable
within 60 days.

(9) The sole general partner of Providence is PEPLLC. Mr. Salem is a member of
PEPLLC and may be deemed to indirectly beneficially own the shares owned by
Providence. Mr. Salem disclaims beneficial ownership of these shares.

(10) The sole general partner of Norwest is Itasca. Mr. Still is a general
partner of Itasca and may be deemed to indirectly beneficially own the
shares owned by Norwest. Mr. Still disclaims beneficial ownership of these
shares.

(11) Includes options exercisable for 28,000 shares of Common Stock exercisable
within 60 days.

(12) Includes options exercisable for 12,000 shares of Common Stock exercisable
within 60 days.

(13) Includes options exercisable for 15,000 shares of Common Stock exercisable
within 60 days.

(14) Includes options exercisable for 109,000 shares of Common Stock exercisable
within 60 days (not including options held by Mr. Johnson's estate).

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<PAGE> 71

NTT INVESTMENT

NTT Stock Purchase Agreement and NTT Investment Agreement. Pursuant to a
Stock Purchase and Master Strategic Relationship Agreement, dated as of April 7,
1998, between the Company and NTT (the "NTT Stock Purchase Agreement"), NTT
agreed to purchase, concurrent with and conditioned upon the consummation of the
Offering (the "IPO Closing"), a number of shares of the Company's Common Stock
equal to the lesser of (i) 12.5% of the total number of shares of Common Stock,
on a fully diluted and fully converted basis (calculated as of the IPO Closing
after giving effect to the Offering and the sale to NTT), or (ii) the quotient
of $100.0 million divided by the "Per Share Price" payable by NTT. The "Per
Share Price" to be paid by NTT will be equal to the Price to Public in the
Offering multiplied by 96.75% (subject to certain adjustments in the event that
shares of Common Stock are issued at less than the Per Share Price prior to the
IPO Closing).

The Company and NTT also entered into an Investment Agreement, dated as of
April 7, 1998 (the "NTT Investment Agreement"), providing for certain
arrangements generally effective from and after the purchase of shares by NTT
under the NTT Stock Purchase Agreement. Pursuant to the NTT Investment
Agreement, the Company agreed to appoint an individual designated by NTT to the
Board of Directors of the Company. So long as certain ownership conditions are
met, the NTT designee will serve for an initial term ending as of the third
annual stockholder meeting following the IPO Closing. Thereafter, the Company
has agreed, subject to certain exceptions, to nominate as a member of the Board
of Directors at each subsequent election of the applicable class of directors a
person designated by NTT who will be subject to election by the stockholders of
the Company. Additionally, NTT will have the right, subject to the satisfaction
of certain conditions, to designate up to three individuals to be employed by
the Company in corporate development, technical and/or marketing positions to
assist in implementing and carrying out the commercial relationship between
Verio and NTT.

The Investment Agreement imposes certain limitations on NTT's ability to
dispose of the shares of Common Stock that it acquires. In particular, NTT has
granted to the Company certain rights of first offer and rights of first refusal
which apply, under certain circumstances, in the event that NTT proposes to sell
some or all of the shares that it acquires. The specific terms of these rights
vary depending upon the quantity of shares proposed to be sold and other terms
of the proposed sale. In addition, NTT has agreed on behalf of itself and its
affiliates to certain "standstill" restrictions pursuant to which NTT and its
affiliates may make open market or privately negotiated purchases of additional
voting securities (including Common Stock) so long as the total holdings of NTT
and its affiliates do not exceed 17.5% of the Company's fully diluted Common
Stock after taking into account such acquisition. The Company also granted NTT
certain registration rights with respect to the Common Stock it acquires. See
"Certain Transactions -- Description of Capital Stock -- Registration Rights."

The NTT Stock Purchase Agreement may be terminated prior to the IPO Closing
only in certain limited circumstances, including in the event that the sale of
shares to NTT has not occurred by July 31, 1998. The NTT Investment Agreement
will terminate automatically upon any termination of the NTT Stock Purchase
Agreement.

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<PAGE> 72

DESCRIPTION OF CAPITAL STOCK

The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by the provisions of the Certificate of
Incorporation and Bylaws, which have been filed as exhibits to the Company's
Registration Statement of which this Prospectus is a part.

Upon the closing of the Offering, the authorized capital stock of the
Company, after giving effect to the conversion of all outstanding Preferred
Stock into Common Stock will be 137,500,000 shares of capital stock, consisting
of 125,000,000 shares of Common Stock, par value $0.001 per share, and
12,500,000 shares of Preferred Stock, par value $0.001 per share (the
"Undesignated Preferred Stock").

COMMON STOCK

As of April 24, 1998 there were 1,294,266 shares of Common Stock
outstanding held of record by 26 stockholders.

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any outstanding shares of
Preferred Stock, if any. Holders of Common Stock have no preemptive rights or
rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon completion of the Offering will be, fully paid and
nonassessable. The rights of holders of Common Stock are subject to, and may be
adversely affected by, the rights of any series of Preferred Stock which the
Company may issue in the future.

PREFERRED STOCK

Following completion of the Offering and the conversion of all outstanding
shares of Preferred Stock into Common Stock, the Board of Directors will have
the authority to issue from time to time up to 12,500,000 shares of Undesignated
Preferred Stock in one or more series and to fix the powers, designations,
preferences and relative, participating, optional or other rights thereof,
including dividend rights, conversion rights, voting rights, redemption terms,
liquidation preferences (any or all of which may be greater than the rights of
the Common Stock) and the number of shares constituting each such series,
without any further vote or action by the Company's stockholders. The issuance
of such Undesignated Preferred Stock could adversely affect the rights of
holders of Common Stock and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plans
to issue any shares of such Undesignated Preferred Stock after the Offering.

WARRANTS

As of April 24, 1998, the Company had warrants outstanding to purchase an
aggregate of 2,112,480 shares of Common Stock at an exercise price per share of
$0.01 (the "Warrants"). The Warrants were issued in connection with the issuance
of the 1997 Notes and will become exercisable after the Offering. Holders of the
Warrants are entitled to certain registration rights. See "-- Registration
Rights."

REGISTRATION RIGHTS

Pursuant to the Stockholders Agreement between the Company and the
Investors, the Investors are entitled to certain demand and piggyback
registration rights with respect to the registration of certain Registrable
Securities (as defined in the Stockholders Agreement) under the Securities Act.
At any time after the effective date of the first registration statement filed
by the Company under the Securities Act, Investors owning 25% or more of the
Registrable Securities may require the Company to effect registration under the
Securities Act of their Registrable Securities, subject to the Board of
Directors' right to defer such registration for a period of up to 180 days. In
addition, if the Company proposes to register securities under the Securities

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<PAGE> 73

Act (other than a registration statement on Form S-8 or S-4), whether or not for
its own account, then any of the Investors has a right (subject to quantity
limitations determined by underwriters if the offering involves an underwriting)
to request that the Company register such Investor's Registrable Securities. All
registration expenses incurred in connection with up to two long-form and all
short-form and piggyback registrations will be borne by the Company. Each
Investor will pay for its own Selling Expenses (as defined in the Stockholders
Agreement) on a pro rata basis. These registration rights are subject to certain
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares included in such registration. See
"Certain Transactions -- Stockholders Agreement."

In connection with the Series D-1 Agreements the Company entered into
certain investment agreements (the "Investment Agreements") with the holders
(the "Series D-1 Holders") of shares of Series D-1 Preferred Stock. Pursuant to
the Investment Agreements, some of the Series D-1 Holders are entitled to
certain piggyback registration rights with respect to the registration of
certain Registrable Securities (as defined in the Investment Agreements) under
the Securities Act. At any time after a Lock-Up Termination Date (as defined in
the Investment Agreements), the Company proposes to register any of its
securities under the Securities Act (other than a registration statement on Form
S-8 or S-4), whether or not for its own account, such Series D-1 Holders are
entitled to notice of such registration and are entitled to include such Series
D-1 Holder's Registrable Securities therein. All such rights granted under the
Investment Agreements shall terminate with respect to the Registrable Securities
of a Series D-1 Holder upon the earliest to occur of (i) the second anniversary
of the initial public offering of the Company, (ii) such time as all such
Registrable Securities may be immediately sold pursuant to Rule 144 under the
Securities Act within any 90-day period, or (iii) upon any sale of such
Registrable Securities pursuant to a registration statement or Rule 144 under
the Securities Act. The Company is required to bear all registration expenses
(other than underwriting discounts and commissions) incurred in connection with
any such registrations. The Company is not responsible for any expenses of any
counsel retained to act on behalf of Series D-1 Holder participating in such
registration. All of these registration rights are subject to certain conditions
and limitations including, in particular, if the underwriters of an offering
seek to limit the number of shares included in such offering, all holders of
demand and piggyback registration rights (other than the piggyback registration
rights held by the Series D-1 Holders) shall include their shares in such
offering in priority to the Series D-1 Holders.

In connection with the issuance of the 1997 Notes, the holders of a number
of the Warrants, Warrant Shares and Registrable Securities (as defined in a
registration rights agreement entered into in connection with the issuance of
the 1997 Notes) (the "Subject Equity") equivalent to a majority of the Warrant
Shares subject to the originally issued Warrants, will be entitled to require
the Company to effect one registration under the Securities Act of the Subject
Equity, subject to certain limitations. Holders of such Registrable Securities
also will have the right to include such Registrable Securities in any
registration statement under the Securities Act filed by the Company (other than
(a) a registration statement on Form S-8 or S-4, (b) a registration statement
filed in connection with an offer of securities solely to existing
securityholders or (c) a Demand Registration (as defined in the registration
rights agreement)), whether or not for its own account. These registration
rights are subject to certain conditions and limitations, among them the right
of the underwriters of an offering to limit the number of shares included in
such registration.

Pursuant to the NTT Investment, after the first anniversary of the
consummation of the Offering, NTT may require, on up to three occasions, that
the Company effect a registration statement under the Securities Act for the
sale of the shares of Common Stock issued to NTT, subject, in certain
circumstances, to the Company's right to defer any such demand for registration
for specified periods. In addition, if the Company proposes to register its
securities under the Securities Act, or another holder of the Company's Common
Stock exercises its demand registration rights, then NTT has a right (subject to
certain cutbacks determined by the underwriters in the event of an underwritten
offering) to include shares of NTT's Common Stock in any such offering. All
registration expenses will be borne by the Company subject to certain
exceptions, other than selling expenses which must be paid by NTT. In the event
that any shares of NTT's Common Stock are included in a registration statement,
the Company has agreed to indemnify NTT against certain losses for which NTT may
become liable under the Securities Act.

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ANTI-TAKEOVER PROVISIONS

General

Certain provisions of the DGCL and the Company's Certificate of
Incorporation and Bylaws could have the effect of delaying, deterring or
preventing a future takeover or change in control of the Company unless such
takeover or change in control is approved by the Company's Board of Directors.
Such provisions also may render the removal of directors and management more
difficult. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Company's Common Stock. These
provisions of Delaware law and the Company's Certificate of Incorporation and
Bylaws also may have the effect of discouraging or preventing certain types of
transactions involving an actual or threatened change of control of the Company
(including unsolicited takeover attempts), even though such a transaction may
offer the Company's stockholders the opportunity to sell their stock at a price
above the prevailing market price. See "Risk Factors -- Anti-Takeover
Provisions."

Certificate of Incorporation and Bylaws

Certain provisions of the Certificate of Incorporation and Bylaws could
have the effect of discouraging potential acquisition proposals or delaying or
preventing a change of control of the Company. In particular, effective upon
consummation of the Offering, all stockholder actions must be effected at a duly
called meeting and not by a consent in writing, and an affirmative vote of the
holders of 80% of the Company's capital stock would be required to amend such
provision.

The Certificate of Incorporation and Bylaws of the Company also provide
that, upon consummation of the Offering, the Board of Directors will be divided
into three classes of directors, as nearly equal in number as is reasonably
possible, serving staggered terms so that directors' initial terms will expire
at the first, second and third succeeding annual meeting of the stockholders
following the Offering, respectively. At each such succeeding annual meeting of
stockholders, directors elected to succeed those directors whose terms are
expiring at such meeting shall be elected for a term of office to expire at the
third succeeding annual meeting of stockholders following such election. A vote
of at least 80% of the Company's capital stock would be required to amend such
provision.

The Company believes that a classified board of directors will help to
assure the continuity and stability of the Board of Directors and the Company's
business strategies and policies as determined by the Board of Directors, since
a majority of the directors at any given time will have had prior experience as
directors of the Company. The Company believes that this, in turn, will permit
the Board of Directors to more effectively represent the interest of
stockholders. With a classified board of directors, at least two annual meetings
of stockholders, instead of one, will generally be required to effect a change
in the majority of the Board of Directors. As a result, a provision relating to
a classified Board of Directors may discourage proxy contests for the election
of directors or purchases of a substantial block of the Common Stock because its
provisions could operate to prevent obtaining control of the Board of Directors
in a relatively short period of time. The classification provision and the
prohibition on stockholder action by written consent could also have the effect
of discouraging a third party from making a tender offer or otherwise attempting
to obtain control of the Company. Under the DGCL, a director on a classified
board may be removed by the stockholders of the corporation only for cause.

The Company's Bylaws provide that special meetings of the stockholders of
the Company may be called only by the President or, at the direction of the
Board of Directors, the Secretary of the Company. The Company's Bylaws require
advance written notice, which generally must be received by the Secretary of the
Company not less than 30 days nor more than 60 days prior to the meeting, by a
stockholder of a proposal or director nomination which such stockholder desires
to present at a meeting of stockholders. Any amendment of this provision would
require a vote of at least 80% of the Company's capital stock.

The Company's Certificate of Incorporation does not include a provision for
cumulative voting in the election of directors. Under cumulative voting, a
minority stockholder holding a sufficient number of shares may be able to ensure
the election of one or more directors. The absence of cumulative voting may have
the effect of limiting the ability of minority stockholders to effect changes in
the Board of Directors and, as a

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<PAGE> 75

result, may have the effect of deterring a hostile takeover or delaying or
preventing changes in control or management of the Company.

The Company's Bylaws and, effective upon consummation of the Offering, the
Company's Certificate of Incorporation provide that vacancies in the Board of
Directors may be filled by a majority of directors in office, although less than
a quorum, and not by the stockholders.

The Certificate of Incorporation allows the Company to issue up to
12,500,000 shares of Undesignated Preferred Stock with rights senior to those of
the Common Stock and that otherwise could adversely affect the interests of
holders of Common Stock, which could decrease the amount of earnings or assets
available for distribution to the holders of Common Stock or could adversely
affect the rights and powers, including voting rights, of the holders of Common
Stock. In certain circumstances, such issuance could have the effect of
decreasing the market price of the Common Stock, as well as having the
anti-takeover effect discussed above.

These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company. These provisions are designed to reduce the vulnerability of the
Company to an unsolicited acquisition proposal and to discourage certain tactics
that may be used in proxy fights. However, such provisions could have the effect
of discouraging others from making tender offers for the Company's shares and,
as a consequence, they also may inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
Such provisions also may have the effect of preventing changes in the management
of the Company. See "Risk Factors -- Anti-Takeover Provisions."

Delaware Takeover Statute

The Company is subject to Section 203 of the DGCL ("Section 203"), which,
subject to certain exceptions, prohibits a Delaware corporation from engaging in
a "business combination" with an "interested stockholder" for a period of three
years following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder; (ii) upon consummation of the
transaction that resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (x)
by persons who are directors and also officers and (y) by employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) on or subsequent to such date, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

TRANSFER AGENT AND REGISTRAR

Norwest Bank Minnesota, National Association has been appointed as the
transfer agent and registrar for the Company's Common Stock.

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<PAGE> 76

SHARES ELIGIBLE FOR FUTURE SALE

The Shares sold in the Offering will be freely tradeable without
restriction or further registration under the Securities Act, except for any
Shares purchased by an affiliate of the Company, which will be subject to the
limitations of Rule 144 under the Securities Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her restricted
securities (as that term is defined in Rule 144) for at least one year from the
date such securities were acquired from the Company or an affiliate of the
Company would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the Common Stock and (ii) the average weekly trading
volume of the common stock during the four calendar weeks preceding a sale by
such person. Sales under Rule 144 are also subject to certain manner-of-sale
provisions, notice requirements and the availability of current public
information about the Company. Under Rule 144, however, a person who has held
shares for a minimum of two years from the later of the date such securities
were acquired from the Company or an affiliate of the Company and who is not,
and for the three months prior to the sale of such shares has not been, an
affiliate of the Company is free to sell such shares without regard to the
volume, manner-of-sale and certain other limitations contained in Rule 144.

In general, under Rule 701 of the Securities Act as currently in effect,
any employee, officer, director, consultant or advisor of the Company who
purchased shares from the Company in connection with a compensatory stock or
option plan or written employment agreement is eligible to resell such shares 90
days after the effective date of this offering in reliance on Rule 144, but
without compliance with certain restrictions, including the holding period,
contained in Rule 144.

Within 90 days of the date of this Prospectus, the Company intends to file
one or more registration statements under the Securities Act to register shares
of Common Stock reserved for issuance under its equity incentive plans, thus
permitting the resale of such shares by non-affiliates in the public market
without restriction under the Securities Act. Such registration statements will
become effective immediately upon filing. As of April 24, 1998, options to
purchase approximately 4,063,340 shares of Common Stock were outstanding under
the Company's stock option plans.

The Company, its directors and its executive officers, and certain
stockholders, who hold, as of April 24, 1998 approximately 20,661,978 shares of
Common Stock (or options to purchase Common Stock that are currently exercisable
or exercisable within 60 days), have agreed not to offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or announce an offering
of, any shares of Common Stock or any securities convertible into, or
exchangeable for shares of Common Stock for a period of six months from the date
of this Prospectus, without the prior written consent of Smith Barney Inc.,
except under limited circumstances. An additional 12,000 shares of Common Stock
issuable upon exercise of outstanding options, will become saleable after the
six-month lock-up period. In addition, NTT has agreed not to offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or announce
an offering of, any NTT Shares for a period of six months from the date of this
Prospectus without the prior written consent of Smith Barney Inc.

In connection with the Buyouts and acquisitions that involved the issuance
of shares of Series D-1 Preferred Stock, the Company has entered into market
standoff agreements with the holders of the Series D-1 Preferred Stock so
issued, which restrictions expire in one-third increments on the six, twelve and
eighteen month anniversaries of the date of this Prospectus. Following the
six-month, twelve-month and eighteen-month lock-up periods, approximately
738,171, 738,171 and 738,171 additional shares of Common Stock, respectively,
will become immediately saleable subject to the manner of sale, volume, notice
and information requirements of Rule 144 of the Securities Act which could be
applicable to certain holders of such Common Stock.

In addition, the Company has granted certain holders of its capital stock
rights to require the registration for sale of such capital stock under the
Securities Act. See "Certain Transactions -- Stockholders Agreement" and
"Description of Capital Stock -- Registration Rights."

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<PAGE> 77

Prior to the Offering, there has been no established market for the Common
Stock and no predictions can be made about the effect, if any, that market sales
of Common Stock or the availability of such shares for sale will have on the
market price prevailing from time to time. Nevertheless, the actual sale of, or
the perceived potential for the sale of, Common Stock in the public market may
have an adverse effect on the market price for the Common Stock.

After the closing of the Offering, the holders of approximately 26,958,127
shares of Common Stock, including approximately 2,112,480 shares of Common Stock
issuable upon exercise of outstanding Warrants, will be entitled to certain
rights with respect to the registration of such shares under the Securities Act.
See "Description of Capital Stock -- Registration Rights."

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<PAGE> 78

UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement
among the Company and the Underwriters (the "Underwriting Agreement"), the
Company has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of the Underwriters, for whom Smith Barney Inc.,
Credit Suisse First Boston Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation are acting as the representatives (the
"Representatives"), has severally agreed to purchase the number of Shares set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Smith Barney Inc............................................
Credit Suisse First Boston Corporation......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
---------
Total............................................. 5,000,000
=========
</TABLE>

The Company has been advised by the Representatives that the several
Underwriters initially propose to offer such Shares to the public at the Price
to Public set forth on the cover page of this Prospectus and part of the Shares
to certain dealers at such price less a concession not in excess of $
per Share under the Price to Public. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per Share to
certain other dealers. After the Offering, the Price to Public and such
concessions may be changed.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 750,000
additional shares of Common Stock from the Company at the Price to Public less
the Underwriting Discount, solely to cover over-allotments. To the extent that
the Underwriters exercise such option, each Underwriter will be committed,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriter's initial commitment.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof. The Underwriting Agreement further provides
that this Offering is conditioned upon the concurrent closing of the NTT
Investment.

Subject to certain exceptions, the Company, its directors, officers,
certain stockholders and NTT have agreed not to offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, or announce the offering of any
shares of Common Stock, including any such shares beneficially or indirectly
owned or controlled by any such person, or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock, for six months from the
date of this Prospectus, without the prior written consent of Smith Barney Inc.

At the Company's request, the Underwriters have reserved up to 375,000
shares of Common Stock (the "Directed Shares") for sale at the Price to Public
to persons who are directors, officers or employees of, or otherwise associated
with, the Company and its affiliates and who have advised the Company of their
desire to purchase such Shares. The number of Shares available for sale to the
general public will be reduced to the extent of sales of Directed Shares to any
of the persons for whom they have been reserved. Any Shares not so purchased
will be offered by the Underwriters on the same basis as all other Shares
offered hereby.

The Underwriters will not confirm sales to any discretionary account
without the prior specific written approval of the customer.

During and after the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include overallotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members of other
broker-dealers in respect of the Shares of Common Stock sold in the Offering for
their account may be reclaimed by the syndicate if such Shares are repurchased
by the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or

77
<PAGE> 79

otherwise affect the market price of the Common Stock which may be higher than
the price that might otherwise prevail in the open market. The Underwriters are
not required to engage in these activities and may end these activities at any
time.

Prior to the Offering, there has been no public market for the Common
Stock. The Price to Public was determined by negotiations between the Company
and the Representatives. Among the factors considered in determining the Price
to Public were prevailing market conditions, the market values of publicly
traded companies that the Underwriters believed to be somewhat comparable to the
Company, the demand for the Shares and for similar securities of publicly traded
companies that the Underwriters believed to be somewhat comparable to the
Company, the future prospects of the Company and its industry in general, sales,
earnings and certain other financial and operating information of the Company in
recent periods, and other factors deemed relevant. There can be no assurance
that the prices at which the Shares will sell in the public market after the
Offering will not be lower than the Price to Public.

Salomon Brothers Inc, an affiliate of Smith Barney Inc., was an Initial
Purchaser of the 1998 Notes. In addition, Smith Barney Inc. or certain of its
affiliates may provide financial advisory services to the Company, for which it
expects to receive customary compensation.

Credit Suisse First Boston Corporation has provided financial advisory
services to the Company during the past 12 months for which it has received
customary compensation.

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<PAGE> 80

LEGAL MATTERS

The validity of the Shares offered hereby and general corporate legal
matters will be passed upon for the Company by Morrison & Foerster LLP, San
Francisco, California. Certain legal matters relating to the sale of Shares in
the Offering will be passed upon by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York. Members of the firm
Morrison & Foerster LLP will purchase shares in the Company's directed share
program. See "Underwriting."

EXPERTS

The consolidated financial statements of Verio Inc. and Subsidiaries as of
December 31, 1996 and 1997 and for the period from inception (March 1, 1996) to
December 31, 1996, and the year ended December 31, 1997 and the financial
statements of On-Ramp Technologies, Inc. as of and for the nine months ended
July 31, 1996; Global Enterprise Services -- Network Division (a Division of
Global Enterprise Services, Inc.) as of December 31, 1995 and 1996, and for each
of the years in the three-year period ended December 31, 1996 and the period
ended January 17, 1997; Compute Intensive Inc. as of December 31, 1995 and 1996,
and for each of the years in the two-year period ended December 31, 1996, and
the period ended February 18, 1997; NorthWestNet, Inc. as of and for the six
months ended June 30, 1996 and the eight months ended February 28, 1997,
Northwest Academic Computing Consortium, Inc. as of and for the year ended June
30, 1995 and the six months ended December 31, 1995; Aimnet Corporation as of
and for the year ended March 31, 1997 and for the period ended May 19, 1997;
West Coast Online, Inc. as of and for the nine months ended September 30, 1997;
Clark Internet Services, Inc. as of and for the year ended September 30, 1997
and for the period ended October 17, 1997; ATMnet as of and for the years ended
October 31, 1996 and 1997; Global Internet Network Services, Inc. as of December
31, 1996 and November 26, 1997 and for the year and period then ended;
Pennsylvania Research Partnership Network as of and for the years ended November
30, 1996 and 1997 and for the period ended December 24, 1997; Monumental Network
Systems, Inc. as of and for the years ended December 31, 1996 and 1997; Internet
Servers, Inc. as of December 31, 1996 and 1997 and for the period from inception
(August 23, 1995) to December 31, 1995 and the years ended December 31, 1996 and
1997; NSNet, Inc. as of and for the years ended December 31, 1996 and 1997;
Access One, Inc. as of and for the year ended December 31, 1997; STARnet, L.L.C.
as of and for the year ended December 31, 1997; Computing Engineers Inc. as of
and for the years ended December 31, 1996 and 1997; and LI Net, Inc. as of April
30, 1997 and January 31, 1998 and for the years ended April 30, 1996 and 1997
and the nine months ended January 31, 1998, have been included herein and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company is not currently subject to the information requirements of the
Exchange Act. The Company is filing concurrently with the Registration Statement
on Form S-1 of which this Prospectus forms a part, a Registration Statement on
Form S-4 covering exchange offers for the Company's 1997 Notes and 1998 Notes.
When the Securities and Exchange Commission (the "Commission") declares
effective the Registration Statement on Form S-1, the Company will be required
to file reports and other information with the Commission pursuant to the
informational requirements of the Exchange Act. Such reports and other
information can be inspected and copied at the Public Reference Section of the
Commission and at the Commission's regional offices at the addresses given
below.

As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits, schedules and undertakings set
forth elsewhere in this Registration Statement. For further information
pertaining to the Company and the securities offered hereby, reference is made
to such Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents or provisions of any
documents referred to herein are not necessarily complete, and in each instance,
reference is made to the copy of the document filed as an exhibit to this
Registration Statement. The

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<PAGE> 81

Company will issue annual and quarterly reports. Annual reports will include
audited financial statements prepared in accordance with accounting principles
generally accepted in the United States and a report of its independent auditors
with respect to the examination of such financial statements. In addition, the
Company will issue to its securityholders such other unaudited quarterly or
other interim reports as it deems appropriate.

This Registration Statement may be inspected without charge at the office
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may
be obtained from the Commission at prescribed rates from the Public Reference
Section of the Commission at such address, and at the Commission's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. In addition, registration statements and certain other filings
made with the Commission through its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system are publicly available through the Commission's site
on the Internet's World Wide Web, located at http://www.sec.gov.

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<PAGE> 82

GLOSSARY OF TERMS

ATM Asynchronous Transfer Mode. An information transfer standard
for routing traffic which uses packets (cells) of a fixed
length.

Backbone A centralized high-speed network that interconnects smaller,
independent networks.

Bandwidth The number of bits of information which can move through a
communications medium in a given amount of time; the
capacity of a telecommunications circuit/ network to carry
voice, data and video information. Typically measured in
kbps and Mbps.

caching Temporary storage or replication of a Web server content at
one or more locations throughout the Internet to provide a
quicker response to a browser request.

CPE Customer Premise Equipment.

CSU/DSU Channel Service Unit/Digital Service Unit. A device used to
terminate telephone company equipment and prepare data for
router interface.

DNS Domain Name Server.

DS-3 or T-3 A data communications circuit capable of transmitting data
at 45 Mbps. Equivalent to 28 T-1's of data capacity.
Currently used only by businesses/institutions and carriers
for high end applications.

Ethernet A common method of networking computers in a LAN. Ethernet
will handle about 10 Mbps and can be used with almost any
kind of computer.

FDDI Fiber Distributed Data Interface. A standard for
transmitting data on fiber-optic cables at a rate of 100
Mbps.

Firewall A system placed between networks that filters data passing
through it and prevents unauthorized traffic, thereby
enhancing the security of the network.

Frame Relay An information transfer standard for relaying traffic based
on an address contained in the six-byte header of a variable
length packet that is up to 2,106 bytes long.

Hertz The dimensional unit for measuring the frequency with which
an electromagnetic signal cycles through the zero-value
state between lowest and highest states. One Hertz
(abbreviated Hz) equals one cycle per second. KHz
(KiloHertz) stands for thousands of Hertz; MHz (MegaHertz)
stands for millions of Hertz; GHz (GigaHertz) stands for
billions of Hertz.

Internet A global collection of interconnected computer networks
which use a specific communications protocol.

IP Internet Protocol. Network protocols that allow computers
with different architectures and operating system software
to communicate with other computers on the Internet.

ISDN Integrated Services Digital Network. An information transfer
standard for transmitting digital voice and data over
telephone lines at speeds up to 128 Kbps.

ISPs Internet Service Providers. Companies formed to provide
access to the Internet to consumers and business customers
via local networks.

IXC Interexchange Carrier. A telecommunications company that
provides telecommunications services between local exchanges
on an interstate or intrastate basis.

kbps Kilobits per second. A transmission rate. One kilobit equals
1,024 bits of information.

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<PAGE> 83

LAN Local Area Network. A data communications network designed
to interconnect personal computers, workstations,
minicomputers, file servers and other communications and
computing devices within a localized environment.

Leased Line Telecommunications line dedicated to a particular customer
along predetermined routes.

LEC Local Exchange Carrier. A telecommunications company that
provides telecommunications services in a geographic area in
which calls generally are transmitted without toll charges.
LECs include both RBOCs and competitive local exchange
carriers.

LMDS Local Multipoint Distribution Service. Two blocks of
spectrum with total bandwidth of 1150 MHz and 150 MHz to be
auctioned and used for various wireless services.

MAE-East A major exchange point among ISPs, located in Falls Church,
Virginia.

MAE-West A major exchange point among ISPs, located in Santa Clara,
California.

Mbps Megabits per second. A transmission rate. One megabit equals
1,024 kilobits.

MMDS Microwave Multipoint Distribution Service.

Modem A device for transmitting digital information over an analog
telephone line.

MSAs Metropolitan Statistical Areas. A designation by the U.S.
Census Bureau for Metropolitan areas with a central city or
an urbanized area having a minimum population of 50,000 with
a total metropolitan population of at least 100,000 and
including all counties that have strong economic and social
ties to the central city.

NAP Network Access Point. A location at which ISPs exchange each
other's traffic.

National Node National network access point where IP traffic is exchanged
between network links and where regional networks access the
national network.

NOC Network Operations Center. Facility where the Company
monitors and manages the Company's network.

OC-3 A data communications circuit consisting of three DS-3s
capable of transmitting data at 155 Mbps.

Peering The commercial practice under which ISPs exchange each
other's traffic without the payment of settlement charges.
Peering occurs at both public and private exchange points.

POP Point of Presence. Telecommunications facility where the
Company locates network equipment used to connect customers
to its network backbone.

Proxy Server A server that acts on behalf of one or more other servers,
usually for screening, firewall, caching, or a combination
of these purposes. Typically, a proxy server is used within
a company to gather all Internet requests, forward them out
to Internet servers, and then receive the responses and in
turn forward them to the original requestor within the
company.

Router Equipment placed between networks that relays data to those
networks based upon a destination address contained in the
data packets being routed.

TCP/IP Transmission Control Protocol/Internet Protocol. A suite of
network protocols that allow computers with different
architectures and operating system software to communicate
with other computers on the Internet.

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VPN Virtual Private Network. A network capable of providing the
tailored services of a private network (i.e. low latency,
high throughput, security and customization) while
maintaining the benefits of a public network (i.e. ubiquity
and economies of scale).

WAN Wide Area Network. A data communications network designed to
interconnect personal computers, workstations, mini
computers, file servers and other communications and
computing devices across a broad geographic region.

Web Site A server connected to the Internet from which Internet users
can obtain information.

World Wide Web or
Web A collection of computer systems supporting a communications
protocol that permits multi-media presentation of
information over the Internet.

xDSL A term referring to a variety of new Digital Subscriber Line
technologies. Some of these varieties are asymmetric with
different data rates in the downstream and upstream
directions. Others are symmetric. Downstream speeds range
from 384 kbps (or "SDSL") to 1.5-8 Mbps (or "ASDL").

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<PAGE> 85

VERIO INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Unaudited Pro Forma Condensed Combined Financial Statements:
Pro Forma Condensed Combined Balance Sheet as of December
31, 1997 (unaudited).................................... F-4
Pro Forma Condensed Combined Statement of Operations for
the Year Ended December 31, 1997 (unaudited)............ F-5
Notes to Pro Forma Condensed Combined Financial Statements
(unaudited)............................................. F-6
Verio Inc. and Subsidiaries -- Consolidated Financial
Statements:
Independent Auditors' Report.............................. F-14
Consolidated Balance Sheets as of December 31, 1996 and
1997.................................................... F-15
Consolidated Statements of Operations for the Period from
Inception (March 1, 1996) to December 31, 1996 and the
Year Ended December 31, 1997............................ F-16
Consolidated Statements of Stockholders' Deficit for the
Period from Inception (March 1, 1996) to December 31,
1996 and the Year Ended December 31, 1997............... F-17
Consolidated Statements of Cash Flows for the Period from
Inception (March 1, 1996) to December 31, 1996 and the
Year Ended December 31, 1997............................ F-18
Notes to Consolidated Financial Statements................ F-19
On-Ramp Technologies, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-30
Balance Sheet as of July 31, 1996......................... F-31
Statement of Operations for the Nine Months Ended July 31,
1996.................................................... F-32
Statement of Stockholders' Deficit for the Nine Months
Ended July 31, 1996..................................... F-33
Statement of Cash Flows for the Nine Months Ended July 31,
1996.................................................... F-34
Notes to Financial Statements............................. F-35
Global Enterprises Services -- Network Division -- Financial
Statements:
Independent Auditors' Report.............................. F-38
Balance Sheets as of December 31, 1995 and 1996........... F-39
Statements of Operations and Owner's Deficit for the Years
Ended December 31, 1994, 1995, 1996 and Period Ended
January 17, 1997........................................ F-40
Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996 and Period Ended January 17, 1997... F-41
Notes to Financial Statements............................. F-42
Compute Intensive, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-45
Balance Sheets as of December 31, 1995 and 1996........... F-46
Statements of Operations for the Years Ended December 31,
1995 and 1996 and Period Ended February 18, 1997........ F-47
Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1995 and 1996 and Period Ended
February 18, 1997....................................... F-48
Statements of Cash Flows for the Years Ended December 31,
1995 and 1996 and Period Ended February 18, 1997........ F-49
Notes to Financial Statements............................. F-50
NorthWestNet, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-55
Balance Sheets as of June 30, 1995 and 1996............... F-56
Statements of Operations for the Year Ended June 30, 1995
and the Six Months Ended December 31, 1995 and Six
Months Ended June 30, 1996 and the Eight Months Ended
February 28, 1997....................................... F-57
Statements of Stockholders' Equity and Fund Balance for
the Year Ended June 30, 1995 and the Six Months Ended
December 31, 1995 and Six Months Ended June 30, 1996 and
the Eight Months Ended February 28, 1997................ F-58
Statements of Cash Flows for the Year Ended June 30, 1995
the Six Months Ended December 31, 1995, and the Six
Months Ended June 30, 1996 and the Eight Months Ended
February 28, 1997....................................... F-59
Notes to Financial Statements............................. F-60
Aimnet Corporation -- Financial Statements:
Independent Auditors' Report.............................. F-67
Balance Sheet as of March 31, 1997........................ F-68
Statement of Operations for the Year Ended March 31, 1997
and Period Ended May 19, 1997........................... F-69
Statements of Stockholders' Equity for the Year Ended
March 31, 1997 and Period Ended May 19, 1997............ F-70
Statements of Cash Flows for the Year Ended March 31, 1997
and Period Ended May 19, 1997........................... F-71
Notes to Financial Statements............................. F-72
West Coast Online, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-75
Balance Sheet as of September 30, 1997.................... F-76
Statement of Operations and Accumulated Deficit for the
Nine Months Ended September 30, 1997.................... F-77
Statement of Cash Flows for the Nine Months Ended
September 30, 1997...................................... F-78
Notes to Financial Statements............................. F-79
Clark Internet Services, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-82
Balance Sheet as of September 30, 1997.................... F-83
Statements of Operations and Retained Earnings for the
Year Ended September 30, 1997 and Period Ended October
17, 1997................................................ F-84
Statements of Cash Flows for the Year Ended September 30,
1997 and Period Ended October 17, 1997.................. F-85
Notes to Financial Statements............................. F-86
ATMnet -- Financial Statements:
Independent Auditors' Report.............................. F-88
Balance Sheets as of October 31, 1996 and 1997............ F-89
Statements of Operations for the Years Ended October 31,
1996 and 1997........................................... F-90
Statements of Stockholders' Deficit for the Years Ended
October 31, 1996 and 1997............................... F-91
</TABLE>

F-1
<PAGE> 86

<TABLE>
<S> <C>
Statements of Cash Flows for the Years Ended October 31,
1996 and 1997........................................... F-92
Notes to Financial Statements............................. F-93
Global Internet Network Services, Inc. -- Financial
Statements:
Independent Auditors' Report.............................. F-97
Balance Sheets as of December 31, 1996 and November 26,
1997.................................................... F-98
Statements of Operations for the Year Ended December 31,
1996 and the Period Ended November 26, 1997............. F-99
Statements of Stockholders' Equity (Deficit) for the Year
Ended December 31, 1996 and the Period Ended November
26, 1997................................................ F-100
Statements of Cash Flows for the Year Ended December 31,
1996 and the Period Ended November 26, 1997............. F-101
Notes to Financial Statements............................. F-102
Pennsylvania Research Partnership Network
(PREPnet) -- Financial Statements:
Independent Auditors' Report.............................. F-105
Balance Sheets as of November 30, 1996 and 1997........... F-106
Statements of Operations and Owner's Deficit for the Years
Ended November 30, 1996 and 1997 and the Period Ended
December 24, 1997....................................... F-107
Statements of Cash Flows for the Years Ended November 30,
1996 and 1997 and the Period Ended December 24, 1997.... F-108
Notes to Financial Statements............................. F-109
Monumental Network Systems, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-112
Balance Sheets as of December 31, 1996 and 1997........... F-113
Statements of Operations for the Years Ended December 31,
1996 and 1997........................................... F-114
Statements of Stockholders' Deficit for the Years Ended
December 31, 1996 and 1997.............................. F-115
Statements of Cash Flows for the Years Ended December 31,
1996 and 1997........................................... F-116
Notes to Financial Statements............................. F-117
Internet Servers, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-121
Balance Sheets as of December 31, 1996 and 1997........... F-122
Statements of Operations for the Period from Inception
(August 23, 1995) to December 31, 1995 and Years Ended
December 31, 1996 and 1997.............................. F-123
Statements of Stockholders' Equity for the Period from
Inception (August 23, 1995) to December 31, 1995 and
Years ended December 31, 1996 and 1997.................. F-124
Statements of Cash Flows for the Period from Inception
(August 23, 1995) to December 31, 1995 and Years Ended
December 31, 1996 and 1997.............................. F-125
Notes to Financial Statements............................. F-126
NSNet, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-129
Balance Sheets as of December 31, 1996 and 1997........... F-130
Statements of Operations for the Years Ended December 31,
1996 and 1997........................................... F-131
Statements of Owner's and Stockholder's Equity for the
Years Ended December 31, 1996 and 1997.................. F-132
Statements of Cash Flows for the Years Ended December 31,
1996 and 1997........................................... F-133
Notes to Financial Statements............................. F-134
Access One, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-137
Balance Sheet as of December 31, 1997..................... F-138
Statement of Operations and Accumulated Deficit for the
Year Ended December 31, 1997............................ F-139
Statement of Cash Flows for the Year Ended December 31,
1997.................................................... F-140
Notes to Financial Statements............................. F-141
STARnet, L.L.C. -- Financial Statements:
Independent Auditors' Report.............................. F-145
Balance Sheet as of December 31, 1997..................... F-146
Statement of Operations for the Year Ended December 31,
1997.................................................... F-147
Statement of Members' Equity for the Year Ended December
31, 1997................................................ F-148
Statement of Cash Flows for the Year Ended December 31,
1997.................................................... F-149
Notes to Financial Statements............................. F-150
Computing Engineers Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-152
Balance Sheets as of December 31, 1996 and 1997........... F-153
Statements of Operations for the Years Ended December 31,
1996 and 1997........................................... F-154
Statements of Stockholders' Equity for the Years Ended
December 31, 1996 and 1997.............................. F-155
Statements of Cash Flows for the Years Ended December 31,
1996 and 1997........................................... F-156
Notes to Financial Statements............................. F-157
LI Net, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-159
Balance Sheets as of April 30, 1997 and January 31,
1998.................................................... F-160
Statements of Operations for the Years Ended April 30,
1996 and 1997 and the Nine Months Ended January 31,
1998.................................................... F-161
Statements of Stockholders' Equity (Deficit) for the Years
Ended April 30, 1996 and 1997 and the Nine Months Ended
January 31, 1998........................................ F-162
Statements of Cash Flows for the Years Ended April 30,
1996 and 1997 and the Nine Months Ended January 31,
1998.................................................... F-163
Notes to Financial Statements............................. F-164
</TABLE>

F-2
<PAGE> 87

VERIO INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

During the period from August 1, 1996 through the date of this Registration
Statement, Verio Inc. ("Verio" or the "Company") completed numerous business
combinations, whereby the Company acquired newly authorized redeemable,
convertible preferred stock, shares of common stock, or certain net assets of
entities operating in the Internet industry (ISPs), and completed the Buyout of
the remaining equity interests of certain ISPs in which it initially acquired a
less-than-100% equity position (collectively, the "Completed Acquisitions"). In
addition, the Company has entered into a definitive agreement to acquire an
additional ISP, which acquisition, in the opinion of management, is probable to
be completed, (the "Proposed Acquisition"). Business combinations, which are
acquisitions of a 100% ownership interest in the target business or of a
majority ownership interest (upon conversion of the preferred shares to common
stock) on a fully diluted basis, are accounted for using the purchase method of
accounting. Acquisitions of minority interests represented by preferred stock
are accounted for using the equity method of accounting, as described in Note 1
to the Consolidated Financial Statements. The Completed Acquisitions and
Proposed Acquisition are described in Note A to the accompanying pro forma
condensed combined financial statements.

While the Company now seeks to acquire 100% of new ISPs, the Company's
early acquisition strategy was to rapidly build mass and scale by acquiring less
than 100% of its ISPs. In each case where the Company acquired less than 100% of
an ISP initially, it obtained the right to Buyout the remaining equity in the
future at a price based on either agreed upon revenue multiples or the fair
market value of the ISP. As part of its integration strategy, the Company has
effected the Buyouts of all but two of the ISPs in which it did not initially
acquire a 100% interest, through the use of cash on hand and the issuance of
equity. As of the date of this Registration Statement, Verio has consummated the
Buyout of the following fourteen ISPs; On-Ramp Technologies, Inc.; NorthWestNet,
Inc.; National Knowledge Networks, Inc.; Access One, Inc.; Signet Partners,
Inc.; Surf Network, Inc.; Pacific Rim Network, Inc.; Internet Engineering
Associates, Inc.; AimNet Corporation; West Coast Online, Inc.; ServiceTech,
Inc., Clark Internet Services, Inc., Compute Intensive Inc. and Structured
Network Systems, Inc. With respect to those Buyouts that have not yet been
completed, the Company has contractual rights to effect those two Buyouts and
expects to complete these Buyouts during the remainder of 1998. However, there
can be no assurance that the Company will be able to complete these Buyouts at
the times, or in accordance with the terms and conditions, that it currently
contemplates. These acquisitions will also be accounted for using the purchase
method of accounting.

The unaudited pro forma condensed combined balance sheet assumes that the
Completed Acquisitions and the Proposed Acquisition occurred on December 31,
1997 and includes the December 31, 1997 historical consolidated balance sheets
of Verio and the acquired businesses adjusted for the pro forma effects of these
acquisitions. The unaudited pro forma condensed combined statement of operations
for the year ended December 31, 1997 assumes that the Completed Acquisitions and
the Proposed Acquisition had occurred on January 1, 1997, and includes the
historical consolidated statements of operations of Verio and the Completed and
Proposed Acquisitions for the year ended December 31, 1997, adjusted for the pro
forma effects of the acquisitions. The unaudited pro forma condensed combined
balance sheet also assumes the conversion of the Preferred Stock into common
stock upon completion of the Offering.

The unaudited pro forma condensed combined statement of operations is not
necessarily indicative of the results of operations that would actually have
occurred if the transactions had been consummated as of January 1, 1997 and is
not intended to indicate the expected results for any future period. These
statements should be read in conjunction with the historical consolidated
financial statements and related notes thereto of Verio, and certain acquired
businesses, included herein. The actual purchase accounting adjustments may be
revised upon completion of the acquisitions.

F-3
<PAGE> 88

VERIO INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1997 (UNAUDITED)
AMOUNTS IN THOUSANDS

ASSETS

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable and accrued
expenses....................... $ 19,634 $ 2,448 $ 59 $ -- $ 22,141
Lines of credit, notes payable and
current portion of long-term
debt and capital lease
obligations.................... 4,326 1,474 142 (535)(3) 5,407
Deferred revenue.................. 7,177 1,755 119 -- 9,051
-------- ------- ------ -------- --------
Total current
liabilities............. 31,137 5,677 320 (535) 36,599
Long-term debt and capital lease
obligations, less current
portion........................... 142,321 1,208 122 129,043 272,694
-------- ------- ------ -------- --------
Total liabilities......... 173,458 6,885 442 128,508 309,293
Minority interests in
subsidiaries...................... 2,765 -- -- (2,765)(5) --
Redeemable preferred stock.......... 97,249 2,716 -- (2,716)(2) --
(97,249)(7)
Stockholders' deficit:
Preferred stock................... 10,200 -- -- (10,200)(7) --
Common stock and additional
paid-in capital................ 1,598 1,152 540 (1,692)(2) 134,607
107,449(7)
25,560(1)
Warrants.......................... 12,675 -- -- -- 12,675
Retained earnings (deficit)....... (51,474) (2,876) (108) 2,984(2) (61,578)
(10,104)(9)
-------- ------- ------ -------- --------
(27,001) (1,724) 432 113,997 85,704
-------- ------- ------ -------- --------
Total liabilities and
stockholders' deficit... $246,471 $ 7,877 $ 874 $139,775 $394,997
======== ======= ====== ======== ========
</TABLE>

F-4
<PAGE> 89

VERIO INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA

<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------
COMPLETED PROPOSED PRO FORMA PRO FORMA
ACQUISITIONS ACQUISITION ADJUSTMENTS COMBINED
VERIO (NOTE C) (NOTE C) (NOTE D) VERIO
---------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Internet connectivity.................... $ 23,476 $38,583 $1,094 $ (98)(3) $ 63,055
Enhanced services and other.............. 12,216 12,761 233 -- 25,210
---------- ------- ------ ----------- -----------
Total revenue..................... 35,692 51,344 1,327 (98) 88,265
---------- ------- ------ ----------- -----------
Costs and expenses:
Internet services operating costs........ 15,974 21,854 393 (76)(3) 38,145
Selling, general and administrative and
other.................................. 49,383 31,900 787 -- 82,070
Depreciation and amortization............ 10,624 3,130 127 12,030(4) 25,911
---------- ------- ------ ----------- -----------
Total costs and expenses.......... 75,981 56,884 1,307 11,954 146,126
---------- ------- ------ ----------- -----------
Loss from operations................... (40,289) (5,540) 20 (12,052) (57,861)
Other income (expense):
Interest income.......................... 6,080 65 2 -- 6,147
Interest expense......................... (11,826) (572) (19) -- (12,417)
Equity in losses of affiliates........... (1,958) -- -- 1,958(5) --
---------- ------- ------ ----------- -----------
Loss before minority interests and
income taxes......................... (47,993) (6,047) 3 (10,094) (64,131)
Minority interests......................... 1,924 -- -- (1,924)(5) --
Income taxes............................... -- (1,247) -- 1,247(6) --
---------- ------- ------ ----------- -----------
Net loss.......................... (46,069) (7,294) (3) (10,771) (64,131)
Accretion of preferred stock to liquidation
value.................................... (260) -- -- 260(7) --
---------- ------- ------ ----------- -----------
Net loss attributable to common
stockholders............................. $ (46,329) $(7,294) $ 3 $ (10,511) $ (64,131)
========== ======= ====== =========== ===========
Weighted average shares outstanding --basic
and diluted.............................. 1,144,685 20,945,667(8) 22,090,352
========== =========== ===========
Loss per common share -- basic and
diluted.................................. $ (40.47) $ (2.90)
========== ===========
</TABLE>

F-5
<PAGE> 90

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(A) BASIS OF PRESENTATION

During the period from inception (March 1, 1996) to April 24, 1998, Verio
completed numerous business combinations, and completed the Buyout of the
remaining equity interests of certain ISPs in which it initially acquired a
less-than-100% equity position (Completed Acquisitions). In addition, the
Company has entered into a definitive agreement to acquire an additional ISP
which has not been completed at the date of this Prospectus but which, in the
opinion of management, is probable to be completed. This transaction is referred
to as the "Proposed Acquisition." All of the acquisitions have been or will be
accounted for using the purchase method of accounting. Summary information
regarding the Completed and Proposed Acquisitions is as follows:

<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE
FOR
COMPLETED
AND PROPOSED CONSIDERATION
ACQUISITIONS -----------------------------
THROUGH CASH
APRIL 24, AND PREFERRED
COMPLETED ACQUISITIONS ACQUISITION DATE(S) 1998 NOTES STOCK(b) TOTAL
---------------------- ------------------- ------------- ------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
On-Ramp Technologies, Inc................ August 1, 1996 51%
October 4, 1996 4%
February 26, 1998 45% $13,485 $6,985 $20,470
National Knowledge Networks, Inc......... August 2, 1996 26%
November 7, 1997 15%
February 27, 1998 59% 2,999 -- 2,999
RAINet, Inc.............................. August 2, 1996 100% 2,000 -- 2,000
Access One, Inc.......................... December 12, 1996 20%
February 27, 1998 80% 6,006 -- 6,006
CCnet, Inc............................... December 19, 1996 100% 1,800 -- 1,800
Signet Partners, Inc..................... December 19, 1996 25%
November 20, 1997 16%
February 26, 1998 59% 1,234 1,283 2,517
Global Enterprise Services -- Network
Division............................... January 17, 1997 100% 2,350 -- 2,350
Surf Network, Inc........................ January 31, 1997 25%
December 22, 1997 75% 603 -- 603
Pacific Rim Network, Inc................. February 4, 1997 27%
February 16, 1998 73% 850 -- 850
Pioneer Global Telecommunications,
Inc.................................... February 6, 1997 100% 1,011 -- 1,011
Compute Intensive Inc.................... February 18, 1997 55%
April 24, 1998 45% 7,099 8,042 15,141
NorthWestNet, Inc........................ February 28, 1997 85%
March 6, 1998 15% 12,089 2,475 14,564
Internet Engineering Associates, Inc..... March 4, 1997 20%
February 25, 1998 80% 206 1,500 1,706
Internet Online, Inc..................... March 5, 1997 35% 1,050 -- 1,050
Structured Network Systems, Inc.......... March 6, 1997 20%
April 16, 1998 80% 1,250 -- 1,250
</TABLE>

F-6
<PAGE> 91
VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE
FOR
COMPLETED
AND PROPOSED CONSIDERATION
ACQUISITIONS -----------------------------
THROUGH CASH
APRIL 24, AND PREFERRED
COMPLETED ACQUISITIONS ACQUISITION DATE(S) 1998 NOTES STOCK(b) TOTAL
---------------------- ------------------- ------------- ------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
RustNet, Inc............................. March 14, 1997 100% 1,703 -- 1,703
AimNet Corporation....................... May 19, 1997 55%
September 22, 1997 45% 7,613 -- 7,613
West Coast Online, Inc................... July 26, 1996 20%
April 29, 1997 12%
September 30, 1997 68% 2,000 -- 2,000
ServiceTech, Inc......................... August 1, 1997 40%
December 31, 1997 60% 2,055 -- 2,055
Branch Information Services, Inc......... September 17, 1997 100% 1,687 -- 1,687
Communique, Inc.......................... October 2, 1997 100% 3,000 -- 3,000
Clark Internet Services, Inc............. October 17, 1997 51%
February 25, 1998 49% 3,969 3,431 7,400
ATMnet................................... November 5, 1997 100% 5,522 -- 5,522
Global Internet Network Services, Inc.... December 1, 1997 100% 6,000 -- 6,000
Sesquinet................................ December 24, 1997 100%(a) 732 -- 732
PREPnet.................................. December 24, 1997 100% 1,405 -- 1,405
Monumental Network Systems, Inc.......... December 31, 1997 100% 3,962 -- 3,962
Internet Servers, Inc.................... December 31, 1997 100% 9,800 10,200 20,000
NSNet, Inc............................... February 27, 1998 100% 1,535 1,765 3,300
LI Net, Inc.............................. April 9, 1998 100% 6,500 -- 6,500
STARnet, L.L.C........................... April 14, 1998 100% 3,500 -- 3,500
Computing Engineers Inc.................. April 15, 1998 100% 9,000 -- 9,000
Florida Internet Corporation............. April 15, 1998 100% 2,200 -- 2,200
Proposed Acquisition -- Matrix Online
Media, Inc............................. -- 100% 4,000 -- 4,000
</TABLE>

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

(a) Assets of this entity were purchased by On-Ramp Technologies, Inc.

(b) Represents shares of Series D-1 Preferred Stock valued at $15 per share.
For NorthWestNet, Inc., the amount represents options to purchase Preferred
Stock at $15 per share. Such per share value was determined by the
Company's Board of Directors based on comparable valuations of private and
public companies, methodologies based on multiples of revenue and
discounted cash flows, and arms-length negotiated values.

The accompanying unaudited pro forma condensed combined balance sheet as of
December 31, 1997 includes historical balances of Verio and the businesses to be
acquired adjusted for the pro forma effects of the acquisitions completed
through April 24, 1998, including the acquisitions of the remaining interests in
certain consolidated subsidiaries and minority owned affiliates, and a proposed
acquisition which the Company

F-7
<PAGE> 92
VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

believes is probable to be completed subsequent to April 24, 1998. All
acquisitions are assumed to have been completed for cash, debt or the issuance
of preferred stock of Verio. The unaudited pro forma condensed combined
statement of operations for the year ended December 31, 1997 includes historical
results of operations of Verio and the businesses acquired or to be acquired,
including the acquisitions of the remaining interests in certain consolidated
subsidiaries and minority owned affiliates, adjusted for the pro forma effects
of the acquisitions.

F-8
<PAGE> 93

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(B) HISTORICAL CONDENSED BALANCE SHEET INFORMATION -- COMPLETED AND PROPOSED
ACQUISITIONS

Historical condensed balance sheet information for the Completed
Acquisitions as of December 31, 1997 is as follows:

<TABLE>
<CAPTION>
INTERNET NATIONAL STRUCTURED
PACIFIC RIM SIGNET ENGINEERING KNOWLEDGE NETWORK
NETWORK, INC. PARTNERS, INC. ASSOCIATES, INC. NSNET, INC. NETWORKS, INC. SYSTEMS, INC.
------------- -------------- ---------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.... $ -- $ 60 $271 $ 20 $ 166 $ 27
Receivables, net............. 46 112 106 86 73 206
Prepaid expenses and other... 31 83 49 354 12 1
----- ----- ---- ---- ------- -----
Total current
assets.............. 77 255 426 460 251 234
Equipment and leasehold
improvements, net............ 181 238 191 379 92 54
Other assets................. -- 25 45 67 13 7
----- ----- ---- ---- ------- -----
Total assets.......... $ 258 $ 518 $662 $906 $ 356 $ 295
===== ===== ==== ==== ======= =====
Current liabilities:
Accounts payable and accrued
expenses................... $ 366 $ 285 $119 $139 $ 70 $ 252
Lines of credit, notes
payable and current portion
of long-term debt and
capital lease
obligations................ 100 35 32 234 89 70
Deferred revenue............. 12 88 157 83 112 16
----- ----- ---- ---- ------- -----
Total current
liabilities......... 478 408 308 456 271 338
Long-term debt and capital
lease obligations, less
current portion............ 124 10 10 62 65 15
----- ----- ---- ---- ------- -----
Total liabilities..... 602 418 318 518 336 353
Redeemable preferred stock..... 150 802 206 -- 899 150
Stockholders' equity:
Common stock and additional
paid-in capital............ 55 38 10 107 227 1
Retained earnings
(deficit).................. (549) (740) 128 281 (1,106) (209)
----- ----- ---- ---- ------- -----
Total stockholders'
equity (deficit).... (494) (702) 138 388 (879) (208)
----- ----- ---- ---- ------- -----
Total liabilities and
stockholders' equity
(deficit)........... $ 258 $ 518 $662 $906 $ 356 $ 295
===== ===== ==== ==== ======= =====
</TABLE>

F-9
<PAGE> 94

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
FLORIDA COMPUTING
ACCESS ONE, LI NET INTERNET ENGINEERS STARNET
INC. INC. CORPORATION INC. LLC. TOTAL
----------- ------ ----------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 259 $ 25 $ 4 $ 16 $210 $ 1,058
Receivables, net................... 344 225 107 430 112 1,847
Prepaid expenses and other......... 146 9 145 39 88 957
------ ----- ----- ------ ---- -------
Total current assets........ 749 259 256 485 410 3,862
Equipment and leasehold improvements,
net................................ 679 501 219 1,050 208 3,792
Other assets....................... 10 29 3 20 4 223
------ ----- ----- ------ ---- -------
Total assets................ $1,438 $ 789 $ 478 $1,555 $622 $ 7,877
====== ===== ===== ====== ==== =======
Current liabilities:
Accounts payable and accrued
expenses......................... $ 550 $ 268 $ 96 $ 259 $ 44 $ 2,448
Lines of credit, notes payable and
current portion of long-term debt
and capital lease obligations.... 453 153 -- 308 -- 1,474
Deferred revenue................... 294 159 212 250 372 1,755
------ ----- ----- ------ ---- -------
Total current liabilities... 1,297 580 308 817 416 5,677
Long-term debt and capital lease
obligations, less current
portion.......................... 38 270 -- 614 -- 1,208
------ ----- ----- ------ ---- -------
Total liabilities........... 1,335 850 308 1,431 416 6,885
Redeemable preferred stock........... 509 -- -- -- -- 2,716
Stockholders' equity:
Common stock and additional paid-in
capital.......................... 93 317 298 6 -- 1,152
Retained earnings (deficit)........ (499) (378) (128) 118 206 (2,876)
------ ----- ----- ------ ---- -------
Total stockholders' equity
(deficit)................. (406) (61) 170 124 206 (1,724)
------ ----- ----- ------ ---- -------
Total liabilities and
stockholders' equity
(deficit)................. $1,438 $ 789 $ 478 $1,555 $622 $ 7,877
====== ===== ===== ====== ==== =======
</TABLE>

Historical condensed balance sheet information for the Proposed Acquisition as
of December 31, 1997 represents information for Matrix Online Media, Inc. only.

F-10
<PAGE> 95

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Historical condensed statement of operations information for the Completed
Acquisitions for the year ended December 31, 1997 including the periods from
January 1, 1997 to the dates of consolidation is as follows:
<TABLE>
<CAPTION>
PIONEER GLOBAL
AIMNET RUSTNET, COMPUTE NORTHWEST TELECOMMUNICATIONS, WEST COAST
YEAR ENDED DECEMBER 31, 1997 CORPORATION INC. GES INTENSIVE NET INC. ONLINE, INC.
---------------------------- ----------- -------- ----- --------- --------- ------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Internet connectivity....... $1,068 $ 310 $ 112 $ 468 $ 709 $ 62 $1,192
Enhanced services and
other..................... 101 69 -- 326 351 7 457
------ ----- ----- ----- ------ ---- ------
Total revenue......... 1,169 379 112 794 1,060 69 1,649
Operating costs and expenses:
Internet services operating
costs..................... 444 147 94 301 113 33 735
Selling, general and
administrative and
other..................... 978 319 133 673 1,661 37 981
Depreciation and
amortization.............. 248 17 -- 16 136 4 77
------ ----- ----- ----- ------ ---- ------
Total costs and
expenses............ 1,670 483 227 990 1,910 74 1,793
------ ----- ----- ----- ------ ---- ------
Earnings (loss) from
operations................ (501) (104) (115) (196) (850) (5) (144)
Interest income............... 8 -- --
Interest expense.............. -- (8) -- (8) -- (2) --
------ ----- ----- ----- ------ ---- ------
Earnings (loss) before
income taxes............ (493) (112) (115) (204) (850) (7) (144)
Income taxes.................. -- -- -- -- 118 (5) --
------ ----- ----- ----- ------ ---- ------
Net earnings (loss)... $ (493) $(112) $(115) $(204) $ (732) $(12) $ (144)
====== ===== ===== ===== ====== ==== ======

<CAPTION>
BRANCH
INFORMATION
YEAR ENDED DECEMBER 31, 1997 SERVICES, INC.
---------------------------- --------------
<S> <C>
Revenue:
Internet connectivity....... $588
Enhanced services and
other..................... 84
----
Total revenue......... 672
Operating costs and expenses:
Internet services operating
costs..................... 84
Selling, general and
administrative and
other..................... 298
Depreciation and
amortization.............. 2
----
Total costs and
expenses............ 384
----
Earnings (loss) from
operations................ 288
Interest income............... --
Interest expense.............. --
----
Earnings (loss) before
income taxes............ 288
Income taxes.................. (101)
----
Net earnings (loss)... $187
====
</TABLE>

<TABLE>
<CAPTION>
GLOBAL
CLARK INTERNET
INTERNET SURF NETWORK
COMMUNIQUE, SERVICES, NETWORK, SERVICES,
INC. INC. INC. SESQUINET ATMNET INC. PREPNET
----------- --------- -------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
Internet connectivity.................... $1,454 $2,582 $ 585 $1,124 $2,754 $2,501 $2,026
Enhanced services and other.............. 764 562 190 -- 73 1,284 121
------ ------ ------ ------ ------- ------ ------
Total revenue...................... 2,218 3,144 775 1,124 2,827 3,785 2,147
Operating costs and expenses:
Internet services operating costs........ 690 1,394 431 538 2,976 2,679 793
Selling, general and administrative and
other.................................. 1,159 1,784 981 367 1,786 1,019 773
Depreciation and amortization............ 5 116 76 54 40 280 121
------ ------ ------ ------ ------- ------ ------
Total costs and expenses............... 1,854 3,294 1,488 959 4,802 3,978 1,687
------ ------ ------ ------ ------- ------ ------
Earnings (loss) from operations........ 364 (150) (713) 165 (1,975) (193) 460
Interest income............................ -- 2 -- -- -- -- --
Interest expense........................... -- (25) (33) -- (171) (8) (11)
------ ------ ------ ------ ------- ------ ------
Earnings (loss) before income taxes.... 364 (173) (746) 165 (2,146) (201) 449
Income taxes............................... (127) -- -- (58) -- -- (171)
------ ------ ------ ------ ------- ------ ------
Net earnings (loss)................ $ 237 $ (173) $ (746) $ 107 $(2,146) $ (201) $ 278
====== ====== ====== ====== ======= ====== ======
</TABLE>

F-11
<PAGE> 96

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
INTERNET
INTERNET SERVICE PACIFIC RIM SIGNET ENGINEERING STRUCTURED
MONUMENTAL, SERVERS, TECH, NETWORK, PARTNERS, NSNET, ASSOCIATES, NETWORK
INC. INC. INC. INC. INC. INC. INC. SYSTEMS, INC.
----------- -------- ------- ------------- --------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Internet connectivity..... $2,425 $ 704 $ 1,536 $ 472 $1,133 $1,832 $ 831 $ 859
Enhanced services and
other................... 47 3,688 627 337 518 15 303 27
------ ------ ------- ----- ------ ------ ------ -----
Total revenue......... 2,472 4,392 2,163 809 1,651 1,847 1,134 886
Operating costs and
expenses:
Internet services
operating costs......... 1,162 536 1,229 385 336 471 323 473
Selling, general and
administrative and
other................... 1,757 2,006 1,814 674 1,977 939 678 511
Depreciation and
amortization............ 172 260 197 69 10 126 63 --
------ ------ ------- ----- ------ ------ ------ -----
Total costs and
expenses........... 3,091 2,802 3,240 1,128 2,323 1,536 1,064 984
------ ------ ------- ----- ------ ------ ------ -----
Earnings (loss) from
operations............ (619) 1,590 (1,077) (319) (672) 311 70 (98)
Interest income............. -- 26 -- -- -- -- 14 --
Interest expense............ (16) -- (42) (15) (5) (6) -- (17)
------ ------ ------- ----- ------ ------ ------ -----
Earnings (loss) before
income taxes.......... (635) 1,616 (1,119) (334) (677) 305 84 (115)
Income taxes................ -- (602) 33 (15) -- (116) (29) --
------ ------ ------- ----- ------ ------ ------ -----
Net earnings (loss)... $ (635) $1,014 $(1,086) $(349) $ (677) $ 189 $ 55 $(115)
====== ====== ======= ===== ====== ====== ====== =====
</TABLE>

<TABLE>
<CAPTION>
NATIONAL
KNOWLEDGE FLORIDA COMPUTING
ACCESSONE, NETWORKS, LI INTERNET ENGINEERS STARNET,
INC. INC. NET, INC. CORPORATION INC. L.L.C. TOTAL
---------- --------- --------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Internet connectivity........ $2,484 $1,169 $1,907 $1,172 $3,322 $1,202 $38,583
Enhanced services and
other...................... 1,035 234 120 264 758 399 12,761
------ ------ ------ ------ ------ ------ -------
Total revenue............ 3,519 1,403 2,027 1,436 4,080 1,601 51,344
Operating costs and expenses:
Internet services operating
costs...................... 1,510 669 792 773 1,026 717 21,854
Selling, general and
administrative and other... 2,251 1,282 1,573 578 2,341 570 31,900
Depreciation and
amortization............... 245 55 135 121 329 156 3,130
------ ------ ------ ------ ------ ------ -------
Total costs and
expenses.............. 4,006 2,006 2,500 1,472 3,696 1,443 56,884
------ ------ ------ ------ ------ ------ -------
Earnings (loss) from
operations............... (487) (603) (473) (36) 384 158 (5,540)
Interest income................ -- 6 -- -- -- 9 65
Interest expense............... (26) (26) (39) (12) (96) (6) (572)
------ ------ ------ ------ ------ ------ -------
Earnings (loss) before
income taxes............. (513) (623) (512) (48) 288 161 (6,047)
Income taxes................... -- (3) -- -- (110_ (61) (1,247)
------ ------ ------ ------ ------ ------ -------
Net earnings (loss)...... $ (513) $ (626) $ (512) $ (48) $ 178 $ 100 $(7,294)
====== ====== ====== ====== ====== ====== =======
</TABLE>

Historical condensed statement of operations information for the Proposed
Acquisition for the year ended December 31, 1997 represents information for
Matrix Online Media, Inc. only.

F-12
<PAGE> 97

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(D) PRO FORMA ADJUSTMENTS

The following pro forma adjustments have been made to the condensed
combined balance sheet as of December 31, 1997 and the condensed combined
statement of operations for the year ended December 31, 1997. The purchase
accounting adjustments relating to the acquisitions completed prior to January
1, 1998 are included in the historical consolidated balance sheet of Verio as of
December 31, 1997.

(1) To reflect cash and 1,704,000 shares of preferred stock, which is
the approximate number of shares issued and proposed to be issued as of
December 31, 1997 in connection with the Completed and Proposed
Acquisitions subsequent to December 31, 1997, and the allocation of excess
purchase price to goodwill in the amount of $69,025,000 and to adjust
investments in affiliates for the proposed acquisitions of majority
interests. Preferred shares issued for acquisitions were recorded at fair
value as determined by the Company's Board of Directors and based on other
third-party issuances of Company securities. In the opinion of management,
the historical balances of all other assets acquired and liabilities
assumed approximate fair value.

(2) To eliminate equity accounts of the Proposed Acquisition.

(3) To eliminate intercompany revenue, expenses, receivables and
payables.

(4) To adjust amortization expense due to increase in carrying value
of goodwill, using a ten-year life, including additional amortization
expense related to consolidated acquisitions completed during 1997, as if
such acquisitions had been completed as of January 1, 1997, as follows:

<TABLE>
<S> <C>
Pro forma goodwill for acquisitions completed or proposed to
be completed after December 31, 1997 as if the
acquisitions occurred on January 1, 1997.................. $69,025
Amortization period (years)................................. 10
-------
Amortization of goodwill for acquisitions completed or
proposed to be completed after December 31, 1997.......... 6,903
Amortization of goodwill on 1997 acquisitions for the period
from January 1, 1997 through the date of acquisition as if
the acquisitions had occurred as of January 1, 1997....... 5,127
-------
Total....................................................... $12,030
=======
</TABLE>

(5) To eliminate minority interests share of equity and operations and
equity in losses of affiliates upon acquisition of 100% ownership
interests.

(6) To eliminate income tax expense or benefit of acquired businesses
due to consolidated net operating loss for the year ended December 31,
1997.

(7) To reflect the conversion of all preferred shares into common
stock upon completion of the Offering.

(8) To reflect the conversion of 20,945,667 shares of preferred stock
into common stock upon completion of the Offering, including 1,704,000
shares of preferred stock assumed to be issued and converted to common
stock subsequent to December 31, 1997.

(9) To reflect (i) the proceeds from the 1998 Notes, after the effect
of the Refinancing and including deferred financing costs of $3,666,000,
(ii) the extraordinary charge of approximately $10,104,000 for the loss on
the Refinancing, and (iii) the reduction of restricted cash requirements of
$12,732,000 in connection with the Refinancing.

F-13
<PAGE> 98

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying consolidated balance sheets of Verio Inc.
and subsidiaries as of December 31, 1996 and 1997, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the period
from inception (March 1, 1996) to December 31, 1996 and the year ended December
31, 1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Verio Inc.
and subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the period from inception (March 1, 1996) to
December 31, 1996 and the year ended December 31, 1997 in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-14
<PAGE> 99

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------- DECEMBER 31,
1996 1997 1997(1)
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 66,467 $ 72,586
Restricted cash and securities (notes 3 and 4)............ -- 21,015
Receivables:
Trade, net of allowance for doubtful accounts of $117
and $1,233............................................. 611 7,565
Affiliates.............................................. 119 735
Prepaid expenses and other................................ 410 3,921
-------- --------
Total current assets................................ 67,607 105,822
Restricted cash and securities (notes 3 and 4).............. -- 19,539
Investments in affiliates, at cost (note 2)................. 1,536 2,378
Equipment and leasehold improvements:
Internet access and computer equipment.................... 4,485 30,535
Furniture, fixtures and computer software................. 220 3,301
Leasehold improvements.................................... 141 1,596
-------- --------
4,846 35,432
Less accumulated depreciation and amortization............ (359) (7,219)
-------- --------
Net equipment and leasehold improvements............ 4,487 28,213
Other assets:
Goodwill, net of accumulated amortization of $303 and
$3,595 (note 2)......................................... 8,736 83,216
Debt issuance costs, net of accumulated amortization of
$330.................................................... -- 4,858
Organization costs and other, net......................... 262 2,445
-------- --------
Total assets........................................ $ 82,628 $246,471
======== ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 2,132 $ 7,389
Accrued expenses.......................................... 931 11,401
Accrued interest payable.................................. -- 844
Accrued preferred stock issuance costs.................... 1,110 --
Lines of credit, notes payable and current portion of
long-term debt (note 3)................................. 2,573 2,751
Current portion of capital lease obligations (note 4)..... 64 1,575
Deferred revenue.......................................... 659 7,177
-------- --------
Total current liabilities........................... 7,469 31,137
Long-term debt, less current portion, net of discount (note
3)........................................................ 20 139,376
Capital lease obligations, less current portion (note 4).... 86 2,945
-------- --------
Total liabilities................................... 7,575 173,458
-------- --------
Minority interests in subsidiaries (note 2)................. 2,231 2,765
Redeemable preferred stock (note 5):
Series A, convertible, $.001 par value. 6,100,000 shares
authorized, 6,033,333 shares issued and outstanding at
December 31, 1996 and 1997. Liquidation preference of
$18,100................................................. 18,078 18,080 --
Series B, convertible, $.001 par value. 10,117,000 shares
authorized 10,000,000 and 10,028,334 shares issued and
outstanding at December 31, 1996 and 1997. Liquidation
preference of $60,170................................... 58,799 59,193 --
Series C, convertible, $.001 par value. 2,500,000 shares
authorized, issued and outstanding at December 31, 1997.
Liquidation preference of $20,000....................... -- 19,976 --
-------- -------- --------
76,877 97,249 --
-------- -------- --------
Stockholders' equity (deficit) (note 6):
Preferred stock, Series D-1, convertible, $.001 par value.
3,000,000 shares authorized, 680,000 shares issued and
outstanding at December 31, 1997. Liquidation preference
of $10,200 (note 5)..................................... -- 10,200 --
Common stock, $.001 par value; 35,133,000 shares
authorized; 1,090,000 and 1,254,533 shares issued and
outstanding at December 31, 1996 and 1997 (20,496,200
shares pro forma)....................................... 1 1 20
Additional paid-in capital................................ 1,089 14,272 121,702
Accumulated deficit....................................... (5,145) (51,474) (51,474)
-------- -------- --------
Total stockholders' equity (deficit)................ (4,055) (27,001) 70,248
-------- -------- --------
Commitments (notes 2, 4 and 5)
Total liabilities and stockholders' deficit......... $ 82,628 $246,471
======== ========
</TABLE>

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

(1) Reflects the conversion of all preferred shares into common stock on the
basis described in Note 5, only upon completion of the offering described in
the registration statement.

See accompanying notes to consolidated financial statements.

F-15
<PAGE> 100

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR
(MARCH 1, 1996) ENDED
TO DECEMBER 31, DECEMBER 31,
1996 1997
----------------- ------------
<S> <C> <C>
Revenue:
Internet connectivity:
Dedicated.............................................. $ 1,100 $ 16,383
Dial-up................................................ 1,139 7,093
Enhanced services and other............................... 126 12,216
------- --------
Total revenue..................................... 2,365 35,692
Costs and expenses:
Internet services operating costs......................... 974 15,974
Selling, general and administrative and other............. 7,002 49,383
Depreciation and amortization............................. 669 10,624
------- --------
Total costs and expenses.......................... 8,645 75,981
------- --------
Loss from operations.............................. (6,280) (40,289)
Other income (expense):
Interest income........................................... 593 6,080
Interest expense.......................................... (115) (11,826)
Equity in losses of affiliates............................ -- (1,958)
------- --------
Loss before minority interests.................... (5,802) (47,993)
Minority interests.......................................... 680 1,924
------- --------
Net loss.......................................... (5,122) (46,069)
Accretion of preferred stock to liquidation value........... (23) (260)
------- --------
Net loss attributable to common shareholders...... $(5,145) $(46,329)
======= ========
Loss per common share -- basic and diluted.................. $ (5.29) $ (40.47)
======= ========
Weighted average number of common shares outstanding --basic
and diluted............................................... 971,748 1,144,685
======= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-16
<PAGE> 101

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
PREFERRED ------------------ PAID-IN ACCUMULATED
STOCK SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT INCEPTION................ $ -- -- $-- $ -- $ -- $ --
Issuance of common stock for cash.... -- 1,090,000 1 1,089 -- 1,090
Accretion of preferred stock to
liquidation value.................. -- -- -- -- (23) (23)
Net loss............................. -- -- -- -- (5,122) (5,122)
------- --------- --- ------- -------- --------
BALANCES AT DECEMBER 31, 1996........ -- 1,090,000 1 1,089 (5,145) (4,055)
Issuance of common stock for exercise
of options......................... -- 76,200 148 -- 148
Issuance of common stock for cash.... -- 88,333 360 -- 360
Warrants issued in connection with
debt offering (note 3)............. -- -- -- 12,675 -- 12,675
Issuance of preferred stock in
business combination (note 5)...... 10,200 -- -- -- -- 10,200
Accretion of redeemable preferred
stock to liquidation value......... -- -- -- (260) (260)
Net loss............................. -- -- -- (46,069) (46,069)
------- --------- --- ------- -------- --------
BALANCES AT DECEMBER 31, 1997........ $10,200 1,254,533 $ 1 $14,272 $(51,474) $(27,001)
======= ========= === ======= ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-17
<PAGE> 102

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM INCEPTION YEAR
(MARCH 1, 1996) ENDED
TO DECEMBER 31, DECEMBER 31,
1996 1997
--------------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(5,122) $(46,069)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization.......................... 669 10,624
Minority interests' share of losses.................... (680) (1,924)
Equity in losses of affiliates......................... -- 1,958
Changes in operating assets and liabilities, excluding
effects of business combinations:
Receivables.......................................... (265) (1,561)
Prepaid expenses and other current assets............ (284) (2,305)
Accounts payable..................................... 1,439 (1,656)
Accrued expenses..................................... 1,910 3,082
Accrued interest payable............................. -- 844
Deferred revenue..................................... 7 1,684
------- --------
Net cash used by operating activities............. (2,326) (35,323)
------- --------
Cash flows from investing activities:
Acquisition of equipment and leasehold improvements....... (3,430) (14,547)
Acquisition of net assets in business combinations and
investments in affiliates, net of cash acquired........ (5,627) (64,023)
Restricted cash and securities............................ (40,554)
Other..................................................... (66) (1,206)
------- --------
Net cash used by investing activities............. (9,123) (120,330)
------- --------
Cash flows from financing activities:
Proceeds from lines of credit, notes payable and long-term
debt................................................... -- 145,512
Repayments of lines of credit and notes payable........... (20) (3,468)
Repayments of capital lease obligations................... (8) (950)
Proceeds from issuance of common and preferred stock, net
of issuance costs...................................... 77,944 20,678
------- --------
Net cash provided by financing activities......... 77,916 161,772
------- --------
Net increase in cash and cash equivalents......... 66,467 6,119
Cash and cash equivalents:
Beginning of period....................................... -- 66,467
------- --------
End of period............................................. $66,467 $ 72,586
======= ========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ -- $ 10,982
======= ========
Equipment acquired through capital lease obligations...... $ 58 $ 3,301
======= ========
Acquisition of net assets in business combination through
issuance of notes payable.............................. $ 6,675 $ 4,718
======= ========
Acquisition of net assets in business combination through
issuance of preferred stock............................ $ -- $ 10,200
======= ========
Warrants issued in connection with debt offering.......... $ -- $ 12,675
======= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-18
<PAGE> 103

VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization and Basis of Presentation

Verio Inc. (Verio or the Company) was incorporated on March 1, 1996 to
capitalize on the growing demand for Internet access and enhanced services by
business users through the acquisition, integration, and growth of existing
independent Internet service providers with a business customer focus in
targeted geographic regions. The goal of the Company is to be the dominant,
full-service national provider of Internet connectivity and enhanced Internet
services to small and medium sized businesses. The Company commenced operations
in April 1996 and had no activity other than the sale of common stock to
founders prior to April 1, 1996.

The accompanying consolidated financial statements include the accounts of
Verio and its majority owned subsidiaries, as described in Note 2. All
significant intercompany balances and transactions have been eliminated in
consolidation. The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

(b) Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. Included in cash
equivalents as of December 31, 1996 and December 31, 1997 are U.S. government,
municipal and corporate debt securities, money market accounts and commercial
paper, totaling $61,769,000 and $75,442,000 (exclusive of cash overdraft in the
amount of $11,228,000), respectively, with maturities ranging from thirty to
ninety days.

Restricted cash and securities include U.S. government securities which are
classified as securities held to maturity and recorded at cost. At December 31,
1997, cost approximated market value.

Equipment and leasehold improvements are recorded at cost. Depreciation is
provided over the estimated useful lives of the assets ranging from 3 to 5 years
using the straight-line method. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful life of the asset.

(d) Investments in Affiliates and Consolidation of Subsidiaries

Investments in affiliates represent newly issued preferred shares of
various affiliates. The preferred shares are convertible at the option of the
Company into common shares on a one-for-one basis and represent future common
stock ownership interests, upon conversion, of less than 50%. As the Company did
not acquire a common stock ownership interest, these investments are recorded at
cost until such time as the preferred shares are converted to common. In
addition, if these entities incur losses resulting in the equity of the common
shareholders being reduced to zero, the Company will utilize the equity method
of accounting for these investments and will generally recognize 100% of all
losses of the affiliates from that date, up to the amount of the Company's
investment, based on the inability of the majority common shareholders to fund
additional losses. During the year ended December 31, 1997, the Company
recognized equity in losses of affiliates of $1,958,000 under this method of
accounting.

The Company has also acquired preferred shares in certain entities which
are convertible into future common stock ownership interests of greater than
50%. In these situations, the Company has majority representation on the Board
of Directors and majority voting rights, exercises significant control over the

F-19
<PAGE> 104
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

entities' operations, and intends to acquire a 100% common ownership interest in
the future. Accordingly, the accounts of these investees have been consolidated
with those of the Company in the accompanying consolidated financial statements
from the dates of acquisition (see note 2).

(e) Other Assets

The excess of cost over the fair value of net assets acquired, or goodwill,
is amortized using the straight-line method over a 10-year period. Other
intangibles are amortized using the straight-line method over periods ranging
from three to seven years.

(f) Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lives Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. In addition, the
recoverability of goodwill is further evaluated under the provisions of APB
Opinion No. 17, Intangible Assets, based upon undiscounted cash flows. If such
assets are impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the estimated fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
value or fair value, less costs to sell.

(g) Revenue Recognition

Revenue related to Internet services is recognized as the services are
provided, and deferred and amortized to operations for amounts billed relating
to future periods. Installation and customer set-up fees are recognized upon
completion of the services. Revenue from consulting services is recognized as
the services are provided. Revenue from hardware and software sales is
recognized upon shipment of the respective products.

(h) Peering Relationships

The Company does not pay any fees in connection with its peering
relationships with other companies and does not record revenue or expense in
connection with those arrangements. The nature of these relationships is that
the parties share the responsibility for communications that occur between their
respective local networks. These peering relationships are essentially exchanges
of similar productive assets rather than a culmination of an earnings process.
Accordingly, these arrangements are appropriately not reflected in the
operations of the Company.

(i) Income Taxes

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the difference is expected to reverse.

(j) Stock-Based Compensation

The Company accounts for its stock-based employee compensation plans using
the intrinsic value based method prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations (APB 25). The Company has provided pro forma disclosures of net
loss and loss per share as if the fair value based method of accounting for the
plans, as prescribed by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), had been applied. Pro forma
disclosures include the effects of employee stock options granted during the
period and year ended December 31, 1996 and 1997.

F-20
<PAGE> 105
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(k) Loss Per Share

Loss per share is presented in accordance with the provisions of Statement
of Financial Accounting Standards No. 128, Earnings Per Share, (SFAS 128). SFAS
128 replaced the presentation of primary and fully diluted earnings (loss) per
share (EPS), with a presentation of basic EPS and diluted EPS. Under SFAS 128,
basic EPS excludes dilution for common stock equivalents and is computed by
dividing income or loss available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock and resulted in the
issuance of common stock. Basic and diluted EPS are the same in 1996 and 1997,
and all common stock equivalents are antidilutive.

(2) BUSINESS COMBINATIONS AND INVESTMENTS IN AFFILIATES

During the period from inception (March 1, 1996) to December 31, 1996, the
Company completed seven business combinations and investments for cash and notes
payable. All of the acquisitions were accounted for using the purchase method of
accounting, and represent the acquisition of stock or net assets. Outstanding
stock options of acquired businesses were included in the determination of the
purchase prices based on fair values. For those businesses acquired and
consolidated, the results of operations for the acquired businesses are included
in the Company's consolidated statement of operations from the dates of
acquisition. Summary information regarding the business combinations is as
follows:

Consolidated acquisitions in 1996:

<TABLE>
<CAPTION>
TOTAL OWNERSHIP
OWNERSHIP INTEREST AT APPROXIMATE
INTEREST DECEMBER 31, PURCHASE
BUSINESS NAME ACQUISITION DATE PURCHASED(a) 1996(a) PRICE
------------- ---------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
On-Ramp Technologies, Inc........ August 1, 1996 51%
October 4, 1996 4% 55%(b) $ 8,775,000
RAINet, Inc...................... August 2, 1996 100% 100%(c) 2,000,000
CCnet Inc........................ December 19, 1996 100% 100%(c) 1,800,000
-----------
$12,575,000
Acquisition costs................ 284,000
-----------
$12,859,000
===========
</TABLE>

The aggregate purchase price, including acquisition costs was allocated based
upon fair value as follows:

<TABLE>
<S> <C>
Equipment............................................ $ 1,359,000
Goodwill............................................. 9,039,000
Net current assets................................... 2,461,000
-----------
Total purchase price........................ $12,859,000
===========
</TABLE>

Unconsolidated investments in 1996:

<TABLE>
<CAPTION>
OWNERSHIP TOTAL OWNERSHIP APPROXIMATE
INTEREST INTEREST AT PURCHASE
BUSINESS NAME ACQUISITION DATE PURCHASED(a) DECEMBER 31, 1996(a) PRICE
------------- ---------------- ------------ -------------------- -----------
<S> <C> <C> <C> <C>
West Coast Online, Inc....... July 26, 1996 20% 20%(b) $ 225,000
National Knowledge Networks,
Inc........................ August 2, 1996 26% 26%(b) 300,001
Access One, Inc.............. December 12, 1996 20% 20%(b) 506,039
Signet Partners, Inc......... December 19, 1996 25% 25%(b) 402,960
----------
$1,434,000
Acquisition costs............ 102,000
----------
$1,536,000
==========
</TABLE>

During the year ended December 31, 1997, the Company completed 23 business
combinations and investments for cash, notes payable and preferred stock. All of
the acquisitions were accounted for using the purchase method of accounting. For
those businesses acquired and consolidated, the results of operations for

F-21
<PAGE> 106
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the acquired businesses are included in the Company's consolidated statement of
operations from the dates of acquisition. Seventeen subsidiaries were acquired
and newly consolidated during 1997. In addition, the Company formed two new
start-up subsidiaries. Summary information regarding these acquisitions is as
follows:

Consolidated acquisitions in 1997:

<TABLE>
<CAPTION>
OWNERSHIP TOTAL OWNERSHIP APPROXIMATE
INTEREST INTEREST AT PURCHASE
BUSINESS NAME ACQUISITION DATE PURCHASED(a) DECEMBER 31, 1997(a) PRICE(e)
------------- ---------------- ------------ -------------------- -----------
<S> <C> <C> <C> <C>
Global Enterprise
Services -- Network
Division............... January 17, 1997 100% 100%(d) $ 2,350,000
Pioneer Global
Telecommunications,
Inc. .................. February 6, 1997 100% 100%(c) 1,011,000
Compute Intensive
Inc. .................. February 18, 1997 55% 55%(b) 4,900,000
NorthWestNet, Inc. ...... February 28, 1997 85% 85%(c) 9,464,000
RUSTnet, Inc. ........... March 14, 1997 100% 100%(c) 1,703,000
Aimnet Corporation....... May 19, 1997 55%
September 22, 1997 45% 100%(c) 7,613,000
Branch Information
Services, Inc. ........ September 17, 1997 100% 100%(c) 1,687,000
West Coast Online,
Inc. .................. April 29, 1997 12%
September 30, 1997 68% 100%(b) 1,775,000
Communique, Inc. ........ October 2, 1997 100% 100%(c) 3,000,000
Clark Internet Services,
Inc. .................. October 17, 1997 51% 51%(b) 3,520,000
ATMnet .................. November 5, 1997 100% 100%(d) 5,522,000
Global Internet Network
Services, Inc. ........ December 1, 1997 100% 100%(c) 6,000,000
Surf Network, Inc. ...... January 31, 1997 25%
December 22, 1997 75% 100%(b) 603,000
PREPnet.................. December 24, 1997 100% 100%(d) 1,405,000
Sesquinet................ December 24, 1997 100% 100%(d) 732,000
Service Tech, Inc. ...... August 1, 1997 40%
December 31, 1997 60% 100%(b) 2,055,000
Monumental Network
Systems, Inc. ......... December 31, 1997 100% 100%(c) 3,962,000
Internet Servers,
Inc. .................. December 31, 1997 100% 100%(c) 20,000,000
-----------
$77,302,000
Acquisition costs........ 3,396,000
-----------
$80,698,000
===========
</TABLE>

The aggregate purchase price, including acquisition costs of $3,396,000 was
allocated based upon fair values as follows:

<TABLE>
<S> <C>
Equipment...................................... $ 12,378,000
Goodwill....................................... 77,772,000
Net current liabilities........................ (9,452,000)
------------
Total purchase price................. $ 80,698,000
============
</TABLE>

F-22
<PAGE> 107
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Unconsolidated investments in 1997:

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

(a) Represents existing ownership interest or, in the case of investments in
preferred stock, ownership upon conversion of preferred shares to common,
on a fully diluted basis.

(b) Represents ownership of preferred stock of affiliate or subsidiary.

(d) Represents acquisition of net assets.

(e) Purchase prices are comprised of cash and notes payable for all
Acquisitions except Internet Servers, Inc. which included the issuance of
680,000 shares of Series D-1 preferred stock at $15 per share. Such per
share value was determined by the Company's Board of Directors based on
comparable valuations of private and public companies, methodologies based
on multiples of revenue and discounted cash flows, and arms-length
negotiated values.

The following unaudited condensed pro forma information presents the
unaudited results of operations of the Company as if the above consolidated
acquisitions had occurred on January 1, 1996:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997
---------- ----------
(AMOUNTS IN THOUSANDS,
EXCEPT FOR PER SHARE DATA)
<S> <C> <C>
Revenue..................................................... $ 44,693 $ 63,665
Net loss.................................................... (33,326) (59,006)
Net loss attributable to common shareholders................ (33,349) (59,266)
Loss per common share -- basic and diluted.................. $ (34.32) $ (51.77)
</TABLE>

The pro forma results do not necessarily represent results that would have
occurred if the consolidated acquisitions had taken place as of January 1, 1996,
nor are they necessarily indicative of the results of future operations.

For all of its less-than-100%-owned ISP affiliates, the Company has the
option to acquire all of the remaining ownership interests. Generally, the
option may be exercised beginning one year from the date of the initial
investment or upon the earlier of the completion of an initial public offering
of common stock by the

F-23
<PAGE> 108
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company or a significant strategic investment in the Company. In one case, the
Company's option becomes mandatorily exercisable upon completion of an initial
public offering.

Subsequent to December 31, 1997 and through February 25, 1998, the Company
has completed or expects to complete the acquisition of the remaining ownership
interests and acquisitions of 12 ISPs, for total consideration of approximately
$50 million in preferred stock and cash.

(3) DEBT

Lines of credit, notes payable and long-term debt consists of the following
as of December 31, 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
--------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
13.5% Senior Notes due in 2004, net of unamortized discount
of $12,130,136(a)......................................... $ -- $137,870
Revolving lines of credit, bearing interest at .5% to 2.00%
above prime, (9.0% to 10.5% at December 31, 1997) due
primarily on demand, secured by restricted cash of
$765,000.................................................. -- 788
Unsecured notes payable bearing interest primarily at 7%,
due in 1998 and 1999...................................... 2,500 2,809
Other....................................................... 93 660
------- --------
2,593 142,127
Less current portion........................................ (2,573) (2,751)
------- --------
Long-term debt, less current portion.............. $ 20 $139,376
======= ========
</TABLE>

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

(a) In June 1997, the Company completed a debt offering of $150,000,000, 13.5%
Senior Notes due 2004 (the "1997 Notes") and warrants to purchase 2,112,480
shares of common stock at $.01 per share, which were valued at
approximately $12,675,000 based on the Company's most recent equity
offering. Interest on the 1997 Notes is payable semi-annually on June 15
and December 15 of each year. The value attributed to the warrants has been
recorded as debt discount and is being amortized to interest expense using
the interest method over the term of the 1997 Notes. Upon closing, the
Company deposited U.S. Treasury securities in an escrow account in an
amount that, together with interest on the securities, will be sufficient
to fund the first five interest payments (through December 1999) on the
1997 Notes. This restricted cash and securities balance totaled $38,195,404
at December 31, 1997. The 1997 Notes are redeemable on or after June 15,
2002 at 103% of the face value.

The indenture covering the 1997 Notes includes various covenants
restricting the payment of dividends, additional indebtedness, disposition of
assets, and transactions with affiliates.

Maturities of lines of credit, notes payable and long-term debt are as
follows:

<TABLE>
<S> <C>
1998.............................................. $ 2,751
1999.............................................. 1,032
2000.............................................. 474
2001.............................................. --
2002.............................................. --
Thereafter........................................ 137,870
--------
$142,127
========
</TABLE>

F-24
<PAGE> 109
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of February 25, 1998, Verio had received commitments from a group of
commercial lending institutions to provide an aggregate of up to $57.5 million
pursuant to a two-year revolving credit financing facility. The Company is in
the process of negotiating the definitive terms and conditions and final
documentation for this facility. Chase Manhattan Bank has committed to serve as
agent for the lenders in this facility. In addition, the Company is considering
a possible private placement of up to $100 million in senior notes. There can be
no assurance that the Company will be able to negotiate final terms and
conditions that are acceptable to the Company with respect to, or to consummate,
either of such financing efforts.

(4) LEASES AND COMMITMENTS

The Company leases office space, certain facilities storing internet points
of presence and certain computer and office equipment under capital and
operating leases expiring at various dates through 2003. Future minimum annual
lease payments under these leases as of December 31, 1997 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
1998........................................................ $ 2,279 $ 5,786
1999........................................................ 1,840 5,178
2000........................................................ 1,128 3,485
2001........................................................ 42 1,393
2002........................................................ 9 487
Thereafter.................................................. -- 172
------- -------
Total minimum payments............................ $ 5,298 $16,501
=======
Less amount representing interest........................... (778)
-------
Present value of net minimum lease payments....... 4,520
Less current portion........................................ (1,575)
-------
$ 2,945
=======
</TABLE>

Rent expense for the period from inception (March 31, 1996) to December 31,
1996 and the year ended December 31, 1997 was $128,000 and $1,856,000,
respectively.

In addition, the Company has entered into agreements with two
telecommunications companies to provide the Company with products and services
to be used in its operations. Under one agreement, the minimum payments as of
December 31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
1998................................................ $1,200
1999................................................ 1,900
2000................................................ 2,400
2001................................................ 800
------
Total minimum payments.................... $6,300
======
</TABLE>

Under the second agreement, the Company is obligated to spend a total of
$39 million between June 16, 1997 and June 16, 2002 of which $1,500,000 had been
paid as of December 31, 1997. Annual payments will be based on actual usage by
the Company.

The Company had an outstanding irrevocable letter of credit in the amount
of $1.1 million as of December 31, 1997. This letter of credit, which is
automatically renewed after one year at the discretion of the bank, not to be
extended beyond January 31, 2003, is to collateralize the Company's lease
obligation to a third party. The fair value of this letter of credit
approximates contract value which is fixed over the life of the commitment.
Restricted cash in the amount of $1,400,000 secures the letter of credit.
F-25
<PAGE> 110
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) PREFERRED STOCK

Series A, B and C preferred shares were issued in 1996 and 1997 at $3, $6
and $8 per share, respectively, for total proceeds of $18,100,001, $60,170,004
and $20,000,000, respectively, and are convertible into common stock initially
on a one-for-one basis. In December 1997, the Company also issued 680,000 shares
of Series D-1 preferred shares at $15 per share in connection with an
acquisition. The preferred shares are entitled to receive dividends equal, on an
as-converted basis, to any amount paid to common stockholders. In the event of
any liquidation or dissolution of the Company, including certain mergers,
consolidations and asset sales, holders of the preferred shares are entitled to
receive an amount equal to the original issuance price, plus any declared and
unpaid dividends.

In addition, the Series A, B and C preferred shares are subject to
mandatory redemption, in total, by the Company in October 2004. The Series D-1
preferred shares are not redeemable. Upon redemption, the Series C shares are
senior to Series B shares, which are senior to Series A shares, on the basis
provided in the preferred stock terms. Series A, B, C and D-1 preferred shares
may be converted into shares of common stock at any time at the option of the
holder. The Series A, B, C and D-1 preferred shares are also subject to
mandatory conversion upon consummation of a public offering of common stock
resulting in proceeds to the Company of not less than $30 million and at an
offering price per share equal to at least $15. In addition, shares of Series
D-1 preferred stock are subject to mandatory conversion upon the election of
each of the Series A, B and C classes, each voting as a separate class, to
convert to common.

(6) STOCK-BASED COMPENSATION PLANS

The Company has established Incentive Stock Option Plans (the Plans)
whereby, at the discretion of the Board of Directors (the Board), the Company
may grant stock options to employees of the Company and its controlled
subsidiaries. As of December 31, 1997, the Company had reserved 2,750,000 shares
for issuance under the Plans. The Plans were amended subsequent to December 31,
1997 to increase the number of shares reserved for issuance to 4,750,000. The
option price is determined by the Board at the time the option is granted, but
in no event is less than the fair market value of the Company's common stock at
the date of grant, as determined by the Board. As of December 31, 1996 and
December 31, 1997, options had been granted entitling the holders to purchase
707,200 and 2,237,050 shares of the Company's common stock, respectively, at
exercise prices of $1, $3, $6, $6.75 and $8.50 per share. Options granted on or
before December 19, 1997, vest over a five year period, and expire ten years
from the date of grant. Options granted December 20, 1997, or later, vest over a
four year period, and expire eight years from the date of grant. In certain
circumstances, options vest earlier or later based upon the fair value of the
Company's common shares or upon reaching certain performance targets, as
defined, and in the case that such performance targets are not met, such
performance-based options vest seven years from the date of grant. Performance
based options granted on or before December 19, 1997, expire ten years from the
date of grant, and performance based options granted December 20, 1997, or
later, expire eight years from the date of grant. As of December 31, 1997,
54,700 options, in total, were vested and exercisable. Options may be exercised
prior to their scheduled vesting date, but are subject to a repurchase by the
Company at the exercise price until the scheduled vesting date. The weighted
average contractual term of outstanding options was approximately 5 years at
December 31, 1997.

F-26
<PAGE> 111
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes option activity for the period from
inception (March 1, 1996) through December 31, 1997:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Options granted at the following exercise prices:
$1 per share.............................................. 60,000
$3 per share.............................................. 647,700
---------
Options outstanding at December 31, 1996.................. 707,700 $2.83
Options granted at the following exercise prices:
$3 per share.............................................. 6,000
$6 per share.............................................. 924,550
$6.75 per share........................................... 635,450
$8.50 per share........................................... 191,250
Options forfeited......................................... (151,700) $5.95
Options exercised......................................... (76,200) $1.95
--------- -----
Options outstanding at December 31, 1997.................... 2,237,050 $5.55
========= =====
</TABLE>

As discussed in Note 1, the Company applies APB Opinion 25 and related
interpretations in accounting for its stock compensation plan. Accordingly,
since the Company grants stock options with exercise prices equal to fair value
at the date of grant, no compensation expense has been recognized relating to
option grants in 1996 and 1997. During the period and year ended December 31,
1996 and 1997, the per share weighted-average fair value of stock options
granted was $.46 and $1.08, respectively, on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: no dividends or volatility, risk-free interest rate of 6%, and
expected life of three years. If the Company had recorded compensation expense
for the period and year ended December 31, 1996 and 1997, based on the fair
value of the options at the grant date under SFAS No. 123, net loss available to
common stockholders would increase to $5,210,000 and $46,737,000, respectively,
and basic and diluted net loss per common share would increase to $4.78 and
$40.83, respectively.

(7) INCOME TAXES

Income tax benefit for the year and period ended December 31 differs from
the amounts that would result from applying the federal statutory rate of 34% as
follows:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Expected tax benefit........................................ $(1,749) (15,752)
State income taxes, net of federal benefit.................. (180) (1,622)
Nondeductible goodwill amortization......................... 26 820
Change in valuation allowance for deferred tax assets,
exclusive of effect of acquired net operating losses...... 1,877 16,472
Other....................................................... 26 82
------- --------
Actual income tax benefit.............................. $ -- --
======= ========
</TABLE>

F-27
<PAGE> 112
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Temporary differences that give rise to the components of deferred tax
assets as of December 31 are as follows:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Net operating loss carryforwards, including acquisitions.... $ 2,238 18,586
Other, net.................................................. 39 163
------- --------
Gross deferred tax asset.......................... 2,277 18,749
Valuation allowance......................................... (2,277) (18,749)
------- --------
Net deferred tax asset............................ $ -- --
======= ========
</TABLE>

At December 31, 1997, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $49.9 million, of which $5.9
million and $44.0 million is available to offset future federal taxable income,
if any, through 2011 and 2012, respectively. As a result of various preferred
stock transactions during 1996 and 1997, management believes the Company has
undergone an "ownership change" as defined by section 382 of the Internal
Revenue Code. Accordingly, the utilization of a portion of the net operating
loss carryforward may be limited. Due to this limitation, and the uncertainty
regarding the ultimate utilization of the net operating loss carryforward, no
tax benefit for losses has been recorded by the Company in 1996 and 1997, and a
valuation allowance has been recorded for the entire amount of the deferred tax
asset.

(8) CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
accounts receivable. As of December 31, 1996 and 1997, the Company had no
concentrations of credit risk. Concentrations of credit risk with respect to
trade receivables are limited due to the large number of customers comprising
the Company's customer base and the relatively minor balances of each individual
account. At December 31, 1996 and December 31, 1997, the fair value, of the
Company's financial instruments approximate their carrying value, based on their
terms and interest rates.

(9) EMPLOYEE BENEFIT PLAN

The Company has a 401(k) Plan (the Plan) for all full time employees of the
Company. The Company may make discretionary contributions to the Plan on behalf
of employees that meet certain contribution eligibility requirements defined
under the terms of the Plan. The Company did not make any contributions to the
Plan during 1996 or 1997.

(10) QUARTERLY FINANCIAL DATA (UNAUDITED)

Summary quarterly financial information for the Company is as follows. The
second quarter of 1996 represents the period from inception (March 1, 1996) to
March 31, 1996 (Amounts in Thousands).

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
1996 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
---- -------- ------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue.................................. $ -- $ -- $ 678 $ 1,687 $ 2,365
Loss from operations..................... -- (329) (1,395) (4,556) (6,280)
Net loss................................. -- (329) (1,442) (3,374) (5,145)
Loss per common share -- basic and
diluted................................ -- (0.34) (1.48) (3.47) (5.29)
</TABLE>

F-28
<PAGE> 113
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1997 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
---- -------- ------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue.................................. $ 4,414 $ 8,249 $ 9,624 $ 13,405 $ 35,692
Loss from operations..................... (5,592) (8,854) (10,741) (15,102) (40,289)
Net loss................................. (4,677) (8,120) (12,762) (20,770) (46,329)
Loss per common share -- basic and
diluted................................ (4.29) (7.28) (10.84) (18.06) (40.47)
</TABLE>

F-29
<PAGE> 114

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of On-Ramp Technologies,
Inc. as of July 31, 1996, and the related statements of operations,
stockholders' deficit, and cash flows for the nine months then ended. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of On-Ramp Technologies, Inc.
as of July 31, 1996, and the results of its operations and its cash flows for
the nine months then ended in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Denver, Colorado
April 11, 1997

F-30
<PAGE> 115

ON-RAMP TECHNOLOGIES, INC.

BALANCE SHEET
JULY 31, 1996

ASSETS

<TABLE>
<S> <C>
Current assets:
Trade receivables, net of allowance for doubtful accounts
of $80,812............................................. $ 433,075
Prepaid expenses and other................................ 25,079
-----------
Total current assets.............................. 458,154
Equipment, net (note 2)..................................... 867,388
-----------
Total assets...................................... $ 1,325,542
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Cash overdraft............................................ $ 91,342
Accounts payable.......................................... 448,460
Accrued liabilities....................................... 61,750
Current portion of note payable (note 3).................. 55,003
Deferred revenue.......................................... 652,965
-----------
Total current liabilities......................... 1,309,520
Note payable, less current portion (note 3)................. 58,692
-----------
Total liabilities................................. 1,368,212
-----------
Stockholders' equity (deficit) (note 5):
Common stock, $0.001 par value, 40,000,000 shares
authorized, 1,079,000 shares issued.................... 1,079
Additional paid-in capital................................ 1,804,871
Accumulated deficit....................................... (1,822,620)
Treasury stock -- 689,971 shares at cost.................. (26,000)
-----------
Total stockholders' deficit....................... (42,670)
-----------
Commitments and contingencies (note 4):
Total liabilities and stockholders' deficit....... $ 1,325,542
===========
</TABLE>

See accompanying notes to financial statements.

F-31
<PAGE> 116

ON-RAMP TECHNOLOGIES, INC.

STATEMENT OF OPERATIONS
NINE MONTHS ENDED JULY 31, 1996

<TABLE>
<S> <C>
Revenue:
Internet services......................................... $2,959,650
Computer hardware and software sales...................... 312,487
Consulting services....................................... 92,881
----------
Total revenue..................................... 3,365,018
----------
Cost and expenses:
Internet services operating costs......................... 606,249
Cost of hardware and software sales....................... 249,990
Selling, general and administrative....................... 2,210,706
Provision for bad debts................................... 497,742
Depreciation.............................................. 260,194
----------
Total operating expenses.......................... 3,824,881
----------
Loss from operations.............................. (459,863)
Other income (expense):
Interest income........................................... 8,035
Interest expense.......................................... (7,991)
----------
Net loss.......................................... $ (459,819)
==========
</TABLE>

See accompanying notes to financial statements.

F-32
<PAGE> 117

ON-RAMP TECHNOLOGIES, INC.

STATEMENT OF STOCKHOLDERS' DEFICIT
NINE MONTHS ENDED JULY 31, 1996

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON PAID-IN ACCUMULATED TREASURY EQUITY
STOCK CAPITAL DEFICIT STOCK (DEFICIT)
------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT NOVEMBER 1, 1995............ 1,079 1,799,699 (1,362,801) (26,000) 411,977
Capital contribution.................... -- 5,172 -- -- 5,172
Net loss................................ -- -- (459,819) -- (459,819)
------ --------- ---------- ------- --------
BALANCES AT JULY 31, 1996............... $1,079 1,804,871 (1,822,620) (26,000) (42,670)
====== ========= ========== ======= ========
</TABLE>

See accompanying notes to financial statements.

F-33
<PAGE> 118

ON-RAMP TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1996

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(459,819)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation........................................... 260,194
Provision for bad debts................................ 497,742
Changes in operating assets and liabilities:
Trade receivables.................................... (375,867)
Prepaid expenses..................................... 6,103
Accounts payable..................................... (170,123)
Accrued liabilities.................................. 4,891
Deferred revenue..................................... 227,140
---------
Net cash used by operating activities............. (9,739)
---------
Cash flows from investing activities --
purchases of equipment.................................... (222,564)
---------
Cash flows from financing activities:
Increase in cash overdraft................................ 91,342
Principal payments on note payable........................ (26,919)
Capital contribution...................................... 5,172
---------
Net cash used by financing activities............. 69,595
---------
Decrease in cash.................................. (162,708)
Cash at beginning of period................................. 162,708
---------
Cash at end of period....................................... $ --
=========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 7,991
=========
</TABLE>

See accompanying notes to financial statements.

F-34
<PAGE> 119

ON-RAMP TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Presentation

On-Ramp Technologies, Inc. (the Company) was incorporated in the State of
Texas on December 27, 1993. The Company's business consists of providing
regional internet access services, and hardware and software sales and
consulting, to customers in Texas and Georgia.

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 at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from consulting services is recognized as the services are
provided. Revenue from hardware and software sales is recognized upon shipment
of the respective products.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
recorded using the straight-line method over the estimated useful life of the
related assets of three years. Costs for normal repairs and maintenance are
expensed as incurred.

Income Taxes

Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, (SFAS 109).
Under SFAS 109, deferred income taxes are recognized for the future tax
consequences of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end based on enacted tax laws and
statutory rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. The adoption of SFAS 121 as of November
1, 1995 did not have a significant effect on the Company's financial position or
results of operations.

Stock Based Compensation

In October 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, (SFAS No. 123), which establishes a fair

F-35
<PAGE> 120
ON-RAMP TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

value-based method of accounting for stock-based compensation plans. Companies
are encouraged to adopt all provisions of SFAS No. 123 and are required to
comply with the disclosure requirements of SFAS No. 123, which was effective for
fiscal years beginning after December 15, 1995. The Company will continue to
account for stock based compensation under the provisions of APB Opinion No. 25
and will provide the pro forma disclosures required by SFAS 123.

(2) EQUIPMENT

Equipment consisted of the following at July 31, 1996:

<TABLE>
<S> <C>
Internet and computer equipment............................. $1,155,370
Furniture and office equipment.............................. 119,973
Leasehold improvements...................................... 6,668
----------
1,282,011
Less accumulated depreciation............................... (414,623)
----------
$ 867,388
==========
</TABLE>

(3) DEBT

Debt as of July 31, 1996 consists of the following:

<TABLE>
<S> <C>
Note payable bearing interest at 18%, monthly principal and
interest payments of $7,020 through April 1, 1998......... $113,695
Less current portion...................................... (55,003)
--------
$ 58,692
========
</TABLE>

(4) COMMITMENTS AND CONTINGENCIES

Future minimum annual lease payments under operating leases for each of the
years ending July 31, are as follows:

Rent expense for the nine months ended July 31, 1996 totaled $90,999.

Concentration of Credit Risk and Financial Instruments

The Company provides unsecured credit to customers in the normal course of
business. Failure of the customers to pay could result in losses up to the
recorded receivable balances. The Company does not have any customers that
represent greater than 5% of total revenue at July 31, 1996.

The Company conducts business in Texas and Georgia. Customers who operate
in Texas represent approximately 97% of the Company's customer base and accounts
receivable.

At July 31, 1996, the fair values of the Company's financial instruments
approximate their carrying values based on their terms and interest rates.

F-36
<PAGE> 121
ON-RAMP TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) STOCKHOLDERS' EQUITY

Effective August 1, 1996, the Company issued 1,250,000 shares of newly
authorized redeemable, convertible preferred stock to Verio Inc. (Verio)for cash
consideration of $2,336,816, cancellation of indebtedness in the amount of
$1,663,184, and a note receivable of $4,175,000. The preferred shares are
convertible into common shares on a one for one basis and represent a 50.82%
interest in the Company upon conversion. The preferred shares are redeemable at
the option of the holder at any time, vote on an as-converted basis, and have a
liquidation preference equal to the issuance price. On October 4, 1996, Verio
purchased 100,000 shares of common stock from two Company shareholders for cash
consideration of $600,000, representing an additional 4.07% interest in the
Company. In addition, Verio acquired an option to acquire a 100% common stock
ownership in the Company in the future upon the occurrence of certain events,
including an initial public offering of Verio common stock.

The Company established a stock option plan (the Plan) which provides that
salaried officers or key employees, non-employee directors, and consultants who
provide services to the Company may, at the discretion of the Board of
Directors, be granted options to purchase shares of common stock. 130,560 shares
of the Company's Common Stock have been authorized for issuance under the Plan,
of which 59,878 shares were granted during the nine months ended July 31, 1996,
with an exercise price of $6.34 per share. There were no options exercised or
canceled during the nine months ended July 31, 1996. As of July 31, 1996, 11,976
options were exercisable.

Generally, options vest 20% or 25% on the date of grant of the option and
the balance vests thereafter over a 4 or 3 year period.

During the nine months ended July 31, 1996, the per share weighted-average
fair values of stock options granted was $.71 on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions; expected dividend yield 0%, risk-free interest rate of 6%, and
expected life of four years. If the Company determined compensation expense for
the nine months ended July 31, 1996 based on the fair value of the options at
the grant date under SFAS No. 123, net loss would have been approximately
$468,000.

(6) INCOME TAXES

At December 31, 1995, the Company has a net operating loss carryforward for
federal income tax purposes of $534,000 which is available to offset future
federal taxable income, if any, through 2010. Management believes the Company
has undergone an ownership change under section 382 of the Internal Revenue Code
and, accordingly, the utilization of the net operating loss carryforward
incurred prior to this ownership change is limited. Due to this limitation and
the uncertainty regarding the ultimate utilization of the net operating loss
carryforward a valuation allowance has been recorded for the full amount of the
deferred tax asset related to the net operating loss carryforward, which
represents the only significant temporary difference as of December 31, 1996.

F-37
<PAGE> 122

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Global Enterprise
Services -- Network Division (a Division of Global Enterprise Services, Inc.) as
of December 31, 1995 and 1996, and the related statements of operations and
owners' deficit, and cash flows for each of the years in the three-year period
ended December 31, 1996 and the period ended January 17, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Global Enterprise
Services -- Network Division (a Division of Global Enterprises Services, Inc.)
as of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1996 and
for the period ended January 17, 1997, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-38
<PAGE> 123

GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

BALANCE SHEETS
DECEMBER 31, 1995 AND 1996

ASSETS

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 31,072 33,018
Accounts receivable, net of allowance for doubtful
accounts of $67,247 in 1995 and $84,510 in 1996........ 843,980 822,823
Prepaid expenses and other assets......................... 26,286 10,424
----------- -----------
Total current assets.............................. 901,338 866,265
Equipment, net (note 2)..................................... 1,672,045 2,388,509
Other assets................................................ 43,487 118,888
----------- -----------
Total assets...................................... $ 2,616,870 3,373,662
=========== ===========
LIABILITIES AND OWNER'S DEFICIT
Current liabilities:
Accounts payable.......................................... $ 1,223,510 2,450,316
Accrued expenses.......................................... 378,400 449,270
Deferred revenue.......................................... 1,293,360 1,545,884
Current portion of capital lease obligations (note 6)..... 213,041 548,608
Due to related party (note 3)............................. 866,840 2,183,256
----------- -----------
Total current liabilities......................... 3,975,151 7,177,334
Capital lease obligations, less current portion (note 6).... 454,122 824,034
----------- -----------
Total liabilities................................. 4,429,273 8,001,368
Owner's deficit............................................. (1,812,403) (4,627,706)
----------- -----------
Total liabilities and owner's deficit............. $ 2,616,870 3,373,662
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-39
<PAGE> 124

GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

STATEMENTS OF OPERATIONS AND OWNER'S DEFICIT
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND PERIOD ENDED JANUARY 17, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
1994 1995 1996 JANUARY 17, 1997
---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Internet services revenue, net........... $3,386,621 3,642,063 3,958,049 155,170
Costs and expenses:
Internet services operating costs...... 1,965,110 2,484,276 3,227,766 163,076
Selling, general and administrative.... 1,716,853 1,953,712 2,847,300 107,179
Depreciation and amortization.......... 191,983 291,541 556,112 33,126
---------- ----------- ----------- -----------
Total operating costs and
expenses..................... 3,873,946 4,729,529 6,631,178 303,381
---------- ----------- ----------- -----------
Loss from operations........... (487,325) (1,087,466) (2,673,129) (148,211)
Interest expense, net.................... (6,479) (39,960) (142,174) (6,622)
---------- ----------- ----------- -----------
Net loss....................... (493,804) (1,127,426) (2,815,303) (154,833)
Owner's deficit at beginning of period... (191,173) (684,977) (1,812,403) (4,627,706)
---------- ----------- ----------- -----------
Owner's deficit at end of period......... $ (684,977) (1,812,403) (4,627,706) (4,782,539)
========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-40
<PAGE> 125

GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND PERIOD ENDED JANUARY 17, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 17,
1994 1995 1996 1997
-------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. (493,804) (1,127,426) (2,815,303) $(154,833)
Adjustments to reconcile net loss to
net cash provided (used) by
operating activities:
Depreciation and amortization...... 191,983 291,541 556,112 33,126
Provision for doubtful accounts.... 30,644 31,714 25,993 --
Changes in operating assets and
liabilities:
Accounts receivable.............. 170,528 (291,457) (4,836) 148,984
Prepaid expenses and other
current assets................ (26,819) 11,404 15,862 (9,636)
Other assets..................... (27,258) 3,771 (75,401) 60,000
Accounts payable................. 286,981 766,581 1,226,806 (52,610)
Accrued expenses................. 63,273 (3,735) 70,870 116,785
Deferred revenue................. 297,900 (387,288) 252,524 (155,171)
-------- ---------- ----------- ---------
Net cash provided (used) by
operating activities........ 493,428 (704,895) (747,373) (13,355)
-------- ---------- ----------- ---------
Cash flows from investing
activities -- purchases of
equipment............................. (321,399) (497,168) (345,436) --
-------- ---------- ----------- ---------
Cash flows from financing activities:
Net change in due to related party.... (142,215) 1,318,772 1,316,416 (153,663)
Proceeds from debt.................... -- -- -- 134,000
Principal repayments on capital lease
obligations........................ (22,739) (93,738) (221,661) --
-------- ---------- ----------- ---------
Net cash provided (used) by
financing activities........ (164,954) 1,225,034 1,094,755 (19,663)
-------- ---------- ----------- ---------
Net increase (decrease) in cash......... 7,075 22,971 1,946 (33,018)
Cash at beginning of period............. 1,026 8,101 31,072 33,018
-------- ---------- ----------- ---------
Cash at end of period................... 8,101 31,072 33,018 $ --
======== ========== =========== =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for
interest........................... 6,073 35,249 70,535 $ 6,622
======== ========== =========== =========
Supplemental disclosure of non-cash
investing activities -- equipment
acquired through capital leases....... 10,908 735,088 927,140 $ --
======== ========== =========== =========
</TABLE>

See accompanying notes to financial statements.

F-41
<PAGE> 126

GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Business and Basis of Presentation

Global Enterprise Services, Inc. (GES) was formed in August 1992 to provide
internet services to subscribers on a national and international basis through a
high performance telecommunications network. The accompanying financial
statements include the accounts of the domestic operations (Network Division),
assuming that the Network Division had been operated separately as of January 1,
1994 and thereafter.

In preparing the accompanying financial statements, management has
allocated certain assets, liabilities, revenue and expenses based upon the
characteristics of the accounts and the business divisions to which they relate.
Expenses which are not directly related to a particular division are allocated
based upon revenue or payroll expense of the division which, in the opinion of
management, represents a reasonable and appropriate method of allocation.

Effective January 17, 1997, the net assets of the Network Division were
acquired by Verio Inc.

Revenue Recognition

Internet services are recognized as the services are provided. The Network
Division records deferred revenue for amounts billed and/or collected in
advance.

Equipment

Equipment, including any assets under capital leases, is stated at cost,
less accumulated depreciation and amortization. Depreciation and amortization is
recorded using the straight-line method over the estimated useful lives of the
related assets or the lease term, which range from five to seven years. Costs
for normal repairs and maintenance are expensed as incurred.

Income Taxes

The operations of the Network Division are included in the income tax
returns of GES, which was treated as a subchapter S Corporation in 1994 and
through August 14, 1995, and a C Corporation beginning on August 15, 1995.

No tax benefit has been allocated to the Network Division in 1994, 1995 and
1996 or for the period ended January 17, 1997, due to losses at the GES level
for which no tax benefit has been provided for financial statement purposes.

F-42
<PAGE> 127
GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk and Financial Instruments

The Network Division provides unsecured credit to customers in the normal
course of business. Failure of the customers to pay could result in losses up to
the recorded receivable balances. The Network Division does not have any
customers that represent greater than 5% of total revenue for the years ended
December 31, 1994, 1995 and 1996 or for the period ended January 17, 1997.

At December 31, 1996, the fair values of the Network Division's financial
instruments approximate their carrying values based on their terms and interest
rates.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. The adoption of SFAS 121 effective
January 1, 1996 did not have a significant effect on the Network Division's
financial position or results of operations.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Internet and computer equipment............................. $2,277,949 3,286,929
Furniture and office equipment.............................. 5,889 64,709
Leasehold improvements...................................... 27,165 204,624
---------- -----------
2,311,003 3,556,262
Less accumulated depreciation and amortization.............. (638,958) (1,167,753)
---------- -----------
$1,672,045 2,388,509
========== ===========
</TABLE>

(3) RELATED PARTY TRANSACTIONS

Amounts due to related party represent net cash transfers between the
Network Division and the other divisions of GES, and are non interest bearing.

(4) EMPLOYEE BENEFIT PLAN

GES has established a defined contribution savings plan which provides for
eligible employees who have met certain age and service requirements to
participate by electing to contribute up to 15% of their gross salary to the
plan, as defined, with GES and the Network Division matching 25% of a
participant's contribution up to a maximum of 10% of gross salary, as defined.
Employee contributions are immediately vested. Contributions to the savings plan
on behalf of the Network Division employees for the years ended December 31,
1994, 1995 and 1996 were $3,253, $1,697 and $6,838, respectively.

F-43
<PAGE> 128
GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) NATIONAL SCIENCE FOUNDATION GRANTS

The Network Division receives grant revenue from the National Science
Foundation (NSF) to provide network connections to certain not-for-profit
educational institutions. Funding is received on a per entity basis. The grant
revenue is recognized ratably over the term of the contract with the
not-for-profit educational institution, which is generally twelve months. Grant
revenue amounted to $131,166, $99,487 and $47,112, in 1994, 1995 and 1996,
respectively. Total amounts receivable at December 31, 1994, 1995 and 1996 were
$34,990, $72,199 and $23,243, respectively.

In September 1994, GES and the Network Division entered into a four year
cooperative agreement with the NSF to provide for interregional connectivity for
the Network Division's United States research and educational customers in the
aggregate amount of $625,115. Pursuant to the agreement, the Network Division
will be reimbursed by the NSF for costs associated with upgrading the Network
Division's existing telecommunications network. The level of funding for each
year will be determined based upon a progress review of the Network Division by
the NSF and the availability of NSF funds. The Network Division is required to
submit an annual plan to the NSF. For the years ended December 31, 1995 and
1996, respectively, the Network Division recognized $154,344 and $196,169 as a
reduction to internet services operating costs. No amounts were recognized for
the year ended December 31, 1994. Total amounts receivable were $30,904 and
$10,326 as of December 31, 1995 and 1996, respectively.

(6) LEASES

The Network Division has entered into capital and operating leases for
telecommunications equipment and office space. Future minimum lease commitments
under all leases at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
------------------------ ---------- ---------
<S> <C> <C>
1997................................... $ 650,731 344,562
1998................................... 468,940 360,623
1999................................... 392,382 360,830
2000................................... 89,056 372,295
2001................................... -- 191,466
---------- ---------
Total minimum lease payments............................. 1,601,109 1,629,776
=========
Less amount representing interest.......................... (228,467)
----------
Present value of minimum lease payments.................. $1,372,642
Less current portion....................................... (548,608)
----------
$ 824,034
==========
</TABLE>

Rent expense for the years ended December 31, 1994, 1995 and 1996 was
$193,904, $218,408 and $455,936, respectively.

The Network Division has guaranteed monthly usage levels with its primary
communications vendors at December 31, 1996 as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997.................................................... $205,000
1998.................................................... 205,000
1999.................................................... 51,250
--------
Total.............................................. $461,250
========
</TABLE>

F-44
<PAGE> 129

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Compute Intensive, Inc.
as of December 31, 1995 and 1996, and the related statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the two
year period ended December 31, 1996 and for the period ended February 18, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Compute Intensive, Inc. as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the years in the two year period ended December 31, 1996 and
for the period ended February 18, 1997 in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-45
<PAGE> 130

COMPUTE INTENSIVE INC.

BALANCE SHEETS
DECEMBER 31, 1995 AND 1996

ASSETS

<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
Current assets:
Cash...................................................... $ 20,335 44,328
Trade receivables, net of allowance for doubtful accounts
of $35,033 and $105,858 in 1995 and 1996,
respectively........................................... 455,148 506,017
Income taxes receivable................................... 9,612 15,510
Deferred income taxes (note 7)............................ 16,362 --
Prepaid expenses and other................................ 5,937 183,834
-------- ---------
Total current assets.............................. 507,394 749,689
Equipment, net (note 2)..................................... 344,988 604,358
Other assets................................................ 15,408 48,587
-------- ---------
Total assets...................................... $867,790 1,402,634
======== =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Revolving lines of credit (note 3)........................ $ 28,193 207,115
Current portion of note payable to related party (note
3)..................................................... 18,341 --
Current portion of obligations under capital leases (note
4)..................................................... 60,220 121,535
Accounts payable.......................................... 373,146 809,791
Accrued liabilities....................................... 113,218 142,235
Deferred revenue.......................................... 43,343 53,295
-------- ---------
Total current liabilities......................... 636,461 1,333,971
Note payable to related party, less current portion (note
3)........................................................ 70,384 --
Capital lease obligations, less current portion (note 4).... 104,048 169,476
Deferred income taxes (note 7).............................. 27,790 --
-------- ---------
Total liabilities................................. 838,683 1,503,447
Stockholders' equity (deficit):
Common stock, no par value, 1,000,000 shares authorized,
900,000 shares issued and outstanding.................. 900 900
Additional paid-in capital................................ 41,112 106,266
Accumulated deficit....................................... (12,905) (207,979)
-------- ---------
Total stockholders' equity (deficit).............. 29,107 (100,813)
-------- ---------
Commitments and contingencies (note 4)
Total liabilities and stockholders' equity
(deficit)....................................... $867,790 1,402,634
======== =========
</TABLE>

See accompanying notes to financial statements.

F-46
<PAGE> 131

COMPUTE INTENSIVE INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND PERIOD ENDED FEBRUARY 18, 1997

<TABLE>
<CAPTION>
PERIOD
ENDED
FEBRUARY 18,
1995 1996 1997
---------- --------- ------------
<S> <C> <C> <C>
Revenue:
Internet services....................................... $ 584,174 2,013,098 519,127
Consulting services..................................... 1,562,814 1,878,336 187,812
Computer hardware sales................................. 263,924 387,215 44,540
Computer software sales................................. 5,345 37,881 17,375
Other................................................... 69,145 60,037 24,736
---------- --------- --------
Total revenue................................... 2,485,402 4,376,567 793,590
---------- --------- --------
Operating expenses:
Cost of consulting services............................. 503,454 537,000 107,604
Cost of internet services............................... 317,768 670,158 144,457
Cost of hardware sales.................................. 227,913 292,941 26,394
Cost of software sales.................................. 5,859 28,043 15,032
Marketing and selling................................... 348,006 541,426 137,449
General and administrative.............................. 1,001,736 2,331,945 544,350
Depreciation and amortization........................... 46,174 133,280 15,954
---------- --------- --------
Total operating expenses........................ 2,450,910 4,534,793 991,240
---------- --------- --------
Earnings (loss) from operations................. 34,492 (158,226) (197,650)
Interest expense.......................................... (23,319) (54,174) (7,254)
---------- --------- --------
Earnings (loss) before income taxes............. 11,173 (212,400) (204,904)
Income tax benefit (expense) (note 7)..................... (7,308) 17,326 --
---------- --------- --------
Net earnings (loss)............................. $ 3,865 (195,074) (204,904)
========== ========= ========
</TABLE>

See accompanying notes to financial statements.

F-47
<PAGE> 132

COMPUTE INTENSIVE INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND PERIOD ENDED FEBRUARY 18, 1997

<TABLE>
<CAPTION>
TOTAL
COMMON ADDITIONAL STOCKHOLDERS'
COMMON STOCK PAID-IN ACCUMULATED EQUITY
STOCK SUBSCRIBED CAPITAL DEFICIT (DEFICIT)
------ ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1995........ $ -- 900 41,112 (16,770) 25,242
Issuance of common stock........... 900 (900) -- -- --
Net earnings....................... -- -- -- 3,865 3,865
---- ---- ------- -------- ---------
BALANCES AT DECEMBER 31, 1995...... 900 -- 41,112 (12,905) 29,107
Capital contribution (note 3)...... -- -- 65,154 -- 65,154
Net loss........................... -- -- -- (195,074) (195,074)
---- ---- ------- -------- ---------
BALANCES AT DECEMBER 31, 1996...... 900 -- 106,266 (207,979) (100,813)
Net loss........................... -- -- -- (204,904) (204,904)
---- ---- ------- -------- ---------
BALANCES AT FEBRUARY 18, 1997...... $900 -- 106,266 (412,883) (305,717)
==== ==== ======= ======== =========
</TABLE>

See accompanying notes to financial statements.

F-48
<PAGE> 133

COMPUTE INTENSIVE INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND PERIOD ENDED FEBRUARY 18, 1997

<TABLE>
<CAPTION>
PERIOD
ENDED
FEBRUARY 18,
1995 1996 1997
--------- --------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................................... $ 3,865 (195,074) (204,904)
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization...................... 46,174 133,280 15,954
Deferred income tax expense (benefit).............. 11,972 (11,428) --
Provision for bad debts............................ 35,015 135,593 5,580
Changes in operating assets and liabilities:
Increase in receivables.......................... (306,539) (186,462) (64,719)
Decrease (increase) in prepaid expenses and
other......................................... 4,463 (117,897) (33,368)
Increase in other assets......................... (7,678) (35,191) (2,251)
Increase in accounts payable..................... 306,005 372,637 78,036
Increase in accrued liabilities.................. 22,478 29,017 49,219
Increase in income tax receivable................ (17,064) (5,898) 15,510
Increase in deferred revenue..................... 34,358 9,952 (18,215)
--------- --------- ---------
Net cash provided (used) by operating
activities.................................. 133,049 128,529 (159,428)
--------- --------- ---------
Cash flows from investing activities -- Purchases of
equipment............................................. (131,193) (158,549) (119,999)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under revolving lines of credit............ 19,000 305,258 66,057
Repayments of revolving lines of credit............... (1,808) (126,336) (98,225)
Borrowings (payments) on note payable to related
party.............................................. (11,275) (19,563) 200,000
Principal payments on capital lease obligations....... (24,880) (105,346) (12,717)
Cash overdraft........................................ -- -- 79,984
--------- --------- ---------
Net cash provided (used) by financing
activities.................................. (18,963) 54,013 235,099
--------- --------- ---------
Increase (decrease) in cash................... (17,107) 23,993 (44,328)
Cash, beginning of period............................... 37,442 20,335 44,328
--------- --------- ---------
Cash, end of period..................................... $ 20,335 44,328 --
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes....................................... $ 10,800 -- $ --
========= ========= =========
Interest........................................... $ 21,571 54,175 $ 7,253
========= ========= =========
Noncash investing and financing activities -- Equipment
acquired through capital lease obligations............ $ 158,006 232,089 $ --
========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-49
<PAGE> 134

COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Compute Intensive, Inc. (the Company) was incorporated in the State of
California on December 31, 1993. The Company has three distinct areas of
business; providing regional internet access services to customers in California
and New Mexico, software and hardware consulting and sales, and software
development and implementation.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from consulting services is recognized when services have been
rendered. On fixed price contracts, revenue is recognized over the course of the
contract using the percentage-of-completion method. The Company provides for any
anticipated losses on such contracts in the period in which such losses are
first determinable.

Revenue from hardware and software sales is recognized upon shipment of the
respective products if the Company has no significant future obligations and
collectibility is probable.

Equipment

Equipment, including any assets under capital leases, is stated at cost,
less accumulated depreciation and amortization. Depreciation and amortization is
recorded using the straight-line method over the estimated useful lives of the
related assets on the lease term, which range from five to seven years. Costs
for normal repairs and maintenance are expensed as incurred.

Income Taxes

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1995 and 1996 approximate their
carrying values based on their terms and interest rates. The use of different
market assumptions and/or estimation methodologies may have a significant effect
on the estimated fair values.

F-50
<PAGE> 135
COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at lower of the carrying amount or
fair value less costs to sell. The adoption of SFAS 121 in 1996 did not have a
significant effect on the Company's financial position or results of operations.

Stock Based Compensation

In October 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, (SFAS No. 123), which establishes a fair value-based method of
accounting for stock-based compensation plans. Companies are encouraged to adopt
all provisions of SFAS No. 123 and are required to comply with the disclosure
requirements of SFAS No. 123, which was effective for fiscal years beginning
after December 15, 1995. The Company will continue to account for stock based
compensation under the provisions of APB Opinion No. 25 and will provide the pro
forma disclosures required by SFAS 123.

Reclassifications

Certain reclassifications have been made to the 1995 financial statements
to conform with the 1996 presentation.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Internet and computer equipment............................. $342,407 730,143
Furniture and office equipment.............................. 55,016 57,718
Leasehold improvements...................................... 1,892 2,092
-------- --------
399,315 789,953
Less accumulated depreciation and amortization.............. (54,327) (185,595)
-------- --------
$344,988 604,358
======== ========
</TABLE>

Equipment includes assets owned under capital leases with a net book value
of $173,607 and $315,303 at December 31, 1995 and 1996, respectively.

(3) DEBT

At December 31, 1995 and 1996, the Company had an $100,000 unsecured
revolving line of credit agreement with a bank, under which $28,193 and $32,167
was outstanding, respectively. Borrowings under the line bear interest at the
bank's prime lending rate plus 4.75% or 4.5%, based on an average daily balance,
payable monthly (12.75% at December 31, 1996) and are due in 1997.

F-51
<PAGE> 136
COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

On October 16, 1996, the Company entered into an additional $200,000
revolving line of credit agreement with a bank, under which $174,948 was
outstanding at December 31, 1996. Borrowings under the line bear interest at the
bank's prime lending rate plus 2%, based on an average daily balance, payable
monthly (10.25% at December 31, 1996) and are due in 1997.

Note payable to related party at December 31, 1995 bore interest at 7.5%
and was due in monthly installments through 2000. During 1996, the unpaid
balance of $65,154 was assumed by the Company's majority stockholder and was
forgiven and recorded as a capital contribution. The Company borrowed $200,000
from Verio Inc. (Verio) (See note 6), during the period ended February 18, 1997.
Such amount was non interest bearing and was repaid in connection with Verio's
investment in the Company.

(4) COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 1997.

Future minimum annual lease payments under capital and noncancelable
operating leases for each of the years ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ---------
<S> <C> <C>
1997........................................................ $ 166,477 200,490
1998........................................................ 123,363 269,220
1999........................................................ 50,815 281,820
2000........................................................ 24,352 307,020
2001........................................................ 11,823 313,320
--------- ---------
Total minimum payments.................................... 376,830 1,371,870
=========
Less amount representing interest........................... (85,819)
---------
Present value of net minimum lease payments............... 291,011
Less current portion........................................ (121,535)
---------
$ 169,476
=========
</TABLE>

Rent expense for the years ended December 31, 1995 and 1996 and the period
ended February 18, 1997 was $83,148, $128,130 and $27,800, respectively.

Concentration of Credit Risk

The Company provides unsecured credit to customers in the normal course of
business. Failure of the customers to pay could result in losses up to the
recorded receivable balances. The Company's largest customer represented
approximately 32% and 20% of total revenues for the years ended December 31,
1995 and 1996, respectively.

The Company conducts business in California and New Mexico. Customers who
operate in California represent at least 75% of the Company's customer base and
accounts receivable.

(5) EMPLOYEE BENEFIT PLAN

The Company has a Simplified Employee Pension Plan (the Plan) covering all
employees who meet certain eligibility requirements. The Company may make
discretionary contributions to the Plan on behalf of

F-52
<PAGE> 137
COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

employees that meet certain contribution eligibility requirements defined under
the terms of the Plan. The Company did not make any contributions to the Plan
during 1995 or 1996.

(6) STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK

On February 18, 1997, the Company issued 770,234 shares of newly authorized
redeemable, convertible preferred stock to Verio for cash consideration of
$4,899,998. The preferred shares are convertible into common shares on a 1.000
for 1.0017 basis and represent a 55% ownership interest in the Company upon
conversion. The preferred shares are redeemable at the option of the holder at
any time, vote on an as-converted basis, and include a liquidation preference
equal to the issuance price. In addition, Verio acquired an option to acquire a
100% common stock ownership in the Company which it may exercise at any time on
or after one year following the issuance date of the preferred shares. Upon the
initial public offering of Verio common stock or a significant strategic
investor in Verio, Verio is required to exercise the option.

The Company's 1995 Stock Option/Stock Issuance Plan (the Plan) was adopted
by the Board of Directors and approved by the shareholders of the Company in
March 1995. The Plan provides that salaried officers or key employees,
non-employee directors, and consultants who provide services to the Company may,
at the discretion of the plan administrator, be granted options to purchase
shares of common stock. 250,000 shares of the Company's Common Stock have been
authorized for issuance under the Plan, of which 131,000 and 29,500 nonqualified
options were granted in 1995 and 1996, respectively, with an exercise price of
$.05 and $.001 per share, respectively. All options were granted at fair value
at the date of grant, as determined by the Company's Board of Directors. There
were no options exercised and 18,176 were canceled during 1996.

Generally, options vest 25% on the first anniversary of the option grant
date and the balance vests thereafter in equal successive monthly installments
over the next 36 months of service. Option grants to nonemployee directors must
be approved by the Board.

During 1995 and 1996, the per share weighted-average fair values of stock
options granted was $.01 and $.65, respectively, on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for both years; expected dividend yield 0%, risk-free interest rate
of 6%, and expected life of three years. If the Company determined compensation
expense in 1995 and 1996 based on the fair value of the options at the grant
date under SFAS No. 123, net loss and net earnings would not have been
significantly different than the historical results of operations.

(7) INCOME TAXES

Income tax expense (benefit) consists of the following for the years ended
December 31:

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Current:
Federal.................................................. $(3,838) (6,698)
State.................................................... (826) 800
------- -------
(4,664) (5,898)
------- -------
Deferred:
Federal.................................................. 9,261 (8,717)
State.................................................... 2,711 (2,711)
------- -------
11,972 (11,428)
------- -------
$ 7,308 (17,326)
======= =======
</TABLE>

No tax benefit was recorded for the period ended February 18, 1997 due to
uncertainty as to realization of the net operating loss for the period.

F-53
<PAGE> 138
COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income taxes expense (benefit) for the years ended December 31 differs from
the amounts that would result from applying the federal statutory rate of 34% as
follows:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Expected tax expense (benefit).............................. $ 3,798 (72,216)
State income taxes, net of federal benefit.................. 335 (6,373)
Nondeductible expenses...................................... 3,175 7,142
Increase in valuation allowance for deferred tax assets..... -- 41,066
Other....................................................... -- 13,055
-------- --------
Actual income tax expense (benefit).................... $ 7,308 (17,326)
======== ========
</TABLE>

Temporary differences that give rise to the components of deferred tax
assets and liabilities as of December 31 are as follows:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ -- 50,231
Accounts receivable, due to allowance for doubtful
accounts for financial statement purposes only......... 15,169 37,983
Other..................................................... 1,193 --
-------- --------
Gross deferred tax asset.......................... 16,362 88,214
Valuation allowance......................................... -- (41,066)
-------- --------
Net deferred tax asset............................ 16,362 47,148
-------- --------
Deferred tax liability:
Equipment, due to differences in depreciation for
financial statement and tax purposes................... (23,696) (43,054)
Other..................................................... (4,094) (4,094)
-------- --------
Total deferred tax liability...................... (27,790) (47,148)
-------- --------
Net deferred tax liability........................ $ 11,428 --
======== ========
</TABLE>

As of December 31, 1996, the Company has a net operating loss carryforward
of approximately $132,000 for federal income tax purposes which will expire in
2011, if not utilized. A valuation allowance has been recorded for a portion of
the related deferred tax asset due to the uncertainty relating to the
realization of the entire net operating loss carryforward in the future.

F-54
<PAGE> 139

INDEPENDENT AUDITORS' REPORT

The Board of Directors
NorthWestNet, Inc.:

We have audited the accompanying balance sheet of NorthWestNet, Inc. as of
June 30, 1996, and the related statements of operations, stockholders' equity,
and cash flows for the six months ended June 30, 1996 and the eight months ended
February 28, 1997. We have also audited the accompanying balance sheet of
Northwest Academic Computing Consortium, Inc. (Predecessor Company) as of June
30, 1995 and the related statements of operations, fund balance and cash flows
for the year ended June 30, 1995 and the six months ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NorthWestNet, Inc. as of
June 30, 1996, and the results of its operations and its cash flows for the six
months ended June 30, 1996, and the eight months ended February 28, 1997 and the
financial position of Northwest Academic Computing Consortium, Inc. as of June
30, 1995 and the results of its operations and its cash flows for the year ended
June 30, 1995 and the six months ended December 31, 1995 in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

Seattle, Washington
January 31, 1998

F-55
<PAGE> 140

NORTHWESTNET, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY NORTHWESTNET, INC.
----------- ------------------
JUNE 30, JUNE 30,
1995 1996
----------- ------------------
<S> <C> <C>
Cash and cash equivalents................................... $ 563,952 277,284
Accounts receivable, net.................................... 842,753 1,243,981
Prepaids and other assets................................... 29,605 32,505
---------- ----------
Total current assets.............................. 1,436,310 1,553,770
Equipment, furniture and leasehold improvements, net........ 1,246,180 1,613,981
Deferred income taxes....................................... -- 46,000
---------- ----------
Total assets...................................... $2,682,490 3,213,751
========== ==========

LIABILITIES, STOCKHOLDERS' EQUITY AND FUND BALANCE

Accounts payable............................................ $ 108,297 165,606
Accrued liabilities......................................... 102,010 340,677
Deferred revenues and customer advances..................... 965,589 1,374,708
---------- ----------
Total current liabilities......................... 1,175,896 1,880,991
---------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 10,000,000
shares; issued and outstanding 4,000,000 shares and
4,000,100 shares at June 30, 1995 and June 30, 1996,
respectively........................................... -- 40,000
Additional paid-in capital................................ -- 1,193,402
Retained earnings......................................... -- 99,358
---------- ----------
Total stockholders' equity........................ -- 1,332,760
---------- ----------
Fund balance................................................ 1,506,594 --
---------- ----------
Total liabilities and stockholders' equity........ $2,682,490 3,213,751
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-56
<PAGE> 141

NORTHWESTNET, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PREDECESSOR COMPANY NORTHWESTNET, INC.
-------------------------- --------------------------
SIX MONTHS SIX MONTHS EIGHT MONTHS
YEAR ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, FEBRUARY 28,
1995 1995 1996 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenue:
Internet access and connection fees..... $2,218,354 1,197,690 1,655,211 2,572,917
Online information service fees......... 430,031 310,430 380,522 976,404
Grants.................................. 10,000 146,734 78,342 85,795
Other................................... 117,835 15,407 16,949 47,019
---------- --------- --------- ---------
Total revenue................... 2,776,220 1,670,261 2,131,024 3,682,135
Operating expenses:
Salaries and employee benefits.......... 1,145,224 770,215 886,958 2,728,589
Network operations and circuits......... 225,570 356,711 320,396 547,031
Professional fees....................... 254,982 126,789 39,307 61,047
Marketing and advertising............... 55,222 32,460 66,209 114,544
General and administrative.............. 624,314 309,961 364,418 673,541
Depreciation and amortization........... 507,693 248,770 311,261 509,122
---------- --------- --------- ---------
Total operating expenses........ 2,813,005 1,844,906 1,988,549 4,633,874
---------- --------- --------- ---------
Operating income (loss)................... (36,785) (174,645) 142,475 (951,739)
Interest income........................... 46,108 25,639 15,883 25,083
---------- --------- --------- ---------
Earnings (loss) before income
taxes......................... 9,323 (149,006) 158,358 (926,656)
---------- --------- --------- ---------
Income tax expense (benefit).............. -- -- 59,000 (135,000)
---------- --------- --------- ---------
Net earnings (loss)............. $ 9,323 (149,006) 99,358 (791,656)
========== ========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-57
<PAGE> 142

NORTHWESTNET, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY AND FUND BALANCE

<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
FUND COMMON PAID-IN (ACCUMULATED STOCKHOLDERS'
BALANCE STOCK CAPITAL DEFICIT) EQUITY
----------- ------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JUNE 30, 1994............... $ 1,497,271 -- -- -- --
Net earnings............................ 9,323 -- -- -- --
----------- ------ --------- -------- ---------
BALANCES AT JUNE 30, 1995............... 1,506,594 -- -- -- --
Net loss for the six months ended
December 31, 1995..................... (149,006) -- -- -- --
Distribution to stockholder............. (124,186) -- -- -- --
----------- ------ --------- -------- ---------
BALANCES AT DECEMBER 31, 1995........... 1,233,402 -- -- -- --
Issuance of common stock to effect
corporate reorganization.............. (1,233,402) 40,000 1,193,402 -- 1,233,402
Net earnings for the six months ended
June 30, 1996......................... -- -- -- 99,358 99,358
----------- ------ --------- -------- ---------
BALANCES AT JUNE 30, 1996............... -- 40,000 1,193,402 99,358 1,332,760
Exercise of stock options............... -- 1 86 -- 87
Contingent stock compensation expense... -- -- 451,696 -- 451,696
Net loss for the eight months ended
February 28, 1997..................... -- -- -- (791,656) (791,656)
----------- ------ --------- -------- ---------
BALANCES AT FEBRUARY 28, 1997........... $ -- 40,001 1,645,184 (692,298) 992,887
=========== ====== ========= ======== =========
</TABLE>

See accompanying notes to financial statements.

F-58
<PAGE> 143

NORTHWESTNET, INC.

STATEMENTS OF CASH FLOWS
JUNE 30, 1995 AND 1996 AND DECEMBER 31, 1996

<TABLE>
<CAPTION>
PREDECESSOR COMPANY NORTHWESTNET, INC.
------------------------- -------------------------
SIX MONTHS SIX MONTHS EIGHT MONTHS
YEAR ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, FEBRUARY 28,
1995 1995 1996 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................... $ 9,323 (149,006) 99,358 (791,656)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization...... 507,693 248,770 311,261 509,122
Contingent stock option
compensation..................... -- -- -- 451,696
Loss on disposition of equipment... -- -- -- 10,526
Deferred tax benefit............... -- -- (46,000) (74,000)
Increases and decreases in:
Accounts receivable.............. (272,151) 418,635 (819,863) 624,707
Prepaids and other assets........ (18,841) (28,347) 25,447 (1,396,570)
Accounts payable................. (73,064) (48,302) (37,056) 304,296
Accrued liabilities.............. (9,079) 110,275 128,392 1,069,605
Deferred revenue................. 331,904 76,759 332,360 (599,775)
--------- ---------- --------- -----------
Net cash provided by (used in)
operating activities........ 475,785 628,784 (6,101) 107,951
--------- ---------- --------- -----------
Cash flows from investing activities:
Purchase of equipment, furniture and
leasehold improvements............. (760,922) (260,850) (524,315) (1,047,283)
Disposition of equipment.............. -- -- -- 22,678
--------- ---------- --------- -----------
Net cash used in investing
activities.................. (760,922) (260,850) (524,315) (1,024,605)
--------- ---------- --------- -----------
Cash flows from financing activities:
Advances from Verio, Inc. ............ -- -- -- 2,560,294
Distribution to stockholder........... -- -- (124,186) --
Exercise of stock options............. -- -- -- 87
--------- ---------- --------- -----------
Net cash provided by (used in)
financing activities........ -- -- (124,186) 2,560,381
--------- ---------- --------- -----------
Increase (decrease) in cash
and cash equivalents........ (285,137) 367,934 (654,602) 1,643,727
Cash and cash equivalents at beginning
of period............................. 849,089 563,952 931,886 277,284
--------- ---------- --------- -----------
Cash and cash equivalents at end of
period................................ $ 563,952 931,886 277,284 1,921,011
========= ========== ========= ===========
Supplemental disclosures of cash flow
information -- cash paid during the
period for income taxes............... $ 900 -- 82,000 118,000
========= ========== ========= ===========
Supplemental schedule of noncash
financing and investing activities:
Accounts payable related to purchase
of equipment....................... $ 15,140 13,523 129,144 --
========= ========== ========= ===========
Issuance of common stock to effect
corporate reorganization........... $ -- 1,233,402 -- --
========= ========== ========= ===========
</TABLE>

See accompanying notes to financial statements.

F-59
<PAGE> 144

NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996 AND FEBRUARY 28, 1997

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of Business

NorthWestNet, Inc. (NorthWestNet), a for-profit corporation incorporated in
the state of Oregon, is a subsidiary of Northwest Academic Computing Consortium,
Inc. (NWACC). NorthWestNet provides Internet access and related on-line
information services to businesses, educational institutions and other
organizations located principally in the Northwest.

(b) Corporate Reorganization

NWACC, a nonprofit corporation organized to promote research, education and
economic development in the Northwest, had been providing Internet access to
businesses and organizations in the Northwest since 1991.

On January 1, 1996, NWACC completed a transaction that included the
creation of NorthWestNet. The transaction consisted of the transfer of
substantially all of NWACC's operating assets and liabilities to NorthWestNet in
exchange for 4,000,000 shares of common stock, which represented all of the
outstanding common stock of NorthWestNet. This transaction represented a
tax-free transfer pursuant to the Internal Revenue Code (IRC) section 351. In
connection with the transaction, all NWACC employees became NorthWestNet
employees.

NWACC's relationship to NorthWestNet, is now that of a stockholder,
currently the majority stockholder. NWACC intends to maintain its tax-exempt
status under IRC section 501(c)(3); however, its activities are independent of
NorthWestNet and its employees.

There was no change in the carrying amounts of assets and liabilities
transferred from NWACC to NorthWestNet effective January 1, 1996. The
accompanying financial statements include the accounts of NWACC through December
31, 1995, presented as Predecessor Company.

The carrying amounts of net assets transferred from NWACC to NorthWestNet
effective January 1, 1996 are summarized as follows:

<TABLE>
<S> <C>
Cash and cash equivalents................................... $ 807,700
Accounts receivable, net.................................... 424,118
Prepaids and other assets................................... 57,952
Equipment, furniture and leasehold improvements, net........ 1,271,783
----------
Total assets...................................... 2,561,553
----------
Accounts payable............................................ 73,518
Accrued expenses............................................ 212,285
Deferred revenue............................................ 1,042,348
----------
Total liabilities................................. 1,328,151
----------
Net assets........................................ $1,233,402
==========
</TABLE>

(d) Cash Equivalents

All short-term investments with original maturities of three months or less
at date of purchase are considered to be cash equivalents.

F-60
<PAGE> 145
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(e) Concentrations of Credit Risk

Financial instruments that potentially subject NorthWestNet to
concentrations of credit risk consist principally of cash equivalents and
accounts receivable. NorthWestNet's cash equivalents represent investments in
money market funds which are readily convertible to cash. Accounts receivable
are principally from NorthWestNet's customers located throughout the Northwest.

(f) Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. The adoption of SFAS 121 effective July
1, 1996 did not have a significant effect on the NorthWestNet's financial
position or results of operations.

(g) Revenue Recognition

Revenues consist primarily of Internet access fees, connection fees and
on-line information service fees. Internet access fees consist of fixed monthly
amounts and are recognized ratably over the terms of the service contracts.
Connection fees, representing customer site equipment and installation charges,
are recognized upon installation of a customer's Internet connectivity. Fixed
on-line information service fees are recognized ratably over the terms of the
service contracts. Volume-based on-line information service fees are recognized
as such services are delivered. Payments received in advance of providing
services are deferred until the period such services are provided.

(h) Advertising Costs

Advertising costs are expensed as incurred.

(i) Depreciation and Amortization

Equipment, furniture and leasehold improvements are stated at cost.
Depreciation and amortization are provided on the straight-line method over the
estimated useful lives of the assets, or the lease term, if shorter. The
estimated useful lives of the assets are as follows:

<TABLE>
<CAPTION>
<S> <C>
Network equipment........................................... 3 - 4 years
Computer and office equipment............................... 2 - 3 years
Furniture and fixtures...................................... 7 years
Leasehold improvements...................................... 5 years
</TABLE>

(j) Use of Estimates

NorthWestNet management has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, revenues and expenses, and
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

F-61
<PAGE> 146
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(k) Income Taxes

NorthWestNet accounts for income taxes using the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts and tax bases of existing assets and liabilities.

NWACC was exempt from the payment of Federal income taxes under IRC section
501(c)(3). Therefore, no provision for income taxes was required through
December 31, 1995.

(l) Stock-Based Compensation

Prior to July 1, 1996, NorthWestNet accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
July 1, 1996, NorthWestNet adopted Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of APB Opinion No. 25 for
transactions with employees and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied to these transactions. NorthWestNet has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.

(2) EQUIPMENT, FURNITURE AND LEASEHOLD IMPROVEMENTS

Equipment, furniture and leasehold improvements and related accumulated
depreciation and amortization consist of the following:

<TABLE>
<CAPTION>
JUNE 30
------------------------
1995 1996
----------- ---------
<S> <C> <C>
Network equipment........................................... $ 1,645,558 1,878,787
Computer and office equipment............................... 603,051 586,653
Furniture and fixtures...................................... 102,010 77,011
Leasehold improvements...................................... 50,301 50,301
----------- ---------
Total cost........................................ 2,400,920 2,592,752
Less accumulated depreciation and amortization.............. (1,154,740) (978,771)
----------- ---------
$ 1,246,180 1,613,981
=========== =========
</TABLE>

(3) ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
JUNE 30
------------------
1995 1996
-------- -------
<S> <C> <C>
Accrued compensation and benefits........................... $102,010 153,447
Network operations and circuits............................. -- 129,080
Other....................................................... -- 58,150
-------- -------
$102,010 340,677
======== =======
</TABLE>

F-62
<PAGE> 147
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) BORROWING AGREEMENT

NorthWestNet had a borrowing agreement with a commercial bank, which
expired in June 1997, that provided for a $400,000 operating line of credit
(Line of Credit) and a $600,000 equipment term loan (Term Loan). Borrowings
under the Line of Credit were limited to 75% of eligible accounts receivable and
bear interest at the bank's prime rate plus 1.75%. The Term Loan bore interest
at the bank's prime rate plus 2%. Borrowings under this agreement were secured
by substantially all of NorthWestNet's assets. There were no borrowings under
the Line of Credit or Term Loan as of June 30, 1996.

(5) INCOME TAXES

The components of NorthWestNet's income tax expense (benefit) for the six
months ended June 30, 1996 and the eight months ended February 28, 1997 are as
follows:

<TABLE>
<CAPTION>
SIX EIGHT
MONTHS MONTHS
ENDED ENDED
JUNE 30, FEBRUARY 28,
1996 1997
-------- ------------
<S> <C> <C>
Current:
Federal..................................................... $100,000 (66,000)
State....................................................... 5,000 5,000
Deferred -- Federal......................................... (46,000) (74,000)
-------- ---------
$ 59,000 (135,000)
======== =========
</TABLE>

Deferred income taxes result from temporary differences in the recognition
of income and expense between financial statement and income tax reporting.
Temporary differences at June 30, 1996 are primarily attributable to
depreciation and amortization of equipment, furniture and leasehold
improvements. The tax effects of these temporary differences result in deferred
tax assets which are classified as noncurrent on the accompanying June 30, 1996
balance sheet. Actual tax expense for the six months ended June 30, 1996
approximates the amount calculated using the Federal statutory rate of 34%, plus
the provision for state taxes. The tax benefit for the eight months ended
February 28, 1997 differs from the expected benefit, calculated using the
Federal statutory rate of 34%, primarily due to non-deductible stock option
compensation.

(6) STOCKHOLDERS' EQUITY -- EMPLOYEE STOCK OPTION PLAN

NorthWestNet adopted a stock option plan (Plan) in January 1996 to
compensate its employees for future services and has reserved 1.5 million shares
of common stock for option grants under the Plan. Of the reserved shares,
500,000 are for options which are exercisable, upon reaching defined corporate
objectives (Contingent Options), at an exercise price of $.875 per share. The
date the defined corporate objectives are met, any excess of fair market value
per share over the exercise price per share of the outstanding options would be
charged to salaries and benefits expense in the statement of operations with a
corresponding increase in stockholder's equity. As of December 31, 1996, 370,000
contingent shares were outstanding. The remaining 1 million reserved shares are
for options which generally vest, based on continued employment, over periods
ranging from three to four years in equal monthly increments beginning the month
after the grant (Noncontingent Options). All options expire ten years from the
date of grant and are exercisable at the fair market value of the common stock
at the grant date.

F-63
<PAGE> 148
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A summary of stock option activity under the Plan follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------------
WEIGHTED-
SHARES AVERAGE
AVAILABLE NON- EXERCISE
FOR GRANT CONTINGENT CONTINGENT PRICE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Authorization of Plan.......................... 1,500,000 -- -- $ --
Options granted................................ (988,000) 583,000 405,000 0.875
Options relinquished........................... 76,771 (41,771) (35,000) 0.875
Balances at June 30, 1996...................... 588,771 541,229 370,000 0.875
Options granted................................ (54,000) 54,000 -- 1.956
Options exercised.............................. -- (100) -- 0.875
Options relinquished........................... 3,229 (3,229) -- 0.875
Options surrendered for cash................... -- (192,265) -- 0.875
Balances at February 28, 1997.................. 538,000 399,635 370,000 $0.951
</TABLE>

NorthWestNet applies APB Opinion No. 25 in accounting for its Plans, and,
because the Company grants options at fair value, as determined by the Company's
Board of Directors, no compensation cost has been recognized for its employee
stock options in the financial statements. Had NorthWestNet determined
compensation cost of employee stock options based on the fair value at the grant
date for its stock options under SFAS No. 123, NorthWestNet's net earnings would
have been reported as the pro forma amounts indicated below:

<TABLE>
<CAPTION>
SIX EIGHT
MONTHS MONTHS
ENDED ENDED
JUNE 30, FEBRUARY 28,
1996 1997
-------- ------------
<S> <C> <C>
Net earnings (loss):
As reported............................................... $99,359 (791,656)
Pro forma................................................. 26,469 (892,205)
</TABLE>

The per share weighted-average fair value of stock options granted during
the six months ended June 30, 1996 and the eight months ended February 28, 1997
was $0.28 and $0.70 respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions: six months
ended June 30, 1996 -- expected dividend yield 0%, risk-free interest rate of
5.51% and an expected life of 7 years; eight months ended February 28,
1997 -- expected dividend yield 0%, risk-free interest rate of 6.55%, and an
expected life of 7 years.

F-64
<PAGE> 149
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
under the Plan at June 30, 1996 and February 28, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------
WEIGHTED-AVERAGE
NUMBER REMAINING
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE
--------------- ----------- ---------------------
<S> <C> <C>
June 30, 1996:
$0.875............................................... 911,229 9.5 years
-------
February 28, 1997:
$0.875............................................... 715,635
1.375............................................... 6,000
2.000............................................... 34,500
$2.10................................................ 13,500
-------
$0.875-2.000......................................... 769,635 9.5 years
-------
</TABLE>

All options became vested and exercisable upon completion of the ownership
change described in note 10.

(7) LEASES

NorthWestNet leases its office and certain network operations facilities
under operating leases which expire in 2002. NorthWestNet subleases a portion of
its office space as sublessor under operating leases which expire in 1996 and
1997. Rental expense, net of sublease income, is included in general and
administrative expenses and is comprised of the following:

<TABLE>
<CAPTION>
MINIMUM SUBLEASE
RENTALS INCOME TOTAL
-------- -------- -------
<S> <C> <C> <C>
Year ended June 30, 1995................................ $142,318 34,665 107,653
Six months ended December 31, 1995...................... 88,960 28,623 60,337
Six months ended June 30, 1996.......................... 88,795 24,423 64,372
Eight months ended February 28, 1997.................... 119,696 25,455 94,241
</TABLE>

NorthWestNet leases circuit lines from various vendors under month-to-month
operating leases. Rent expense on these circuit line leases amounted to
$225,570, $316,712, $270,395, and $413,697 for fiscal year ended 1995, the six
months ended December 31, 1995 and June 30, 1996, and the eight months ended
February 28, 1997, respectively, and is included in network operations and
circuits in the statements of operations.

In November 1996, NorthWestNet amended its existing operating lease for its
office facilities. The amendment increased the space leased by NorthWestNet by
approximately 9,000 square feet, beginning in February 1997, and extended the
lease term of existing space to February 2002. Additionally, in December 1996,
NorthWestNet entered into an operating lease for network operations facilities.
The initial term of the lease is five years, beginning in March 1997, with two
three-year extensions available at NorthWestNet's option.

(8) DEFINED CONTRIBUTION PLAN

NorthWestNet and NWACC both sponsor defined contribution plans. For the
NorthWestNet plan, employees who have worked a minimum of three months and
attained age 20 are eligible to participate and employee contributions are
matched by NorthWestNet up to certain limits. Sponsor contributions to the plans

F-65
<PAGE> 150
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

totaled $35,765, $17,589, $26,781, and $68,855 for the year ended June 30, 1995
and the six months ended December 31, 1995 and June 30, 1996, and the eight
months ended February 28, 1997, respectively.

(9) BUSINESS CONCENTRATION

One customer accounted for approximately 25%, 23%, 27%, and 23% of revenues
for the year ended June 30, 1995, the six months ended December 31, 1995 and
June 30, 1996, and the eight months ended February 28, 1997, respectively. Such
customer had account receivable balance of $227,662 at June 30, 1996.

Additionally, another customer accounted for approximately 14% of revenues
for the eight months ended February 28, 1997.

(10) OWNERSHIP CHANGE

On January 22, 1997, NorthWestNet, NWACC and Verio Inc. (Verio) executed a
Stock Purchase Agreement (Agreement) pursuant to which Verio acquired all of the
common stock of NorthWestNet owned by NWACC. Under the Agreement, Verio also
agreed to contribute at least $3.4 million to NorthWestNet, of which
approximately $2.3 million was funded in February 1997. The transaction closed
on February 28, 1997.

In connection with the sale to Verio, 370,000 contingent options became
exercisable and $451,696 of compensation expense was recorded by NorthWestNet in
February 1997 which was funded by Verio in addition to the $3.4 million. (See
note 6). In addition, the Plan was amended to provide for Verio's right to
acquire all of the securities outstanding under that plan.

F-66
<PAGE> 151

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
VERIO INC.:

We have audited the accompanying balance sheet of Aimnet Corporation
(wholly-owned by Aimquest Corporation) as of March 31, 1997 and the related
statements of operations, stockholder's equity, and cash flows for the year
ended March 31, 1997 and the period ended May 19, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aimnet Corporation as of
March 31, 1997, and the results of its operations and its cash flows for the
year ended March 31, 1997 and the period ended May 19, 1997 in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-67
<PAGE> 152

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

BALANCE SHEET
MARCH 31, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash...................................................... $ 201,074
Trade receivables, net of allowance for doubtful accounts
of $52,770............................................. 460,611
Inventory................................................. 39,344
Prepaid expenses and other................................ 44,867
-----------
Total current assets.............................. 745,896
Equipment, net (note 2)..................................... 880,224
-----------
Total assets...................................... $ 1,626,120
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable.......................................... $ 141,680
Accrued expenses.......................................... 31,260
Deferred revenue.......................................... 19,251
Due to parent (note 3).................................... 514,122
Current portion of obligations under capital lease
obligations (note 4)................................... 8,153
-----------
Total current liabilities......................... 714,466
Capital lease obligations, less current portion (note 4).... 17,409
-----------
Total liabilities................................. 731,875
Stockholder's equity (note 6):
Common stock, no par value, 1,000 shares authorized, 100
shares issued and outstanding.......................... 2,307,640
Accumulated deficit....................................... (1,413,395)
-----------
Total stockholder's equity........................ 894,245
Commitments (note 4)
-----------
Total liabilities and stockholder's equity........ $ 1,626,120
===========
</TABLE>

See accompanying notes to financial statements.

F-68
<PAGE> 153

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1997 AND PERIOD ENDED MAY 19, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
MAY 19,
1997 1997
----------- ------------
<S> <C> <C>
Revenue:
Internet services......................................... $ 2,649,839 303,600
Other (note 3)............................................ 215,279 87,788
----------- ---------
Total revenue..................................... 2,865,118 391,388
----------- ---------
Operating expenses:
Internet services and other operating costs............... 1,225,329 124,275
Selling, general and administrative....................... 2,098,958 437,292
Provision for bad debts................................... 425,295 --
Depreciation.............................................. 528,931 94,801
----------- ---------
Total operating expenses.......................... 4,278,513 656,368
----------- ---------
Net loss.......................................... $(1,413,395) (264,980)
=========== =========
</TABLE>

See accompanying notes to financial statements.

F-69
<PAGE> 154

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

STATEMENT OF STOCKHOLDER'S EQUITY
YEAR ENDED MARCH 31, 1997 AND PERIOD ENDED MAY 19, 1997

<TABLE>
<CAPTION>
INTERCOMPANY
COMMON ACCOUNT ACCUMULATED
STOCK WITH PARENT DEFICIT TOTAL
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Balance as of March 31, 1996................ $ -- 1,592,490 -- 1,592,490
Incorporation as wholly owned subsidiary and
additional capital contribution by
parent.................................... 2,307,640 (1,592,490) -- 715,150
Net loss.................................... -- -- (1,413,395) (1,413,395)
---------- ---------- ---------- ----------
Balances as of March 31, 1997............... $2,307,640 -- (1,413,395) 894,245
Net loss.................................... -- -- (264,980) (264,980)
---------- ---------- ---------- ----------
Balances as of May 19, 1997................. $2,307,640 -- (1,678,375) 629,265
========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-70
<PAGE> 155

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1997 AND PERIOD ENDED MAY 19, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
1997 MAY 19, 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,413,395) (264,980)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation........................................... 528,931 94,801
Provision for bad debts................................ 425,295 --
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables............. (375,042) 40,670
Decrease (increase) in inventory..................... (5,423) 13,107
Decrease in prepaid expenses and other............... 7,047 4,416
Decrease in accounts payable......................... (44,692) (7,459)
Increase (decrease) in accrued expenses.............. (15,248) 18,522
Increase (decrease) in deferred revenue.............. 10,968 (5,171)
----------- --------
Net cash used by operating activities............. (881,559) (106,094)
----------- --------
Cash flows from investing activities -- purchases of
equipment................................................. (320,809) (54,458)
----------- --------
Cash flows from financing activities:
Cash capital contribution by parent....................... 715,150 --
Increase in due to related party.......................... 514,122 55,264
Principal payments on capital lease obligations........... (3,255) (1,548)
----------- --------
Net cash provided by financing activities......... 1,226,017 53,716
----------- --------
Increase (decrease) in cash....................... 23,649 (106,836)
Cash, beginning of period................................... 177,425 201,074
----------- --------
Cash, end of period......................................... $201,074 94,238
=========== ========
Noncash investing and financing activities --
Equipment acquired through capital lease obligations...... $28,817 --
=========== ========
</TABLE>

See accompanying notes to financial statements.

F-71
<PAGE> 156

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Aimnet Corporation (the Company) was incorporated in the State of
California on September 26, 1996 as a wholly owned subsidiary of Aimquest
Corporation (Aimquest). Prior to incorporation, the Company's assets,
liabilities, and operations were included in the financial statements of
Aimquest. The Company provides regional internet access services, and hardware
and software sales to customers in California. The accompanying financial
statements include the operations of the Company assuming that the Company had
been operated separately as of April 1, 1996 and thereafter.

Effective May 19, 1997, Verio Inc. acquired a 55% ownership interest in the
Company (see note 6).

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance. Revenue
from hardware and software sales is recognized upon shipment of the respective
products.

Inventory

Inventory, consisting of systems hardware and software and maintenance
parts and supplies is recorded at the lower of cost (first-in, first-out) or
market.

Equipment

Equipment, including assets held under capital leases, is stated at cost,
less accumulated depreciation and amortization. Depreciation and amortization is
recorded using the straight-line method over the shorter of the estimated useful
lives of the related assets or the lease term, which are two or three years.
Costs for normal repairs and maintenance are expensed as incurred.

Income Taxes

The Company is included in the tax returns of Aimquest. Income taxes are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, (SFAS 109). Under SFAS 109,
deferred income taxes are recognized for the future tax consequences of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.

No tax benefit has been allocated to the Company due to the Company's net
loss and the uncertainty regarding the ultimate utilization of such loss in the
consolidated income tax returns of Aimquest. A valuation allowance has been
recorded for the entire balance of the deferred tax asset related to the
Company's net loss.

F-72
<PAGE> 157
AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of March 31, 1997 approximate their carrying values
based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

Customers who operate in California represent substantially all of the
Company's customer base and accounts receivable. However, no single customer
comprised more than 5% of accounts receivable or total revenue as of or for the
year ended March 31, 1997 or the period ended May 19, 1997.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell. The adoption of SFAS 121 effective
April 1, 1996 did not have a significant effect on the Company's financial
position or results of operations.

(2) EQUIPMENT

Equipment consisted of the following at March 31, 1997:

<TABLE>
<S> <C>
Internet and computer equipment.......................... $1,712,000
Furniture................................................ 29,144
----------
1,741,144
Less accumulated depreciation............................ (860,920)
----------
$ 880,224
==========
</TABLE>

Equipment includes assets owned under capital leases with a net book value
of $25,562 at March 31, 1997.

(3) RELATED PARTY TRANSACTIONS

The Company provides internet services to Aimquest which totaled $5,924 for
the year ended March 31, 1997 and $20,386 for the period ended May 19, 1997.

Amounts due to parent represent cash transfers from Aimquest which are
noninterest bearing.

F-73
<PAGE> 158
AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2001. Future minimum annual lease
payments under capital and noncancelable operating leases for each of the years
ending March 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ----------
<S> <C> <C>
1998.................................................... $12,396 327,146
1999.................................................... 12,396 283,916
2000.................................................... 8,780 279,810
2001.................................................... -- 109,488
Less future minimum payments to be received under
noncancelable subleases............................... -- (31,059)
------- -------
Total minimum payments................................ 33,572 969,301
=======
Less amount representing interest....................... (8,010)
-------
Present value of net minimum lease payments........... 25,562
Less current portion.................................... (8,153)
-------
$17,409
=======
</TABLE>

Rent expense for the year ended March 31, 1997 and the period ended May 19,
1997 totaled $314,890 and $38,203, respectively.

(5) EMPLOYEE BENEFIT PLAN

Aimquest has a 401(k) (the Plan) covering all employees of the Company who
meet certain eligibility requirements. Employer contributions are not required
and the Company did not make any contributions to the Plan during the year ended
March 31, 1997 or the period ended May 19, 1997.

(6) SUBSEQUENT EVENT

Effective May 19, 1997, Verio Inc. (Verio) acquired 77 shares of the
Company's series A preferred stock for cash consideration of approximately
$4,171,000. The preferred shares represent a 55% ownership interest in the
Company, on a fully diluted basis, and are convertible into common shares on a
one for one basis. In addition, the preferred shares have a liquidation
preference equal to the issuance price. Verio also acquired an option to acquire
a 100% ownership in the Company in the future upon the occurrence of certain
events, including an initial public offering of Verio common stock.

F-74
<PAGE> 159

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of West Coast Online, Inc.
as of September 30, 1997 and the related statements of operations and
accumulated deficit, and cash flows for the nine months then ended. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of West Coast Online, Inc. as
of September 30, 1997, and the results of its operations and its cash flows for
the nine months then ended in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Denver, Colorado
November 21, 1997

F-75
<PAGE> 160

WEST COAST ONLINE, INC.

BALANCE SHEET
SEPTEMBER 30, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash...................................................... $ 25,907
Trade receivables, net of allowance for doubtful accounts
of $3,588.............................................. 96,659
Prepaid expenses and other................................ 4,933
---------
Total current assets.............................. 127,499
Equipment, net (note 2)..................................... 524,474
Other assets................................................ 7,148
---------
Total assets...................................... $ 659,121
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable:
Trade.................................................. $ 41,270
Related party (note 5)................................. 27,009
Accrued liabilities....................................... 105,487
Deferred revenue.......................................... 99,679
Current portion of capital lease obligations (note 3)..... 57,874
---------
Total current liabilities......................... 331,319
Capital lease obligations, less current portion (note 3).... 69,994
Total liabilities................................. 401,313
---------
Redeemable preferred stock, 2,000,000 shares authorized
(note 4):
Series A, 60,000 shares issued and outstanding............ 225,000
Series B, 50,710 shares issued and outstanding............ 250,000
---------
Total redeemable preferred stock.................. 475,000
---------
Stockholders' deficit (note 4):
Common stock, no par value, 1,000,000 shares authorized,
246,000 shares issued and outstanding.................. 79,775
Accumulated deficit....................................... (296,967)
---------
Total stockholders' deficit....................... (217,192)
Commitments (note 3)
Total liabilities and stockholders' deficit....... $ 659,121
=========
</TABLE>

See accompanying notes to financial statements.

F-76
<PAGE> 161

WEST COAST ONLINE, INC.

STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
<S> <C>
Revenue:
Internet services......................................... $1,354,911
Computer hardware sales................................... 171,818
Other..................................................... 126,394
----------
Total revenue..................................... 1,653,123
----------
Operating expenses:
Internet services operating costs......................... 641,106
Cost of hardware sales.................................... 136,978
Selling, general and administrative....................... 913,743
Depreciation.............................................. 106,185
----------
Total operating expenses.......................... 1,798,012
----------
Loss from operations.............................. (144,889)
Interest expense............................................ (22,772)
----------
Net loss.......................................... (167,661)
Accumulated deficit at beginning of period.................. (129,306)
----------
Accumulated deficit at end of period........................ $ (296,967)
==========
</TABLE>

See accompanying notes to financial statements.

F-77
<PAGE> 162

WEST COAST ONLINE, INC.

STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(167,661)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation........................................... 106,185
Provision for bad debts................................ 3,588
Changes in operating assets and liabilities:
Receivables.......................................... (39,945)
Prepaid expenses and other current assets............ 5,197
Other assets......................................... (7,148)
Accounts payable and accrued liabilities............. 12,802
Deferred revenue..................................... 35,944
---------
Net cash used by operating activities............. (51,038)
---------
Cash flows from investing activities -- purchase of
equipment................................................. (154,301)
---------
Cash flows from financing activities:
Proceeds from issuance of redeemable preferred stock...... 250,000
Principal payments under capital lease obligations........ (36,541)
---------
Net cash provided by financing activities......... 213,459
---------
Net increase in cash.............................. 8,120
Cash at beginning of period................................. 17,787
---------
Cash at end of period....................................... $ 25,907
=========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 22,772
=========
Noncash investing and finance activities -- equipment
acquired through capital lease obligations................ $ 67,064
=========
</TABLE>

See accompanying notes to financial statements.

F-78
<PAGE> 163

WEST COAST ONLINE, INC.

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

West Coast Online, Inc. (the Company) was incorporated in the State of
California on January 30, 1996. The Company provides internet access services
and computer hardware sales to customers primarily in California.

As of September 30, 1997, Verio Inc. (Verio) acquired all of the
outstanding common stock of the Company, resulting in 100% ownership.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
recorded using the straight-line method over the shorter of the estimated useful
lives of the related assets or the lease term, which range from three to five
years. Costs of normal repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from hardware sales is recognized upon shipment of the respective
products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
Under SFAS 109, deferred income taxes are recognized for the future tax
consequences of differences between the tax bases of assets and liabilities and
their financial reporting amounts at September 30, 1997 based on enacted tax
laws and statutory rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company has a net operating loss carryforward of approximately $181,000
which expires in 2012. No tax benefit has been recorded by the Company for the
nine months ended September 30, 1997 due to the Company's net loss and the
uncertainty regarding the ultimate utilization of such loss carryforward. A
valuation allowance has been

F-79
<PAGE> 164
WEST COAST ONLINE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

recorded for the entire balance of the deferred tax asset related to the
carryforward. Other temporary differences between financial statement and income
tax bases of assets and liabilities are not significant.

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1997 approximate their carrying values
based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

Customers who operate in California represent substantially all of the
Company's customer base. However, no single customer comprised more than 10% of
accounts receivable or total revenue for the nine months ended September 30,
1997.

(2) EQUIPMENT

Equipment consisted of the following at September 30, 1997:

<TABLE>
<S> <C>
Internet and computer equipment............................. $ 733,411
Furniture and office equipment.............................. 21,312
---------
754,723
Less accumulated depreciation and amortization.............. (230,249)
---------
$ 524,474
=========
</TABLE>

Equipment includes assets held under capital leases with a net book value
of $134,362 at September 30, 1997.

(3) COMMITMENTS

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable leases expiring
at various dates through 2001. Future minimum annual lease payments under
noncancelable operating leases for each of the years ending September 30 are as
follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998................................................... $ 70,104 $ 72,160
1999................................................... 63,728 36,342
2000................................................... 18,974 10,743
2001................................................... -- 7,162
-------- --------
Total minimum payments............................... $152,806 $126,407
========
Less amount representing interest...................... (24,938)
--------
Present value of net minimum lease payments.......... 127,868
Less current portion................................... (57,874)
--------
$ 69,994
========
</TABLE>

Rent expense for the nine months ended September 30, 1997 totaled $64,820.

F-80
<PAGE> 165
WEST COAST ONLINE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) REDEEMABLE PREFERRED STOCK

The Company issued 60,000 Series A and 50,710 Series B shares of
redeemable, convertible preferred stock in 1996 and 1997, respectively, to
Verio. The preferred shares were convertible into common shares on a one for one
basis and were mandatorily redeemable in 2000. On September 30, 1997, in
connection with the Verio Acquisition, as described in Note 1, Verio converted
these preferred shares to common stock.

(5) TRANSACTIONS WITH RELATED PARTY

During the nine months ended September 30, 1997, the Company received
certain network services from Verio Inc. The entire cost of these services
remain in Accounts Payable-Related Party at September 30, 1997 and is included
in internet services and network operating costs.

F-81
<PAGE> 166

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of Clark Internet Services,
Inc. as of September 30, 1997, and the related statements of operations and
retained earnings, and cash flows for the year ended September 30, 1997 and the
period ended October 17, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Clark Internet Services,
Inc. as of September 30, 1997, and the results of its operations and its cash
flows for the year ended September 30, 1997 and the period ended October 17,
1997 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-82
<PAGE> 167

CLARK INTERNET SERVICES, INC.

BALANCE SHEET
SEPTEMBER 30, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents................................. $ 54,293
Trade accounts receivable, net of allowance for doubtful
accounts of $28,154.................................... 438,186
Related party receivable (note 5)......................... 42,104
Prepaid expenses and other................................ 122,894
----------
Total current assets.............................. 657,477
Equipment, net (note 2)..................................... 650,001
Other assets, net........................................... 112,475
----------
Total assets...................................... $1,419,953
==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 261,194
Accrued liabilities....................................... 91,474
Salaries and commissions payable.......................... 98,220
Deferred revenue and customer advances.................... 514,555
Current portion of long-term debt (note 3)................ 175,800
----------
Total current liabilities......................... 1,141,243
Long-term debt, net of current portion (note 3)............. 264,950
Total liabilities................................. 1,406,193
Stockholders' equity:
Common stock, no par value, 1,000,000 shares authorized,
860,000 shares issued and outstanding.................. 4,000
Retained earnings......................................... 9,760
----------
Total stockholders' equity........................ 13,760
----------
Commitments (note 4)
Total liabilities and stockholders' equity........ $1,419,953
==========
</TABLE>

See accompanying notes to financial statements.

F-83
<PAGE> 168

CLARK INTERNET SERVICES, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEAR ENDED SEPTEMBER 30, 1997 AND PERIOD ENDED OCTOBER 17, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 17,
1997 1997
---------- ------------
<S> <C> <C>
Revenue:
Internet services......................................... $3,601,491 159,079
Other..................................................... 114,193 48,917
---------- -------
Total revenue..................................... 3,715,684 207,996
---------- -------
Operating expenses:
Internet services......................................... 1,672,046 48,346
Selling, general and administrative....................... 2,053,619 195,610
Depreciation and amortization............................. 139,379 9,547
---------- -------
Total operating expenses.......................... 3,865,044 253,503
---------- -------
Loss from operations.............................. (149,360) (45,507)
Other income (expense):
Interest income........................................... 2,702 (1,054)
Interest expense.......................................... (26,929) --
---------- -------
Net loss.......................................... (173,587) (46,561)
Retained earnings (deficit):
Beginning of period....................................... 183,347 9,760
---------- -------
End of period............................................. $ 9,760 (36,801)
========== =======
</TABLE>

See accompanying notes to financial statements.

F-84
<PAGE> 169

CLARK INTERNET SERVICES, INC.

STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1997 AND PERIOD ENDED OCTOBER 17, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
1997 OCTOBER 17, 1997
--------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(173,587) (46,561)
Adjustments to reconcile net loss to net cash provided by
operating activities -- depreciation and
amortization........................................... 139,379 9,547
Changes in operating assets and liabilities:
Trade and related party accounts receivable, net....... (362,396) 2,483
Prepaid expenses and other............................. (19,671) 32,793
Accounts payable....................................... 157,360 (78,954)
Accrued liabilities, and salaries and commissions
payable............................................... 92,849 30,677
Deferred revenue and customer advances................. 245,114 30,809
Other assets, net...................................... (61,263) 12,179
--------- --------
Net cash provided (used) by operating
activities...................................... 17,785 (7,027)
Cash flows used by investing activities --
purchases of equipment.................................... (425,477) --
--------- --------
Cash flows used by financing activities:
Proceeds from bank lines of credit........................ 90,000 --
Proceeds from bank loan................................... 375,000 --
Repayment of bank loan.................................... (51,929) --
--------- --------
Net cash provided by financing activities......... 413,071 --
--------- --------
Net increase (decrease) in cash and cash
equivalents..................................... 5,379 (7,027)
Cash and cash equivalents, at beginning of period........... 48,914 54,293
--------- --------
Cash and cash equivalents, at end of period................. $ 54,293 47,266
========= ========
Supplemental disclosures of cash flow information --
cash paid during year for interest........................ $ 26,929 1,053
========= ========
</TABLE>

See accompanying notes to financial statements.

F-85
<PAGE> 170

CLARK INTERNET SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Clark Internet Services, Inc. (the Company) is a provider of internet
access services to businesses and individuals, primarily in the Maryland,
Washington DC, and Northern Virginia regions.

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

Effective October 17, 1997, Verio Inc. acquired 51% of the outstanding
common stock of the Company.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

Equipment

Equipment is recorded at cost. Depreciation is provided over the estimated
useful lives of the assets ranging from 3 to 5 years using the straight-line
method.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of (Statement No. 121). Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations, including goodwill, when
indicators of impairment are present and the undiscounted future cash flows
estimated to be generated by those assets are less than the assets' carrying
amount. If such assets are impaired, the impairment to be recognized is measured
by the amounts by which the carrying amount of the assets exceeds the fair value
of the assets. Assets to be disposed of are reported at the lower of the
carrying value or fair value, less costs to sell.

Revenue Recognition

Internet services revenue is recognized as the services are provided.
Installation charges and set-up fees are recognized when installation is
completed. The Company records deferred revenue for accounts billed and/or
collected in advance.

Income Taxes

At December 31, 1997, the Company has a net operating loss carryforward for
federal income tax purposes of $235,000 which is available to offset future
federal taxable income, if any, through 2012. Due to the uncertainty regarding
the ultimate utilization of the net operating loss carryforward a valuation
allowance

F-86
<PAGE> 171
CLARK INTERNET SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

has been recorded for the full amount of the deferred tax asset related to the
net operating loss carryforward, which represents the only significant temporary
difference as of September 30, 1997.

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statements purposes. Management estimates that the fair values of all
financial instruments as of September 30, 1997 approximate their carrying values
based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

(2) EQUIPMENT

Equipment consisted of the following at September 30, 1997:

<S> <C>
Furniture and fixtures...................................... $ 337,163
Computer and equipment...................................... 656,496
---------
993,659
Less accumulated depreciation............................... (343,658)
---------
$ 650,001
=========
</TABLE>

Depreciation expense for the year ended September 30, 1997 and the period
ended October 17, 1997 totaled $138,054 and $9,547, respectively.

(3) BANK LINE OF CREDIT AND NOTES PAYABLE

In April 1997, the Company entered into a $200,000 line of credit agreement
with a bank, with interest at the prime rate plus 1.5% (10.0% at September 30,
1997). Borrowings under the line of credit are due in April 1998.

In addition, the Company also borrowed $375,000 from a bank under a loan
secured by the Small Business Administration with interest at the prime rate
plus 2% (10.5% at September 30, 1997). Monthly principal payments of $6,250 are
due through April 2002.

(4) LEASES

The Company leases its facilities under long-term operating leases expiring
at various dates through 2002. Future minimum lease payments consist of the
following at September 30:

<S> <C>
1998........................................................ $363,000
1999........................................................ 182,155
2000........................................................ 42,926
2001........................................................ 25,320
2002........................................................ 13,811
--------
Total minimum lease payments...................... $627,212
========
</TABLE>

Rent expense totaled $484,162 for the year ended September 30, 1997.

(5) TRANSACTION WITH RELATED PARTY

The related party receivable at September 30, 1997 is due from an entity
owned by the Company's Chief Executive Officer, for whom the Company provides
general accounting and administrative services. These amounts were repaid
subsequent to September 30, 1997.

F-87
<PAGE> 172

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of ATMnet as of October 31,
1996 and 1997, and the related statements of operations, stockholders' deficit,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

KPMG Peat Marwick LLP

Denver, Colorado
December 13, 1997

F-88
<PAGE> 173

ATMNET

BALANCE SHEETS
OCTOBER 31, 1996 AND 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 76,037 11,739
Trade receivables, net of allowance for doubtful accounts
of $30,000 and $25,981................................. 279,871 192,726
Other receivables......................................... 13,646 --
Other..................................................... 56,607 65,886
----------- -----------
Total current assets.............................. 426,161 270,351
Equipment and leasehold improvements, net (note 2).......... 1,404,863 1,120,396
Investment in affiliate (note 3)............................ 87,500 --
Intangible assets, net of accumulated amortization of
$99,758 and $52,952....................................... 181,081 134,273
----------- -----------
Total assets...................................... $ 2,099,605 1,525,020
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 1,736,880 2,738,070
Accrued liabilities....................................... 162,381 589,794
Due to related parties (note 6)........................... 16,235 41,209
Deferred revenue.......................................... 176,481 115,393
Subordinated notes payable to stockholders and related
parties (note 4)....................................... -- 908,979
Current portion of capital lease obligations (note 7)..... 140,223 150,134
----------- -----------
Total current liabilities......................... 2,232,200 4,543,579
Capital lease obligations, less current portion............. 164,514 14,379
----------- -----------
Total liabilities................................. 2,396,714 4,557,958
Stockholders' deficit (note 5):
Common stock, no par value, 83,000,000 shares authorized;
29,100,000 shares issued and outstanding............... 1,158,532 1,158,532
Accumulated deficit....................................... (1,455,641) (4,191,470)
----------- -----------
Total stockholders' deficit....................... (297,109) (3,032,938)
Commitments (note 7)........................................
----------- -----------
Total liabilities and stockholders' deficit....... $ 2,099,605 1,525,020
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-89
<PAGE> 174

ATMNET

STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Revenue:
Internet services (note 6)................................ $ 1,236,478 $ 2,730,732
Equipment sales........................................... 440,315 513,941
----------- -----------
Total revenue..................................... 1,676,793 3,244,673
----------- -----------
Operating expenses:
Cost of internet services................................. 845,465 1,963,858
Cost of equipment sold.................................... 258,517 381,043
Other operating expenses.................................. 645,710 721,012
Selling, general and administrative....................... 957,253 1,927,589
Depreciation and amortization............................. 343,682 649,510
----------- -----------
Total operating expenses.......................... 3,050,627 5,643,012
----------- -----------
Loss from operations...................................... (1,373,834) (2,398,339)
Other expenses:
Interest expense.......................................... (36,203) (167,864)
Other..................................................... (21,000) (169,626)
----------- -----------
Net loss.......................................... $(1,431,037) $(2,735,829)
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-90
<PAGE> 175

ATMNET

STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED OCTOBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK DEFICIT TOTAL
---------- ----------- -----------
<S> <C> <C> <C>
BALANCE AS OF NOVEMBER 1, 1995....................... $ 458,200 $ (24,604) $ 433,596
Issuance of common stock for cash.................... 700,332 -- 700,332
Net loss............................................. -- (1,431,037) (1,431,037)
---------- ----------- -----------
BALANCES AS OF OCTOBER 31, 1996...................... 1,158,532 (1,455,641) (297,109)
Net loss............................................. -- (2,735,829) (2,735,829)
---------- ----------- -----------
BALANCES AS OF OCTOBER 31, 1997...................... $1,158,532 $(4,191,470) $(3,032,938)
========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-91
<PAGE> 176

ATMNET

STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,431,037) $(2,735,829)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization.......................... 343,682 649,510
Provision for doubtful accounts........................ 62,000 58,686
Loss on write-off of investment........................ -- 87,500
Changes in operating assets and liabilities:
Trade receivables.................................... (302,792) 28,459
Other receivables.................................... 46,354 13,646
Other current assets................................. (51,943) (9,279)
Accounts payable..................................... 1,710,981 1,001,190
Accrued liabilities and due to related parties....... 172,852 452,387
Deferred revenue..................................... 171,898 (61,088)
----------- -----------
Net cash provided (used) by operating
activities..................................... 721,995 (514,818)
----------- -----------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements.......... (1,235,719) (318,235)
Investment in affiliates, at cost......................... (87,500) --
----------- -----------
Net cash used by investing activities............. (1,323,219) (318,235)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of subordinated debt............... -- 1,018,979
Proceeds from issuance of common stock.................... 700,332 --
Principal payments on subordinated debt................... -- (110,000)
Principal payments on capital lease obligations........... (114,166) (140,224)
----------- -----------
Net cash provided by financing activities......... 586,166 768,755
----------- -----------
Net decrease in cash.............................. (15,058) (64,298)
Cash, beginning of year..................................... 91,095 76,037
----------- -----------
Cash, end of year........................................... $ 76,037 $ 11,739
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest............................................... $ 36,203 $ 25,765
=========== ===========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations................ $ 345,046 $ --
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-92
<PAGE> 177

ATMNET

NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

ATMnet (the Company) was incorporated in the State of California on
February 26, 1997. The Company provides regional internet access services, and
hardware sales to customers mainly in California.

Effective November 5, 1997, Verio Inc. acquired substantially all of the
net assets of the Company.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance. Revenue
from hardware sales is recognized upon shipment of the respective products.

Equipment and Leasehold Improvements

Equipment and leasehold improvements, including assets held under capital
leases, is stated at cost, less accumulated depreciation and amortization.
Depreciation and amortization is recorded using the straight-line method over
the shorter of the estimated useful lives of the related assets or the lease
term, which are two or three years. Costs for normal repairs and maintenance are
expensed as incurred.

Investment in Affiliates

Investment in affiliate represents common stock of an affiliate
representing less than a 20% ownership interest which is accounted for using the
cost method.

Intangible Assets

The excess of cost over the fair value of net assets acquired, or goodwill,
and organization costs are amortized using the straight-line method over five
years.

Income Taxes

The Company has a net operating loss carryforward for income tax purposes
of approximately $3,883,000 which expires in 2012. No tax benefit has been
recorded by the Company in fiscal 1996 and 1997 due to the Company's net loss
and the uncertainty regarding the ultimate utilization of such loss
carryforward. A valuation allowance has been recorded for the entire balance of
the deferred tax asset related to the carryforward. Other temporary differences
between financial statement and income tax bases of assets and liabilities are
not significant.

F-93
<PAGE> 178
ATMNET

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996 AND 1997

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of October 31, 1997 and 1996 approximate their carrying
values based on their terms and interest rates. The use of different market
assumptions and/or estimation methodologies may have a significant effect on the
estimated fair values.

Long-Lived Assets

The Company accounts for long-lived assets under the provisions of
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
(SFAS 121). Statement No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value, less
costs to sell.

Stock-Based Compensation

The Company applies APB Opinion 25 and related interpretations in
accounting for its stock compensation plan. Accordingly, since the Company
grants stock options with exercise prices equal to fair value at the date of
grant, no compensation expense has been recognized in 1996 or 1997. Under
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123), entities are permitted to adopt the fair value method
of accounting for employee stock-based compensation plans. However, SFAS 123
allows an entity to continue using the intrinsic value method under APB Opinion
No. 25, but requires the entity to make pro forma disclosures of net income or
loss as if the fair value method of accounting had been applied.

(2) EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment consisted of the following at October 31, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Internet and computer equipment............................. $1,613,305 1,786,575
Furniture and fixtures...................................... 77,668 133,730
Leasehold improvements...................................... 12,080 100,983
---------- ---------
1,703,053 2,021,288
Less accumulated depreciation............................... (298,190) (900,892)
---------- ---------
$1,404,863 1,120,396
========== =========
</TABLE>

Equipment and leasehold improvements includes assets owned under capital
leases with a net book value of $195,294 and $333,079 at October 31, 1996 and
1997, respectively.

F-94
<PAGE> 179
ATMNET

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996 AND 1997

(3) INVESTMENT IN AFFILIATE

During fiscal 1996, the Company acquired a 10% interest in Turpike
Corporation for a purchase price of $87,500. The investment was written off in
fiscal 1997.

(4) SUBORDINATED NOTES PAYABLE

Subordinated notes payable as of October 31, 1997 consists of notes payable
to stockholders and related parties, with interest at rates varying from prime
plus 2% (10.5% at October 31, 1997) to 18%, due in June 1998. The notes are
subordinate to all other senior indebtedness of the Company. Interest expense
related to the subordinated notes totaled $104,130 in 1997.

(5) STOCK COMPENSATION PLANS

The Company established a Stock Option Plan in March 1996, whereby. at the
discretion of the Board of Directors (the Board), the Company may grant stock
options to certain key employees of the Company. The option price is determined
by the Board at the time the option is granted, but in no event is less than the
fair market value of the Company's common stock at the date of grant, as
determined by the Board. The options vest over a five year period or, in certain
circumstances, earlier based on the fair value of the Company's common shares,
as defined, and expire ten years from the date of grant. As of October 31, 1997,
no options had been exercised or are exercisable. The weighted-average
contractual life of outstanding options as of October 31, 1997 is approximately
two years.

The following table summarizes option activity for two years ended October
31, 1997:

Options granted during fiscal 1996 at the following exercise price:

<TABLE>
<S> <C>
Options granted during fiscal 1996 at the following exercise
price:
$0.30 per share........................................... 4,410,000
$0.33 per share........................................... 1,000,000
----------
Options outstanding at October 31, 1996..................... 5,410,000
Options cancelled......................................... (1,545,000)
----------
Options outstanding at October 31, 1997..................... 3,865,000
==========
Weighted average exercise price of outstanding options...... $.31
==========
</TABLE>

During the years ended October 31, 1996 and 1997, the per share
weighted-average fair value of stock options granted was $.03 on the date of
grant using the Black-Scholes opinion-pricing model with the following
weighted-average assumptions; no dividends or volatility, risk-free interest
rate of 6%, and expected life of two years. If the Company had determined
compensation expense for the years ended October 31, 1996 and 1997 based on the
fair value of the options at the grant dates under SFAS No. 123, net loss would
increase to $1,595,000 and $2,854,000, respectively.

(6) RELATED PARTY TRANSACTIONS

The Company provides internet services to a company whose founder and CEO
is a shareholder of ATMnet. Revenue earned by ATMnet from this company totaled
$15,523 and $22,581 during the years ended October 31, 1996 and 1997,
respectively.

Amounts due to related parties are for services provided, are non-interest
bearing and are due within one year.

F-95
<PAGE> 180
ATMNET

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996 AND 1997

(7) LEASES

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2000. Future minimum annual lease
payments under capital and noncancelable operating leases for each of the years
ending October 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ---------
<S> <C> <C>
1998........................................................ $ 161,028 173,868
1999........................................................ 22,524 142,068
2000........................................................ -- 26,209
--------- -------
Total minimum payments.................................... 183,552 342,145
=======
Less amount representing interest........................... (19,039)
---------
Present value of net minimum lease payments............... 164,513
Less current portion........................................ (150,134)
---------
$ 14,379
=========
</TABLE>

Rent expense for the years ended October 31, 1996 and 1997 totaled $72,686
and $168,410, respectively.

F-96
<PAGE> 181

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Global Internet Network
Services, Inc. (wholly-owned by Global Internet.Com Inc.) as of December 31,
1996 and November 26, 1997, and the related statements of operations,
stockholder's equity (deficit), and cash flows for the year ended December 31,
1996 and the period ended November 26, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Global Internet Network
Services, Inc. as of December 31, 1996 and November 26, 1997 and, and the
results of its operations and its cash flows for the year ended December 31,
1996 and the period ended November 26, 1997 in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 20, 1998

F-97
<PAGE> 182

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

BALANCE SHEETS
DECEMBER 31, 1996 AND NOVEMBER 26, 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Current assets:
Cash...................................................... $ 132,118 30,681
Trade receivables, net of allowance for doubtful accounts
of $59,777 in 1996 and $86,166 in 1997................. 935,979 449,959
Receivables from affiliates (note 3)...................... 40,497 53,542
Inventory................................................. 126,020 102,801
Prepaid expenses and other................................ 60,869 83,323
---------- ---------
Total current assets.............................. 1,295,483 720,306
Equipment, net (note 2)..................................... 557,142 799,179
Other assets................................................ 3,864 3,723
---------- ---------
Total assets...................................... $1,856,489 1,523,208
========== =========

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities:
Accounts payable.......................................... $ 631,660 109,651
Accrued liabilities....................................... 17,996 18,168
Deferred revenue.......................................... 486,167 418,885
Current portion of obligations under capital leases (note
4)..................................................... 37,828 106,720
Due to parent (note 3).................................... 942,098 --
---------- ---------
Total current liabilities......................... 2,115,749 653,424
Capital lease obligations, less current portion (note 4).... 31,687 193,630
---------- ---------
Total liabilities................................. 2,147,436 847,054
---------- ---------
Stockholder's equity (deficit):
Common stock, $1.00 par value, 10,000 shares authorized,
5,000 shares issued and outstanding.................... 5,000 5,000
Additional paid-in capital................................ 245,000 1,412,849
Accumulated deficit....................................... (540,947) (741,695)
---------- ---------
Total stockholder's equity (deficit)................... (290,947) 676,154
---------- ---------
Commitments (note 4)
Total liabilities and stockholder's equity (deficit)... $1,856,489 1,523,208
========== =========
</TABLE>

See accompanying notes to financial statements.

F-98
<PAGE> 183

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 AND
PERIOD ENDED NOVEMBER 26, 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Revenue:
Internet services......................................... $1,979,201 2,501,037
Consulting services (note 3).............................. 344,233 564,150
Computer hardware and software sales (note 3)............. 853,396 355,731
National Science Foundation revenue (note 7).............. 440,119 114,982
Other..................................................... 80,401 248,816
---------- ----------
Total revenue..................................... 3,697,350 3,784,716
---------- ----------
Operating expenses:
Internet services operating costs......................... 1,530,020 1,960,653
Cost of hardware and software sales....................... 591,227 292,874
Engineering and network................................... 507,843 425,430
Marketing and selling..................................... 248,986 238,982
General and administrative................................ 956,052 785,960
Depreciation and amortization............................. 259,956 280,445
---------- ----------
Total operating expenses.......................... 4,094,084 3,984,344
---------- ----------
Loss from operations.............................. (396,734) (199,628)
Other income (expense):
Interest expense.......................................... (9,897) (8,229)
Other, net................................................ 43,577 7,109
---------- ----------
Net loss.......................................... $ (363,054) (200,748)
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-99
<PAGE> 184

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1996 AND
PERIOD ENDED NOVEMBER 26, 1997

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDER'S
COMMON PAID-IN ACCUMULATED EQUITY
STOCK CAPITAL DEFICIT (DEFICIT)
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996..................... $5,000 245,000 (177,893) 72,107
Net loss........................................ -- -- (363,054) (363,054)
------ --------- -------- --------
BALANCES AT DECEMBER 31, 1996................... 5,000 245,000 (540,947) (290,947)
Transfer of net assets to parent (note 6)....... -- (101,088) -- (101,088)
Conversion of note payable to parent to equity
(note 6)...................................... -- 1,156,437 -- 1,156,437
Capital contribution by parent (note 6)......... -- 112,500 -- 112,500
Net loss........................................ -- -- (200,748) (200,748)
------ --------- -------- --------
BALANCES AT NOVEMBER 26, 1997................... $5,000 1,412,849 (741,695) 676,154
====== ========= ======== ========
</TABLE>

See accompanying notes to financial statements.

F-100
<PAGE> 185

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 AND
PERIOD ENDED NOVEMBER 26, 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(363,054) (200,748)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization.......................... 259,956 280,445
Provision for bad debts................................ 70,445 95,913
Changes in operating assets and liabilities:
Trade receivables.................................... (231,005) 377,062
Inventory............................................ (43,335) 23,219
Other current assets................................. (26,954) (22,454)
Accounts payable..................................... 575,188 (522,009)
Accrued liabilities.................................. (382,897) 172
Deferred revenue..................................... 58,277 (67,282)
Other................................................ (3,241) --
--------- ---------
Net cash used by operating activities............. (86,620) (35,682)
--------- ---------
Cash flows from investing activities -- purchases of
equipment................................................. (336,795) (334,161)
--------- ---------
Cash flows from financing activities:
Capital contribution by parent............................ -- 112,500
Advances by parent........................................ 544,707 214,339
Principal payments made under capital lease obligations... (39,720) (58,433)
--------- ---------
Net cash provided by financing activities......... 504,987 268,406
--------- ---------
Increase (decrease) in cash....................... 81,572 (101,437)
Cash, beginning of year..................................... 50,546 132,118
--------- ---------
Cash, end of year........................................... $ 132,118 30,681
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 10,095 15,681
========= =========
Noncash investing and financing activities:
Equipment acquired through capital lease obligations... $ -- 299,940
========= =========
Transfer of assets to parent........................... $ -- 101,088
========= =========
</TABLE>

See accompanying notes to financial statements.

F-101
<PAGE> 186

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND NOVEMBER 26, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Global Internet Network Services, Inc. (the Company) is engaged in
providing regional internet access services, software and hardware consulting
and sales to customers in a ten state region. The Company was incorporated in
Nebraska in September 1987, as Midnet Inc., a nonprofit corporation organized to
promote research, education and economic development. On July 15, 1994, Midnet
Inc. became a for profit corporation and was purchased by Global Internet.Com
Inc. (Parent) on August 8, 1994. On March 12, 1997, the Company changed its
corporate name from Midnet Inc. to Global Internet Network Services, Inc.

Effective November 26, 1997, Verio Inc. (Verio) acquired a 100% ownership
interest in the Company. (see note 6).

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance. Revenue
from consulting services is recognized when services have been rendered. Revenue
from hardware and software sales is recognized upon shipment of the respective
products.

Inventory

Inventory, consisting of systems hardware and software and maintenance
parts and supplies is recorded at the lower of cost (first-in, first-out) or
market.

Equipment

Equipment, including any assets held under capital leases, is recorded at
cost, less accumulated depreciation and amortization. Depreciation and
amortization is recorded using the straight-line method over the estimated
useful lives of the related assets or the lease term, which range from three to
five years. Costs for normal repairs and maintenance are expensed as incurred.

Income Taxes

The Company is included in the tax returns of the Parent. Income taxes are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109). Under SFAS 109,
deferred income taxes are recognized for the future tax consequences of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.

The Company has a net operating loss carryforward of approximately
$518,000, which expires in 2012. No tax benefit has been recorded by the Company
for 1996 or 1997 due to the Company's net loss and the uncertainty regarding the
ultimate utilization of such loss in the consolidated income tax returns of the
Parent. A valuation allowance has been recorded for the entire balance of the
deferred tax asset related to the

F-102
<PAGE> 187
GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Company's net loss. Other temporary differences between financial statement and
income tax bases of assets and liabilities are not significant.

Concentration of Credit Risk

The Company provides unsecured credit to customers in the normal course of
business. Failure of the customers to pay could result in losses up to the
recorded receivable balances. The Company did not have any customers that
represent greater than 5% of total revenue for the year ended December 31, 1996
and the period ended November 26, 1997, respectively.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at lower of the carrying amount or
fair value less costs to sell. SFAS 121 did not have a significant effect on the
Company's financial position or results of operations in 1997 and 1996.

(2) EQUIPMENT

Equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 26,
1996 1997
------------ ------------
<S> <C> <C>
Internet and computer equipment............................ $821,921 1,342,321
Furniture and office equipment............................. 137,847 150,254
Leasehold improvements..................................... 1,228 2,001
-------- ---------
960,996 1,494,576
Less accumulated depreciation and amortization............. (403,854) (695,397)
-------- ---------
$557,142 799,179
======== =========
</TABLE>

(3) TRANSACTIONS WITH PARENT

Amounts due to Parent represent noninterest bearing cash transfers from the
Parent (see note 6).

Hardware and software sales and consulting revenue from affiliates of the
Parent for the year ended December 31, 1996 and the period ended November 27,
1997 were $92,273 and $561,438, respectively.

(4) LEASES

The Company leases certain internet and computer equipment under capital
leases. At December 31, 1996 and November 26, 1997, leased equipment was
included in internet and computer equipment with net book values of $80,117 and
$367,003, respectively. The Company also leases office space under a
noncancelable operating lease expiring in November 2002.

F-103
<PAGE> 188
GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum annual lease payments under capital and noncancelable
operating leases for years ending November 30 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ---------
<S> <C> <C>
1998........................................................ $ 131,748 47,634
1999........................................................ 116,448 50,016
2000........................................................ 95,435 52,516
2001........................................................ -- 55,142
2002........................................................ -- 57,899
--------- -------
Total minimum payments.................................... 343,631 263,207
=======
Less amount representing interest........................... (43,281)
---------
Present value of net minimum lease payments............... 300,350
Less current portion........................................ (106,720)
---------
$ 193,630
=========
</TABLE>

Rent expense for the year ended December 31, 1996 and the period ended
November 26, 1997 was $71,738 and $63,724, respectively.

(5) EMPLOYEE BENEFIT PLAN

The Parent has a 401(k) (the Plan) covering all employees of the Company
who meet certain eligibility requirements. Employer contributions are not
required and the Parent did not make any contributions to the Plan during the
year ended December 31, 1996 and the period ended November 26, 1997.

(6) STOCKHOLDER'S EQUITY

In connection with the acquisition of common stock of the Company by Verio
Inc. (Verio) amounts due to parent totaling $1,156,437 were converted to equity
and the Parent made a cash contribution to the Company in the amount of
$112,500.

Prior to the Verio acquisition in November 1997, the Company transferred
certain net assets of a division to the Parent in the amount of $101,088, which
division was not acquired by Verio.

(7) NATIONAL SCIENCE FOUNDATION GRANTS

The Company receives grant revenue under contracts with the National
Science Foundation (NSF) to provide network connections to certain
not-for-profit educational institutions. Grant revenue is recognized ratably
over the term of the contract, which is generally twelve months. Grant revenue
amounted to $440,119 and $114,982 for the year ended December 31, 1996 and the
period ended November 26, 1997, respectively. Total amounts receivable at
December 31, 1996 and November 26, 1997 were $65,858 and $16,439, respectively.

F-104
<PAGE> 189

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of the Pennsylvania
Research Partnership Network (PREPnet) as of November 30, 1996 and 1997, and the
related statements of operations and owners' deficit, and cash flows for the
years then ended and the period ended December 24, 1997. These financial
statements are the responsibility of PREPnet's management. Our responsibility is
to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Pennsylvania Research
Partnership Network (PREPnet) as of November 30, 1996 and 1997, and the results
of its operations and its cash flows for the years then ended and for the period
ended December 24, 1997 in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 20, 1998

F-105
<PAGE> 190

THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

BALANCE SHEETS
NOVEMBER 30, 1996 AND 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
----------- ---------
<S> <C> <C>
Current assets:
Trade receivables, net of allowance for doubtful accounts
of $14,631 and $13,313, respectively................... $ 73,943 $ 102,041
Prepaid expenses and other................................ 1,769 15,409
----------- ---------
Total current assets.............................. 75,712 117,450
Equipment, net (note 2)..................................... 200,538 138,008
----------- ---------
Total assets...................................... $ 276,250 $ 255,458
=========== =========

LIABILITIES AND OWNER'S DEFICIT

Current liabilities:
Accounts payable.......................................... $ 88,639 $ 132,039
Accrued liabilities....................................... 44,555 3,020
Current portion of obligations under capital leases (note
3)..................................................... 57,468 56,262
Deferred revenue.......................................... 1,084,501 683,371
----------- ---------
Total current liabilities......................... 1,275,163 874,692
Capital lease obligations, less current portion (note 3).... 55,502 --
----------- ---------
Total liabilities................................. 1,330,665 874,692
Owners' deficit............................................. (1,054,415) (619,234)
Commitments (note 3)
----------- ---------
Total liabilities and owner's deficit............. $ 276,250 $ 255,458
=========== =========
</TABLE>

See accompanying notes to financial statements.

F-106
<PAGE> 191

THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

STATEMENTS OF OPERATIONS AND OWNERS' DEFICIT
YEARS ENDED NOVEMBER 30, 1996 AND 1997 AND PERIOD ENDED DECEMBER 24, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 24,
1996 1997 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Internet services.................................... $ 2,027,682 $ 2,026,439 $ 156,459
Grant revenue (note 4)............................... 194,343 98,711 --
Other................................................ 6,309 22,477 --
----------- ----------- ----------
Total revenue................................ 2,228,334 2,147,627 156,459
----------- ----------- ----------
Costs and expenses:
Internet services operating costs.................... 588,543 792,684 80,972
Selling, general and administrative (note 5)......... 831,230 773,174 64,625
Depreciation......................................... 92,251 121,192 8,285
----------- ----------- ----------
Total costs and expenses..................... 1,512,024 1,687,050 153,882
----------- ----------- ----------
Earnings from operations..................... 716,310 460,577 2,577
Interest expense, net.................................. (18,331) (11,261) (938)
----------- ----------- ----------
Net earnings................................. 697,979 449,316 1,639
Owners' deficit at beginning of period................. (726,569) (1,054,415) (619,234)
Net advances to owners................................. (1,025,825) (14,135) (23,911)
----------- ----------- ----------
Owners' deficit at end of period....................... $(1,054,415) $ (619,234) $ (641,506)
=========== =========== ==========
Pro forma information:
Historical net earnings.............................. $ 697,979 $ 449,316 $ 1,639
Pro forma adjustment for income tax expense.......... (265,000) (171,000) (600)
----------- ----------- ----------
Pro forma net earnings....................... $ 432,979 $ 278,316 $ 1,039
=========== =========== ==========
</TABLE>

See accompanying notes to financial statements.

F-107
<PAGE> 192

THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1996 AND 1997 AND PERIOD ENDED DECEMBER 24, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 24,
1996 1997 1997
----------- --------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings........................................ $ 697,979 $ 449,316 $ 1,639
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation..................................... 92,251 121,192 8,285
Provision for bad debts.......................... 14,631 13,313 --
Changes in operating assets and liabilities:
Trade receivables.............................. 58,406 (41,411) (38,747)
Prepaid expenses and other assets.............. -- (13,640) 6,294
Accounts payable and accrued liabilities....... 100,318 1,865 (5,400)
Deferred revenue............................... 178,313 (401,130) 57,131
----------- --------- ---------
Net cash provided by operating activities... 1,141,898 129,505 29,202
----------- --------- ---------
Cash flows from investing activities -- purchase of
equipment........................................... (61,987) (58,662) --
----------- --------- ---------
Cash flows from financing activities:
Repayments of capital lease obligations............. (54,086) (56,708) (5,291)
Net advances to owners.............................. (1,025,825) (14,135) (23,911)
----------- --------- ---------
Net cash used by financing activities....... (1,079,911) (70,843) (29,202)
----------- --------- ---------
Net change in cash and cash at beginning and
end of period............................. $ -- $ -- $ --
=========== ========= =========
Supplemental disclosure of cash flow
information -- cash paid for interest............... $ 18,331 $ 11,261 $ 938
=========== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-108
<PAGE> 193

THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

The accompanying financial statements include the accounts of the
Pennsylvania Research Partnership Network (PREPnet), the data communications
network of a consortium of research institutions in Pennsylvania. A joint
venture between Carnegie Mellon University and the University of Pittsburgh
serves as the legal entity and coordinator of the consortium. The accompanying
financial statements have been prepared assuming that PREPnet had been operated
separately as of December 1, 1995 and thereafter. PREPnet provides internet
services to businesses, educational institutions, not-for-profit organizations,
and individual subscribers.

Effective December 24, 1997, the net assets of PREPnet were acquired by
Verio Inc. in a purchase business combination.

Revenue Recognition

Internet services are recognized as the services are provided. PREPnet
records deferred revenue for amounts billed and/or collected in advance.

Equipment

Equipment, including any assets held under capital leases, is stated at
cost, less accumulated depreciation. Depreciation is recorded using the
straight-line method over the estimated useful lives of the related assets or
the lease term, which is 3 years. Costs for normal repairs and maintenance are
expensed as incurred.

Long-Lived Assets

PREPnet evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). Statement No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.

Income Taxes

The operations of PREPnet are included in the income tax returns of the
joint venture, which is a non-profit entity and is exempt from income taxes.
However, pro forma information has been included in the accompanying statement
of operations to reflect a pro forma adjustment for income tax expense as if
PREPnet had been a separate taxable entity subject to federal and state income
taxes for all periods presented.

F-109
<PAGE> 194
THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statements purposes. Management estimates that the fair values of all
financial instruments as of November 30, 1996 and 1997 approximate their
carrying values based on their terms and interest rates. The use of different
market assumptions and/or estimation methodologies may have a significant effect
on the estimated fair values.

(2) EQUIPMENT

Equipment consisted of the following at November 30:

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Internet and computer equipment............................. $ 321,434 $ 376,014
Furniture and office equipment.............................. 5,854 9,936
--------- ---------
327,288 385,950
Less accumulated depreciation and amortization.............. (126,750) (247,942)
--------- ---------
$ 200,538 $ 138,008
========= =========
</TABLE>

(3) COMMITMENTS

PREPnet leases certain computer and office equipment under capital leases.
PREPnet also leases office space under noncancelable operating leases expiring
at various dates through 2001.

Future minimum annual lease payments under capital and noncancelable
operating leases for each of the years ending November 30 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998........................................................ $ 58,810 $ 50,731
1999........................................................ -- 50,341
2000........................................................ -- 27,867
2001........................................................ -- 49,171
-------- --------
Total minimum payments.................................... 58,810 $178,110
========
Less amount representing interest........................... (2,548)
--------
Present value of net minimum lease payments............... 56,262
Less current portion........................................ (56,262)
--------
$ --
========
</TABLE>

Rent expense for the years ended November 30, 1996 and 1997 and the period
ended December 24, 1997 was $47,674, $73,218 and $6,102, respectively.

(4) GRANT REVENUE

PREPnet receives grant revenue from the National Science Foundation and
other government agencies to provide network connections to certain
not-for-profit educational institutions. Grant revenue is recognized ratably
over the term of the contract, which is generally twelve months. Total deferred
grant revenue at November 30, 1996 was $71,667.

F-110
<PAGE> 195
THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) RELATED PARTY TRANSACTIONS

Carnegie Mellon University provides administrative support and use of
facilities to PREPnet and allocates the cost of these services to the entity.
Such allocations totalled approximately $69,188 and $81,886 for the years ended
November 30, 1996 and 1997, respectively.

F-111
<PAGE> 196

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Monumental Network
Systems, Inc. as of December 31, 1996 and 1997, and the related statements of
operations, stockholders' deficit, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Monumental Network Systems,
Inc. as of December 31, 1996 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-112
<PAGE> 197

MONUMENTAL NETWORK SYSTEMS, INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
--------- -----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 63,693 $ --
Trade receivables, net of allowance for doubtful accounts
of $15,363 and $41,207................................. 138,263 214,440
--------- -----------
Total current assets.............................. 201,956 214,440
Equipment, net (note 2)..................................... 359,327 440,406
Other assets, net........................................... 17,664 66,562
--------- -----------
Total assets...................................... $ 578,947 $ 721,408
========= ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable.......................................... $ 186,526 $ 258,319
Accrued liabilities....................................... 23,052 163,436
Current portion of notes payable (note 3):
Related party.......................................... 30,025 132,954
Other.................................................. 9,789 49,694
Current portion of obligations under capital lease (note
4)..................................................... 70,736 82,194
Deferred revenue.......................................... 326,924 573,057
Cash overdraft............................................ -- 166,157
--------- -----------
Total current liabilities......................... 647,052 1,425,811
Notes payable, less current portion (note 3)................ 8,915 21,067
Capital lease obligations, less current portion (note 4).... 114,764 97,208
--------- -----------
Total liabilities................................. 770,731 1,544,086
Stockholders' deficit:
Common stock, $1.00 par value, 500,000 shares authorized,
300,944 and 302,779 shares issued and outstanding as of
December 31, 1996 and 1997............................. 300,944 302,779
Additional paid-in capital................................ 197,494 199,329
Accumulated deficit....................................... (690,222) (1,324,786)
--------- -----------
Total stockholders' deficit....................... (191,784) (822,678)
Commitments (note 4)
--------- -----------
Total liabilities and stockholders' deficit....... $ 578,947 $ 721,408
========= ===========
</TABLE>

See accompanying notes to financial statements.

F-113
<PAGE> 198

MONUMENTAL NETWORK SYSTEMS, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Revenue:
Internet services......................................... $1,250,789 $2,425,121
Computer hardware and software sales...................... 95,557 41,733
Other..................................................... 24,197 4,653
---------- ----------
Total revenue..................................... 1,370,543 2,471,507
---------- ----------
Operating expenses:
Internet services operating costs......................... 385,439 743,524
Cost of hardware and software sales....................... 198,486 417,559
Selling, general and administrative....................... 1,246,716 1,756,956
Depreciation.............................................. 74,607 172,092
---------- ----------
Total operating expenses.......................... 1,905,248 3,090,131
---------- ----------
Loss from operations.............................. (534,705) (618,624)
Interest expense, net....................................... 18,448 15,940
---------- ----------
Net loss.......................................... $ (553,153) $ (634,564)
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-114
<PAGE> 199

MONUMENTAL NETWORK SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
------------------ PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996.............. 114,015 $114,015 $ -- $ (137,069) $ (23,054)
Issuance of common shares for cash....... 100,000 100,000 100,000 -- 200,000
Issuance of common shares for services or
equipment.............................. 86,929 86,929 97,494 -- 184,423
Net loss................................. -- -- -- (553,153) (553,153)
------- -------- -------- ----------- ---------
BALANCES AT DECEMBER 31, 1996............ 300,944 300,944 197,494 (690,222) (191,784)
Issuance of common shares for cash....... 1,000 1,000 1,000 -- 2,000
Issuance of common shares for services... 835 835 835 -- 1,670
Net loss................................. -- -- -- (634,564) (634,564)
------- -------- -------- ----------- ---------
BALANCES AT DECEMBER 31, 1997............ 302,779 $302,779 $199,329 $(1,324,786) $(822,678)
======= ======== ======== =========== =========
</TABLE>

See accompanying notes to financial statements.

F-115
<PAGE> 200

MONUMENTAL NETWORK SYSTEMS, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(553,153) $(634,564)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation........................................... 74,607 172,092
Provision for bad debts................................ 15,363 170,634
Changes in operating assets and liabilities:
Trade receivables.................................... (127,442) (246,811)
Other assets......................................... (15,691) (48,898)
Accounts payable..................................... 120,414 71,793
Accrued liabilities.................................. 13,704 140,384
Deferred revenue..................................... 278,172 246,133
--------- ---------
Net cash used by operating activities............. (194,026) (129,237)
--------- ---------
Cash flows from investing activities -- purchases of
equipment................................................. (142,367) (178,377)
--------- ---------
Cash flows from financing activities:
Net change in cash overdraft.............................. -- 166,157
Borrowings under note payable to related parties.......... 30,848 130,000
Principal payments on note payable to related parties..... (823) (27,071)
Borrowings under notes payable............................ 18,704 66,229
Repayments of notes payable............................... -- (14,172)
Principal payments on capital lease obligations........... (36,824) (80,892)
Issuance of common stock.................................. 384,423 3,670
--------- ---------
Net cash provided by financing activities......... 396,328 243,921
--------- ---------
Increase (decrease) in cash....................... 59,935 (63,693)
Cash at beginning of year................................... 3,758 63,693
--------- ---------
Cash at end of year......................................... $ 63,693 $ --
========= =========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 18,739 $ 16,508
========= =========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations................ $ 219,242 $ 74,794
========= =========
</TABLE>

See accompanying notes to financial statements.

F-116
<PAGE> 201

MONUMENTAL NETWORK SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Monumental Network Systems, Inc. (the Company) was incorporated in the
State of Virginia on April 13, 1994. The Company's business consists of
providing regional internet access services, hardware and software sales, and
consulting to customers in Virginia, Maryland and the Washington D.C. area.

Effective December 31, 1997, Verio Inc. acquired all of the outstanding
common stock of the Company.

Equipment

Equipment, including any assets held under capital leases, is stated at
cost, less accumulated depreciation. Depreciation is recorded using the
straight-line method over the estimated useful lives of the related assets, or
over the lease term, which range from three to seven years. Costs for normal
repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). Statement No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at lower of the carrying amount or fair value less
costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from consulting services is recognized when services have been
rendered.

Revenue from hardware and software sales is recognized upon shipment of the
respective products, if significant future vendor obligations do not exist and
collectibility is probable.

Income Taxes

F-117
<PAGE> 202
MONUMENTAL NETWORK SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1996 and 1997 approximate their
carrying values based on their terms and interest rates. The use of different
market assumptions and/or estimation methodologies may have a significant effect
on the estimated fair values.

Customers who operate in Virginia, Maryland and the Washington D.C. area
represent substantially all of the Company's customer base. No single customer
comprised more than 10% of accounts receivable or total revenue as of or for the
years ended December 31, 1996 or 1997.

Stock-Based Compensation

The Company accounts for its stock-based employee compensation plan using
the intrinsic value based method prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations (APB 25). The Company has provided pro forma disclosures of net
loss as if the fair value based method of accounting for the plan, as prescribed
by Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), had been applied. Pro forma disclosures
include the effects of employee stock options granted during the years ended
December 31, 1996 and 1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Equipment................................................... $413,615 $ 642,498
Furniture and office equipment.............................. 39,310 55,505
Leasehold improvements...................................... -- 8,093
-------- ---------
452,925 706,096
Less accumulated depreciation............................... (93,598) (265,690)
-------- ---------
$359,327 $ 440,406
======== =========
</TABLE>

Equipment includes assets held under capital leases with a net book value
of $198,445 and $201,745 at December 31, 1996 and 1997, respectively.
Depreciation expense totaled $74,607 and $172,092 for the years ended December
31, 1996 and 1997, respectively.

(3) DEBT

Notes payable consists of the following as of December 31, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Notes payable with interest rates ranging from 8.25% to
8.39%, secured by vehicles due through 2002............... $14,319 $ 34,625
Unsecured notes payable to vendors with interest at 15% due
in 1998................................................... 4,385 36,136
------- --------
18,704 70,761
Less current portion........................................ (9,789) (49,694)
------- --------
$ 8,915 $ 21,067
======= ========
</TABLE>

F-118
<PAGE> 203
MONUMENTAL NETWORK SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

During 1996, the Company issued notes payable to stockholders of the
Company in the amount of $30,848, with interest at 6%, and monthly payments of
principal and interest due in various dates through 1998. The total unpaid
balance as of December 31, 1997 was $30,025.

During 1997, the Company issued additional notes payable to stockholders of
the Company totaling $130,000, which bear interest at 9%, with interest payable
annually, and are due on demand.

(4) COMMITMENTS

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998........................................................ $103,978 $29,132
1999........................................................ 66,919 5,736
2000........................................................ 39,031 1,710
2001........................................................ 3,818 --
-------- -------
Total minimum payments.................................... 213,746 $36,578
=======
Less amount representing interest........................... (34,344)
--------
Present value of net minimum lease payments............... 179,402
Less current portion........................................ (82,194)
--------
$ 97,208
========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 was $38,967 and
$53,084, respectively.

(5) INCOME TAXES

As of December 31, 1997, the Company has a net operating loss carryforward
of approximately $470,000 which will expire in 2012, if not utilized. A
valuation allowance has been recorded for the entire deferred tax asset related
primarily to the net operating loss carryforward due to the uncertainty relating
to the realization of the benefit of the deferred tax asset in the future.

(6) STOCK OPTION PLAN

The Company's 1997 Option Plan (the Plan) was adopted by the Board of
Directors and approved by the stockholders of the Company on January 1, 1997.
The Plan provides that salaried officers or key employees, non-employee
directors, and consultants who provide services to the Company may, at the
discretion of the plan administrator, be granted Incentive or Non-statutory
stock options to purchase shares of common stock. 200,000 shares of the
Company's common stock have been authorized for issuance under the Plan, of
which 11,872 incentive stock options were granted in 1997, with an exercise
price of $2.00 per share. None of the options were exercised or canceled during
1997.

Options vest 25% on the first anniversary of the option grant date and 25%
on each of the following three anniversary dates. As of December 31, 1997, no
options were vested or exercisable. The weighted average contractual term of
outstanding options was approximately 9 years at December 31, 1997.

The per share weighted-average fair value of stock options granted was $.33
on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions; expected dividend yield

F-119
<PAGE> 204
MONUMENTAL NETWORK SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

0%, risk-free interest rate of 6%, and expected life of three years. If the
Company determined compensation expense in 1997 based on the fair value of the
options at the grant date under SFAS No. 123, net loss would not have been
significantly different from the historical results of operations other than for
compensation expense recognized for options granted at less than fair value, as
discussed below.

None of the incentive stock option shares were exercisable or vested as of
December 31, 1997. However, in accordance with the acquisition agreement between
the Company and Verio Inc., Monumental Network Systems, Inc. purchased the
11,872 options outstanding as of December 31,1997 at fair market value, less the
exercise price per share, and recorded a charge to operations of $84,152.

F-120
<PAGE> 205

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Internet Servers, Inc.
as of December 31, 1996 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for the period from inception (August 23,
1995) to December 31, 1995 and the years ended December 31, 1996 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Internet Servers, Inc. as of
December 31, 1996 and 1997, and the results of its operations and its cash flows
for the period from inception (August 23, 1995) to December 31, 1995 and the
years ended December 31, 1996 and 1997 in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
March 2, 1998

F-121
<PAGE> 206

INTERNET SERVERS, INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 18,021 $1,161,510
Receivables:
Trade, net of allowance for doubtful accounts of
$11,029 in 1997....................................... 98,675 220,571
Employees.............................................. -- 67,000
Prepaid expenses and other................................ -- 85,478
-------- ----------
Total current assets.............................. 116,696 1,534,559
Equipment, net (note 2)..................................... 484,240 714,205
-------- ----------
Total assets...................................... $600,936 $2,248,764
======== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 35,061 $ 118,241
Accrued liabilities....................................... 11,731 159,366
Income taxes payable...................................... 111,314 316,456
Deferred revenue.......................................... -- 14,388
-------- ----------
Total current liabilities......................... 158,106 608,451
Stockholders' equity (note 5):
Common stock, no par value, 100,000 shares authorized,
10,895 and 11,092 shares issued and outstanding........ 70,918 426,129
Retained earnings......................................... 371,912 1,214,184
-------- ----------
Total stockholders' equity........................ 442,830 1,640,313
Commitments (note 4)
-------- ----------
Total liabilities and stockholders' equity........ $600,936 $2,248,764
======== ==========
</TABLE>

See accompanying notes to financial statements.

F-122
<PAGE> 207

INTERNET SERVERS, INC.

STATEMENTS OF OPERATIONS
PERIOD FROM INCEPTION (AUGUST 23, 1995) TO DECEMBER 31, 1995 AND
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 23,
1995) TO
DECEMBER 31,
1995 1996 1997
------------ ---------- ----------
<S> <C> <C> <C>
Revenue:
Enhanced services................................... $48,380 $1,507,875 $3,476,045
Internet services................................... -- -- 704,187
Other............................................... 2,520 -- 211,962
------- ---------- ----------
Total revenue............................... 50,900 1,507,875 4,392,194
======= ========== ==========
Operating costs and expenses:
Enhanced and internet services operating costs...... 8,240 631,111 1,820,757
Selling, general and administrative................. 35,698 166,751 721,337
Depreciation........................................ 5,728 90,343 259,984
------- ---------- ----------
Total costs and expenses.................... 49,666 888,205 2,802,078
------- ---------- ----------
Earnings from operations.................... 1,234 619,670 1,590,116
Other income, net..................................... -- 322 26,215
------- ---------- ----------
Earnings before income taxes................ 1,234 619,992 1,616,331
Income tax expense (note 3)........................... -- (111,314) (602,059)
------- ---------- ----------
Net earnings................................ $ 1,234 $ 508,678 $1,014,272
======= ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-123
<PAGE> 208

INTERNET SERVERS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (AUGUST 23, 1995) TO DECEMBER 31, 1995 AND
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
COMMON STOCK
------------------ RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ -------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCES AT INCEPTION......................... -- $ -- $ -- $ --
Issuances of common stock for cash............ 9,800 13,000 -- 13,000
Net earnings.................................. -- -- 1,234 1,234
------ -------- ---------- ----------
BALANCES AT DECEMBER 31, 1995................. 9,800 13,000 1,234 14,234
Issuance of common stock for services......... 1,095 57,918 -- 57,918
Dividends paid in cash........................ -- -- (138,000) (138,000)
Net earnings.................................. -- -- 508,678 508,678
------ -------- ---------- ----------
BALANCES AT DECEMBER 31, 1996................. 10,895 70,918 371,912 442,830
Issuance of common stock for services......... 197 355,211 -- 355,211
Dividends paid in cash........................ -- -- (172,000) (172,000)
Net earnings.................................. -- -- 1,014,272 1,014,272
------ -------- ---------- ----------
BALANCES AT DECEMBER 31, 1997................. 11,092 $426,129 $1,214,184 $1,640,313
====== ======== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-124
<PAGE> 209

INTERNET SERVERS, INC.

STATEMENTS OF CASH FLOWS
PERIOD FROM INCEPTION (AUGUST 23, 1995) TO DECEMBER 31, 1995 AND
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 23,
1995) TO
DECEMBER 31,
1995 1996 1997
------------ --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings......................................... $ 1,234 $ 508,678 $1,014,272
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation...................................... 5,728 90,343 259,984
Provision for bad debts........................... -- -- 58,371
Common stock issued for services.................. -- 57,918 355,211
Changes in operating assets and liabilities:
Receivables..................................... (12,611) (86,064) (247,267)
Prepaid expenses and other...................... -- -- (85,478)
Accounts payable................................ 13,224 21,837 83,180
Accrued liabilities............................. 4,896 6,835 147,635
Income taxes payable............................ -- 111,314 205,142
Deferred revenue................................ -- -- 14,388
-------- --------- ----------
Net cash provided by operating activities.... 12,471 710,861 1,805,438
-------- --------- ----------
Cash flows from investing activities -- purchases of
equipment............................................ (35,144) (545,167) (489,949)
-------- --------- ----------
Cash flows from financing activities:
Borrowings on debt................................... 7,000 -- --
Repayments of debt................................... -- (7,000) --
Proceeds from issuance of common stock............... 13,000 -- --
Dividends............................................ -- (138,000) (172,000)
Net change in cash overdraft......................... 2,673 (2,673) --
-------- --------- ----------
Net cash provided (used) by financing
activities................................. 22,673 (147,673) (172,000)
-------- --------- ----------
Increase in cash and cash equivalents........ -- 18,021 1,143,489
Cash and cash equivalents at beginning of period....... -- -- 18,021
-------- --------- ----------
Cash and cash equivalents at end of period............. $ -- $ 18,021 $1,161,510
======== ========= ==========
Supplemental disclosure of cash flow information --
cash paid during the year for income taxes........... $ -- $ 40,000 $ 349,743
======== ========= ==========
</TABLE>

See accompanying notes to financial statements.

F-125
<PAGE> 210

INTERNET SERVERS, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Internet Servers, Inc. (the Company) was incorporated in the State of Utah
on August 23, 1995. The Company's business consists of providing regional
internet enhanced services and consulting to customers in Utah and throughout
the Western states.

Effective December 31, 1997, Verio Inc. acquired 100% of the outstanding
common stock of the Company.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.

Revenue Recognition

Revenue related to enhanced and internet services is recognized as the
services are provided. Enhanced services consists primarily of web hosting
services to customers. The Company records deferred revenue for accounts billed
and/or collected in advance.

Revenue from hardware and software sales is recognized upon shipment of the
respective products if the Company's future obligations are not significant and
collectibility is probable.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
provided over the estimated useful lives of the assets ranging from three to
seven years using the straight-line method. Costs for normal repairs and
maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations including goodwill when indications of impairment are
present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value less costs to sell.

Income Taxes

From inception to September 1, 1996, the Company elected to be treated as a
subchapter S Corporation for income tax purposes. Accordingly, taxable income
through September 1, 1996 was included in the income tax returns of the
shareholders. On September 1, 1996, the Company converted to a C Corporation.

F-126
<PAGE> 211
INTERNET SERVERS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the difference is expected to reverse.

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1996 and 1997 approximate their
carrying values based on their terms and interest rates. The use of different
market assumptions and/or estimation methodologies may have a significant effect
on the estimated fair values.

Customers who operate in Utah represent substantially all of the Company's
customer base and accounts receivable. However, no single customer comprised
more than 10% of accounts receivable or total revenue as of or for the years
ended December 31, 1995, 1996 or 1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Internet and computer equipment............................. $561,296 $1,044,691
Furniture and office equipment.............................. 19,015 25,569
-------- ----------
580,311 1,070,260
Less accumulated depreciation and amortization.............. (96,071) (356,055)
-------- ----------
$484,240 $ 714,205
======== ==========
</TABLE>

(3) INCOME TAXES

Income tax expense consists of the following for the years ended December
31:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Current:
Federal...................................... $ 91,314 $548,794
State........................................ 20,000 53,265
-------- --------
$111,314 $602,059
======== ========
</TABLE>

Income tax expense for the years ended December 31 differs from the amounts
computed using the federal statutory tax rate of 34% to earnings before income
taxes as follows:

<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Expected tax expense........................................ $ 210,797 $549,553
State income taxes, net of federal benefit.................. 20,460 53,341
S Corporation taxable income................................ (120,693) --
Other....................................................... 750 (835)
--------- --------
Actual income tax expense......................... $ 111,314 $602,059
========= ========
</TABLE>

F-127
<PAGE> 212
INTERNET SERVERS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Temporary differences in the bases of assets and liabilities for financial
statement and income tax purposes are not significant as of December 31, 1996
and 1997.

(4) COMMITMENTS

The Company leases certain computer equipment and office space under
noncancelable operating leases expiring at various dates through 2000. Future
minimum annual lease payments under noncancelable operating leases for each of
the years ending December 31 are as follows:

<TABLE>
<S> <C>
1998.............................................. $359,139
1999.............................................. 345,684
2000.............................................. 148,654
--------
Total minimum payments............................ $853,477
========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 was $14,500 and
$241,402, respectively.

(5) STOCKHOLDERS' EQUITY

On October 21, 1996, the Company entered into an employment agreement with
an officer. The agreement included a compensation and benefit package which also
included a long-term incentive provision consisting of the granting of shares of
the Company's common stock equal to two percent of the total common shares
outstanding. As of December 31, 1996, 25 shares had been issued resulting in
compensation expense of $45,078 based on the estimated fair value of the stock,
as determined by the Company's Board of Directors.

In accordance with the acquisition agreement between the Company and Verio
Inc., the unvested shares under the employment agreement were fully vested at
December 31, 1997. An additional 197 shares were issued as of December 31, 1997
and compensation expense of $355,211 was recognized by the Company based on the
estimated fair value of the stock using the acquisition price in the Verio Inc.
transaction.

F-128
<PAGE> 213

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

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

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

KPMG Peat Marwick LLP

Denver, Colorado
March 13, 1998

F-129
<PAGE> 214

NSNET, INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

ASSETS (NOTE 3)

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Current assets:
Cash...................................................... $ 4,188 $ 20,169
Receivables:
Trade, net of allowance for doubtful accounts of $3,133
and $12,158 in 1996 and 1997, respectively............ 27,494 85,881
Other.................................................. -- 20,377
Prepaid expenses and other................................ 124,829 333,130
-------- --------
Total current assets.............................. 156,511 459,557
Equipment, net (note 2)..................................... 177,410 378,874
Other assets................................................ -- 67,665
-------- --------
Total assets...................................... $333,921 $906,096
======== ========

LIABILITIES AND OWNER'S AND STOCKHOLDER'S EQUITY

Current liabilities:
Cash overdraft............................................ $ 41,057 $ --
Accounts payable.......................................... 7,614 94,252
Accrued liabilities....................................... 37,778 44,866
Revolving lines of credit (note 3)........................ -- 200,000
Current portion of capital lease obligations (note 4)..... -- 34,231
Deferred revenue and customer advances.................... 42,827 82,699
-------- --------
Total current liabilities......................... 129,276 456,048
Capital lease obligations, less current portion (note 4).... -- 61,636
-------- --------
Total liabilities................................. 129,276 517,684
Owner's and Stockholder's equity:
Owner's equity............................................ 204,645 --
Common stock, no par value, 2,000,000 shares authorized,
100,000 shares issued and outstanding at December 31,
1997................................................... -- 204,645
Retained earnings......................................... -- 183,767
-------- --------
Total owner's and stockholder's equity............ 204,645 388,412
Commitments (note 4)
-------- --------
Total liabilities and owner's and stockholder's
equity.......................................... $333,921 $906,096
======== ========
</TABLE>

See accompanying notes to financial statements.

F-130
<PAGE> 215

NSNET, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Revenue:
Internet services......................................... $887,939 $1,832,374
Other..................................................... -- 14,550
-------- ----------
Total revenue..................................... 887,939 1,846,924
-------- ----------
Operating expenses:
Internet services operating costs......................... 210,517 471,247
Selling, general and administrative....................... 485,128 938,523
Depreciation.............................................. 61,106 126,301
-------- ----------
Total operating expenses.......................... 756,751 1,536,071
-------- ----------
Earnings from operations.......................... 131,188 310,853
Other income (expense), net................................. 1,885 (5,508)
-------- ----------
Net earnings...................................... $133,073 305,345
======== ==========
Pro forma information:
Historical net earnings................................... 133,073 305,345
Pro forma adjustment for income tax expense............... (51,000) (116,000)
-------- ----------
Pro forma net earnings............................ $ 82,073 $ 189,345
======== ==========
</TABLE>

See accompanying notes to financial statements.

F-131
<PAGE> 216

NSNET, INC.

STATEMENTS OF OWNER'S AND STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
TOTAL
OWNER'S COMMON RETAINED STOCKHOLDER'S
EQUITY STOCK EARNINGS EQUITY
--------- -------- --------- -------------
<S> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996..................... $ 75,037 $ -- $ -- $ 75,037
Distributions................................. (3,465) -- -- (3,465)
Net earnings.................................. 133,073 -- -- 133,073
--------- -------- --------- ---------
BALANCES AT DECEMBER 31, 1996................... 204,645 -- -- 204,645
Issuance of common stock upon incorporation
(note 1)................................... (204,645) 204,645 -- --
Distributions................................. -- -- (121,578) (121,578)
Net earnings.................................. -- -- 305,345 305,345
--------- -------- --------- ---------
BALANCES AT DECEMBER 31, 1997................... $ -- $204,645 $ 183,767 $ 388,412
========= ======== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-132
<PAGE> 217

NSNET, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 133,073 $ 305,345
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation........................................... 61,106 126,301
Provision for bad debts................................ 3,133 24,334
Changes in operating assets and liabilities:
Receivables.......................................... (17,073) (103,098)
Prepaid expenses and other........................... (124,829) (208,301)
Accounts payable and accrued liabilities............. 26,911 93,726
Deferred revenue and customer advances............... 25,647 39,872
--------- ---------
Net cash provided by operating activities......... 107,968 278,179
--------- ---------
Cash flows from investing activities:
Purchases of equipment.................................... (141,372) (217,958)
Increase in other assets.................................. -- (67,665)
--------- ---------
Net cash used by investing activities............. (141,372) (285,623)
--------- ---------
Cash flows from financing activities:
Cash overdraft............................................ 41,057 (41,057)
Borrowings under revolving lines of credit................ -- 240,000
Repayments under revolving lines of credit................ -- (40,000)
Principal payments under capital lease obligations........ -- (13,940)
Distributions............................................. (3,465) (121,578)
--------- ---------
Net cash provided by financing activities......... 37,592 23,425
--------- ---------
Increase in cash.................................. 4,188 15,981
Cash at beginning of year................................... -- 4,188
--------- ---------
Cash at end of year......................................... $ 4,188 $ 20,169
========= =========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ -- $ 5,508
========= =========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations................ $ -- $ 109,807
========= =========
</TABLE>

See accompanying notes to financial statements.

F-133
<PAGE> 218

NSNET, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

NSNet, Inc. (the Company) was incorporated as a subchapter S Corporation in
the State of California on January 1, 1997. Prior to incorporation, the Company
was operating as NextGen Systems Internet Services, a sole proprietorship formed
in 1992. All assets and liabilities of the sole proprietorship were contributed
to the Company upon incorporation and recorded at historical cost. The Company
provides internet access services to customers in California.

Effective February 27, 1998, Verio Inc. acquired 100% of the outstanding
common stock of the Company.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for accounts billed and/or collected in advance.

Equipment

Equipment, including assets held under capital leases, is stated at cost,
less accumulated depreciation. Depreciation is recorded using the straight-line
method over the shorter of the estimated useful lives of the related assets or
the lease term, which is three years. Costs for normal repairs and maintenance
are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Income Taxes

No provision for income taxes has been included in the accompanying
financial statement for 1996 or 1997 due to the Company's status as a sole
proprietorship and subchapter S Corporation. Accordingly, net earnings as of
December 31, 1996 were included in owner's equity and taxable income has been
included in the tax returns of the owner and stockholder. However, pro forma
information has been included in the accompanying statements of operations to
reflect a pro forma adjustment for income tax expense as if the Company had been
a separate taxable entity subject to federal and state income taxes for both
years presented.

Concentration of Credit Risk and Financial Instruments

F-134
<PAGE> 219
NSNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

values of all financial instruments as of December 31, 1996 and 1997 approximate
their carrying values based on their terms and interest rates. The use of
different market assumptions and/or estimation methodologies may have a
significant effect on the estimated fair values.

Customers who operate in California represent substantially all of the
Company's customer base. No single customer comprised more than 10% of accounts
receivable or total revenue as of or for the years ended December 31, 1996 or
1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Internet and computer equipment............................. $255,112 $ 568,239
Furniture................................................... 10,000 24,638
-------- ---------
265,112 592,877
Less accumulated depreciation............................... (87,702) (214,003)
-------- ---------
$177,410 $ 378,874
======== =========
</TABLE>

Equipment includes assets held under capital leases with a net book value
of $94,248 at December 31, 1997.

(3) DEBT

At December 31, 1997, the Company had a $150,000 unsecured revolving line
of credit agreement with a bank, under which $100,000 was outstanding.
Borrowings under the line bear interest at the bank's prime rate plus 2.975%
(11.475% at December 31, 1997), and are due in 1998. The agreement included
various restrictive covenants including limitations on indebtedness and payment
of dividends. As of December 31, 1997, the Company was not in compliance with
the restrictions on additional indebtedness. All borrowings under this line were
paid in full subsequent to the acquisition by Verio, Inc.

At December 31, 1997, the Company had an additional $125,000 revolving line
of credit agreement with a second bank, secured by substantially all of the
assets of the Company, under which $100,000 was outstanding. Borrowings under
the line bear interest at the bank's prime rate plus 1.5% (10% at December 31,
1997), and are due in 1998.

(4) COMMITMENTS

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2002. Future

F-135
<PAGE> 220
NSNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

minimum annual lease payments under capital and noncancelable operating leases
for each of the years ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998........................................................ $ 43,434 $ 95,767
1999........................................................ 43,434 110,092
2000........................................................ 23,227 114,004
2001........................................................ -- 118,862
2002........................................................ -- 108,956
-------- --------
Total minimum payments.................................... 110,095 $547,681
========
Less amount representing interest........................... (14,228)
--------
Present value of net minimum lease payments............... 95,867
Less current portion........................................ (34,231)
--------
$ 61,636
========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 totaled $19,801
and $34,082, respectively.

F-136
<PAGE> 221

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of Access One, Inc. as of
December 31, 1997 and the related statements of operations and accumulated
deficit, and cash flows for the year then ended. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Access One, Inc. as of
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.

KPMG Peat Marwick LLP

Denver, Colorado
April 9, 1998

F-137
<PAGE> 222

ACCESS ONE, INC.

BALANCE SHEET
DECEMBER 31, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash...................................................... $ 259,144
Trade receivables, net of allowance for doubtful accounts
of $148,040 (note 3)................................... 344,773
Inventory................................................. 40,635
Prepaid expenses and other................................ 105,365
----------
Total current assets.............................. 749,917
Equipment, net (notes 2 and 3).............................. 678,752
Other assets................................................ 9,853
----------
Total assets...................................... $1,438,522
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Revolving line of credit.................................. $ 110,000
Accounts payable:
Trade.................................................. 144,297
Related party (note 5)................................. 273,306
Accrued liabilities....................................... 376,330
Notes payable (note 3).................................... 88,550
Current portion of capital lease obligations (note 4)..... 8,858
Note payable to related party (note 5).................... 32,194
Deferred revenue.......................................... 294,266
----------
Total current liabilities......................... 1,327,801
Capital lease obligations, less current portion (note 4).... 6,812
----------
Total liabilities................................. 1,334,613
Redeemable preferred stock, $0.01 par value, 500,000 shares
authorized, 200,000 shares issued and outstanding (note
6)........................................................ 508,748
Stockholders' deficit (note 6):
Common stock, $0.01 par value, 2,000,000 shares
authorized, 800,000 shares issued and outstanding...... 8,000
Additional paid-in capital................................ 85,476
Accumulated deficit....................................... (498,315)
----------
Total stockholders' deficit....................... (404,839)
Commitments (note 4)
----------
Total liabilities and stockholders' deficit....... $1,438,522
==========
</TABLE>

See accompanying notes to financial statements.

F-138
<PAGE> 223

ACCESS ONE, INC.

STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
Revenue:
Internet services......................................... $2,485,583
Enhanced services......................................... 702,639
Computer hardware and software sales...................... 303,465
Other..................................................... 27,019
----------
Total revenue..................................... 3,518,706
----------
Operating expenses:
Internet and enhanced services operating costs (note 5)... 613,084
Cost of hardware and software sales....................... 226,205
Selling, general and administrative (note 5).............. 2,922,073
Depreciation.............................................. 245,003
----------
Total operating expenses.......................... 4,006,365
----------
Loss from operations.............................. (487,659)
Other expense:
Interest expense.......................................... (21,833)
Other, net................................................ (3,808)
----------
Net loss.......................................... $ (513,300)
==========
Retained earnings at beginning of year...................... 14,985
Accumulated deficit at end of year.......................... (498,315)
==========
</TABLE>

See accompanying notes to financial statements.

F-139
<PAGE> 224

ACCESS ONE, INC.

STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(513,300)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation......................................... 245,003
Provision for bad debts.............................. 386,983
Changes in operating assets and liabilities:
Receivables....................................... (445,284)
Inventory......................................... (40,635)
Prepaid expenses and other current assets......... (96,000)
Other assets...................................... (9,708)
Accounts payable and accrued liabilities.......... 541,280
Deferred revenue.................................. 148,798
---------
Net cash provided by operating activities.... 217,137
---------
Cash flows from investing activities -- purchase of
equipment................................................. (559,530)
---------
Cash flows from financing activities:
Borrowings under revolving line of credit................. 110,000
Borrowings under note payable............................. 127,916
Principal payments on note payable........................ (39,366)
Borrowings under notes to related parties................. 6,965
Principal payments under capital lease obligations........ (15,501)
---------
Net cash provided by financing activities.... 190,014
---------
Net decrease in cash......................... (152,379)
Cash at beginning of year................................... 411,523
---------
Cash at end of year......................................... $ 259,144
=========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 21,822
=========
</TABLE>

See accompanying notes to financial statements.

F-140
<PAGE> 225

ACCESS ONE, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Access One, Inc. (the Company) was originally organized as a limited
liability company on July 1, 1994. The Company reincorporated on December 9,
1996 as a C corporation in the state of Washington. The Company provides
internet access and enhanced services and computer hardware and software sales
to customers primarily in Washington.

Effective February 27, 1998, Verio Inc. (Verio) acquired all of the
outstanding common stock of the Company, resulting in 100% ownership (see Note
6).

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
recorded using the straight-line method over the shorter of the estimated useful
lives of the related assets or the lease terms, which range from three to five
years. Costs for normal repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Revenue Recognition

Internet and enhanced services are recognized as the services are provided.
Enhanced services consist primarily of web hosting and collocation services to
customers. The Company records deferred revenue for amounts billed and/or
collected in advance.

Revenue from hardware sales is recognized upon shipment of the respective
products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

F-141
<PAGE> 226
ACCESS ONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company has a net operating loss carryforward for income tax purposes
of approximately $337,000 which expires in 2012. No tax benefit has been
recorded by the Company in 1997 due to the Company's net loss and the
uncertainty regarding the ultimate utilization of such loss carryforward. The
Company also has a deferred tax asset related to the allowance for doubtful
accounts of approximately $56,000. A valuation allowance has been recorded for
the entire balance of the deferred tax asset related to the carryforward and the
allowance for doubtful accounts. Other temporary differences between financial
statement and income tax bases of assets and liabilities are not significant.

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1997 approximate their carrying values
based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

Customers who operate in Washington represent substantially all of the
Company's customer base. No single customer comprised more than 10% of revenue
or accounts receivable as of or for the year ended December 31, 1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31, 1997:

<TABLE>
<S> <C>
Internet and computer equipment........................... $ 926,175
Furniture and office equipment............................ 120,657
---------
1,046,832
Less accumulated depreciation and amortization.............. (368,080)
---------
$ 678,752
=========
</TABLE>

Equipment includes assets held under capital lease with a net book value of
$12,990 at December 31, 1997.

(3) DEBT

Lines of credit and notes payable consist of the following as of December
31, 1997:

<TABLE>
<S> <C>
Revolving line of credit, maximum credit available of
$300,000, bearing interest at 1.5% above the bank's prime
lending rate, (10% at December 31, 1997), due in 1998, and
secured by accounts receivable............................ $ 110,000
Notes payable, bearing interest at 10.25%, due on demand, or
if no demand is made, in monthly payments of principal and
interest of $5,945 through April, 1999, and secured by
certain equipment of the Company.......................... 88,550
---------
198,550
Less current portion........................................ (198,550)
---------
Long-term debt, less current portion...................... $ --
=========
</TABLE>

The Company's revolving line of credit includes various restrictive
covenants including limitations on indebtedness and maintaining a specified debt
to equity ratio. As of December 31, 1997, the Company was not

F-142
<PAGE> 227
ACCESS ONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

in compliance with limitations placed by the debt to equity ratio. All
borrowings under the line were repaid upon completion of the buyout by Verio
Inc. in February 1998.

(4) COMMITMENTS

Leases

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 1999. Future minimum annual lease
payments under noncancelable capital and operating leases for each of the years
ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998.................................... $ 8,280 $80,808
1999.................................... 7,589 1,512
------- -------
Total minimum payments................ $15,869 $82,320
======= =======
Less amount representing interest....... (199)
-------
Present value of net minimum lease
payments.............................. 15,670
Less current portion.................... (8,858)
-------
$ 6,812
=======
</TABLE>

Rent expense for the year ended December 31, 1997 totaled $219,500.

The Company has commitments with two different telecommunications companies
to receive future services from such companies. Future payments under these
agreements total $8,200 per month through September 1999.

(5) TRANSACTIONS WITH RELATED PARTIES

During 1997, the Company received customer service, technical support, and
backbone transport services provided by Verio. Total amounts charged to the
Company by Verio in this manner were $79,421 included in internet and enhanced
services operating costs and $178,969 included in selling, general, and
administrative expenses. Verio also purchased approximately $14,916 of equipment
on behalf of the Company. Amounts due to related party at December 31, 1997
relate to these services and purchases of equipment and are non interest
bearing.

Note payable to related party is a non interest bearing, unsecured note
payable to the majority stockholder of the Company.

(6) REDEEMABLE PREFERRED STOCK

During 1996, the Company issued 200,000 shares of redeemable, convertible
Series A preferred stock to Verio. The preferred shares are convertible into
common shares on a one for one basis and are mandatorily redeemable in 2002. In
connection with the Verio acquisition disclosed in note 1, the preferred shares
were converted to common stock.

F-143
<PAGE> 228
ACCESS ONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(7) EMPLOYEE BENEFIT PLAN

The Company sponsors a 401(k) Plan (the Plan) for all full time employees.
The Company makes matching contributions of 25% of employee contributions up to
6% of the respective employee's salary. During 1997 the Company made
contributions to the Plan totaling $11,876.

F-144
<PAGE> 229

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of STARnet, L.L.C. as of
December 31, 1997 and the related statements of operations, members' equity and
cash flows for the year then ended. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of STARnet, L.L.C. as of
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.

KPMG Peat Marwick LLP

Denver, Colorado
March 27, 1998

F-145
<PAGE> 230

STARNET, L.L.C.

BALANCE SHEET
DECEMBER 31, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash...................................................... $210,089
Trade receivables, net of allowance for doubtful accounts
of $22,944............................................. 111,541
Inventory................................................. 69,089
Prepaid expenses and other................................ 18,779
--------
Total current assets.............................. 409,498
Equipment, net (note 2)..................................... 208,336
Other assets................................................ 4,583
--------
Total assets...................................... $622,417
========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 31,371
Accrued liabilities....................................... 12,895
Deferred revenue.......................................... 371,608
--------
Total current liabilities......................... 415,874
Members' equity............................................. 206,543
Commitments (note 3)
--------
Total liabilities and members' equity............. $622,417
========
</TABLE>

See accompanying notes to financial statements.

F-146
<PAGE> 231

STARNET, L.L.C.

STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
Revenue:
Internet services......................................... $1,201,504
Computer hardware sales................................... 386,376
Other..................................................... 13,094
----------
Total revenue..................................... 1,600,974
----------
Operating expenses:
Internet services operating costs......................... 397,019
Cost of hardware sales.................................... 319,486
Selling, general and administrative....................... 570,461
Depreciation.............................................. 155,968
----------
Total operating expenses.......................... 1,442,934
----------
Earnings from operations.......................... 158,040
Other income (expense):
Interest income........................................... 9,411
Other, net................................................ (6,282)
----------
Net earnings...................................... $ 161,169
==========
Pro forma information:
Historical net earnings................................... 161,169
Pro forma adjustment for income tax expense............... (61,000)
----------
Pro forma net earnings............................ $ 100,169
==========
</TABLE>

See accompanying notes to financial statements.

F-147
<PAGE> 232

STARNET, L.L.C.

STATEMENT OF MEMBERS' EQUITY
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
Balance at January 1, 1997.................................. $ 290,109
Distributions to members.................................... (244,735)
Net earnings................................................ 161,169
---------
Balance at December 31, 1997................................ $ 206,543
=========
</TABLE>

See accompanying notes to financial statements.

F-148
<PAGE> 233

STARNET, L.L.C.

STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 161,169
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation........................................... 155,968
Provision for bad debts................................ 44,484
Loss on sale of assets................................. 6,282
Changes in operating assets and liabilities:
Receivables.......................................... (40,725)
Inventory............................................ 50,205
Prepaid expenses and other current assets............ (13,944)
Other assets......................................... 834
Accounts payable and accrued liabilities............. (54,304)
Deferred revenue..................................... (3,346)
---------
Net cash provided by operating activities......... 306,623
---------
Cash flows from investing activities -- purchase of
equipment................................................. (117,202)
---------
Cash flows from financing activities -- distributions to
members................................................... (244,735)
---------
Net decrease in cash.............................. (55,314)
Cash at beginning of year................................... 265,403
---------
Cash at end of year......................................... $ 210,089
=========
</TABLE>

See accompanying notes to financial statements.

F-149
<PAGE> 234

STARNET, L.L.C.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

STARnet, L.L.C. (the Company) was originally organized as a limited
liability company in the State of Missouri as Internetix, L.L.C. on June 21,
1994. On August 18, 1997, the Company changed its name to STARnet, L.L.C. The
Company provides internet access services and computer hardware sales to
customers primarily in Missouri and Illinois.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
recorded using a method that estimates the straight-line method over the
estimated useful lives of the related assets, which is three years. Costs for
normal repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from hardware sales is recognized upon shipment of the respective
products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

No provision for income taxes has been included in the accompanying
financial statements due to the Company's status as a limited liability
corporation. Accordingly, taxable income has been included in the tax returns of
the members. However, pro forma information has been included in the
accompanying statement of operations to reflect a pro forma adjustment for
income tax expense as if the Company had been a separate taxable entity subject
to federal and state income taxes for the year ended December 31, 1997.

Concentration of Credit Risk and Financial Instruments

F-150
<PAGE> 235
STARNET, L.L.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

terms and interest rates. The use of different market assumptions and/or
estimation methodologies may have a significant effect on the estimated fair
values.

Customers who operate in Missouri and Illinois represent substantially all
of the Company's customer base. Three customers comprised approximately 38% of
accounts receivable as of December 31, 1997. However, no single customer
comprised more than 10% of revenue for the year ended December 31, 1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31, 1997:

<TABLE>
<S> <C>
Internet and computer equipment............................. $ 503,324
Furniture and office equipment.............................. 2,750
---------
506,074
Less accumulated depreciation and amortization.............. (297,738)
---------
$ 208,336
=========
</TABLE>

(3) COMMITMENTS

The Company leases office space and equipment under noncancelable leases
expiring at various dates through 2002. Future minimum annual lease payments
under noncancelable operating leases for each of the years ending December 31
are as follows:

<TABLE>
<S> <C>
1998............................................... $32,873
1999............................................... 26,236
2000............................................... 2,716
2001............................................... 870
2002............................................... 400
-------
Total minimum payments................... $63,095
=======
</TABLE>

Rent expense for the year ended December 31, 1997 totaled $39,630.

In addition, the Company has a verbal agreement to guarantee certain
obligations of a related party with a telecommunications company for one year in
the amount of $250,000.

F-151
<PAGE> 236

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

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

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

KPMG Peat Marwick LLP

Denver, Colorado
March 27, 1998

F-152
<PAGE> 237

COMPUTING ENGINEERS INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

ASSETS (NOTE 3)

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash...................................................... $ -- $ 15,995
Trade receivables, net of allowance for doubtful accounts
of $133,739 and $62,085 in 1996 and 1997,
respectively........................................... 340,799 429,171
Inventory................................................. -- 37,411
Prepaid expenses and other................................ 2,014 2,014
---------- ----------
Total current assets.............................. 342,813 484,591
Equipment, net (note 2)..................................... 821,637 1,049,662
Other assets, net........................................... -- 20,420
---------- ----------
Total assets...................................... $1,164,450 $1,554,673
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Cash overdraft............................................ $ 54,352 $ --
Accounts payable.......................................... 355,223 225,153
Accrued liabilities....................................... 5,252 33,373
Current portion of note payable (note 3).................. -- 84,352
Current portion of obligations under capital leases (note
4)..................................................... 193,873 223,826
Deferred revenue.......................................... 146,010 249,817
---------- ----------
Total current liabilities......................... 754,710 816,521
Note payable, less current portion (note 3)................. -- 585,002
Capital lease obligations, less current portion (note 4).... 49,776 28,811
---------- ----------
Total liabilities................................. 804,486 1,430,334
Stockholders' equity:
Common stock, $10 par value, 1,000 shares authorized, 100
shares issued and outstanding.......................... 1,000 1,000
Additional paid-in capital................................ 5,000 5,000
Retained earnings......................................... 353,964 118,339
---------- ----------
Total stockholders' equity........................ 359,964 124,339
---------- ----------
Commitments (note 4)
Total liabilities and stockholders' equity........ $1,164,450 $1,554,673
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-153
<PAGE> 238

COMPUTING ENGINEERS INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Revenue:
Internet services......................................... $2,326,898 $3,321,562
Consulting services....................................... -- 162,683
Computer hardware and software sales...................... 88,664 537,057
Other..................................................... -- 58,176
---------- ----------
Total revenue..................................... 2,415,562 4,079,478
---------- ----------
Operating expenses:
Internet services operating costs......................... 606,522 632,653
Costs of hardware and software sales...................... 148,770 392,676
Marketing and selling..................................... 47,155 299,990
General and administrative................................ 1,179,149 2,041,265
Depreciation and amortization............................. 144,953 329,296
---------- ----------
Total operating expenses.......................... 2,126,549 3,695,880
---------- ----------
Earnings from operations.......................... 289,013 383,598
Interest expense............................................ (19,254) (95,223)
---------- ----------
Net earnings...................................... $ 269,759 $ 288,375
========== ==========
Pro forma information:
Historical net earnings................................... $ 269,759 $ 288,375
Pro forma adjustment for income tax expense............... (103,000) (110,000)
---------- ----------
Pro forma net earnings............................ $ 166,759 $ 178,375
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-154
<PAGE> 239

COMPUTING ENGINEERS INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996............ 100 $1,000 $5,000 $ 207,104 $ 213,104
Distributions to stockholders.......... -- -- -- (122,899) (122,899)
Net earnings........................... -- -- -- 269,759 269,759
--- ------ ------ --------- ---------
BALANCES AT DECEMBER 31, 1996.......... 100 1,000 5,000 353,964 359,964
Distributions to stockholders.......... -- -- -- (524,000) (524,000)
Net earnings........................... -- -- -- 288,375 288,375
--- ------ ------ --------- ---------
BALANCES AT DECEMBER 31, 1997.......... 100 $1,000 $5,000 $ 118,339 $ 124,339
=== ====== ====== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-155
<PAGE> 240

COMPUTING ENGINEERS INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 269,759 $ 288,375
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization.......................... 144,953 329,296
Provision for bad debts................................ 133,739 165,153
Changes in operating assets and liabilities:
Trade receivables.................................... (472,524) (253,525)
Inventory............................................ -- (37,411)
Prepaid expenses and other........................... 142 --
Accounts payable..................................... 355,223 (130,070)
Accrued liabilities.................................. 238 28,121
Deferred revenue..................................... 146,010 103,807
--------- ---------
Net cash provided by operating activities......... 577,540 493,746
--------- ---------
Cash flows from investing activities -- purchases of
equipment................................................. (336,776) (228,892)
--------- ---------
Cash flows from financing activities:
Net change in cash overdraft.............................. (15,314) (54,352)
Borrowings under note payable............................. -- 700,000
Debt issuance costs....................................... -- (20,420)
Principal payments on note payable........................ -- (30,646)
Principal payments on capital lease obligations........... (102,551) (319,441)
Distributions to shareholders............................. (122,899) (524,000)
--------- ---------
Net cash used by financing activities............. (240,764) (248,859)
--------- ---------
Increase in cash.................................. -- 15,995
Cash at beginning of year................................... -- --
--------- ---------
Cash at end of year......................................... $ -- $ 15,995
========= =========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 19,254 $ 95,223
========= =========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations................ $ 346,200 $ 328,429
========= =========
</TABLE>

See accompanying notes to financial statements.

F-156
<PAGE> 241

COMPUTING ENGINEERS INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Computing Engineers Inc. (the Company) was incorporated in the State of
Illinois on November 1, 1993. The Company is a provider of internet access
services to businesses and individuals, primarily in Illinois.

Equipment

Equipment, including any assets held under capital leases, is stated at
cost, less accumulated depreciation and amortization. Depreciation and
amortization is recorded using the straight-line method over the shorter of the
estimated useful lives of the related assets or the lease term, which is three
years. Costs for normal repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). Statement No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at lower of the carrying amount or fair value less
costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from consulting services is recognized when services have been
rendered.

Revenue from hardware and software sales is recognized upon shipment of the
respective products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

No provision for income taxes has been included in the accompanying
financial statements for 1996 or 1997 due to the Company's status as a
subchapter S corporation. Accordingly, taxable income has been included in the
tax returns of the stockholders. However, pro forma information has been
included in the accompanying statements of operations to reflect a pro forma
adjustment for income tax expense as if the Company had been a separate taxable
entity subject to federal and state income taxes for all periods presented.

Concentration of Credit Risk and Financial Instruments

F-157
<PAGE> 242
COMPUTING ENGINEERS INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Internet and computer equipment............................ $ 973,392 $1,522,201
Furniture and office equipment............................. 22,048 30,560
--------- ----------
995,440 1,552,761
Less accumulated depreciation and amortization............. (173,803) (503,099)
--------- ----------
$ 821,637 $1,049,662
========= ==========
</TABLE>

Equipment includes assets owned under capital leases with a net book value
of $305,530 and $474,893 at December 31, 1996 and 1997, respectively.

(3) DEBT

Debt consists of the following as of December 31, 1997:

<TABLE>
<S> <C>
Note payable bearing interest at prime plus 2.75% (11.25% at
December 31, 1997), monthly principal and interest
payments of $11,986 through May 12, 2004, secured by
substantially all the assets of the Company............... $669,354
Less current portion........................................ (84,352)
--------
$585,002
========
</TABLE>

(4) COMMITMENTS

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2005. Future minimum annual lease
payments under capital and noncancelable operating leases for each of the years
ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ----------
<S> <C> <C>
1998........................................................ $ 252,242 $ 234,353
1999........................................................ 29,695 219,153
2000........................................................ -- 192,161
2001........................................................ -- 197,120
2002........................................................ -- 202,079
Thereafter.................................................. -- 472,345
--------- ----------
Total minimum payments.................................... 281,937 $1,517,211
==========
Less amount representing interest........................... (29,300)
---------
Present value of net minimum lease payments............... 252,637
Less current portion........................................ (223,826)
---------
$ 28,811
=========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 was $93,501 and
$134,777, respectively.

F-158
<PAGE> 243

INDEPENDENT AUDITORS' REPORT

The Board of Directors
LI Net, Inc.:

We have audited the accompanying balance sheets of LI Net, Inc. as of April
30, 1997 and January 31, 1998, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years ended April 30,
1996 and 1997 and the nine months ended January 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LI Net, Inc. as of April 30,
1997 and January 31, 1998, and the results of its operations and its cash flows
for the years ended April 30, 1996 and 1997 and the nine months ended January
31, 1998 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
March 27, 1998

F-159
<PAGE> 244

LI NET, INC.

BALANCE SHEETS
APRIL 30, 1997 AND JANUARY 31, 1998

ASSETS

<TABLE>
<CAPTION>
1997 1998
-------- ---------
<S> <C> <C>
Current assets:
Cash...................................................... $ 49,036 $ 24,575
Receivables (note 3):
Trade, net of all allowance for doubtful accounts of
$28,948 and $50,000, respectively..................... 157,643 225,148
Other.................................................. -- 6,000
Prepaid expenses and other................................ 3,850 3,850
-------- ---------
Total current assets.............................. 210,529 259,573
Equipment, net (notes 2 and 3).............................. 355,906 500,654
Other assets................................................ 25,057 28,708
-------- ---------
Total assets...................................... $591,492 $ 788,935
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $171,038 $ 245,777
Accrued liabilities....................................... 13,942 22,521
Current portion of notes payable (note 3):
Bank................................................... -- 22,476
Related party (note 6)................................. 9,038 8,885
Revolving line of credit (note 3)......................... 15,265 39,993
Current portion of obligations under capital leases (note
4)..................................................... 52,090 81,652
Deferred revenue.......................................... 77,766 158,740
-------- ---------
Total current liabilities......................... 339,139 580,044
Notes payable, less current portion (note 3):
Bank...................................................... -- 93,542
Related party (note 6).................................... 126,052 114,029
Capital lease obligations, less current portion (note 4).... 87,826 62,453
-------- ---------
Total liabilities................................. 553,017 850,068
Stockholders' equity (deficit):
Common stock, no par value, 100 shares authorized and
issued................................................. 44,000 44,000
Additional paid-in capital................................ -- 273,100
Retained earnings (deficit)............................... 6,375 (378,233)
Treasury stock -- 5 shares at April 30, 1997, at cost..... (11,900) --
-------- ---------
Total stockholders' equity (deficit).............. 38,475 (61,133)
-------- ---------
Commitments (note 4)
Total liabilities and stockholders' equity
(deficit)....................................... $591,492 $ 788,935
======== =========
</TABLE>

See accompanying notes to financial statements.

F-160
<PAGE> 245

LI NET, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 1996 AND 1997 AND NINE MONTHS ENDED JANUARY 31, 1998

<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Internet services..................................... $608,714 $1,033,595 $1,430,480
Computer hardware sales............................... 152,854 325,723 90,233
-------- ---------- ----------
Total revenue................................. 761,568 1,359,318 1,520,713
-------- ---------- ----------
Operating expenses:
Internet services operating costs..................... 197,025 317,225 551,993
Costs of hardware sold................................ 73,370 156,347 42,987
Selling, general and administrative expenses(note
7)................................................. 358,627 769,898 1,180,146
Depreciation.......................................... 64,470 77,762 100,902
-------- ---------- ----------
Total operating expenses...................... 693,492 1,321,232 1,876,028
Earnings (loss) from operations............... 68,076 38,086 (355,315)
Interest expense........................................ (10,596) (55,325) (29,293)
-------- ---------- ----------
Earnings (loss) before income taxes........... 57,480 (17,239) (384,608)
Income tax expense (note 5)............................. (7,600) -- --
-------- ---------- ----------
Net earnings (loss)........................... $ 49,880 $ (17,239) $ (384,608)
======== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-161
<PAGE> 246

LI NET, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED APRIL 30, 1996 AND 1997 AND NINE MONTHS ENDED JANUARY 31, 1998

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL RETAINED STOCKHOLDERS'
COMMON PAID-IN EARNINGS TREASURY EQUITY
STOCK CAPITAL (DEFICIT) STOCK (DEFICIT)
------- ---------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT MAY 1, 1995............ $44,000 $ -- $ (26,266) $ -- $ 17,734
Purchase of treasury stock......... -- -- -- (10,000) (10,000)
Net earnings....................... -- -- 49,880 -- 49,880
------- -------- --------- -------- ---------
BALANCES AT APRIL 30, 1996......... 44,000 -- 23,614 (10,000) 57,614
Purchase of treasury stock......... -- -- -- (13,800) (13,800)
Issuance of treasury stock for
services (note 7)................ -- -- -- 11,900 11,900
Net loss........................... -- -- (17,239) -- (17,239)
------- -------- --------- -------- ---------
BALANCES AT APRIL 30, 1997......... 44,000 -- 6,375 (11,900) 38,475
Issuance of treasury stock for
services (note 7)................ -- 273,100 -- 11,900 285,000
Net loss........................... -- -- (384,608) -- (384,608)
------- -------- --------- -------- ---------
BALANCES AT JANUARY 31, 1998....... $44,000 $273,100 $(378,233) $ -- $ (61,133)
======= ======== ========= ======== =========
</TABLE>

See accompanying notes to financial statements.

F-162
<PAGE> 247

LI NET, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1996 AND 1997 AND NINE MONTHS ENDED JANUARY 31, 1998

<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)..................................... $ 49,880 $ (17,239) $(384,608)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation......................................... 64,470 77,762 100,902
Provision for bad debts.............................. -- 28,948 50,000
Issuance of treasury stock for services.............. -- 11,900 285,000
Changes in operating assets and liabilities:
Receivables........................................ (66,218) (103,079) (123,505)
Prepaid expenses and other current assets.......... -- (3,850) --
Other assets....................................... (13,602) (6,580) (3,651)
Accounts payable and accrued liabilities........... 88,042 67,313 83,318
Deferred revenue................................... -- 77,766 80,974
--------- --------- ---------
Net cash provided by operating activities....... 122,572 132,941 88,430
--------- --------- ---------
Cash flows from investing activities -- purchases of
equipment............................................... (149,667) (94,633) (182,471)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under revolving lines of credit.............. -- 15,265 24,728
Proceeds from borrowings from bank...................... -- -- 130,000
Principal payments on notes payable to bank............. -- -- (13,982)
Proceeds from borrowings from related parties........... 107,713 -- --
Principal payments on notes payable to related party.... (21,128) (13,677) (12,176)
Principal payments on capital lease obligations......... -- (39,872) (58,990)
Purchase of treasury stock.............................. (10,000) (13,800) --
--------- --------- ---------
Net cash provided (used) by financing
activities.................................... 76,585 (52,084) 69,580
--------- --------- ---------
Net increase (decrease) in cash................. 49,490 (13,776) (24,461)
Cash at beginning of year................................. 13,322 62,812 49,036
--------- --------- ---------
Cash at end of year....................................... $ 62,812 $ 49,036 $ 24,575
========= ========= =========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest....................... $ 10,596 $ 39,621 $ 22,593
========= ========= =========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations.............. $ 32,876 $ 146,912 $ 63,179
========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-163
<PAGE> 248

LI NET, INC.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1996 AND 1997 AND NINE MONTHS ENDED JANUARY 31, 1998

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

LI Net, Inc. (the Company) was incorporated in the State of New York and
provides regional internet access services to customers in New York.

Equipment

Equipment, including assets held under capital leases, is stated at cost,
less accumulated depreciation. Depreciation is recorded using the straight-line
method over the shorter of the estimated useful lives of the related assets or
the lease terms, which range from three to five years. Costs for normal repairs
and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from hardware sales is recognized upon shipment of the respective
products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

Concentration of Credit Risk and Financial Instruments

F-164
<PAGE> 249
LI NET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

(2) EQUIPMENT

Equipment consisted of the following at April 30, 1997 and January 31,
1998:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Internet and computer equipment............................. $ 409,376 $ 641,881
Furniture and office equipment.............................. 67,532 80,677
Leasehold improvements...................................... 32,297 32,297
--------- ---------
509,205 754,855
Less accumulated depreciation and amortization.............. (153,299) (254,201)
--------- ---------
$ 355,906 $ 500,654
========= =========
</TABLE>

Equipment includes assets held under capital leases with a net book value
of approximately $139,000 and $155,000 at April 30, 1997 and January 31, 1998,
respectively.

(3) DEBT

During fiscal 1998, the Company entered into a loan agreement with a bank
and borrowed $130,000. The loan is secured by the Company's equipment, and bears
interest at 8.75%. Principal and interest payments of $2,683 are due monthly
through 2002. At January 31, 1998, the outstanding balance was $116,018.

At April 30, 1997 and January 31, 1998, the Company had a $50,000 revolving
line of credit agreement with a bank, secured by receivables, under which
$15,265 and $39,993 was outstanding, respectively. Borrowings under the line
bear interest at the bank's prime lending rate plus 2% (10.5% at January 31,
1997) and are due in 1998.

Maturities of the line of credit and note payable for each of the years
ending January 31 are as follows:

(4) COMMITMENTS

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2002.

F-165
<PAGE> 250
LI NET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum annual lease payments under capital and noncancelable
operating leases for each of the years ending January 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1999........................................................ $100,042 $ 63,879
2000........................................................ 53,085 47,121
2001........................................................ 17,937 23,386
2002........................................................ 10,060 5,459
-------- --------
Total minimum payments.................................... 181,124 $139,845
========
Less amount representing interest........................... (37,019)
--------
Present value of net minimum lease payments............... 144,105
Less current portion........................................ (81,652)
--------
$ 62,453
========
</TABLE>

Rent expense for the years ended April 30, 1996 and 1997 and nine months
ended January 31, 1998, was $25,335, $35,353, and $52,779 respectively.

(5) INCOME TAXES

Income tax expense (benefit) for the years ended April 30, 1996 and 1997
and nine months ended January 31, 1998 differs from the amounts that would
result from applying the federal statutory rate of 34% as follows:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Expected tax expense (benefit)...................... $19,543 $(5,861) $(130,777)
State income taxes, net of federal benefit.......... 2,300 (690) (15,374)
Nondeductible expenses.............................. -- 622 1,653
Change in valuation allowance for deferred tax
assets............................................ (14,243) 5,929 144,498
------- ------- ---------
Actual income tax expense................. $ 7,600 $ -- $ --
======= ======= =========
</TABLE>

Temporary differences that give rise to the components of deferred tax
assets and liabilities as of April 30, 1997 and January 31, 1998 are as follows:

<TABLE>
<CAPTION>
1997 1998
-------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 12,738 $ 148,824
Accounts receivable, due to allowance for doubtful
accounts for financial statement purposes only......... 11,000 30,000
Other..................................................... 173 140
-------- ---------
Total deferred tax assets......................... 23,911 178,964
Valuation allowance....................................... (5,929) (150,427)
-------- ---------
Net deferred tax assets........................... 17,982 28,537
-------- ---------
Deferred tax liability:
Equipment, due to differences in depreciation for
financial statement and tax purposes................... (17,982) (28,537)
-------- ---------
Net deferred tax asset (liability)................ $ -- $ --
======== =========
</TABLE>

F-166
<PAGE> 251
LI NET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

As of January 31, 1998, the Company has a net operating loss carryforward
of approximately $392,000 for federal income tax purposes which will expire in
2013, if not utilized. A valuation allowance has been recorded for a portion of
the related deferred tax asset due to the uncertainty relating to the
realization of the net operating loss carryforward in the future.

(6) TRANSACTIONS WITH RELATED PARTIES

Notes payable to related party at April 30, 1997 and January 31, 1998
included $93,917 and $89,334, respectively, of unsecured notes due to
stockholders of the Company. The loans bear interest at 10% with the principal
and interest due in total on July 1, 1999 or upon sale of 50% or more of the
stock of the stockholders.

Also included in notes payable to related party at April 30, 1997 and
January 31, 1998 was an unsecured note due to a relative of a stockholder of the
Company. Principal outstanding on the note was $41,176 and $33,580 at April 30,
1997 and January 31, 1998, respectively. The note bears interest at 10% and is
payable in monthly principal and interest payments of $1,062 until 2001.

Maturities of notes payable to related parties for each of the years ending
January 31 are as follows:

(7) STOCKHOLDERS' EQUITY

During the year ended April 30, 1997 and the nine months ended January 31,
1998, the Company issued treasury shares to an officer as compensation for
services. The Company recorded compensation expense of $11,900 and $285,000,
respectively, which, in the opinion of the Company's Board of Directors,
represented fair value of the shares at the date of issuance.

F-167
<PAGE> 252

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 9
Use of Proceeds....................... 19
Dividend Policy....................... 19
Capitalization........................ 20
Dilution.............................. 21
Selected Consolidated Financial
Data................................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 32
Management............................ 48
Certain Transactions.................. 64
Principal Stockholders................ 68
Description of Capital Stock.......... 71
Shares Eligible for Future Sale....... 75
Underwriting.......................... 77
Legal Matters......................... 79
Experts............................... 79
Additional Information................ 79
Glossary of Terms..................... 81
Index to Financial Statements......... F-1
</TABLE>

Until , 1998 (25 days after the commencement of the offering),
all dealers effecting transactions in the Common Stock, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.

======================================================
======================================================

5,000,000 SHARES

VERIO INC.

COMMON STOCK
[VERIO INC. LOGO]
------------
PROSPECTUS
, 1998

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

SALOMON SMITH BARNEY

CREDIT SUISSE FIRST BOSTON

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

======================================================
<PAGE> 253

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, incurred in connection with the sale of
Common Stock being registered (all amounts are estimated except the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee).

<TABLE>
<CAPTION>
ITEM AMOUNT
---- ----------
<S> <C>
SEC registration fee........................................ $ 33,925
NASD filing fee............................................. 12,000
NASDAQ National Market listing fee.......................... 95,000
Printing and engraving expenses............................. 350,000
Legal fees and expenses..................................... 350,000
Accounting fees and expenses................................ 400,000
Blue sky fees and expense................................... 2,000
Transfer agent fees and expenses............................ 2,000
Miscellaneous............................................... 5,075
----------
Total............................................. $1,250,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Reference is made to Section 145 of the General Corporation Law of the
State of Delaware (the "DGCL"), which provides for indemnification of directors,
officers and other employees in certain circumstances, and to Section 102(b)(7)
of the DGCL, which provides for the elimination or limitation of the personal
liability for monetary damages of directors under certain circumstances. Article
Eight of the Certificate of Incorporation of the Company eliminates the personal
liability for monetary damages of directors under certain circumstances and
provides indemnification to directors and officers of the Company to the fullest
extent permitted by the DGCL. Among other things, these provisions provide
indemnification for officers and directors against liabilities for judgments in
and settlements of lawsuits and other proceedings and for the advance and
payment of fees and expenses reasonably incurred by the director or officer in
defense of any such lawsuit or proceeding.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In June and July of 1996, the Registrant issued an aggregate of 6,033,333
shares of Series A Preferred Stock to Centennial Fund IV, L.P., Centennial
Holdings, Inc., Telecom Partners, L.P., Norwest Equity Partners, V and Brooks
Fiber Properties, Inc. for an aggregate of $18,100,001, pursuant to a Series A
Preferred Stock purchase agreement dated June 25, 1996, and Amendment No. 1
thereto, dated July 3, 1996. The transactions were exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act").

In December 1996, the Registrant issued an aggregate of 10,000,000 shares
of Series B Preferred Stock to Centennial Fund IV, L.P., Centennial Fund V,
L.P., Centennial Entrepreneurs Fund V, L.P., Centennial Holdings, Inc., Norwest
Equity Partners, V, Brooks Fiber Properties, Inc., Fleet Venture Resources,
Inc., Fleet Equity Partners VI, L.P., Providence Equity Partners L.P.,
Providence Equity Partners II L.P., Bessemer Venture Partners, WNA, Boston
Capital Ventures III, L.P., BCV Partners WNA, WNA-DMG Investors, LLC, Perkman
Associates, L.P., GC&H Investments and 11 individuals for an aggregate of
$60,000,000, pursuant to a Series B Preferred Stock purchase agreement, dated as
of December 5, 1996. A private placement fee of $1.46 million was paid by the
Registrant to Deutsche Morgan Grenfell. The transaction was exempt from
registration under Section 4(2) of the Securities Act.

II-1
<PAGE> 254

In May 1997, the Registrant issued an aggregate of 2,500,000 shares of
Series C Preferred Stock to Centennial Fund IV, L.P., Centennial Fund V, L.P.,
Centennial Entrepreneurs Fund V, L.P., Centennial Holdings I, LLC, Norwest
Equity Partners, V, Brooks Fiber Properties, Inc., Providence Equity Partners
L.P., Providence Equity Partners II L.P., Boston Capital Ventures III, L.P. and
BCV Partners WNA for an aggregate of $20,000,000, pursuant to a Series C
Preferred Stock purchase agreement dated May 20, 1997. The transaction was
exempt from registration under Section 4(2) of the Securities Act.

In June 1997, the Registrant issued and sold $150,000,000 principal amount
of 13 1/2% Senior Notes Due 2004 (the "1997 Notes") to Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Lazard Freres & Co. LLC
(together, the "1997 Initial Purchasers"). In connection with the issuance and
sale of the 1997 Notes, the Registrant issued warrants (the "Warrants" and
together with the 1997 Notes, the "Units") to the 1997 Initial Purchasers to
purchase an aggregate of 2,112,480 shares of Common Stock at an exercise price
per share of $0.01. The Warrants will become exercisable after the Offering. The
aggregate underwriting discounts paid by the Registrant to the 1997 Initial
Purchasers was $3,500,000. Issuance of the Units to the 1997 Initial Purchasers
was made in reliance on Section 4(2) of the Securities Act. The resale of the
Units by the 1997 Initial Purchasers was made in reliance on Rule 144A under the
Securities Act, Rule 501 under the Securities Act, and Regulation S under the
Securities Act.

During the period from April 1996 through February 1998, the Registrant
granted options to purchase an aggregate of 2,361,250 shares of Common Stock
(options for 2,023,967 shares of which are outstanding, options for 115,933
shares have been exercised and options for 221,350 shares have been forfeited)
to directors, employees and consultants pursuant to the Registrant's 1996 Stock
Option Plan in reliance on Rule 701 promulgated under the Securities Act.

During the period from April 1997 through April 1998, the Registrant
granted options to purchase an aggregate of 630,300 shares of Common Stock
(options for 467,850 shares of which are outstanding, none of which have been
exercised, and options for 162,450 shares of which have been forfeited) to
directors, employees and consultants pursuant to the Registrant's 1997
California Stock Option Plan in reliance on Rule 701 promulgated under the
Securities Act.

During the period of March 1998 through April 3, 1998, the Registrant
granted options to purchase an aggregate of 973,134 shares of Common Stock and
164,977 shares of Series D-1 Preferred Stock (all of which are outstanding) to
employees and consultants pursuant to the Registrant's 1998 Stock Incentive Plan
in reliance on Rule 701 promulgated under the Securities Act.

In January 1998, the Registrant issued an aggregate of 680,000 shares of
Series D-1 Preferred Stock to five investors pursuant to an Agreement and Plan
of Merger dated as of December 31, 1997, in connection with its acquisition of
Internet Servers, Inc. A finders fee of $300,000 was paid by the Registrant to
Daniel & Associates ("Daniels") in connection with this acquisition. The
transaction was exempt from registration under Regulation 506 of the Securities
Act.

In February 1998, the Registrant issued an aggregate of 85,556 shares of
Series D-1 Preferred Stock to a total of two investors in connection with its
Buyout of Signet Partners, Inc. pursuant to an Agreement and Plan of
Reorganization. The transaction was exempt from registration under Regulation
506 of the Securities Act.

In February 1998, the Registrant issued an aggregate of 107,168 shares of
Series D-1 Preferred Stock to a total of two investors in connection with its
Buyout of Internet Engineering Associates, Inc. pursuant to an Agreement and
Plan of Reorganization. The transaction was exempt from registration under
Regulation 506 of the Securities Act.

In February 1998, the Registrant issued an aggregate of 117,642 shares of
Series D-1 Preferred Stock to a total of two* investors in connection with the
acquisition of NSNet, Inc. pursuant to an Agreement and Plan

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

* Shares issued in the acquisition of NSNet, Inc. were issued to two investors
jointly in a single stock certificate.
II-2
<PAGE> 255

of Reorganization. A finders fee of $133,224 was paid by the Registrant to
Daniels in connection with this acquisition. The transaction was exempt from
registration under Regulation 506 of the Securities Act.

In February 1998, the Registrant issued an aggregate of 465,685 shares of
Series D-1 Preferred Stock to a total of 15 investors in connection with its
Buyout of On-Ramp Technologies, Inc. pursuant to an Agreement and Plan of
Reorganization. The transaction was exempt from registration under Section 4(2)
of the Securities Act.

In February 1998, the Registrant issued an aggregate of 228,700 shares of
Series D-1 Preferred Stock to a total of three investors in connection with its
Buyout of Clark Internet Services, Inc. pursuant to an Agreement and Plan of
Reorganization. This transaction was exempt from registration under Section 4(2)
of the Securities Act.

In March 1998, the Registrant issued and sold $175,000,000 principal amount
of 10 3/8% Senior Notes Due 2005 (the "1998 Notes") to Salomon Brothers Inc,
Lazard Freres & Co. LLC, Chase Securities Inc. and BancBoston Securities Inc.
(together, the "1998 Initial Purchasers"). The aggregate underwriting discounts
paid by the Registrant to the 1998 Initial Purchasers was $4,812,500. Issuance
of the 1998 Notes to the 1998 Initial Purchasers was made in reliance on Section
4(2) of the Securities Act. The resale of the 1998 Notes by the 1998 Initial
Purchasers was made in reliance on Rule 144A under the Securities Act, and
Regulation S under the Securities Act.

In April 1998, the Registrant issued an aggregate of 529,762 shares of
Series D-1 Preferred Stock to a total of 45 investors in connection with its
Buyout of Compute Intensive Inc. pursuant to an Agreement and Plan of
Reorganization. This transaction was exempt from registration under Section
3(a)(10) of the Securities Act.

II-3
<PAGE> 256

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement.
3.1** -- Restated Certificate of Incorporation of the Registrant,
as amended.
3.2** -- Certificate of Amendment of Certificate of Incorporation
of the Registrant.
3.3** -- Certificate of Designation Establishing Series D
Preferred Stock of the Registrant.
3.4** -- Bylaws of the Registrant.
4.1* -- Specimen Stock Certificate of the Registrant.
5.1** -- Form of Opinion of Morrison & Foerster LLP.
10.1** -- Indenture, dated as of June 24, 1997, by and among the
Registrant and First Trust National Association (as
trustee).
10.2** -- Warrant Agreement, dated as of June 24, 1997, by and
between First Trust National Association and the
Registrant.
10.3** -- Common Stock Registration Rights Agreement, dated as of
June 17, 1997, by and among the Registrant, Brooks Fiber
Properties, Inc., Norwest Equity Partners V, Providence
Equity Partners, Centennial Fund V, L.P., Centennial Fund
IV, L.P. (as investors) and Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, and Lazard
Freres & Co. LLC (collectively, the "Initial
Purchasers").
10.4** -- Registration Rights Agreement, dated as of June 17, 1997,
by and among the Registrant and the Initial Purchasers.
10.5** -- Lease Agreement, dated as of June 20, 1997, by and
between the Registrant and Highland Park Ventures, LLC,
with respect to the property in Englewood, Colorado,
including the First Amendment to Lease Agreement, dated
as of December 16, 1997.
10.6** -- Lease Agreement, dated as of May 24, 1997, by and between
the Registrant and IM Joint Venture, with respect to the
property in Dallas, Texas, as amended.
10.7** -- Form of Indemnification Agreement between the Registrant
and each of its officers and directors.
10.8** -- Amended and Restated Stockholders Agreement, dated as of
May 20, 1997, by and between the Registrant, the Series A
Purchasers, the Series B Purchasers, the Series C
Purchasers and members of the Registrant's management.
10.9** -- The Registrant's 1996 Stock Option Plan as amended.
10.10** -- The Registrant's 1997 California Stock Option Plan, as
amended.
10.11 -- The Registrant's 1998 Employee Stock Purchase Plan, as
amended.
10.12** -- The Registrant's 1998 Stock Incentive Plan, as amended.
10.13** -- Form of Compensation Protection Agreement between the
Registrant and each of its officers.
10.14** -- Master Service Agreement, dated as of August 23, 1996, by
and between the Registrant and MFS Datanet, Inc.
10.15** -- Agreement for Terminal Facility Collocation Space, dated
August 8, 1996, by and between MFS Telecom, Inc. and the
Registrant.
10.16** -- Bilateral Peering Agreement, dated May 19, 1997, between
AT&T Corp. and the Registrant.
10.17** -- Master Lease Agreement, dated November 17, 1997, by and
between Insight Investments Corp. and the Registrant.
10.18** -- Master Lease Agreement, dated October 27, 1997, by and
between Cisco Capital Systems Corporation and the
Registrant.
</TABLE>

II-4
<PAGE> 257

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.19**/+ -- Lateral Exchange Networks Interconnection Agreement,
dated as of February 3, 1997, by and between the
Registrant and Sprint Communications Company L.P.
("Sprint").
10.20**/+ -- Cover Agreement, dated September 30, 1996, by and between
the Registrant and Sprint.
10.21**/+ -- Amendment One to Cover Agreement, dated November 7, 1996,
by and between the Registrant and Sprint.
10.22**/+ -- Amendment Two to Cover Agreement, dated March 2, 1998, by
and between the Registrant and Sprint.
10.23** -- Indenture, dated as of March 25, 1998, by and among the
Registrant and First Trust National Association (as
Trustee).
10.24** -- Registration Rights Agreement, dated as of March 25,
1998, by and among the Registrant, and Salomon Brothers
Inc, Lazard Freres & Co. LLC, Chase Securities Inc. and
BancBoston Securities Inc.
10.25**/+ -- Capacity and Services Agreement, dated as of March 31,
1998, by and among the Registrant and Qwest
Communications Corporation.
10.26** -- Credit Agreement, dated as of April 6, 1998, by and among
the Registrant, The Chase Manhattan Bank (as
administrative agent) and Fleet National Bank (as
documentation agent).
10.27** -- Stock Purchase and Master Strategic Relationship
Agreement, dated as of April 7, 1998, by and among the
Registrant and Nippon Telegraph and Telephone Corporation
("NTT"), a Japanese corporation.
10.28**/+ -- Investment Agreement, dated as of April 7, 1998, by and
among the Registrant and NTT.
10.29+ -- Outside Service Provider Agreement, dated as of April 7,
1998, by and among the Registrant and NTT America, Inc.
10.30**/+ -- Master Services Agreement, dated as of June 13, 1997, by
and between the Registrant and MCI Telecommunications
Corporation ("MCI").
10.31**/+ -- MCI Domestic (US) Public Interconnection Agreement, dated
as of June 12, 1997, by and between the Registrant and
MCI, as amended.
10.32 -- The Registrant's 1998 Non-Employee Director Stock
Incentive Plan.
11.1 -- Not applicable.
21.1** -- List of Subsidiaries of the Registrant.
23.1 -- Consent of KPMG Peat Marwick LLP (Denver).
23.2 -- Consent of KPMG Peat Marwick LLP (Seattle).
23.3** -- Consent of Morrison & Foerster LLP (contained in Exhibit
5.1).
24.1** -- Power of Attorney.
27.1** -- Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

** Exhibit previously filed.

+ Document for which confidential treatment has been requested.

II-5
<PAGE> 258

FINANCIAL STATEMENTS AND SCHEDULE:

Financial Statements:

Financial Statements filed as a part of this Registration Statement are
listed in the Index to Financial Statements on page F-1.

Financial Statement Schedules:

<TABLE>
<CAPTION>
SCHEDULE NO. DESCRIPTION
------------ -----------
<C> <S>
II Valuation and Qualifying Accounts
</TABLE>

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934, as amended; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.

(b) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.

(c) The undersigned Registrant hereby undertakes that for the purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared
effective.

For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-6
<PAGE> 259

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Englewood, Colorado on April 27, 1998.

VERIO INC.

By: /s/ CARLA HAMRE DONELSON
----------------------------------
Carla Hamre Donelson
Vice President, General Counsel
and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated below.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEVEN C. HALSTEDT* Chairman of the Board April 27, 1998
- -----------------------------------------------------
Steven C. Halstedt

/s/ JUSTIN L. JASCHKE* Chief Executive Officer and April 27, 1998
- ----------------------------------------------------- Director
Justin L. Jaschke

/s/ JAMES C. ALLEN* Director April 27, 1998
- -----------------------------------------------------
James C. Allen

/s/ TRYGVE E. MYHREN* Director April 27, 1998
- -----------------------------------------------------
Trygve E. Myhren

/s/ PAUL J. SALEM* Director April 27, 1998
- -----------------------------------------------------
Paul J. Salem

/s/ STEVEN W. SCHOVEE* Director April 27, 1998
- -----------------------------------------------------
Steven W. Schovee

/s/ GEORGE J. STILL, JR.* Director April 27, 1998
- -----------------------------------------------------
George J. Still, Jr.

/s/ PETER B. FRITZINGER* Chief Financial Officer April 27, 1998
- -----------------------------------------------------
Peter B. Fritzinger

/s/ DEB MAYFIELD GAHAN* Vice President of Finance and April 27, 1998
- ----------------------------------------------------- Administration (Principal
Deb Mayfield Gahan Accounting Officer)

*By: /s/ CARLA HAMRE DONELSON
------------------------------------------------
Attorney-in-Fact
</TABLE>

II-7
<PAGE> 260

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

Under date of February 25, 1998, we reported on the consolidated balance
sheets of Verio Inc. and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for the period from inception (March 1, 1996) to December 31, 1996 and the
year ended December 31, 1997, which are included in the prospectus. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule in the registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

KPMG PEAT MARWICK LLP

Denver, Colorado
February 25, 1998

S-1
<PAGE> 261

SCHEDULE II

VERIO INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Period from Inception (March 1, 1996) to
December 31, 1996:
Allowance for doubtful Accounts............. $ -- 117 -- 117
Year ended December 31, 1997:
Allowance for doubtful Accounts............. $ 117 1,116 -- 1,233
</TABLE>

S-2
<PAGE> 262

EXHIBIT INDEX

EXHIBITS:

<PAGE> 263

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.18** -- Master Lease Agreement, dated October 27, 1997, by and
between Cisco Capital Systems Corporation and the
Registrant.
10.19**/+ -- Lateral Exchange Networks Interconnection Agreement,
dated as of February 3, 1997, by and between the
Registrant and Sprint Communications Company L.P.
("Sprint").
10.20**/+ -- Cover Agreement, dated September 30, 1996, by and between
the Registrant and Sprint.
10.21**/+ -- Amendment One to Cover Agreement, dated November 7, 1996,
by and between the Registrant and Sprint.
10.22**/+ -- Amendment Two to Cover Agreement, dated March 2, 1998, by
and between the Registrant and Sprint.
10.23** -- Indenture, dated as of March 25, 1998, by and among the
Registrant and First Trust National Association (as
Trustee).
10.24** -- Registration Rights Agreement, dated as of March 25,
1998, by and among the Registrant, and Salomon Brothers
Inc, Lazard Freres & Co. LLC, Chase Securities Inc. and
BancBoston Securities Inc.
10.25**/+ -- Capacity and Services Agreement, dated as of March 31,
1998, by and among the Registrant and Qwest
Communications Corporation.
10.26** -- Credit Agreement, dated as of April 6, 1998, by and among
the Registrant, The Chase Manhattan Bank (as
administrative agent) and Fleet National Bank (as
documentation agent).
10.27** -- Stock Purchase and Master Strategic Relationship
Agreement, dated as of April 7, 1998, by and among the
Registrant and Nippon Telegraph and Telephone Corporation
("NTT"), a Japanese corporation.
10.28**/+ -- Investment Agreement, dated as of April 7, 1998, by and
among the Registrant and NTT.
10.29+ -- Outside Service Provider Agreement, dated as of April 7,
1998, by and among the Registrant and NTT America, Inc.
10.30**/+ -- Master Services Agreement, dated as of June 13, 1997, by
and between the Registrant and MCI Telecommunications
Corporation ("MCI").
10.31**/+ -- MCI Domestic (US) Public Interconnection Agreement, dated
as of June 12, 1997, by and between the Registrant and
MCI, as amended.
10.32 -- The Registrant's 1998 Non-Employee Director Stock
Incentive Plan.
11.1 -- Not applicable.
21.1** -- List of Subsidiaries of the Registrant.
23.1 -- Consent of KPMG Peat Marwick LLP (Denver).
23.2 -- Consent of KPMG Peat Marwick LLP (Seattle).
23.3** -- Consent of Morrison & Foerster LLP (contained in Exhibit
5.1).
24.1** -- Power of Attorney.
27.1** -- Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

** Exhibit previously filed.

+ Document for which confidential treatment has been requested.

<PAGE> 1
EXHIBIT 1.1

VERIO INC.

5,000,000 Shares
Common Stock
($0.001 par value)

UNDERWRITING AGREEMENT

New York, New York
, 1998

Salomon Smith Barney
Smith Barney Inc.
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
As Representatives of the several Underwriters,
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

Verio Inc., a Delaware corporation (the "Company"), proposes
to sell to the several underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, 5,000,000 shares of Common Stock, $0.001 par value ("Common
Stock") of the Company (the "Underwritten Securities"). The Company also
proposes to grant to the Underwriters an option to purchase up to 750,000
additional shares of Common Stock to cover over-allotments (the "Option
Securities"; the Option Securities, together with the Underwritten Securities,
being hereinafter called the "Securities"). To the extent there are no
additional Underwriters listed on Schedule I other than you, the term
Representatives as used herein shall mean you, as Underwriters, and the terms
Representatives and Underwriters shall mean either the singular or plural as the
context requires. The use of the neuter in this Agreement shall include the
feminine and masculine wherever appropriate. Certain terms used herein are
defined in Section 17 hereof.

1. Representations and Warranties. The Company represents and
warrants to, and agrees with each Underwriter as set forth below in this
Section 1.

(a) The Company has prepared and filed with the Commission a
registration statement (file number 333-47099) on Form S-1, including a
related preliminary prospectus,

<PAGE> 2
-2-

for the registration under the Act of the offering and sale of the
Securities. The Company may have filed one or more amendments thereto,
including a related preliminary prospectus, each of which has previously
been furnished to you. The Company will next file with the Commission
either (1) prior to the Effective Date of such registration statement, a
further amendment to such registration statement (including the form of
final prospectus) or (2) after the Effective Date of such registration
statement, a final prospectus in accordance with Rules 430A and 424(b). In
the case of clause (2), the Company has included in such registration
statement, as amended at the Effective Date, all information (other than
Rule 430A Information) required by the Act and the rules thereunder to be
included in such registration statement and the Prospectus. As filed, such
amendment and form of final prospectus, or such final prospectus, shall
contain all Rule 430A Information, together with all other such required
information, and, except to the extent the Representatives shall agree in
writing to a modification, shall be in all substantive respects in the
form furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you, prior to
the Execution Time, will be included or made therein.

(b) On the Effective Date, the Registration Statement did or
will, and when the Prospectus is first filed (if required) in accordance
with Rule 424(b) and on the Closing Date (as defined herein) and on any
date on which Option Securities are purchased, if such date is not the
Closing Date (a "settlement date"), the Prospectus (and any supplements
thereto) will, comply in all material respects with the applicable
requirements of the Act and the rules thereunder; on the Effective Date
and at the Execution Time, the Registration Statement did not or will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, on the Effective Date, the
Prospectus, if not filed pursuant to Rule 424(b), will not, and on the
date of any filing pursuant to Rule 424(b) and on the Closing Date and any
settlement date, the Prospectus (together with any supplement thereto)
will not, include any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties
as to the information contained in or omitted from the Registration
Statement, or the Prospectus (or any supplement thereto) in reliance upon
and in conformity with information furnished herein or in writing to the
Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion in the Registration Statement or the Prospectus
(or any supplement thereto).

<PAGE> 3
-3-

(c) The subsidiaries of the Company listed on Schedule III
hereto (also referred to herein as the "Subsidiaries") are the only
subsidiaries of the Company that constitute "significant subsidiaries"
within the meaning of Rule 1-02(w) of Regulation S-X under the Act. Each
of the Company and the Subsidiaries has been duly organized or
incorporated, as the case may be, and is validly existing and in good
standing under the laws of its jurisdiction of organization or
incorporation, with all requisite power and authority under such laws (a)
to own, lease and operate their respective properties and to conduct their
respective businesses as now conducted and as described in the Prospectus,
and (b) to enter into, deliver, incur and perform their respective
obligations under this Agreement, except, in the case of the foregoing
subclause (a) for authorizations, approvals, orders, leases, certificates
and permits, the failure of which to possess could not reasonably be
expected to have a Material Adverse Effect (as defined below); and are all
duly qualified to do business as foreign partnerships or corporations in
good standing in all other jurisdictions where the ownership or leasing of
their respective properties or the conduct of their respective businesses
requires such qualification, except where the failure to be so qualified
could not reasonably be expected to have a material adverse effect (i) on
the business, condition (financial or otherwise), results of operations,
business affairs or business prospects of the Company and the Subsidiaries
taken as a whole or (ii) on the ability of the Company to perform any of
its obligations under this Agreement or to consummate any of the
transactions contemplated hereby (a "Material Adverse Effect"). The
Company has no ISP affiliates (other than the Subsidiaries) that would
individually constitute a "significant subsidiary" of the Company within
the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act, if
any such ISP affiliate were a subsidiary of the Company.

(d) All the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of the Subsidiaries
are owned by the Company either directly or through wholly owned
subsidiaries free and clear of any perfected security interest or any
other security interests, claims, liens or encumbrances.

(e) The Company's authorized equity capitalization is as set
forth in the Prospectus; the capital stock of the Company conforms in all
material respects to the description thereof contained in the Prospectus;
the outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable; the Securities
being sold hereunder by the Company have been duly and validly authorized,
and, when issued and delivered to and paid for by the Underwriters
pursuant to this Agreement, will be fully paid and nonassessable; the
Securities being sold hereunder by the Company are duly listed, and
admitted and authorized for trading, subject to official

<PAGE> 4
-4-

notice of issuance and evidence of satisfactory distribution, on the
Nasdaq National Market; the certificates for the Securities are in valid
and sufficient form; the holders of outstanding shares of capital stock of
the Company are not entitled to preemptive or other rights to subscribe
for the Securities; and, except as set forth in the Prospectus, no
options, warrants or other rights to purchase, agreements or other
obligations to issue, or rights to convert any obligations into or
exchange any securities for, shares of capital stock of or ownership
interests in the Company are outstanding.

(f) This Agreement has been duly authorized, executed and
delivered by the Company, and constitutes the valid and binding obligation
of the Company, enforceable against the Company in accordance with the
terms hereof, subject to (a) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally, (b) general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law) and (c)
the discretion of the court before which any proceeding therefor may be
brought (clauses (a), (b) and (c) being referred to herein as the
"Enforceability Limitations").

(g) No consent, waiver, authorization, approval, license,
qualification or order of, or filing or registration with, any court or
governmental or regulatory agency or body, domestic or foreign, is
required in connection with the transactions contemplated herein, except
(A) such as have been obtained under the Act, (B) as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") and (C)
as may be required by state securities or "blue sky" laws in connection
with the purchase and distribution of the Securities by the Underwriters
in the manner contemplated herein and in the Prospectus.

(h) The issuance, sale and delivery of the Securities, the
execution, delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated hereby
and the compliance by the Company with the terms of the foregoing do not,
and, at the Closing Date, will not conflict with or constitute or result
in a breach or violation by the Company or any of the Subsidiaries of (A)
any of the terms or provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
by any of the Company or the Subsidiaries or give rise to any right to
accelerate the maturity or require the prepayment of any indebtedness
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the Subsidiaries
under any contract, indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, authorization, permit,
certificate or other agreement or document to which any of the Company or
the Subsidiaries is a party or by which any of them may be bound, or to
which any of them or any of their respective assets or businesses is
subject (collectively, "Contracts") (and the Company has no knowledge of
any conflict, breach or

<PAGE> 5

-5-

violation of such terms or provisions or of any such default, in any such
case, which has occurred or will so result), (B) the articles or by-laws
(each, an "Organizational Document") of each of the Company and the
Subsidiaries or (C) any law, statute, rule or regulation, or any judgment,
decree or order, in any such case, of any domestic or foreign court or
governmental or regulatory agency or other body having jurisdiction over
the Company or any of the Subsidiaries or any of their respective
properties or assets. Schedule IV hereto lists each Contract with respect
to which any conflict, breach or violation of the terms or provisions
thereof or any default with respect thereto could have a Material Adverse
Effect (each such Contract being referred to herein as a "Material
Contract").

(i) No holders of securities of the Company have rights to the
registration of such securities under the Registration Statement.

(j) The audited consolidated financial statements included in
the Prospectus and Registration Statement, including the notes thereto,
respectively present fairly the financial position of each of the Company
and its consolidated subsidiaries, On-Ramp Technologies, Inc., Global
Enterprise Services-Network Division, Compute Intensive, Inc.,
NorthWestNet, Inc., Aimnet Corporation, West Coast Online, Inc., Clark
Internet Services, Inc., ATMnet, Inc., Global Internet Network Services,
Inc., Pennsylvania Research Partnership Network, Monumental Network
Systems, Inc., Internet Servers, Inc., NSNet, Inc., AccessOne, Inc.,
STARnet, L.L.C., Computing Engineers Inc. and LI Net, Inc., at the dates
indicated, and the statement of operations, stockholders' deficit/equity
and cash flows of each of such persons and, where applicable such persons'
consolidated subsidiaries for the periods have been prepared in conformity
with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
selected financial data and the summary financial information included in
the Prospectus and Registration Statement present fairly the information
shown therein and have been compiled on a basis consistent with that of
the financial statements of the Company and its consolidated subsidiaries
included in the Prospectus and Registration Statement. KPMG Peat Marwick
LLP, which has examined such financial statements as set forth in its
report included in the Prospectus and Registration Statement, is an
independent public accounting firm with respect to each of such persons
and, where applicable, such person's Subsidiaries within the meaning of
Regulation S-X under the Act. Except as disclosed in the Prospectus and
Registration Statement, the pro forma financial information relating to
the Company and its Subsidiaries and the related notes thereto included in
the Prospectus and Registration Statement present fairly the information
shown therein, have been prepared in all material respects in accordance
with the Commission's rules and guidelines with respect to pro forma
financial adjustments and have been properly computed on the bases
described therein, and the assumptions

<PAGE> 6
-6-

used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein.

(k) Since the respective dates as of which information is
given in the Prospectus, except as otherwise specifically stated therein,
there has been no (A) material adverse change in the business, condition
(financial or otherwise), results of operations, business affairs or
business prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business (a "Material
Adverse Change"), (B) transaction entered into by any of the Company or
the Subsidiaries, other than in the ordinary course of business, that is
material to the Company and the Subsidiaries taken as a whole or (C)
dividend or distribution of any kind declared, paid or made by the Company
on its capital stock.

(l) None of the Company nor the Subsidiaries is (A) in
violation of its respective Organizational Documents, (B) in default (or,
with notice or lapse of time or both, would be in default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contract or (C) in violation of any law,
statute, judgment, decree, order, rule or regulation of any domestic or
foreign court with jurisdiction over the Company or the Subsidiaries or
any of their respective assets or properties, or other governmental or
regulatory authority, agency or other body, other than, in the case of
clause (B) or (C), such defaults or violations which could not,
individually or in the aggregate, reasonably be expected to have or result
in a Material Adverse Effect; and any real property and buildings held
under lease by the Company or the Subsidiaries are held by the Company or
such Subsidiary, as the case may be, under valid, subsisting and
enforceable leases with such exceptions which could not, individually or
in the aggregate, reasonably be expected to have or result in a Material
Adverse Effect.

(m) Except as set forth in the Prospectus, each of the Company
and the Subsidiaries owns or possesses, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, trademarks, service
marks, trade names, copyrights and know-how (including trade secrets and
other proprietary or confidential information, systems or procedures)
(collectively, "intellectual property") necessary to conduct the business
now or proposed to be operated by it as described in the Prospectus,
except where the failure to own, possess or have the ability to acquire
any such intellectual property could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect; and
none of the Company nor the Subsidiaries has received any notice of
infringement of or conflict with (nor knows of any such infringement of or
conflict with) asserted rights of others with respect to any of such
intellectual property.

(n) Each of the Company and the Subsidiaries has obtained all
material consents, approvals, orders, certificates, licenses, permits,
franchises and other authorizations

<PAGE> 7
-7-

(collectively, the "Licenses") of and from, and has made all declarations
and filings with, all governmental and regulatory authorities, all
self-regulatory organizations and all courts and other tribunals necessary
to own, lease, license and use its properties and assets and to conduct
its businesses in the manner described in the Prospectus (exclusive of any
supplement thereto). None of the Company or the Subsidiaries has received
any notice of proceedings relating to the revocation or modification of,
or denial of any application for, any License which, if the subject of any
unfavorable decision, ruling or finding, could, singly or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect; and no event has occurred which allows, or after notice or lapse
of time, or both, would allow, revocation or termination thereof or result
in any other material impairment of the rights of the holder of any such
License, except where such revocation or termination could not, singly or
in the aggregate, reasonably be expected to have or result in a Material
Adverse Effect; and the Licenses referred to above place no restrictions
on the Company or any of the Subsidiaries that are not described in the
Prospectus (exclusive of any supplement thereto), except where such
restrictions could not, singly or in the aggregate, reasonably be expected
to have or result in a Material Adverse Effect.

(o) There is no legal action, suit, proceeding, inquiry or
investigation before or by any court or governmental body or agency,
domestic or foreign, now pending or, to the best knowledge of the Company,
threatened against the Company or any of the Subsidiaries or any of their
respective properties that could singly or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).

(p) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns, and
has paid all taxes shown as due thereon; and no tax deficiency has been
asserted against any of the Company or the Subsidiaries.

(q) Except as described in the Prospectus, including the
financial statements and notes thereto included therein, each of the
Company and the Subsidiaries has good and marketable title to all real and
personal property described in the Prospectus as being owned by it and
good and marketable title to a leasehold estate in the real and personal
property described in the Prospectus as being leased by it, free and clear
of all liens, charges, encumbrances or restrictions, except to the extent
the failure to have such title or the existence of such liens, charges,
encumbrances or restrictions could not, individually or in the aggregate,
reasonably be expected to have or result in a Material Adverse Effect.

(r) None of the Company or any of the Subsidiaries is and,
after giving effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the Prospectus, will
not be an "investment company" or a company

<PAGE> 8
-8-

"controlled by" an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.

(s) None of the Company nor any of the Subsidiaries nor any of
their respective directors, officers or controlling persons has taken,
directly or indirectly, any action designed, or which might reasonably be
expected, to cause or result, under the Act or otherwise, in, or which has
constituted, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities.

(t) No strike, labor problem, dispute, slowdown, work stoppage
or disturbance with the employees of the Company or any of the
Subsidiaries exists or, to the best knowledge of the Company, is
threatened, which could, individually or in the aggregate, reasonably be
expected to have or result in a Material Adverse Effect.

(u) Each of the Company and the Subsidiaries has insurance in
such amounts and covering such risks and liabilities as are in accordance
with normal industry practice.

(v) The statistical and market-related data included in the
Prospectus are based on or derived from independent sources which the
Company believes to be reliable and accurate in all material respects or
represent the Company's good faith estimates that are made on the basis of
data derived from such sources.

(w) The Company is, and immediately after the Closing Date
will be, Solvent. As used herein, the term "Solvent" means, with respect
to the Company on a particular date, that on such date (A) the fair market
value of the assets of the Company exceeds its respective liabilities
(including without limitation, stated liabilities and identified
contingent liabilities), (B) the present fair salable value of the assets
of the Company will exceed its respective probable liabilities on its
debts (including without limitation, stated liabilities and identified
contingent liabilities), (C) the fair market value of the Company's total
assets exceeds its total liabilities, including identified contingent
liabilities, by an amount at least equal to the total par value of its
common stock both immediately prior to and after the Offering, (D) the
Company is and will be able to pay its debts (including without
limitation, stated liabilities and identified contingent liabilities) as
such debts mature and (E) the Company will not have unreasonably small
capital with which to conduct its present and anticipated business.

(x) Except as described in the Prospectus (exclusive of any
supplement thereto) or as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect (A) to the
Company's knowledge, each of the Company and the Subsidiaries is in
compliance with and not subject to any known liability under applicable

<PAGE> 9
-9-

Environmental Laws (as defined below), (B) to the Company's knowledge,
each of the Company and the Subsidiaries (i) has made all filings and
provided all notices required under any applicable Environmental Law, and
(ii) has, and is in compliance with, all Permits required under any
applicable Environmental Laws, and each of them is in full force and
effect, (C) to the Company's knowledge, there is no civil, criminal or
administrative action, or, investigation, notice or demand letter or
request for information pending or threatened against the Company or any
of the Subsidiaries under any Environmental Law, and (D) to the Company's
knowledge, no lien, charge, encumbrance or restriction has been recorded
under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or any
Subsidiary.

For purposes of this Agreement, "Environmental Laws" means the common law
and all applicable federal, state and local laws or regulations relating
to the protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of
"hazardous substances," as defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.

(y) Except as described in the Prospectus (exclusive of any
supplement thereto), none of the Company nor any of the Subsidiaries has
incurred any liability for any prohibited transaction or funding
deficiency or any complete or partial withdrawal liability with respect to
any pension, profit sharing or other plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), to which the
Company or the Subsidiaries makes or ever has made a contribution and in
which any employee of the Company or any such Subsidiary is or has ever
been a participant, which, individually in the aggregate, could reasonably
be expected to have or result in a Material Adverse Effect. With respect
to such plans, each of the Company and the Subsidiaries is in compliance
in all respects with all applicable provisions of ERISA, except where the
failure to so comply could not, individually or in the aggregate,
reasonably be expected to have or a result in a Material Adverse Effect.

(z) Each of the Company and the Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.

<PAGE> 10
-10-

(aa) There are no transfer taxes or other similar fees or
charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the execution
and delivery of this Agreement or the issuance by the Company or sale by
the Company of the Securities.

(bb) No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary's property or assets
to the Company or any other subsidiary of the Company, except as described
in or contemplated by the Prospectus.

(cc) Except as disclosed in the Registration Statement and the
Prospectus, the Company (i) does not have any material lending or other
relationship with any bank or lending affiliate of Salomon Smith Barney
Holdings Inc. and (ii) does not intend to use any of the proceeds from the
sale of the Securities hereunder to repay any outstanding debt owed to any
affiliate of Salomon Smith Barney Holdings Inc.

(dd) The Company is in compliance with the Commission's staff
legal bulletin No. 5 dated October 8, 1997 related to Year 2000
compliance.

(ee) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to Cahill Gordon & Reindel, counsel for
the Underwriters ("Counsel for the Underwriters") pursuant to the terms of
this Agreement shall be deemed a representation and warranty by the
Company to the Initial Purchasers as to the matters covered thereby.

2. Purchase and Sale. (a) Subject to the terms and conditions
and in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
$ per share, the amount of the Underwritten Securities set forth opposite such
Underwriter's name in Schedule I hereto.

(b) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not jointly, up
to 750,000 Option Securities at the same purchase price per share as the
Underwriters shall pay for the Underwritten Securities. Said option may be
exercised only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole or in part
at any time (but not more than once) on or before the 30th day after the date of
the Prospectus upon written or telephonic notice by the Representatives to the
Company setting forth the number of shares of

<PAGE> 11

-11-

the Option Securities as to which the several Underwriters are exercising the
option and the settlement date. Delivery of certificates for the shares of
Option Securities by the Company and payment therefor to the Company shall be
made as provided in Section 3 hereof. The number of shares of the Option
Securities to be purchased by each Underwriter shall be the same percentage of
the total number of shares of the Option Securities to be purchased by the
several Underwriters as such Underwriter is purchasing of the Underwritten
Securities, subject to such adjustments as you in your absolute discretion shall
make to eliminate any fractional shares.

3. Delivery and Payment. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
, 1998, or at such time on such later date not more than three
Business Days after the foregoing date as the Representatives shall designate,
which date and time may be postponed by agreement between the Representatives
and the Company or as provided in Section 9 hereof (such date and time of
delivery and payment for the Securities being herein called the "Closing Date").
Delivery of the Securities shall be made to the Representatives for the
respective accounts of the several Underwriters against payment by the several
Underwriters through the Representatives of the aggregate purchase price of the
Securities being sold by the Company to or upon the order of the Company by wire
transfer payable in same-day funds to the account specified by the Company.
Delivery of the Underwritten Securities and the Option Securities shall be made
through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct.

If the option provided for in Section 2(b) hereof is exercised
after the third Business Day prior to the Closing Date, the Company will deliver
the Option Securities (at the expense of the Company) to the Representatives on
the date specified by the Representatives (which shall be within three Business
Days after exercise of said option) for the respective accounts of the several
Underwriters, against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the
Company by wire transfer payable in same-day funds to the account specified by
the Company. If settlement for the Option Securities occurs after the Closing
Date, the Company will deliver to the Representatives on the settlement date for
the Option Securities, and the obligation of the Underwriters to purchase the
Option Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.

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

<PAGE> 12
-12-

5. Agreements. The Company agrees with the several
Underwriters that:

(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of
the Registration Statement or supplement to the Prospectus or any Rule
462(b) Registration Statement unless the Company has furnished you a
copy for your review prior to filing and will not file any such
proposed amendment or supplement to which you reasonably object.
Subject to the foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Company will
cause the Prospectus, properly completed, and any supplement thereto to
be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The Company
will promptly advise the Representatives (1) when the Registration
Statement, if not effective at the Execution Time, shall have become
effective, (2) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule
424(b) or when any Rule 462(b) Registration Statement shall have been
filed with the Commission, (3) when, prior to termination of the
offering of the Securities, any amendment to the Registration Statement
shall have been filed or become effective, (4) of any request by the
Commission or its staff for any amendment of the Registration
Statement, or any Rule 462(b) Registration Statement, or for any
supplement to the Prospectus or for any additional information, (5) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution or
threatening of any proceeding for that purpose and (6) of the receipt
by the Company of any notification with respect to the suspension of
the qualification of the Securities for sale in any jurisdiction or of
the institution or threatening of any proceeding for such purpose. The
Company will use its best efforts to prevent the issuance of any such
stop order or the suspension of any such qualification and, if issued,
to obtain as soon as possible the withdrawal thereof.

(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
shall be necessary to amend the Registration Statement or supplement
the Prospectus to comply with the Act or the rules thereunder, the
Company promptly will (1) notify the Representatives of any such event;
(2) prepare and file with the Commission, subject to the second

<PAGE> 13

-13-

sentence of paragraph (i)(a) of this Section 5, an amendment or
supplement which will correct such statement or omission or effect such
compliance; and (3) supply any supplemented Prospectus to you in such
quantities as you may reasonably request.

(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.

(d) The Company will furnish to the Representatives and
Counsel for the Underwriters signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a
copy of the Registration Statement (without exhibits thereto) and, so
long as delivery of a prospectus by an Underwriter or dealer may be
required by the Act, as many copies of each Preliminary Prospectus and
the Prospectus and any supplement thereto as the Representatives may
reasonably request.

(e) The Company will arrange, if necessary, for the
qualification of the Securities for sale under the laws of such
jurisdictions as the Representatives may designate and will maintain
such qualifications in effect so long as required for the distribution
of the Securities; provided, however, that in no event shall the
Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action that would
subject it to service of process in suits, other than those arising out
of the offering or sale of the Securities, in any jurisdiction where it
is not now so subject.

(f) The Company will not, without the prior written consent of
Salomon Smith Barney, for a period of six months following the
Execution Time, offer, sell or contract to sell, or otherwise dispose
of (or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person
in privity with the Company or any affiliate of the Company) directly
or indirectly, or announce the offering of, any other shares of Common
Stock or any securities convertible into, or exchangeable for, shares
of Common Stock [SUBJECT TO CERTAIN EXCEPTIONS TO BE DISCUSSED IN
ADDITION TO THE FOLLOWING PROVISO]; provided, however, that the Company
may issue and sell Common Stock pursuant to any employee stock option
plan, stock ownership plan or dividend reinvestment plan of the Company
in effect at the Execution Time and the Company may issue Common Stock
issuable upon the conversion of securities or the exercise of warrants
outstanding at the Execution Time.

<PAGE> 14

-14-

(g) The Company will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.

(h) The Company agrees to pay the costs and expenses relating
to the following matters: (i) the preparation, printing or reproduction
and filing with the Commission of the Registration Statement (including
financial statements and exhibits thereto), each Preliminary
Prospectus, the Prospectus, and each amendment or supplement to any of
them; (ii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and packaging) of
such copies of the Registration Statement, each Preliminary Prospectus,
the Prospectus, and all amendments or supplements to any of them, as
may, in each case, be reasonably requested for use in connection with
the offering and sale of the Securities; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the
Securities, including any stamp or transfer taxes in connection with
the original issuance and sale of the Securities; (iv) the printing (or
reproduction) and delivery of this Agreement, any blue sky memorandum
and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (v) the
registration of the Securities under the Exchange Act and the listing
of the Securities on the Nasdaq National Market; (vi) any registration
or qualification of the Securities for offer and sale under the
securities or blue sky laws of the several states (including filing
fees and the reasonable fees and expenses of Counsel for the
Underwriters relating to such registration and qualification); (vii)
any filings required to be made with the National Association of
Securities Dealers, Inc. (including filing fees and the reasonable fees
and expenses of Counsel for the Underwriters relating to such filings);
(viii) the transportation and other expenses incurred by or on behalf
of Company representatives in connection with presentations to
prospective purchasers of the Securities; (ix) the fees and expenses of
the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company; and (x) all
other costs and expenses incident to the performance by the Company of
its obligations hereunder.

6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any settlement date pursuant to Section
3 hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:

<PAGE> 15
-15-

(a) If the Registration Statement has not become effective
prior to the Execution Time, unless the Representatives agree in
writing to a later time, the Registration Statement will become
effective not later than (i) 6:00 PM New York City time on the date of
determination of the public offering price, if such determination
occurred at or prior to 3:00 PM New York City time on such date or (ii)
9:30 AM on the Business Day following the day on which the public
offering price was determined, if such determination occurred after
3:00 PM New York City time on such date; if filing of the Prospectus,
or any supplement thereto, is required pursuant to Rule 424(b), the
Prospectus, and any such supplement, will be filed in the manner and
within the time period required by Rule 424(b); and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or threatened.

(b) The Company shall have furnished to the Representatives
the opinion of Morrison & Foerster LLP, counsel for the Company, dated
the Closing Date and addressed to the Representatives, in the form set
forth below and otherwise reasonably satisfactory to the
Representatives and Counsel for the Underwriters, to the effect that:

(i) the Company has been duly incorporated and is
validly existing under the laws of the State of Delaware, with
corporate power and authority to own, lease and operate its
assets and properties and conduct its business as described in
the Prospectus and to enter into and perform its obligations
under this Agreement; to the best knowledge of such counsel
the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect;

(ii) each of the Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Prospectus and to the best knowledge of such counsel is duly
qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing
individually or in the aggregate would not result in a
Material Adverse Effect; all of the issued and outstanding
capital stock of each of the Subsidiaries has been duly
authorized and validly issued, is fully paid and
non-assessable and, to such counsel's knowledge and
information, except as set

<PAGE> 16
-16-

forth in the Final Memorandum under the caption "Business --
Verio Group Network," is owned by the Company directly, free
and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity;

(iii) (A) the Company's authorized, issued and
outstanding equity capitalization is as set forth in the
Prospectus; (B) the capital stock of the Company conforms in
all material respects to the description thereof contained in
the Prospectus; (C) the outstanding shares of Common Stock
have been duly and validly authorized and issued and are fully
paid and nonassessable; (D) the Securities being sold
hereunder by the Company have been duly and validly
authorized, and, when issued and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be fully
paid and nonassessable; (E) the Securities being sold
hereunder by the Company are duly listed, and admitted and
authorized for trading, subject to official notice of
issuance, on the Nasdaq National Market; (F) the certificates
for the Securities are in valid and sufficient form; (G) the
holders of outstanding shares of capital stock of the Company
are not entitled to statutory or, to the knowledge of such
counsel, contractual preemptive or other rights to subscribe
for the Securities; and (H) except as set forth in the
Prospectus, to the knowledge of such counsel, no options,
warrants or other rights to purchase, agreements or other
obligations to issue, or rights to convert any obligations
into or exchange any securities for, shares of capital stock
of or ownership interests in the Company are outstanding;

(iv) the Company has the requisite corporate power and
authority to execute, deliver and perform its obligations
under this Agreement; and this Agreement has been duly
authorized, executed and delivered by the Company;

(v) no consent, waiver, approval, authorization,
license, qualification or order of or filing or registration
with any court or governmental or regulatory agency or body is
required for the execution and delivery by the Company of this
Agreement or for the issue and sale of the Securities, or for
the consummation of any of the transactions contemplated
hereby, except (A) such as have been obtained under the Act,
(B) as may be required by the NASD (as to which such counsel
need express no opinion); and (C) as may be required by state
securities or "blue sky" laws in connection with the purchase
and distribution of the Securities by the Underwriters in the
manner contemplated in this Agreement and the Prospectus;

(vi) the issuance, sale and delivery of the Securities,
the execution, delivery and performance by the Company of this
Agreement (assuming due authorization and execution by each
party other than the Company), and the

<PAGE> 17
-17-

consummation by the Company of the transactions contemplated
hereby and the compliance by the Company with the terms of the
foregoing do not, and, at the Closing Date, will not, conflict
with or constitute or result in a breach or violation by the
Company or any of the Subsidiaries of (A) any provision of the
Certificate of Incorporation or By-laws of the Company, (B)
any of the terms or provisions of, or constitute a default (or
an event which, with notice or lapse of time or both, would
constitute a default) by the Company, or give rise to any
right to accelerate the maturity or require the prepayment of
any indebtedness under, or result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any Subsidiary under any
Material Contract identified in Schedule IV hereto or (C) any
law, statute, rule, or regulation or any order, decree or
judgment known to such counsel to be applicable to the Company
or any Subsidiary, of any court or governmental or regulatory
agency or body or arbitrator known to such counsel to have
jurisdiction over the Company or any of the Subsidiaries or
any of their respective properties or assets;

(vii) to the knowledge of such counsel, other than as
described in the Registration Statement, no legal, regulatory
or governmental proceedings are pending to which the Company
is a party or to which the property or assets of the Company
are subject which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or
which are required to be disclosed in the Registration
Statement, and to the knowledge of such counsel, no such
material proceedings have been threatened against the Company
or with respect to any of its respective assets or properties
and there is no franchise, contract or other document of a
character required to be described in the Registration
Statement or Prospectus, or to be filed as an exhibit thereto,
which is not described or filed as required;

(viii) the statements in the Prospectus under the headings
"Prospectus Summary," "Description of Capital Stock," and
"Certain Transactions," insofar as such statements purport to
summarize certain provisions of the Offering, the Company's
authorized and outstanding capital stock and certain
agreements to which the Company is a party, provide a fair
summary of such provisions of such agreements and instruments;

(ix) the Registration Statement has become effective
under the Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b);
to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued,
no proceedings

<PAGE> 18
-18-

for that purpose have been instituted or threatened and the
Registration Statement and the Prospectus (other than the
financial statements and other financial information contained
therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable
requirements of the Act and the rules thereunder;

(x) no holders of securities of the Company have rights
to the registration of such securities under the Registration
Statement.

(xi) Neither the consummation of the transactions
contemplated hereby nor the sale, issuance, execution or
delivery of the Securities will violate Regulation T, U or X
of the Board of Governors of the Federal Reserve System.

In addition, such counsel shall state that such counsel has
participated in conferences with representatives of the
Representatives, officers and other representatives of the Company and
representatives of the independent certified accountants of the
Company, at which conferences the contents of the Prospectus and the
Registration Statement and the business and affairs of the Company and
the Subsidiaries were discussed, and although such counsel has not
independently verified and does not pass upon or assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement, on the basis of the
foregoing (relying as to materiality to the extent such counsel deemed
appropriate upon the representations and opinions of officers and other
representatives of the Company), no facts have come to the attention of
such counsel which lead such counsel to believe that the Registration
Statement at the Effective Date or as of the Execution Time, contained
or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein not
misleading, or that the Prospectus as of its date and on the Closing
Date included or includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such counsel need
not express any comment with respect to the financial statements,
including the notes thereto and supporting schedules, or any other
financial or statistical data set forth or referred to in the
Registration Statement).

<PAGE> 19
-19-

and certificates of public officials. References to the Prospectus in
this paragraph (b) include any supplements thereto at the Closing Date.
The opinion of such counsel shall be rendered to the Underwriters at
the request of the Company and shall so state therein.

(c) At the Closing Date, the Company shall have furnished to
the Representatives the opinion of Carla Hamre Donelson, Esq., General
Counsel to the Company, dated the Closing Date, in the form set forth
below and otherwise reasonably satisfactory to the Representatives and
Counsel for the Underwriters, to the effect that:

(i) To the knowledge of such counsel, other than as
described in the Prospectus, no legal, regulatory or
governmental proceedings are pending to which any of the
Subsidiaries is a party or to which the property or assets of
the Subsidiaries are subject which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect or which are required to be disclosed in the
Registration Statement, and to the knowledge of such counsel,
no such material proceedings have been threatened against the
Subsidiaries or with respect to any of their respective assets
or properties; and

(ii) None of the Company or the Subsidiaries is in
violation of its respective Organizational Documents; to the
knowledge of such counsel, no default by the Company or any of
the Subsidiaries exists in the due performance or observance
of any material obligation, agreement, covenant or condition
contained in any Material Contract which could reasonably be
expected to have a Material Adverse Effect; and to the
knowledge of such counsel, none of the Company nor the
Subsidiaries is in breach or violation of any law, statute,
rule or regulation, or any judgment, decree or order of any
governmental or regulatory agency or other body having
jurisdiction over the Company or any of the Subsidiaries or
any of their respective properties or assets such that any
such breach or violation could reasonably be expected to have
a Material Adverse Effect.

<PAGE> 20
-20-

and opinions of officers and other representatives of the Company), no
facts have come to the attention of such counsel which lead such
counsel to believe that the Registration Statement at the Effective
Date or as of the Execution Time, contained or contains an untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein not misleading, or that
the Prospectus as of its date and on the Closing Date included or
includes any untrue statement of a material fact or omitted or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading
(it being understood that such counsel need not express any comment
with respect to the financial statements, including the notes thereto
and supporting schedules, or any other financial or statistical data
set forth or referred to in the Registration Statement).

In rendering such opinions, such counsel (A) need not express
any opinion with regard to the application of laws of any jurisdiction
other than the Federal law of the United States, the General
Corporation Law of the State of Delaware and the laws of the State of
Colorado and (B) may rely, as to matters of fact, to the extent she
deems proper on representations or certificates of responsible officers
of the Company and certificates of public officials. References to the
Prospectus in this paragraph (c) include any supplements thereto at the
Closing Date. The opinion of such counsel shall be rendered to the
Underwriters at the request of the Company and shall so state therein.

(d) The Representatives shall have received from Cahill Gordon
& Reindel, Counsel for the Underwriters, such opinion or opinions,
dated the Closing Date and addressed to the Representatives, with
respect to certain matters set forth in clauses (iii) (B), (iii) (D),
(iv), (viii) and (x) of subsection (b) of this Section 6.

In rendering such opinions, such counsel (A) need not express
any opinion with regard to the application of laws of any jurisdiction
other than the Federal laws of the United States, the General
Corporation Law of the State of Delaware and the laws of the State of
New York and (B) may rely, as to matters of fact, to the extent they
deem proper on representations or certificates of responsible officers
of the Company and certificates of public officials.

<PAGE> 21
-21-

upon or assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement, on
the basis of the foregoing (relying as to materiality to the extent
such counsel deemed appropriate upon the representations and opinions
of officers and other representatives of the Company), no facts have
come to the attention of such counsel which lead such counsel to
believe that the Registration Statement at the Effective Date or as of
the Execution Time, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements therein not misleading, or that the Prospectus as
of its date and on the Closing Date included or includes any untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need not express any comment with respect
to the financial statements, including the notes thereto and supporting
schedules, or any other financial or statistical data set forth or
referred to in the Registration Statement).

(e) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectus, any supplements to the Prospectus and this Agreement and
that:

(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date, and the Company has complied with
all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing
Date;

(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or, to the Company's
knowledge, threatened; and

(iii) since the date of the most recent financial
statements included in the Prospectus (exclusive of any
amendment supplement thereto), there has been no Material
Adverse Change, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).

(f) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of Exhibit A
hereto from Nippon Telegraph and Telephone Corporation ("NTT")
addressed to the Representatives.

<PAGE> 22
-22-

(g) At the Execution Time and at the Closing Date, shall have
furnished to the Representatives a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in
form and substance satisfactory to the Representatives, confirming that
they are independent accountants within the meaning of the Act and the
Exchange Act and the applicable published rules and regulations
thereunder and Rule 101 of the Code of Professional Conduct of the
American Institute of Certified Public Accountants ("AICPA") and
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to Representatives with respect to
financial statements and certain financial information contained in the
Final Memorandum, in form and substance satisfactory to Counsel for the
Underwriters.

KPMG Peat Marwick LLP shall have also furnished to the
Representatives a letter stating that the Company's system of internal
accounting controls taken as a whole is sufficient to meet the broad
objectives of internal accounting control insofar as those objective
pertain to the prevention or detection of errors or irregularities in
amounts that would be material in relation to the financial statements
of the Company and its subsidiaries.

All references in this Section 6(g) to the Registration
Statement shall be deemed to include any amendment or supplement
thereto at the date of the letter.

(h) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been (i) any change or
decrease specified in the letter or letters referred to in paragraph
(g) of this Section 6 or (ii) any change, or any development involving
a prospective change, in or affecting the condition (financial or
otherwise), earnings, business or properties of the Company and its
subsidiaries taken as a whole, whether or not arising from transactions
in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto)
the effect of which, in any case referred to in clause (i) or (ii)
above, is, in the sole judgment of the Representatives, so material and
adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the
Registration Statement (exclusive of any amendment thereof) and the
Prospectus (exclusive of any supplement thereto).

(i) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt securities
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act) or any notice given
of any intended or potential decrease in any such rating or of a

<PAGE> 23
-23-

possible change in any such rating that does not indicate the direction
of the possible change.

(j) The Securities shall have been listed and admitted and
authorized for trading on the Nasdaq National Market Stock Exchange,
and satisfactory evidence of such actions shall have been provided to
the Representatives.

(k) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of Exhibit A
hereto from each officer and director of the Company and each of the
stockholders listed on Schedule II hereto addressed to the
Representatives.

(l) NTT shall have consummated its purchase of shares of
Common Stock of the Company pursuant to an Investment Agreement (the
"Investment Agreement") and pursuant to a Stock Purchase and Master
Strategic Relationship Agreement (the "Stock Purchase Agreement"), both
dated as of April 7, 1998 and by and between the Company and NTT,
without waiver of any material provision thereof from the date of
execution. The Outside Service Provider Agreement (the "OSP Agreement"
and, together with the Investment Agreement and the Stock Purchase
Agreement, the "NTT Agreements") dated as of April 7, 1998 by and
between the Company and NTT America, Inc. shall have taken effect,
without waiver of any material provision thereof from the date of
execution. Each of the NTT Agreements shall be in full force and
effect.

(m) Prior to the Closing Date, the Company and the Selling
Stockholders shall have furnished to the Representatives such further
information, certificates and documents as the Representatives may
reasonably request.

If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and Counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancelation shall be given to the Company and
each Selling Stockholder in writing or by telephone or facsimile confirmed in
writing.

[The documents required to be delivered by this Section 6
shall be delivered at the office of Counsel for the Underwriters, at 80 Pine
Street, 17th Floor, New York, New York 10005, on the Closing Date.]

<PAGE> 24
-24-

7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally through Salomon Smith Barney on demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Securities.

8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of
the Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for 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
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion therein. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.

The foregoing indemnity with respect to any untrue statement
contained in or any omission from any Preliminary Prospectus shall not inure to
the benefit of any Underwriter (or any affiliate or person who controls such
Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) from whom the person asserting such loss,
liability, claim, damage or expense purchased any of the Securities that are the
subject thereof if such person was not sent or given a copy of the Prospectus
(or any amendment or supplement thereto), if the Company shall have previously
furnished copies thereof to the Underwriters in accordance with this Agreement,
at or prior to the written confirmation

<PAGE> 25
-25-

of the sale of such Securities to such person and the untrue statement contained
in or the omission from the Preliminary Prospectus was corrected in the
Prospectus (or any amendment or supplement thereto).

(b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity to each Underwriter, but only with reference
to written information relating to such Underwriter furnished to the Company by
or on behalf of such Underwriter through the Representatives specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any Underwriter
may otherwise have. The Company acknowledges that the statements set forth in
the last paragraph of the cover page regarding delivery of the Securities, the
legend in block capital letters on page 2 related to stabilization, syndicate
covering transactions and penalty bids and the table, the second paragraph, the
eighth paragraph and the ninth paragraph under the heading "Underwriting" in any
Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in any Preliminary Prospectus or the Prospectus.

(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified

<PAGE> 26
-26-

party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv)
the indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.

(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively, "Losses") to which the Company and one or more of
the Underwriters may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company and by the Underwriters from the
offering of the Securities; provided, however, that in no case shall any
Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
the Underwriters shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and of the Underwriters in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering (before deducting expenses) received by
it, and benefits received by the Underwriters shall be deemed to be equal to the
total underwriting discounts and commissions, in each case as set forth on the
cover page of the Prospectus. Relative fault shall be determined by reference
to, among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information provided by the Company on the one hand or the
Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Underwriters agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable

<PAGE> 27
-27-

considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).

9. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the Securities agreed to be purchased
by such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
five Business Days, as the Representatives shall determine in order that the
required changes in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Company and any nondefaulting Underwriter for damages occasioned by its
default hereunder.

10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in the Company's Common Stock shall have
been suspended by the Commission or the Nasdaq National Market or trading in
securities generally on the New York Stock Exchange or the Nasdaq National
Market shall have been suspended or limited or minimum prices shall have been
established on either of such Exchange or National Market, (ii) a banking
moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any

<PAGE> 28
-28-

outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war or other calamity or crisis the effect of which on
financial markets is such as to make it, in the sole judgment of the
Representatives, impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Prospectus (exclusive of any
supplement thereto).

11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancelation of this
Agreement.

12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to the Salomon Smith Barney General Counsel (fax
no.: (212) ) and confirmed to the General Counsel, Salomon Smith Barney, at ,
New York, New York, Attention: General Counsel; or, if sent to the Company, will
be mailed, delivered or telefaxed to Verio Inc., 8005 South Chester Street,
Suite 200, Englewood, Colorado 80112, Attention: Carla Hamre Donelson, Esq.;
with a copy to Morrison & Foerster LLP, 425 Market Street, San Francisco,
California 94105, Attention: Gavin Grover, Esq.

13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.

14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York, without regard
to principles of conflicts of law thereof.

15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.

16. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.

17. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.

<PAGE> 29
-29-

"Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.

"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York
City.

"Commission" shall mean the Securities and Exchange
Commission.

"Effective Date" shall mean each date and time that the
Registration Statement, any post-effective amendment or amendments
thereto and any Rule 462(b) Registration Statement became or become
effective.

"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.

"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.

"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(i)(a) above and any preliminary prospectus
included in the Registration Statement at the Effective Date that omits
Rule 430A Information.

"Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Securities
included in the Registration Statement at the Effective Date.

"Registration Statement" shall mean the registration statement
referred to in paragraph 1(i)(a) above, including exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto or
any Rule 462(b) Registration Statement becomes effective prior to the
Closing Date, shall also mean such registration statement as so amended
or such Rule 462(b) Registration Statement, as the case may be. Such
term shall include any Rule 430A Information deemed to be included
therein at the Effective Date as provided by Rule 430A.

"Rule 424", "Rule 430A" and "Rule 462" refer to such rules
under the Act.

"Rule 430A Information" shall mean information with respect to
the Securities and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule
430A.

<PAGE> 30
-30-

"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the initial registration statement.

"Salomon Smith Barney" shall mean Smith Barney Inc. or
Salomon Brothers Inc to the extent that either such party is a
signatory to this Agreement.

<PAGE> 31

If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters.

Very truly yours,

VERIO INC.

By:
------------------------------------
Name:
Title:

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

Smith Barney Inc.
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities
Corporation

By: Smith Barney Inc.

By:
---------------------------------
Name:
Title:

For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.

<PAGE> 32

SCHEDULE I

<TABLE>
<CAPTION>
NUMBER OF UNDERWRITTEN
UNDERWRITERS SECURITIES TO BE PURCHASED
- ------------ --------------------------
<S> <C>
Smith Barney Inc.
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation

---------
Total.............................................. 5,000,000
=========
</TABLE>

<PAGE> 33

SCHEDULE II

Stockholders furnishing lock-up agreements:

Brooks Fiber Properties, Inc.

Norwest Equity Partners V, L.P.

Providence Equity Partners

Centennial Fund V, L.P.

Centennial Fund IV, L.P.

Steven C. Halstedt

Justin L. Jaschke

James C. Allen

Trygve E. Myhren

Paul J. Salem

Stephen W. Schovee

George J. Still, Jr.

Chris J. DeMarche

Carla Hamre Donelson

Peter B. Fritzinger

Sean G. Brophy

Deb Mayfield Gahan

<PAGE> 34

SCHEDULE III

Material Subsidiaries:

<TABLE>
<CAPTION>
Organized Under Percentage Ownership
Name of Entity Laws of of Company
- --------------- --------------- --------------------
<S> <C> <C>
Verio Web Hosting, Inc. Utah 100%
Verio-Northern California, Inc. Colorado 100%
Verio-Northeast, Inc. Colorado 100%
</TABLE>

<PAGE> 35

SCHEDULE IV

[To be updated by the Company]

Material Contracts:

1. Indenture, dated as of June 24, 1997, by and among Verio
Inc. and First Trust National Association (as trustee).

2. Warrant Agreement, dated as of June 24, 1997, by and
between First Trust National Association and Verio Inc.

3. Common Stock Registration Rights Agreement, dated as of
June 17, 1997, by and among Verio Inc., Brooks Fiber Properties, Inc., Norwest
Equity Partners V, Providence Equity Partners, Centennial Fund V, L.P.,
Centennial Fund IV, L.P. (as investors) and the Initial Purchasers.

4. Registration Rights Agreement, dated as of June 17, 1997,
by and among Verio Inc. and the Initial Purchasers.

5. Lease Agreement, dated as of June 20, 1997, by and between
Verio Inc. and Highland Park Ventures, LLC, with respect to the property in
Englewood, Colorado, including the First Amendment to Lease Agreement, dated as
of December 16, 1997.

6. Lease Agreement, dated as of May 24, 1997, by and between
Verio Inc. and IM Joint Venture, with respect to the property in Dallas, Texas,
as amended.

7. Form of Indemnification Agreement between Verio Inc. and
each of its officers and directors.

8. Amended and Restated Stockholders Agreement, dated as of
May 20, 1997, by and between Verio Inc., the Series A Purchasers, the Series B
Purchasers, the Series C Purchasers and members of the management of Verio Inc.

9. The 1996 Stock Option Plan of Verio Inc.

10. The 1997 California Stock Option Plan of Verio Inc.

11. The 1998 Employee Stock Purchase Plan of Verio Inc.

<PAGE> 36
-2-

12. The 1998 Stock Incentive Plan of Verio Inc.

13. Form of Executive Protection Agreement between Verio Inc.
and each of its officers.

14. Master Service Agreement, dated as of August 23, 1996, by
and between Verio Inc. and MFS Datanet, Inc.

15. Agreement for Terminal Facility Collocation Space, dated
August 8, 1996, by and between MFS Telecom, Inc. and Verio Inc.

16. Bilateral Peering Agreement, dated May 19, 1997, between
AT&T Corp. and Verio Inc.

17. Master Lease Agreement, dated November 17, 1997, by and
between Insight Investments Corp. and Verio Inc.

18. Master Lease Agreement, dated October 27, 1997, by and
between Cisco Capital Systems Corporation and Verio Inc.

19. MCI Domestic (US) Public Interconnection Agreement, dated
June 12, 1997, by and between MCI Telecommunications Corporation and Verio Inc.,
as amended.

20. Master Services Agreement, dated January 15, 1998, by and
between MCI Telecommunication Corporation and Verio Inc.

21. Cover Agreement, dated September 30, 1996, by and between
Sprint Communications Company L.P. and Verio Inc., as amended by Amendment One
to Cover Agreement dated November 7, 1996 and Amendment Two to Cover Agreement
dated March 2, 1998.

<PAGE> 37
-3-

25. Lateral Exchange Networks Interconnection Agreement, dated
February 3, 1997, by and between Sprint Communications Company L.P. and Verio
Inc.

<PAGE> 38
EXHIBIT A

[Form of Lock-up Agreement]
FNAME MI LNAME

Verio Inc.
8005 South Chester Street
Suite 200
Englewood, Colorado 80012

[ ], 1998

Smith Barney Inc.
Credit Suisse First Boston
Donaldson, Lufkin & Jenrette Securities Corporation
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Re: Agreement not to sell or otherwise
dispose of securities of Verio Inc.

Ladies and Gentlemen:

The undersigned understands that Verio Inc. (the "Company")
has filed a registration statement on Form S-1 (No. 333-47099) with the
Securities and Exchange Commission in connection with the initial public
offering (the "Offering") of Common Stock ("Shares") of the Company. The
undersigned further understands that the Company proposes to enter into an
underwriting agreement (the "Underwriting Agreement") with Smith Barney Inc.,
Credit Suisse First Boston Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation as representatives for the several Underwriters named in
the Underwriting Agreement (collectively, the "Underwriters"), in connection
with the Offering.

In recognition of the benefit that such Offering will confer
upon the undersigned, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and in order to induce the
Company and the Underwriters to enter into the Underwriting Agreement and to
proceed with the Offering, the undersigned hereby agrees, that, should the
Offering be consummated, for a period of six months after the date of the
Underwriting Agreement relating to the Offering, the undersigned will not,
without the prior written consent of Smith Barney Inc., directly or indirectly,
(i) offer, pledge, sell, contract to

<PAGE> 39

sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise dispose of
or transfer any Shares of the Company or any securities convertible into or
exchangeable or exercisable for the Shares of the Company, whether now owned or
hereafter acquired by the undersigned or with respect to which the undersigned
has or hereafter acquires the power of disposition or (ii) enter into any swap
or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Shares,
whether any such swap transaction is to be settled by delivery of the Shares or
other securities, in cash or otherwise.

Sincerely,

------------------------------------------
Name: FNAME MI LNAME

<PAGE> 1
EXHIBIT 10.11

VERIO INC.

1998 EMPLOYEE STOCK PURCHASE PLAN

(amended and restated as of April 13, 1998)

The following constitute the provisions of the 1998 Employee
Stock Purchase Plan of Verio Inc.

1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Parents or Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Code. The provisions of the Plan, accordingly,
shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Accrual Period" means a period of approximately six months,
commencing on May 15 and November 15 of each year and terminating on the
next following November 14 or May 14, respectively; provided, however, that
the first Accrual Period shall commence on the Effective Date and shall end
on November 14, 1998.

(b) "Board" means the Board of Directors of the Company.

(c) "Change in Control" means a change in ownership or control of
the Company effected through the direct or indirect acquisition by any person
or related group of persons (other than an acquisition from or by the Company
or by a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities.

(d) "Common Stock" means the common stock of the Company.

(e) "Company" means Verio Inc., a Delaware corporation.

(f) "Compensation" means an Employee's base salary, bonuses, annual
awards, and other incentive payments from the Company or one or more Designated
Parents or Subsidiaries, including such amounts of base salary, bonuses, annual
awards and other incentive payments as are deferred by the Employee (i) under a
qualified cash or deferred arrangement described in Section 401(k) of the Code,
or (ii) to a plan qualified under Section 125 of the Code. Compensation does
not include overtime, reimbursements or other expense allowances, fringe
benefits (cash or noncash), moving expenses, deferred compensation,
contributions (other than contributions described in the first sentence) made
on the Employee's behalf by the Company or

1
<PAGE> 2

one or more Designated Parents or Subsidiaries under any employee benefit or
welfare plan now or hereafter established, and any other payments not
specifically referenced in the first sentence.

(g) "Corporate Transaction" means any of the following stockholder-
approved transactions to which the Company is a party:

(1) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;

(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital
stock of the Company's subsidiary corporations) in connection with
complete liquidation or dissolution of the Company; or

(3) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from those
who held such securities immediately prior to such merger; provided,
however that if such merger is preceded by a Change in Control within
six (6) months of the merger, then a Corporate Transaction will be
deemed to have occurred if securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred pursuant to the merger to a
person or persons different from those who held such securities
immediately prior to such Change in Control.

(h) "Designated Parents or Subsidiaries" means the Parents or
Subsidiaries which have been designated by the Plan Administrator from time to
time as eligible to participate in the Plan.

(i) "Effective Date" means the effective date of the Registration
Statement relating to the Company's initial public offering of its Common
Stock. However, should any Designated Parent or Subsidiary become a
participating company in the Plan after such date, then such entity shall
designate a separate Effective Date with respect to its employee-participants.

(j) "Employee" means any individual, including an officer or director,
who is an employee of the Company or a Designated Parent or Subsidiary for
purposes of Section 423 of the Code. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the individual's employer.
Where the period of leave exceeds ninety (90) days and the individual's right
to reemployment is not guaranteed either by statute or by contract, the
employment relationship will be deemed to have terminated on the ninety-first
(91st) day of such leave, for purposes of determining eligibility to
participate in the Plan.

(k) "Enrollment Date" means the first day of each Purchase Period.

2
<PAGE> 3

(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(m) "Exercise Date" means the last day of each Accrual Period.

(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:

(1) Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing price for a share of Common
Stock for the last market trading day prior to the time of the
determination (or, if no closing price was reported on that date, on
the last trading date on which a closing price was reported) on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock or the Nasdaq National Market, whichever
is applicable or (B) if the Common Stock is not traded on any such
exchange or national market system, the average of the closing bid and
asked prices of a share of Common Stock on the Nasdaq Small Cap Market
for the day prior to the time of the determination (or, if no such
prices were reported on that date, on the last date on which such
prices were reported), in each case, as reported in The Wall Street
Journal or such other source as the Plan Administrator deems reliable;
or

(2) In the absence of an established market of the type described
in (1), above, for the Common Stock, and subject to (3), below, the
Fair Market Value thereof shall be determined by the Plan
Administrator in good faith; or

(3) On the Effective Date, the Fair Market Value shall be the
price at which the Board, or if applicable, the Pricing Committee of
the Board, and the underwriters agree to offer the Common Stock to the
public in the initial public offering of the Common Stock, net of
discounts and underwriting commissions.

(o) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

(p) "Participant" means an Employee of the Company or Designated
Parent or Subsidiary who is actively participating in the Plan.

(q) "Plan" means this Employee Stock Purchase Plan.

(r) "Plan Administrator" means either the Board or a committee of the
Board that is responsible for the administration of the Plan as is designated
from time to time by resolution of the Board.

(s) "Purchase Period" means a purchase period established pursuant to
Section 4 hereof.

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<PAGE> 4

(t) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.

(u) "Reserves" means the sum of the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.

(v) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.

3. Eligibility.

(a) General. Any individual who is an Employee on a given Enrollment
Date shall be eligible to participate in the Plan for the Purchase Period
commencing with such Enrollment Date.

(b) Limitations on Grant and Accrual. Any provisions of the Plan to
the contrary notwithstanding, no Employee shall be granted an option under the
Plan (i) if, immediately after the grant, such Employee (taking into account
stock owned by any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or of any Parent or Subsidiary, or (ii) which permits his/her rights to
purchase stock under all employee stock purchase plans of the Company and its
Parents or Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the Fair Market Value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time. The determination of the accrual of the
right to purchase stock shall be made in accordance with Section 423(b)(8) of
the Code and the regulations thereunder.

(c) Other Limits on Eligibility. Notwithstanding Subsection (a),
above, the following Employees shall not be eligible to participate in the Plan
for any relevant Purchase Period: (i) Employees whose customary employment is 20
hours or less per week; (ii) Employees whose customary employment is for not
more than 5 months in any calendar year; (iii) Employees who commence such
employment after the Effective Date who have been so employed for fewer than 6
months; and (iv) Employees who are subject to rules or laws of a foreign
jurisdiction that prohibit or make impractical the participation of such
Employees in the Plan.

4. Purchase Periods.

(a) The Plan shall be implemented through overlapping or consecutive
Purchase Periods until such time as (i) the maximum number of shares of Common
Stock available for issuance under the Plan shall have been purchased or (ii)
the Plan shall have been sooner terminated in accordance with Section 19
hereof. The maximum duration of a Purchase

4
<PAGE> 5

Period shall be twenty-seven (27) months. Initially, the Plan shall be
implemented through overlapping Purchase Periods of twelve (12) months'
duration commencing each May 15 and November 15 following the Effective Date
(except that the initial Purchase Period shall commence on the Effective Date
and shall end on May 14, 1999). The Plan Administrator shall have the authority
to change the length of any Purchase Period and the length of Accrual Periods
within any such Purchase Period subsequent to the initial Purchase Period by
announcement at least thirty (30) days prior to the commencement of the
Purchase Period and to determine whether subsequent Purchase Periods shall be
consecutive or overlapping.

(b) A Participant shall be granted a separate option for each Purchase
Period in which he/she participates. The option shall be granted on the
Enrollment Date and shall be automatically exercised in successive installments
on the Exercise Dates ending within the Purchase Period.

(c) An Employee may participate in only one Purchase Period at a time.
Accordingly, except as provided in Section 4(d), an Employee who wishes to join
a new Purchase Period must withdraw from the current Purchase Period in which
he/she is participating and must also enroll in the new Purchase Period prior
to the Enrollment Date for that Purchase Period.

(d) If on the first day of any Accrual Period in a Purchase Period in
which a Participant is participating, the Fair Market Value of the Common Stock
is less than the Fair Market Value of the Common Stock on the Enrollment Date
of the Purchase Period (after taking into account any adjustment during the
Purchase Period pursuant to Section 18(a)), the Purchase Period shall be
terminated automatically and the Participant shall be enrolled automatically in
the new Purchase Period which has its first Accrual Period commencing on that
date, provided the Participant is eligible to participate in the Plan on that
date and has not elected to terminate participation in the Plan.

(e) Except as specifically provided herein, the acquisition of Common
Stock through participation in the Plan for any Purchase Period shall neither
limit nor require the acquisition of Common Stock by a Participant in any
subsequent Purchase Period.

5. Participation.

(a) An eligible Employee may become a Participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the designated payroll office of
the Company at least ten (10) business days prior to the Enrollment Date for
the Purchase Period in which such participation will commence, unless a later
time for filing the subscription agreement is set by the Plan Administrator for
all eligible Employees with respect to a given Purchase Period.

(b) Payroll deductions for a Participant shall commence with the first
partial or full payroll period beginning on the Enrollment Date and shall end
on the last complete payroll period during the Purchase Period, unless sooner
terminated by the Participant as provided in Section 10.

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<PAGE> 6

6. Payroll Deductions.

(a) At the time a Participant files his/her subscription agreement,
he/she shall elect to have payroll deductions made during the Purchase Period
in amounts between one percent (1%) and not exceeding ten percent (10%) of the
Compensation which he/she receives during the Purchase Period.

(b) All payroll deductions made for a Participant shall be credited to
his/her account under the Plan and will be withheld in whole percentages only.
A Participant may not make any additional payments into such account.

(c) A Participant may discontinue his/her participation in the Plan as
provided in Section 10, or may decrease the rate of his/her payroll deductions
during the Purchase Period by completing and filing with the Company a new
subscription agreement authorizing a decrease in the payroll deduction rate.
The decrease in rate shall be effective with the first full payroll period
commencing ten (10) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A Participant may increase the rate of his/her
payroll deductions for a future Purchase Period by filing with the Company a
new subscription agreement authorizing an increase in the payroll deduction
rate within ten (10) business days (unless the Company elects to process a
given change in participation more quickly) before the commencement of the
upcoming Purchase Period. A Participant may not increase the rate of his/her
payroll deductions for an existing Purchase Period. A Participant's
subscription agreement shall remain in effect for successive Purchase Periods
unless terminated as provided in Section 10. The Plan Administrator shall be
authorized to limit the number of payroll deduction rate changes during any
Purchase Period.

(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a Participant's
payroll deductions may be decreased to 0% at such time during any Accrual
Period which is scheduled to end during the current calendar year (the "Current
Accrual Period") that the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in a prior Accrual Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Accrual Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such Participant's subscription
agreement at the beginning of the first Accrual Period which is scheduled to
end in the following calendar year, unless terminated by the Participant as
provided in Section 10.

7. Grant of Option. On the Enrollment Date, each Participant in such
Purchase Period shall be granted an option to purchase on each Exercise Date of
such Purchase Period (at the applicable Purchase Price) up to a number of
shares of the Common Stock determined by dividing such Participant's payroll
deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the applicable Purchase Price;
provided (i) that such purchase shall be subject to the limitations set forth
in Sections 3(b) and 12 hereof, and (ii) the maximum number of shares of Common
Stock a Participant shall be permitted to purchase in any Accrual Period shall
be one thousand two hundred fifty (1,250)

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<PAGE> 7

shares, subject to adjustment as provided in Section 18 hereof. Exercise of the
option shall occur as provided in Section 8, unless the Participant has
withdrawn pursuant to Section 10, and the option, to the extent not exercised,
shall expire on the last day of the Purchase Period.

8. Exercise of Option. Unless a Participant withdraws from the Plan as
provided in Section 10, below, his/her option for the purchase of shares will
be exercised automatically on each Exercise Date, and the maximum number of
full shares subject to the option shall be purchased for such Participant at
the applicable Purchase Price with the accumulated payroll deductions in
his/her account. No fractional shares will be purchased; any payroll deductions
accumulated in a Participant's account which are not sufficient to purchase a
full share shall be carried over to the next Accrual Period or Purchase Period,
whichever applies, or returned to the Participant, if the Participant withdraws
from the Plan. Notwithstanding the foregoing, any amount remaining in a
Participant's account following the purchase of shares on the Exercise Date due
to the application of Section 423(b)(8) of the Code or Section 7, above, shall
be returned to the Participant and shall not be carried over to the next
Purchase Period. During a Participant's lifetime, a Participant's option to
purchase shares hereunder is exercisable only by him/her.

9. Delivery. Upon receipt of a request from a Participant after each
Exercise Date on which a purchase of shares occurs, the Company shall arrange
the delivery to such Participant, as promptly as practicable, of a certificate
representing the shares purchased upon exercise of his/her option.

10. Withdrawal; Termination of Employment.

(a) A Participant may withdraw all but not less than all the payroll
deductions credited to his/her account and not yet used to exercise his/her
option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the Participant's payroll deductions
credited to his/her account will be paid to such Participant as promptly as
practicable after receipt of notice of withdrawal, such Participant's option
for the Purchase Period will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made during the Purchase
Period. If a Participant withdraws from a Purchase Period, payroll deductions
will not resume at the beginning of the succeeding Purchase Period unless the
Participant delivers to the Company a new subscription agreement.

(b) Upon a Participant's ceasing to be an Employee for any reason or
upon termination of a Participant's employment relationship (as described in
Section 2(j)), the payroll deductions credited to such Participant's account
during the Purchase Period but not yet used to exercise the option will be
returned to such Participant or, in the case of his/her death, to the person or
persons entitled thereto under Section 14, and such Participant's option will
be automatically terminated.

11. Interest. No interest shall accrue on the payroll deductions
credited to a Participant's account under the Plan.

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<PAGE> 8

12. Stock.

(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan shall be three million (3,000,000) shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 18. If on a given Exercise Date the number of shares with respect to
which options are to be exercised exceeds the number of shares then available
under the Plan, the Plan Administrator shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.

(b) A Participant will have no interest or voting right in shares
covered by his/her option until such shares are actually purchased on the
Participant's behalf in accordance with the applicable provisions of the Plan.
No adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date of such purchase.

(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his/her spouse.

13. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all persons.

14. Designation of Beneficiary.

(a) Each Participant will file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the Participant's account
under the Plan in the event of such Participant's death. If a Participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the Participant
(and his/her spouse, if any) at any time by written notice. In the event of the
death of a Participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such Participant's death, the
Company shall deliver such shares and/or cash to the executor or administrator
of the estate of the Participant, or if no such executor or administrator has
been appointed (to the knowledge of the Plan Administrator), the Plan
Administrator, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Plan Administrator, then to
such other person as the Plan Administrator may designate.

15. Transferability. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the Participant. Any

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<PAGE> 9

such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Plan Administrator may treat such act as an
election to withdraw funds from a Purchase Period in accordance with Section
10.

16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.

17. Reports. Individual accounts will be maintained for each
Participant in the Plan. Statements of account will be given to Participants at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

18. Adjustments Upon Changes in Capitalization; Corporate
Transactions.

(a) Adjustments Upon Changes in Capitalization. Subject to any
required action by the stockholders of the Company, the Reserves, as well as
the Purchase Price, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other similar event resulting in an increase or
decrease in the number of issued shares of Common Stock. Such adjustment shall
be made by the Plan Administrator, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option. The Plan Administrator may, if it so determines in the
exercise of its sole discretion, make provision for adjusting the Reserves, as
well as the Purchase Price, in the event the Company effects one or more
reorganizations, recapitalizations, rights offerings or other increases or
reductions of shares of its outstanding Common Stock.

(b) Corporate Transactions. In the event of a proposed Corporate
Transaction, each option under the Plan shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Plan Administrator
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Purchase Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Plan
Administrator shortens the Purchase Period then in progress in lieu of
assumption or substitution in the event of a Corporate Transaction, the Plan
Administrator shall notify each Participant in writing, at least ten (10) days
prior to the New Exercise Date, that the Exercise Date for his/her option has
been changed to the New Exercise Date and that his/her option will be exercised
automatically on the New Exercise Date, unless prior to such date he/she has
withdrawn from the Purchase Period as provided in Section 10. For purposes of
this Subsection, an option granted under the Plan shall be deemed to be assumed
if, following the Corporate Transaction, the option confers the right to
purchase with substantially equivalent terms as the original option, for each
share of Common Stock subject to the option immediately prior to the Corporate
Transaction, the consideration (whether stock, cash or other

9
<PAGE> 10

securities or property) received in the Corporate Transaction by holders of
Common Stock for each share of Common Stock held on the effective date of the
Corporate Transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the Corporate Transaction was not solely common stock
of the successor corporation or its Parent, the Plan Administrator may, with
the consent of the successor corporation and the Participant, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the
Corporate Transaction.

19. Amendment or Termination.

(a) The Plan Administrator may at any time and for any reason
terminate or amend the Plan. Except as provided in Section 18, no such
termination can affect options previously granted, provided that a Purchase
Period may be terminated by the Plan Administrator on any Exercise Date if the
Plan Administrator determines that the termination of the Purchase Period is in
the best interests of the Company and its stockholders. Except as provided in
Section 18, no amendment may make any change in any option theretofore granted
which adversely affects the rights of any Participant. To the extent necessary
to comply with Section 423 of the Code (or any successor rule or provision or
any other applicable law or regulation), the Company shall obtain stockholder
approval in such a manner and to such a degree as required.

(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Plan Administrator shall be entitled to limit the frequency and/or number of
reductions in the amount withheld during Purchase Periods, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, establish additional terms, conditions, rules or procedures to
accommodate the rules or laws of applicable foreign jurisdictions, permit
payroll withholding in excess of the amount designated by a Participant in
order to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each Participant properly
correspond with amounts withheld from the Participant's Compensation, and
establish such other limitations or procedures as the Plan Administrator
determines in its sole discretion advisable and which are consistent with the
Plan.

20. Notices. All notices or other communications by a Participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Plan Administrator at the
location, or by the person, designated by the Plan Administrator for the
receipt thereof.

21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such

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<PAGE> 11

shares pursuant thereto shall comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance. As a condition to the exercise of an option,
the Company may require the Participant to represent and warrant at the time of
any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law. In addition, no options shall
be exercised or shares issued hereunder before the Plan shall have been
approved by stockholders of the Company as provided in Section 23.

22. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 19.

23. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. If such stockholder approval is obtained at
a duly held stockholders' meeting, the Plan must be approved by a majority of
the votes cast at such stockholders' meeting at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the Plan. If such stockholder approval is
obtained by written consent, it must be obtained by the written consent of the
holders of a majority of all outstanding voting stock of the Company. However,
approval at a meeting or by written consent may be obtained by a lesser degree
of stockholder approval if the Plan Administrator determines, after
consultation with the Company's legal counsel if the Plan Administrator deems
such consultation advisable, that such a lesser degree of stockholder approval
will comply with all applicable laws and will not adversely affect the
qualification of the Plan under Section 423 of the Code.

24. No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company
or a Designated Parent or Subsidiary, and it shall not be deemed to interfere
in any way with such employer's right to terminate, or otherwise modify, an
employee's employment at any time.

25. Effect of Plan. The provisions of the Plan shall, in accordance
with its terms, be binding upon, and inure to the benefit of, all successors of
each Participant, including, without limitation, such Participant's estate and
the executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.

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<PAGE> 12

27. Applicable Law. The laws of the State of Colorado (excluding that
body of law pertaining to its conflicts of law) will govern all matters
relating to this Plan except to the extent it is superseded by the laws of the
United States.

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<PAGE> 13

EXHIBIT A
VERIO INC.

1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT

________ Original Application Enrollment Date:_____________
________ Change in Payroll Deduction Rate
________ Change of Beneficiary(ies)

1. I,________________________, hereby elect to participate in
the Verio Inc. 1998 Employee Stock Purchase Plan (the "Plan") and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Employee Stock Purchase Plan.

2. I hereby authorize payroll deductions from each paycheck in
the amount of ______% of my Compensation on each paycheck during the Purchase
Period. I understand that this amount must not be less than one percent (1%) and
not more than ten percent (10%) of my Compensation during the Purchase Period
and that no fractional percentages are permitted. I further understand that:

(a) all payroll deductions made by me shall be credited
to my account under the Plan;

(b) I may not make additional payments into such account;

(c) all payments made by me shall be accumulated for the
purchase of Common Stock at the applicable Purchase
Price determined in accordance with the Plan;

(d) no interest will be credited on funds held in my
account at any time for any reason including, but not
limited to, before or after the purchase of shares
under the Plan or in connection with any refund
caused by my withdrawal from the Plan;

(e) I may discontinue my participation in the Plan at
any time prior to an Exercise Date as provided in
Section 10 of the Plan, but if I do not withdraw from
the Plan, any accumulated payroll deductions will be
used to automatically purchase Common Stock;

(f) I may decrease the rate of my payroll deductions in
whole percentage increments to not less than one
percent (1%) on one occasion during any Accrual
Period by completing and filing a

A-1
<PAGE> 14

new Subscription Agreement with such decrease taking
effect as of the beginning of the payroll period
following the date of filing of a new Subscription
Agreement, filed at least ten (10) business days
prior to the beginning of such payroll period;

(g) I may not increase the rate of my payroll
deductions during any ongoing Purchase Period:

(h) I may increase or decrease the rate of payroll
deductions for future Purchase Periods by filing a
new Subscription Agreement, and that change will be
effective as of the beginning of the next Purchase
Period; and

(i) unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election
for payroll deductions will continue to be effective
for each successive Purchase Period.

4. I have received a copy of the complete "Verio Inc. 1998
Employee Stock Purchase Plan." I understand that my participation in the Plan
is in all respects subject to the terms of the Plan. I understand that the
grant of the option by the Company under this Subscription Agreement is subject
to obtaining stockholder approval of the Employee Stock Purchase Plan.

5. Until I request delivery of certificates, Shares purchased
for me under the Plan shall be owned by my beneficially and shall be held in
street name of the nominee of the third party administrator selected by the Plan
Administrator to administer the Plan records or in such other nominee name as
shall be designated from time to time by the Plan Administrator. Upon delivery,
shares should be issued in the name(s) of (name of employee or employee and
employee's spouse only):

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

6. I understand that if I dispose of any shares received by me
pursuant to the Employee Stock Purchase Plan within two (2) years after the
Enrollment Date (the first day of the Purchase Period during which I purchased
such shares) or within one (1) year after the Exercise Date (the date I
purchased such shares), I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an amount
equal to the excess of the fair market value of the shares on the date such
shares were purchased for me over the price which I paid for the shares. I
hereby agree to notify the Company in writing within 30 days after the date of
any such disposition and I will make adequate provision for foreign, federal,
state or other tax withholding obligations, if any which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any

A-2
<PAGE> 15
withholding necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and 1-year
holding periods described above, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to the
extent of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Purchase Period. The remainder of the gain, if any,
recognized on such disposition will be taxed as long-term capital gain. I also
understand that the foregoing income tax consequences contained herein is only a
summary of some of the basic provisions of the current federal income tax law
and related regulations applicable to the Plan and are subject to change. I
further understand that the Company is not giving tax advice, is not responsible
for advising me of any changes in the applicable tax rules, and that I should
consult a tax advisor concerning the tax consequences of the purchase and sale
of Common Stock under the Plan.

7. I hereby agree to be bound by the terms of the Employee
Stock Purchase Plan. The effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Employee Stock Purchase
Plan.

8. In the event of my death, I hereby designate the following
as my beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan.

NAME: (Please print)

--------------------------------------------------------
(First) (Middle) (Last)
Relationship:

--------------------------------------------------------
Address:

--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
Employee's Social
Security Number:
--------------------------------------------------------

Employee's Home Address:
--------------------------------------------------------

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

A-3
<PAGE> 16

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE PURCHASE PERIODS UNLESS TERMINATED BY ME

Employee's Signature:
-------------------------------------------------------
Dated:
-------------------------------------------------------
Signature of spouse
if beneficiary is other
than spouse:
-------------------------------------------------------
Dated:
-------------------------------------------------------

A-4
<PAGE> 17

EXHIBIT B
VERIO INC.

1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
NOTICE OF WITHDRAWAL

The undersigned Participant in the Purchase Period of the
Verio Inc. 1998 Employee Stock Purchase Plan which began on _________________,
19___, hereby notifies the Company that he or she hereby withdraws from the
Purchase Period. He or she hereby directs the Company to pay to the undersigned
as promptly as practicable all the payroll deductions credited to his/her
account with respect to such Purchase Period. The undersigned understands and
agrees that his/her option for such Purchase Period will be automatically
terminated. The undersigned understands further that no further payroll
deductions will be made for the purchase of shares in the current Purchase
Period and the undersigned shall be eligible to participate in succeeding
Purchase Periods only by delivering to the Company a new Subscription Agreement.

Name and Address
of Participant:
--------------------------------------------------------

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

Signature:
--------------------------------------------------------
Date:
--------------------------------------------------------

B-1

<PAGE> 1

EXHIBIT 10.29

THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

OUTSIDE SERVICE PROVIDER AGREEMENT

This OUTSIDE SERVICE PROVIDER AGREEMENT (the "Agreement") is
entered into as of April 7, 1998 by and between Verio, Inc., a
Delaware corporation, whose offices are located at 8005 South Chester
Street, Suite 200, Englewood, Colorado 80112 ("Verio") and NTT
America, Inc., a New York corporation, whose offices are located at
101 Park Avenue, 41st Floor, New York, New York 10178 ("NTT America")
(each a "Party" and collectively the "Parties").

WHEREAS, Verio is engaged in the business of providing
Internet services to customers in the United States and Canada, and
NTT America and its Affiliates are in the business of providing
telecommunications services to customers which include Japanese
multinational corporations, with operations in the United States and
the Pacific Rim;

WHEREAS, Verio desires to sell to NTT America and the NTT
America Affiliates certain services which will then be resold by
members of the NTT America Group to certain of their customers in the
United States and Canada, and members of the NTT America Group desire
to purchase such services, all as set forth herein; and

WHEREAS, contemporaneously with the execution of this
Agreement, Verio and NTT (as hereinafter defined) are entering into
the Stock Purchase and Master Strategic Relationship Agreement (the
"SPA") and the Investment Agreement (the "Equity Investment
Agreement"), both of even date herewith (collectively, the "Investment
Agreements").

NOW, THEREFORE, in consideration of the foregoing, the mutual
agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, NTT America and Verio agree as follows:

1. CERTAIN DEFINITIONS

1.1. "Affiliate" shall mean, as to a Party hereto, any person, corporation,
firm, partnership or other entity which, directly or indirectly,
through one or more intermediaries, controls (i.e., possesses,
directly or indirectly, the power to direct or cause the direction of
the management and policies of an entity, whether through ownership of
voting securities, by contract, or otherwise), is controlled by or is
under common control with such Party.

1.2. "ATM" or "Asynchronous Transfer Mode" shall mean the information
transfer standard for routing traffic which uses packets (cells) of a
fixed length (53-byte cell).

1.3. [ *** ]

1.4. [ ***
]

- 1 -
<PAGE> 2
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

1.5. "Co-location Service" shall mean the service of renting or leasing
space at the location designated to install a Party's
telecommunications equipment or other equipment.

1.6. "E-Commerce" or "Electronic Commerce" shall mean the business between
trading partners to offer services utilizing electronic information
technologies, including the Internet.

1.7. "Effective Date" shall mean the Closing Date specified in the SPA.

1.8. "Frame Relay" shall mean the information transfer standard for
relaying traffic based on an address contained in the six-byte header
of a variable length packet that is up to 2,106 bytes long.

1.9. "Internet Service Provider" shall mean a commercial organization that
provides Internet services.

1.10. [ *** ]

1.11. [ *** ]

1.12. [ *** ]

1.13. [ *** ]

1.14. "Jointly Developed Services" shall have the meaning set forth in
Section 2.3.

1.15. "Managed Private Line" shall mean the management of private
communication lines dedicated to a customer's particular use.

1.16. [ *** ]

1.17. [ *** ]

1.18. "Network Security Services" shall mean the services provided by
Internet Service Providers to prevent infiltration of their network
and their customers' networks.

1.19. [ *** ]

1.20. [ *** ]

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<PAGE> 3
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

1.21. "NTT" shall mean Nippon Telegraph and Telephone Corporation, a
Japanese corporation.

1.22. "NTT America Affiliates" shall mean those entities set forth on
Attachment E attached hereto. NTT America may modify the list of
Affiliates set forth in Attachment E with Verio's prior consent, not
to be unreasonably withheld.

1.23. "NTT America Group" shall mean NTT America and the NTT America
Affiliates, collectively.

1.24. [ *** ]

1.25. "Peering" shall mean the commercial practice under which Internet
Service Providers exchange each other's traffic.

1.26. "POP" or "Point of Presence" shall mean a location where facilities
and equipment of an Internet Service Provider are installed.

1.27. "Resell Services" shall mean those services described as such in
Attachment A.

1.28. "Routers" shall mean equipment that routes data packets.

1.29 "Service Level Commitments" shall mean those service levels described
in Attachment B.

1.30. "TCP/IP" or "Transmission Control Protocol/Internet Protocol" shall
mean a suite of network protocols that allows computers with different
architectures and operating system software to communicate with other
computers on the Internet.

1.31. [ *** ]

1.32. "Transit" shall mean carrying customers' traffic to the Internet for a
fee.

1.33. "Web" shall mean the World Wide Web.

1.34. "Web Hosting" shall mean the daily operation and maintenance of Web
sites for customers.

1.35. "Working Group" shall have the meaning set forth in Section 6.2.

2. SCOPE OF SERVICES UNDER THIS AGREEMENT

2.1. Application of Agreement. This Agreement shall apply to the provision
of Resell Services and certain Jointly Developed Services by Verio and
NTT America. Neither NTT America nor any of the NTT America
Affiliates shall have any obligation to contract with Verio for any
other services such as Frame Relay, ATM and Managed Private Line
services. In the event NTT

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<PAGE> 4
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

America requests that Verio provide additional services and Verio
desires to provide such services to NTT America, then such services
shall be included as Resell Services pursuant to a mutually agreed
upon written amendment to this Agreement.

2.2. Resell Services. The Resell Services which Verio shall provide to the
NTT America Group for resale to their respective customers are
described in Attachment A. All Resell Services shall be mutually
agreed upon by the Parties. Any change in the scope of such Resell
Services shall be pursuant to a mutually agreed upon written amendment
to this Agreement. Changes in the scope of the Resell Services may
include such additional services which may be developed by Verio and
NTT America pursuant to Section 6.2.3.

2.3. Jointly Developed Services. The Parties shall use their commercially
reasonable and good faith efforts to jointly develop certain services
as described in Section 6.2.3 below (the "Jointly Developed
Services"). Any change in the scope of such Jointly Developed
Services, or the development of additional services, shall be through
the establishment of one or more Working Groups in accordance with
Section 6.2 below. The implementation of any services which may be
developed pursuant to Section 6.2.3 shall be pursuant to a mutually
agreed upon written amendment to this Agreement. After the services
described in Section 6.2.3 have been developed and implemented for
commercial use, the Parties may include such services as Resell
Services through a mutually agreed upon written amendment to this
Agreement. Thereafter, NTT America and Verio may mutually determine
and appropriately modify the specifications and quality levels for
such services including, but not limited to, [ *** ]
[ *** ].

3. RELATIONSHIP OF THE PARTIES

3.1. Independent Contractors. NTT America and Verio are, and shall remain,
independent contractors, each responsible only for its own acts and/or
omissions. Nothing in this Agreement shall be construed to constitute
NTT America and Verio in the relationship of an employer-employee,
franchisor-franchisee, principal-agent, partners or joint venturers,
or as anything other than an independent contractor. Neither Party
shall have the authority to make any representations, claims or
warranties of any kind on behalf of the other Party or on behalf of
such Party's licensors or suppliers.

3.2. Preferred Resell Services Provider. NTT America hereby designates
Verio as the preferred supplier of Resell Services to the NTT America
Group, which Resell Services shall be resold by NTT America to NTT
America's customers in the United States and Canada. For purposes of
this Agreement, NTT America's customers shall include the customers of
any NTT America Affiliate. NTT America shall notify Verio of NTT
America's new customers, after the Effective Date, in the United
States and Canada which desire Resell Services, including a
description of the specific services and scheduling requirements of
such customers, provided that NTT America shall not provide such
notice if: (i) NTT America determines that it is not technically,
commercially or economically feasible under the terms and conditions
of this Agreement for

- 4 -

<PAGE> 5
Verio to provide the Resell Services to such NTT America customer;
(ii) NTT America's customer requests a service provider other than
Verio; or (iii) Verio cannot meet the customer's target installation
date. Subject to the foregoing, Verio shall provide Resell Services
to members of the NTT America Group for all of their customers for
which Verio receives such notification, provided that (a) Verio
receives a service order which reasonably complies with Verio's
standard business practices and (b) NTT America's customer has agreed
to abide by Verio's posted network use policy. If Verio is unable to
provide Resell Services to a member of the NTT America Group or its
customers in certain geographic areas, Verio and such NTT America
Group member may discuss a solution that is technically, commercially
and economically feasible; provided, however, that Verio shall not be
obligated to provide Resell Services in such geographic areas and such
NTT America Group member shall not be obligated to use Verio to
provide Resell Services to the NTT America Group member's customers in
such geographic areas.

3.3. Customer Relationships. Verio acknowledges that all of the NTT
America Group's customers who utilize the Resell Services provisioned
by Verio through NTT America shall contract exclusively with a member
of the NTT America Group, and Verio shall have no direct contractual
or financial interest in the customer relationships associated
therewith.

4. RESELL SERVICES TO BE PROVIDED

4.1. Verio's Responsibilities.

4.1.1. Services. Verio hereby agrees to provide Resell Services to
members of the NTT America Group so that the members of the
NTT America Group may provide such Resell Services to each
customer designated by a member of the NTT America Group to
receive the Resell Services. Verio shall perform all Resell
Services in accordance with and subject to the Service Level
Commitments set forth in Attachment B.

4.1.2. Equipment. Verio shall manage and maintain, at its expense,
the quality and capacity levels of Verio's network, including
without limitation obtaining any additional equipment
necessary to provide Resell Services to NTT America's
customers in accordance with the Service Level Commitments.

4.1.3. Billing. NTT America may request Verio, from time to time, to
provide billing services to the NTT America customers;
provided, however, that Verio is not obligated to provide such
billing services until such time, if any, as Verio has entered
into an agreement with Kenan Systems Corporation which allows
Verio to provide such billing services on behalf of NTT
America. Verio shall provide NTT America with such billing
information concerning NTT America's customers in Verio's
possession as NTT America may reasonably request in order to
allow NTT America to bill NTT America's customers as
contemplated by Section 4.2.3. NTT America acknowledges that
Verio has disclosed to NTT America that Verio's existing
license agreement with Kenan Systems Corporation

- 5 -
<PAGE> 6
currently does not permit Verio to bill NTT America's
customers on behalf of NTT America. Verio and NTT America
shall use commercially reasonable efforts to obtain such
licenses, consents and technical assistance from Kenan Systems
Corporation as may be necessary to allow Verio to provide NTT
America with billing services as well as access to Verio's
customer billing system for the purpose of viewing NTT
America's customer data and making appropriate adjustments
thereto. NTT America shall, at its own expense, pay for any
such license, consent or assistance from Kenan Systems
Corporation or other billing arrangements for NTT America's
customers requested by NTT America. Verio will provide access
to such billing records via a remote terminal to be located on
the premises of one or more of the members of the NTT America
Group. Notwithstanding the foregoing, billing and other data
which identifies each Party's customers shall only be
accessible by each Party's employees who need to access such
data to perform billing services, in accordance with the
Firewall Policy as described in Attachment F.

4.1.4. Customer Termination. Verio and NTT America will use
commercially reasonable good faith efforts jointly to develop
appropriate procedures (including suspension of service or
termination of a customer, and applicable notice periods) for
Verio and members of the NTT America Group to respond to
certain contingencies, such as a customer's violation of
Verio's posted network use policy and other situations which
may result in liability to Verio and/or a member of the NTT
America Group. After such procedures have been developed and
mutually agreed upon (the "Adverse Situation Procedures"),
Verio shall not terminate or materially adversely change any
Resell Service provided to NTT America customers except as
provided in the Adverse Situation Procedures. NTT America
acknowledges that members of the NTT America Group will
contractually require their customers to abide by Verio's
posted network use policy. In the Adverse Situation
Procedures, as to matters within the knowledge and control of
a member of the NTT America Group, such NTT America Group
member shall agree to act as quickly to remedy a violation of
Verio's posted network use policy by such members' customers
as Verio customarily acts to remedy comparable violations by
Verio's own customers or, in the event such NTT America Group
member fails to act within such time frame, agree to
compensate Verio for any liability to a third party arising
from such NTT America Group member's failure to act within
such time frame.

4.2. NTT America's Responsibilities.

4.2.1. Services. NTT America shall be responsible to perform its
obligations set forth and described in Attachment A.

4.2.2. Equipment. NTT America shall obtain and maintain, at its
expense, such equipment required pursuant to Attachment A.

4.2.3. Billing. NTT America shall be responsible for billing NTT
America's customers for all Resell Services provided to such
customers by Verio on behalf of NTT America.

- 6 -
<PAGE> 7
4.2.4. Costs and Expenses. NTT America or the relevant NTT America
Affiliate shall be responsible for payment of the costs and
expenses specifically designated as a responsibility of NTT
America or such NTT America Affiliate pursuant to this
Agreement.

4.3. Customer Service Center.

Verio and NTT America shall work together to develop a group of
Japanese speaking customer support personnel at Verio's Customer
Service Center, to be mutually agreed upon and described in Attachment
A.

5. MARKETING

5.1. Development of Marketing Plan. Verio and NTT America shall jointly
develop and mutually agree upon a marketing plan which shall govern
all aspects of the Parties' joint promotion of the Resell Services
(the "Marketing Plan"). The Marketing Plan shall be based upon the
principles set forth and described in Attachment C attached hereto
and, when mutually agreed upon by the Parties, shall replace and
supersede Attachment C.

5.2. Verio's Responsibilities. Verio shall be responsible to perform its
obligations set forth and described in Attachment C.

5.3. NTT America's Responsibilities. NTT America shall be responsible to
perform its obligations set forth and described in Attachment C.

5.4. Certain Covenants. Verio and NTT America covenant to each other that
it will: (a) not disparage the other Party's products and services or
the good name, good will and reputation of the other Party; (b) avoid
deceptive, misleading, or unethical practices that are or might be
detrimental to the other Party, its products or services, or the
public; (c) make no representations, warranties or guaranties with
regard to the other Party or its products or services, except as
authorized by the other Party in writing; (d) not publish or employ,
or cooperate in the publication or employment of, any misleading or
deceptive advertising material with regard to the other Party or its
products or services; and (e) perform its obligations under this
Article 5 in accordance with the Firewall Policy set forth in
Attachment F. For purposes of this Section 5.4, the term "Party"
shall include the Party's Affiliates.

6. JOINT EFFORTS

6.1. Purpose. During the term of this Agreement, the Parties intend to
develop jointly certain capabilities and to explore certain methods to
integrate the Parties' existing capabilities, as set forth and more
fully described in this Article 6. Prior to the implementation of any
plan developed pursuant to this Article, the Parties shall discuss and
mutually agree upon any amendment to this Agreement reasonably
required to clarify or establish the rights and

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<PAGE> 8
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

obligations of the Parties in connection with the implementation of
such plan. Any resulting additional service developed pursuant to
Section 6.2.3 which NTT America desires to resell to its customers
shall be included among the Resell Services described in Attachment A
pursuant to a mutually agreed upon amendment to this Agreement. All
of the Parties' joint efforts under this Article 6 shall be subject to
the Firewall Policy set forth in Attachment F.

6.2. Establishment of Working Groups. Within thirty (30) calendar days
after the Effective Date of this Agreement, NTT America and Verio
shall establish working groups to develop certain plans described
below (each a "Working Group"). The representatives of the Parties in
each Working Group shall be experts in the area to be addressed by the
applicable Working Group. Each plan developed by a particular Working
Group must be submitted to the appropriate levels of management in
each Party for approval. Neither Party shall have any obligation to
implement a plan unless the Parties mutually agree to such
implementation in writing pursuant to an amendment to this Agreement
or otherwise.

6.2.1. [ *** ] Working Group ("[***] WG"). The
Parties shall establish and direct the OSS WG sub-working
groups to address and to formulate plans to determine the
following issues:

6.2.1.1. [ *** ]
Sub-Working Group ("[***] SWG"). The Parties
shall establish and direct the NMS SWG to
develop a plan for the [ *** ]
[ *** ]
[ *** ] which chooses to so (***) (the
"[***] Plan"). The [***] Plan shall describe:
(a) how and to what extent each Party's
[ *** ]
[***], including a description of any
modification to [ *** ] necessitated
thereby; (b) a schedule to [ *** ]
[ *** ]
[ *** ] ; (c) the
estimated costs of such efforts; and (d) the
ongoing operating expenses estimated to be
incurred by Verio as a result of [ *** ]
[ *** ]
[ *** ]. The Parties intend that
each Party shall bear its own expenses
related to [ *** ]
[ *** ]
[ *** ], and that [ *** ] ongoing
operating expenses shall be borne solely by
[***]. Any incremental license fees
necessary to support [ *** ]
shall be borne solely by [ *** ].

6.2.1.2. [ *** ]
Sub-Working Group ("[ *** ] SWG").
The Parties shall establish and direct the
[ *** ] SWG to formulate a plan
(the "[ *** ] Plan") which shall
describe: (a) a method to [ *** ]

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<PAGE> 9
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

[ *** ] which minimizes
the costs and delays to each Party; (b)
recommendations on how to process [ *** ]
[ *** ] through each Party's [ *** ]; (c)
the estimated licensing fees, if any, to
[ *** ] with respect to [ *** ]
[ *** ] utilized by [ *** ]
[ *** ]; (d) an estimate of
each Party's costs with respect to [ *** ]
[ *** ; and (e) the on-going operating
expenses estimated to be incurred by [ *** ]
for [ **** ]
[ *** ], use of and access to [ *** ]
[ *** ]. The Parties
acknowledge and agree that the Parties' goal
is (i) to minimize development efforts
required to [ *** ] and (ii) that
appropriate license agreements be established
to [ *** ].
Any incremental license fees necessary to
support [ *** ] shall be borne
solely by [ *** ].

6.2.1.3. [ *** ] Sub-Working Group
("[ *** ] SWG"). The Parties shall
establish and direct the [ *** ] SWG
to formulate a plan (the "[ *** ]
Plan") which shall describe: (a)
recommendations on how to structure a [ *** ]
for [ *** ] , including
without limitation, identifying the Party
that shall be responsible for such [ *** ];
(b) the estimated licensing fees, if
any, to [ *** ] with
respect to [ *** ] services; (c) an estimate
of each Party's costs with respect to [ *** ]
services; and (d) the on-going operating
expenses estimated to be incurred by [ *** ]
[ *** ] for use of and
access to [ *** ]. The
Parties acknowledge and agree that the
Parties' goal is (i) to establish a [ *** ]
[ *** ] and limit
the costs associated therewith, (ii) to
establish appropriate license agreements to
provide the [ *** ]
[ *** ], and (iii) to work together to
[ *** ]
[ *** ].

6.2.2. [ *** ] Working Group ("[ *** ] WG").
The Parties shall establish and direct the [ *** ]
WG to address [ *** ]
[ *** ] and to formulate plans to determine the [ *** ]
[ *** ] (to be embodied,
respectively, in the "Peering Arrangement" and the "Transit
Arrangement"). Verio shall provide the initial proposed
pricing schedule for the Transit Arrangement. The Parties
acknowledge and agree that the amount of time to be allocated
to the [ *** ] shall be determined by the [ *** ]
[ *** ] WG. The [ *** ] WG shall also develop
a plan to

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<PAGE> 10
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

establish the [ *** ]
[ *** ]; provided, however, that the Parties first establish
and implement a [ *** ].
The Parties acknowledge that until such [ *** ]
[ *** ] is developed and implemented as provided
herein, [***] shall remain [ *** ].

6.2.2.1. Peering Arrangement. The [ *** ]
[ *** ] WG shall develop a Peering
Arrangement which would: (a) provide for a
[ *** ], without
charge for the [ *** ]
[ *** ]
[ *** ]
(b) identify locations within the continental
United States for [ *** ]
[ *** ]; and (c) agree on a
cost-sharing mechanism for the implementation
of the peering plan to include, without
limitation, [ *** ] expenses, [***]
costs, and [ *** ] expenses, as may
be required to implement the agreed-upon
peering approach.

6.2.2.2. Transit Arrangement. The [ *** ]
[ *** ] WG shall develop a Transit
Arrangement which would: (a) provide for the
[ *** ]
[ *** ]
[ *** ]; (b) provide for the
[ *** ]
[ *** ]
[ *** ]; (c) identify locations
within the continental United States for
[ *** ] relationships; (d) provide for
[ *** ]
[ *** ]
[ *** ]
[ *** ]
[ *** ]
[ *** ]
[ *** ]
[ *** ]; (e) provide
for [ *** ] between the [ *** ] and the
[ *** ] and establish mutually
agreeable [ *** ] terms [ *** ]
[ *** ]; and (f) provide for
[ *** ] review of the pricing schedule with
respect to the Transit Arrangement.

6.2.3. Service Development. NTT America and Verio shall use
commercially reasonable good faith efforts to negotiate the
terms and conditions of an amendment to this Agreement to
develop the following services:

6.2.3.1. [ *** ] Working
Group ("[ *** ] WG"). The Parties shall
establish and direct the [ *** ] WG to develop
a plan for the implementation of [ *** ] (the
"[ *** ]

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<PAGE> 11
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

Arrangement") which shall provide [ *** ]
services to their respective customer bases
through both [ *** ]
[ *** ].

6.2.3.2. Additional Services. The Parties
shall use commercially reasonable good faith
efforts to jointly develop additional
services under the same procedures provided
above for the [ *** ] WG, including, for
example and without limitation: (i) [ *** ]
[ *** ]; (ii) [ *** ]; (iii) [ *** ]; and
(iv) [ *** ].

6.3. Additional Working Groups. The Parties agree to establish additional
Working Groups to address systems issues encountered by the Parties in
the future during the course of their commercial relationship. In
particular, a Working Group shall be established to address the sales
and marketing issues addressed in Attachment C, and an additional
Working Group shall be established to identify appropriate technical
measurements of Verio's provisioning of Resell Services to be used in
the Service Level Commitments.

6.4. Working Group Expenses. Each Party shall bear its own costs and
expenses incurred in connection with such Party's participation in
each Working Group.

6.5. Results of Working Groups. To the extent necessary, the agreements
reached by the working groups in their respective areas of
responsibility shall be embodied in one or more amendments to this
Agreement.

7. FEES AND EXPENSES

7.1. Fees for Resell Services. NTT America (directly or through the NTT
America Affiliates) agrees to pay Verio for all Resell Services
provided to members of the NTT America Group at such prices and upon
such terms as set forth on Attachment D.

7.2. Customer Pricing. Members of the NTT America Group shall, in their
sole discretion, set the prices for the Resell Services provided to
their respective customers.

7.3. Price Adjustment. In no event shall Verio charge members of the NTT
America Group [ *** ] for any Resell Service at a rate higher than
the lowest rate being charged to any other strategic partner of Verio.
In the event that Verio has no other strategic partners, Verio shall
extend to the members of the NTT America Group [ *** ] prices
[ *** ]
[ *** ]
[ *** ]
[ *** ]
[ *** ]. Any change in pricing effected
as a result of the application of the immediately preceding sentence
shall come into effect as of the effective time [ **** ]
[ *** ]
[ *** ].

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<PAGE> 12
7.4. Expenses. The Parties shall set forth their agreement concerning
payment of each Party's expenses in Attachment D hereto.

8. USE OF TRADEMARKS, SERVICE MARKS AND TRADE NAMES

8.1. Trademark License. In no event may either Party or its Affiliates use
the other Party's or the other Party's Affiliates' trademarks, service
marks or trade names without prior written consent of the other Party
or its Affiliate, as the case may be, which may be granted or withheld
in the other Party's or its Affiliate's sole discretion.

8.2. Ownership. Each Party acknowledges that the other Party and its
Affiliates own and retain all trademarks, service marks, trade names,
logos, designations, copyrights and other proprietary rights in or
associated with the other Party and its Affiliates, and agrees that it
will not at any time during or after the term of this Agreement assert
or claim any interest in or do anything that may adversely affect the
validity of any trademark, service mark, trade name, logo, designation
or copyright belonging to or licensed to the other Party or its
Affiliates (including, without limitation, any act or assistance to
act, which may infringe or lead to the infringement of any of the
other Party's or its Affiliates' proprietary rights).

9. ORDERING

9.1. Purchase Orders. NTT America and Verio shall jointly develop and
mutually agree upon an ordering process which shall include the
appropriate use of applicable software and forms that are to be
provided by Verio and which may be altered from time to time as
commercially necessary.

9.2. Cancellation of Purchase Orders. Any purchase order from any member
of the NTT America Group may be canceled in whole or part by such NTT
America Group member without charge upon written notice thereof
received by Verio prior to Verio making commitments which will cause
Verio to incur cancellation charges. NTT America shall reimburse
Verio for any cancellation charges incurred by Verio as a result of a
breach of the immediately preceding sentence by a member of the NTT
America Group.

9.3. Change Orders. Except to the extent that Verio incurs any charges to
any third party, changes may be made by NTT America Group members, at
no additional charge, in any purchase order under this Agreement
(including changes in the quantities and configurations of Verio's
services covered by such purchase order), by a written notice
requesting such changes which is received by Verio at least fifteen
(15) days prior to the scheduled date to initiate services.

10. CONFIDENTIAL INFORMATION

10.1. Confidential Information and Obligations. All documents, other
materials and other information made available to a Party or its
employees by the disclosing Party in connection with this

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Agreement, including but not limited to, this Agreement and any trade
secret, information, process, technique, algorithm, computer program
(source and object code), design, drawing, formula or test data
relating to any research project, work in process, future development,
engineering, manufacturing, marketing, servicing, financing or
personnel matter relating to the disclosing party, its present or
future products, sales, suppliers, clients, customers, employees,
investors or business, whether in oral, written, graphic, or
electronic form (collectively, the "Confidential Information"), shall
be deemed to have been furnished to the other Party in confidence and
shall remain the exclusive property of the disclosing Party both
during and after the term of this Agreement. Each Party shall
maintain in trust and confidence all Confidential Information which it
may (i) develop or accumulate for the disclosing Party during the term
of this Agreement or (ii) acquire from the disclosing Party at any
time, and will not during the term of this Agreement or thereafter,
use the disclosing Party's Confidential Information for its own
benefit or disclose or permit any of its employees or agents to
disclose, through any medium, the Confidential Information to any
other person; provided, however, that the recipient Party may disclose
the disclosing Party's Confidential Information to such employees,
agents and Affiliates of the recipient Party who need to know such
Confidential Information for the purpose of effectuating this
Agreement and who have been informed of and have agreed to protect the
confidential nature of such Confidential Information. For purposes of
this Article 10, the term "Party" shall include the Party's
Affiliates. The rights and obligations of the Parties under this
Article 10 shall be subject to the provisions of Section 5.2 of the
Equity Investment Agreement with respect to the Designated Employees
(as defined in the Equity Investment Agreement).

10.2. Use of Information. Nothing in this Agreement shall prohibit or limit
either Party's use of information (including, but not limited to,
ideas, concepts, know-how, techniques, and methodologies) which (a) is
now, or hereafter becomes, publicly known or available through lawful
means; (b) is rightfully in recipient's possession, as evidenced by
recipient's records; (c) is disclosed to recipient without
confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or
proprietary restriction); (d) is independently developed by recipient
without any breach of this Agreement; or (e) is the subject of a
written permission to disclose provided by the disclosing party. In
the event either Party receives a subpoena or other validly issued
administrative or judicial process requesting Confidential Information
of the other Party, it shall provide prompt notice to the other Party
of such receipt and permit the other Party an opportunity to obtain a
protective order with respect to such Confidential Information. The
Party receiving the subpoena shall thereafter be entitled to comply
with such subpoena or other process to that extent required by law.

10.3. Return of Confidential Information. Upon the termination or
expiration of this Agreement or upon request from the disclosing Party
or after the non-disclosing Party's need for it has expired, the
non-disclosing Party shall return all Confidential Information to the
disclosing Party and certify in writing that it has returned or
destroyed all such information to the disclosing Party and has not
kept any copies of the Confidential Information. The obligation of
each Party with respect to the Confidential Information shall survive
the termination or expiration of this Agreement for a period of three
(3) years.

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10.4. Publicity. Except as necessary to comply with applicable securities
laws or the rules of any applicable securities exchange (provided that
the Party undertaking the publicity has first consulted with the other
Party), no publicity, including, but not limited to press releases,
concerning this Agreement and the relationship of the Parties, shall
be issued by either Party without the prior written consent of the
other Party. Notwithstanding the foregoing, (a) the Parties shall
issue a mutually agreeable joint press release in the United States
and Japan announcing this Agreement upon the Closing under the SPA and
(b) NTT may issue a mutually agreeable press release solely in Japan
announcing the Investment Agreements and this Agreement upon the
execution of this Agreement.

11. INTELLECTUAL PROPERTY

11.1. Grant of Rights. The Parties acknowledge and agree that they shall
grant each other the licenses to their respective intellectual
property rights as necessary and as mutually agreed upon on a
case-by-case basis.

11.2. NTT America's and its Affiliates' Intellectual Property. Unless
otherwise herein expressly provided, all work product, documentation,
procedures, methods, computer programs, source code, software
products, IP products, systems designs, ideas, inventions, techniques
and know how ("Work Product and Innovations") that are developed,
discovered or created solely by NTT America or its Affiliates in the
course of performing NTT America's obligations under this Agreement,
shall be the exclusive property of NTT America or its Affiliates, as
the case may be.

11.3. Verio's and its Affiliates' Intellectual Property. Unless otherwise
herein expressly provided, all Work Product and Innovations that are
developed, discovered or created solely by Verio or its Affiliates in
the course of performing Verio's obligations under this Agreement,
shall be the exclusive property of Verio or its Affiliates, as the
case may be.

11.4. Service Development. Subject to the provisions of this Article 11,
the ownership of any intellectual property developed pursuant to
Section 6.2.3 shall be negotiated by the Parties on a project by
project basis.

12. REPRESENTATIONS AND WARRANTIES

12.1. Representations and Warranties of Verio. Verio represents, warrants,
and covenants to NTT America that:

12.1.1. Verio has the right to enter into this Agreement and to
provide the Resell Services described herein, this Agreement
does not violate any material contracts or other obligations
by which Verio or any of its assets are bound, and the Resell
Services as provided by Verio to the members of the NTT
America Group do not infringe any intellectual property right
(including but not limited to patents, copyrights, trademarks
and trade secrets) of any third party.

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12.1.2. Verio shall continue standard operational practices and
procedures with respect to NTT America's customers relating to
its Resell Services, provide sufficient bandwidth and
availability to ensure that the Resell Services are available
to the members of the NTT America Group and their customers,
provide such commercially and economically viable data loss
prevention and disaster recovery mechanisms, and provide the
latest security features to minimize and prevent infiltration
of Verio's network.

12.1.3. Verio will comply with all applicable international, national,
state, regional, and local laws and regulations in performing
its duties hereunder and in any of its dealings with respect
to the products or services of the members of the NTT America
Group where to not so comply will have a material adverse
effect on Verio's ability to perform its obligations under
this Agreement.

12.2. Representations and Warranties of NTT America NTT America represents,
warrants, and covenants to Verio that:

12.2.1. NTT America has the right to enter into this Agreement and to
resell the Resell Services described herein, this Agreement
does not violate any material contracts or other obligations
by which NTT America or any of its assets are bound and,
except to the extent the representation and warranty set forth
in Section 12.1.1 is not correct, the Resell Services as
provided by the members of the NTT America Group to their
customers do not infringe any intellectual property right
(including but not limited to patents, copyrights, trademarks
and trade secrets) of any third party.

12.2.2. NTT America will comply with all applicable international,
national, state, regional, and local laws and regulations in
performing its duties hereunder and in any of its dealings
with respect to the products or services of Verio where to not
so comply will have a material adverse effect on NTT America's
ability to perform its obligations under this Agreement.

13. INDEMNIFICATION

13.1. Agreement of Verio to Indemnify.

Subject to the conditions, provisions and limitations
of this Article 13, and the other applicable provisions of this
Agreement, Verio hereby agrees to indemnify, defend and hold harmless
the members of the NTT America Group from and against all actual and
direct damages, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and disbursements,
asserted against, resulting to, imposed upon or incurred by the
members of the NTT America Group by reason of or resulting from any of
the following:

13.1.1. Any grossly negligent act or grossly negligent failure to act
or willful misconduct of Verio under this Agreement or any
violation of law by Verio, its employees, officers,
subcontractors, business invitees or agents;

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13.1.2. Any material breach of, or failure to perform any of Verio's
obligations, representations or covenants under, this
Agreement; or

13.1.3. Any third party claim for personal injury or physical damage
to property caused by the grossly negligent or intentional
acts or omissions of Verio, its employees, agents,
subcontractors, or business invitees.

13.2. Agreement of NTT America to Indemnify.

Subject to the conditions, provisions and limitations
of this Article 13, and the other applicable provisions of this
Agreement, NTT America hereby agrees to indemnify, defend and hold
harmless Verio from and against all actual and direct damages, costs
and expenses, including, without limitation, interest, penalties and
reasonable attorneys' fees and disbursements, asserted against,
resulting to, imposed upon or incurred by Verio by reason of or
resulting from any of the following:

13.2.1. Any grossly negligent act or grossly negligent failure to act
or willful misconduct or any violation of law by NTT America,
its employees, officers, subcontractors, business invitees or
agents;

13.2.2. Any material breach of, or failure to perform any of NTT
America's obligations, representations or covenants under,
this Agreement; or

13.2.3. Any third party claims for personal injury or physical damage
to property caused by the negligent or intentional acts or
omissions of NTT America, its employees, agents,
subcontractors, officers or business invitees.

13.3. Conditions of Indemnification.

The obligations and liabilities of Verio and NTT
America hereunder with respect to their respective indemnities
pursuant to this Article 13, resulting from any claim, demand or other
assertion of liability by third parties (hereinafter called
collectively "Demands"), shall be subject to the following terms and
conditions:

13.3.1. Defense by Indemnifying Party. Subject to the consent of the
Party to be indemnified pursuant to this Article 13 (the
"Indemnified Party") (such consent not to be unreasonably
withheld, conditioned or delayed), the indemnifying Party (the
"Indemnifying Party") will have the right to undertake, by
counsel or representatives of its own choosing, the defense,
compromise or settlement of any such Demand asserted against
the Indemnified Party, such defense, compromise or settlement
to be undertaken on behalf of and for the account and risk of
the Indemnifying Party.

13.3.2. Defense by Indemnified Party. In the event the Indemnifying
Party shall elect not to undertake such defense by its own
representatives, the Indemnifying Party shall give

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prompt written notice of its election to the Indemnified
Party, and the Indemnified Party will undertake the defense,
compromise or settlement thereof by counsel designated by it
whom the Indemnifying Party determines in writing to be
satisfactory for such purposes. The consent of the
Indemnifying Party to the Indemnified Party's choice of
counsel shall not be unreasonably withheld, conditioned or
delayed.

13.3.3. Settlement. No settlement or compromise of any such Demand
may be made by a Party hereto without the prior express
written consent or approval of the other Party hereto.

13.3.4. Joint Liability. In the event that any Demand shall arise out
of a transaction or cover any period or periods wherein NTT
America and Verio each is or may be liable hereunder for part
of the liability or obligation arising therefrom, then such
Parties shall, each choosing its own counsel and bearing its
own expense, defend such Demand, and no settlement or
compromise of such Demand may be made without the joint
consent or approval of Verio and NTT America, except where the
respective liabilities and obligations of NTT America and
Verio are clearly allocable or attributable on the basis of
objective facts.

13.3.5. Survival. The agreements to indemnify contained in this
Article 13 shall survive termination or expiration of this
Agreement for a period of two years after the effective date
of such termination or expiration; provided, however, that
with respect to any Demand or other matter (including actual
and direct damages incurred other than as a result of a third
party claim) for which notice has been timely given within
such two year period, the indemnification period shall be
extended until the final resolution of such Demand or other
matter (including actual and direct damages incurred other
than as a result of a third party claim).

13.3.6. Notice. A Party having reason to believe that it may be
entitled to indemnification under this Article 13 shall give
reasonably prompt written notice to the other Party hereto
from whom indemnification may be sought specifying in
reasonable detail the nature and basis of any Demand or other
matter (including actual and direct damages incurred other
than as a result of a third party claim) which may give rise
to such indemnification but such notice shall not be a
condition of such indemnification. The failure of the
Indemnified Party to provide such notice shall not relieve the
Indemnifying Party of its obligations under this Article 13,
unless the delay or failure to provide such notice prejudices
an Indemnifying Party in a manner that demonstrably results in
additional actual and direct damages to such Indemnifying
Party, in which event such Indemnifying Party shall be
relieved of such obligations but only to the extent such
additional actual and direct damages can be proved.

14. LIMITATION OF LIABILITY

14.1. NO CONSEQUENTIAL DAMAGES. EXCEPT TO THE EXTENT THAT A PARTY IS
REQUIRED TO INDEMNIFY THE OTHER PARTY FOR THE PAYMENT OF THE SAME

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THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

TO A THIRD PARTY PURSUANT TO ARTICLE 13, NEITHER PARTY (OR THEIR
AFFILIATES) SHALL BE LIABLE TO THE OTHER FOR SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY NATURE, FOR ANY REASON,
INCLUDING, WITHOUT LIMITATION, THE BREACH OF THIS AGREEMENT OR ANY
TERMINATION OF THIS AGREEMENT, WHETHER SUCH LIABILITY IS ASSERTED ON
THE BASIS OF CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY)
OR OTHERWISE, EVEN IF THE OTHER PARTY (OR ITS AFFILIATES) HAS BEEN
WARNED OF THE POSSIBILITY OF SUCH DAMAGES. ALL REMEDIES, INCLUDING,
WITHOUT LIMITATION, THE TERMINATION OF THIS AGREEMENT AND ALL OF THE
REMEDIES PROVIDED BY LAW (AND NOT EXCLUDED PURSUANT TO THE FOREGOING
SENTENCE), SHALL BE DEEMED CUMULATIVE AND NOT EXCLUSIVE.

14.2. MAXIMUM AGGREGATE LIABILITY. IN NO EVENT WILL NTT AMERICA'S OR
VERIO'S TOTAL AGGREGATE LIABILITY ARISING FROM OR RELATED TO THIS
AGREEMENT, FROM ALL CAUSES OF ACTION OF ANY KIND, INCLUDING TORT,
CONTRACT, NEGLIGENCE, STRICT LIABILITY AND BREACH OF WARRANTY, EXCEED
THE TOTAL AMOUNT PAID BY THE MEMBERS OF THE NTT AMERICA GROUP
HEREUNDER DURING THE PREVIOUS TWELVE MONTHS FROM THE DATE SUCH CLAIM
AROSE.

15. TERM AND TERMINATION

15.1. Term. The term of this Agreement shall be the period of time
commencing on the Effective Date and ending upon the earlier of (a)
the date immediately preceding the third (3rd) anniversary of the
Effective Date and (b) the termination of this Agreement in accordance
with the provisions of this Article 15. In no event shall either
Party have any obligations or liability under this Agreement, and this
Agreement shall not come into effect, until the Parties execute the
Investment Agreements. Either Party may terminate this Agreement in
the event that such Party terminated, or is entitled to terminate, the
SPA pursuant to Section 6.1 thereof.

15.2. Termination for Cause. This Agreement may be terminated by either
Party upon the expiration of sixty (60) days after written notice of a
material breach of any of the obligations of the other Party contained
in this Agreement or the Investment Agreements, if the other Party
fails to cure such breach during the sixty (60) day cure period.

15.3. [ *** ]

15.4. [ *** ]

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THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

[ *** ].

16. DISPUTE RESOLUTION

16.1. Dispute Resolution. Any controversy or claim arising out of, relating
to or in connection with this Agreement shall be resolved through
arbitration pursuant to the Commercial Arbitration Rules of the
American Arbitration Association then in effect, as modified by the
terms of this Article 16. Arbitration shall be conducted at a
location in Denver, Colorado, to be agreed upon by the Parties.

16.2. Incorporation by Reference. To the extent this Article 16 is deemed a
separate agreement, independent from this Agreement, Section 17.6 and
Section 17.9 are incorporated herein by reference.

16.3. Selection of Arbitrators. Arbitration shall be conducted by three (3)
arbitrators with each Party to this Agreement selecting one (1)
arbitrator each and the two selected arbitrators then selecting the
third arbitrator.

16.4. Limited Discovery. Prior to the commencement of the arbitration, each
Party shall be entitled to take limited discovery, including the
rights to request a reasonable number of documents, to serve no more
than twenty (20) interrogatories and to take no more than three (3)
depositions. This limited discovery shall be conducted in accordance
with the Federal Rules of Civil Procedure, which shall be interpreted
and enforced by the arbitrators.

16.5. Hearing and Decision. The arbitrators shall, as soon as practicable
and upon fifteen (15) days' written notice to each Party, conduct an
arbitration hearing and proceeding on the merits of the

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THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

dispute and thereafter shall issue a written decision citing the bases
for the decision, including findings of fact and conclusions of law.
The decision of the arbitrators shall be based on a majority vote.

16.6. Costs and Expenses. Each Party shall bear its own costs and expenses
arising out of any arbitration, including the costs of any arbitrator
selected by it, and shall bear equally the costs, expenses and fees of
the third arbitrator.

16.7. Consolidation and Joinder. Any arbitration arising out of or relating
to this Agreement or breach thereof may include by consolidation,
joinder or other manner any other person or persons which or whom a
party to the arbitration reasonably believes to be substantially
involved in a common question of fact or law.

16.8. Enforcement. The agreement to arbitrate shall be specifically
enforceable under prevailing arbitration law. Any award rendered by
the arbitrators shall be final, binding and enforceable by any party
to the arbitration, and judgment may be rendered upon it in accordance
with applicable law in a court of competent jurisdiction.

16.9. Waiver of Right to Litigate. Each Party hereby waives any and all
rights to, and hereby covenants not to, bring any lawsuit, arbitration
or other proceeding in any jurisdiction, judicial body or forum
arising under or relating to this Agreement or its subject matter
(other than an arbitration proceeding described above or a legal
proceeding solely to enforce the award or judgment of such arbitration
proceeding).

16.10. United States Arbitration Act. The Parties acknowledge that this
Agreement evidences a transaction involving interstate commerce. The
United States Arbitration Act shall govern the interpretation,
enforcement, and proceedings pursuant to the arbitration clause in
this Agreement.

17. GENERAL PROVISIONS

17.1. No Third-Party Beneficiary. It is the explicit intention of the
Parties hereto, that, except for the NTT America Affiliates [ *** ],
no person or entity other than the Parties is or shall be entitled
to bring any action to enforce any provision of this Agreement against
either of the Parties, and the covenants, undertakings, and agreements
set forth in this Agreement shall be solely for the benefit of, and
shall be enforceable only by the Parties hereto or their respective
successors and assigns as permitted hereunder.

17.2. NTT America Affiliate. NTT America has the right to assign the
benefits of this Agreement to any one or more of the NTT America
Affiliates but such assignment shall not render them liable for any of
the obligations under this Agreement, which shall remain the exclusive
obligations of NTT America.

17.3. Force Majeure. Subject to the next following sentence, neither Party
shall be deemed in default of this Agreement to the extent that
performance of its obligations or attempts to cure any breach

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are delayed or prevented by reason of any act of God, fire, natural
disaster, accident, act of government, sabotage of material or
supplies or any other cause beyond the control of such Party ("Force
Majeure"), provided that such Party gives the other Party written
notice thereof promptly and, in any event, within fifteen (15) days of
discovery thereof. In the event of such a Force Majeure, the time for
performance or cure shall be extended for a period equal to the
duration of the Force Majeure but not in excess of six (6) months.

17.4. Assignment. This Agreement and the rights and obligations hereunder
shall not be assigned or otherwise transferred by Verio without the
prior written consent of NTT America. NTT America shall have the
right to assign or transfer its rights under this Agreement to an
Affiliate. Any assignment by NTT America to any entity or person
other than an Affiliate of NTT America requires the prior written
consent of Verio.

17.5. Survival. The provisions of this Agreement which by their terms are
intended to survive the termination of this Agreement, including but
not limited to, Sections 8.2, 11.2, 11.3, 15.3 and 15.4 and Articles
10, 13, 14, 16, and 17 shall survive the termination of this
Agreement, regardless of the reason for the termination.

17.6. Notices. All notices hereunder shall be made by certified or
registered airmail, return receipt requested, by recognized overnight
courier, by confirmed telex or facsimile or confirmed electronic mail,
in each case if sent during normal business hours of the recipient,
and if not, then on the next business day, shall be deemed complete
upon receipt, and shall be sent to the Parties at the following
addresses (or at such other address for a Party as shall be specified
by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof).

Notices to Verio: Verio, Inc.
8005 South Chester Street
Suite 200
Englewood, Colorado 80112
Attention: Mr. Sean Brophy
Telephone: 303-645-1906
Facsimile: 303-708-2494

Copy to the General Counsel of Verio at the address set forth
above.

Notices to NTT America: NTT America, Inc.
101 Park Avenue, 41st Floor
New York, NY 10178

Attention: Mr. Richard Nohe, Vice
President
Telephone: 212 808 2203
Facsimile: 212 661 1078

Copy to: Nippon Telegraph and Telephone
Corporation

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Global Communications Headquarters
Tokyo Opera City Tower
20-2 Nishi-shinjuku 3-chome
Shinjuku-ku,
Tokyo 163-14 Japan

Attention: Mr. Tatsuo Kawasaki, Vice
President
Telephone: 81 3 5353 5361
Facsimile: 81 3 5353 5753

17.7. Waiver. Any waiver of any right or default hereunder shall be
effective only in the instance given and shall not operate as or imply
a waiver of any similar right or default on any subsequent occasion.

17.8. Severability. No determination by a court of competent jurisdiction
that any term or provision of this Agreement is invalid or otherwise
unenforceable shall operate to invalidate or render unenforceable any
other term or provision of this Agreement and all remaining provisions
shall be enforced in accordance with their terms.

17.9. Governing Law. This Agreement shall be governed by the laws of the
State of New York (exclusive of the choice of law rules thereof).

17.10. Entire Agreement; Headings. This Agreement, the Attachments and the
Investment Agreements hereto constitute the entire agreement between
the Parties pertaining to the subject matter hereof and supersede all
prior and contemporaneous agreements, negotiations and understandings,
oral or written. This Agreement may be modified only by an instrument
in writing duly executed by both Parties. The Article and Section
headings in this Agreement are inserted for convenience of reference
only and shall not be used in interpreting this Agreement.

17.11. Attorney's Fees. In any arbitration all costs of arbitration
including reasonable attorney fees shall be allocated to such Party as
designated by the arbitrators.

17.12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.

17.13 Performance by Affiliates. In the event that a Party's performance of
its obligations under this Agreement requires the cooperation or
performance of an Affiliate of such Party, such Party shall procure
the cooperation or performance of its Affiliate.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Parties hereto have signed and sealed this
Agreement on the date first set forth above.

VERIO, INC. NTT AMERICA, INC.

By: /s/ JUSTIN L. JASCHKE By: /s/ KEISUKE NAKASAKI
------------------------------- --------------------------------------

Print Name: Justin L. Jaschke Print Name: Keisuke Nakasaki
----------------------- ------------------------------

Title: President Title: President & CEO
---------------------------- -----------------------------------

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THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

ATTACHMENT A

SERVICES

1. RESELL SERVICES

The Resell Services that Verio shall provide to the NTT
America Group members and their customers are as follows:

1. Normal commercial dedicated and dial-up access
connection to Verio's network

2. Web-hosting and Co-location

3. Network Security Services

4. E-Commerce

5. Consulting services

6. Additional services as may be included herein by
mutual agreement of the Parties pursuant to Section
2.2.

2. JOINTLY DEVELOPED SERVICES

The Jointly Developed Services are those services that Verio and NTT
America may jointly develop in accordance with Article 6 through
Working Groups which Verio shall provide to members of the NTT America
Group and their respective customers upon mutual agreement. After such
services have been developed for commercial use, such services shall,
upon the mutual agreement of Verio and NTT America, be included among
the other Resell Services defined above.

The Jointly Developed Services are as follows:

1. [ *** ]

2. Such other services as the Parties may mutually agree.

3. [ *** ]

3.1 Verio acknowledges and agrees that: (a) [ *** ]
[ *** ]
[ *** ]

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THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

[ *** ].

3.2 Verio may provision [ *** ].

3.3 Verio will provide the [ *** ].

4. CUSTOMER CARE

4.1 Verio shall provide the Resell Services and the
technical support for the Resell Services to members of the NTT
America Group for their customers.

4.2 Verio shall be responsible for responding to
technical issues relating to network connectivity and trouble
shooting, as appropriate, after being notified by members of the NTT
America Group or their customers of problems with the Resell Services.
Verio will provide outside assistance as and when necessary in
accordance with its standard technical support practices. If an NTT
America customer's equipment is provided and managed by Verio, Verio
shall be responsible for on site maintenance and trouble shooting for
that equipment. Verio shall promptly notify NTT America of any
problems or difficulties that have the potential to adversely impact,
or are having an adverse impact on, the Resell Services provided to
NTT America's customers.

4.3 A toll-free number shall be provided by Verio to NTT
America, at NTT America's expense, for NTT America's customers and
shall be used as the method for such customers to reach the Japanese
speaking customer support personnel.

4.4 In an area where NTT America does not have a POP
and/or a sales and support team, Verio shall provide the local
customer support but only after being requested to do so in writing by
NTT America, subject to NTT America and Verio having developed a
mutually agreeable local customer support mechanism and work flow
process, which mechanism and

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process NTT America and Verio shall work together to develop.

4.5 Verio shall contact customers of a member of the NTT
America Group only at the request of a member of the NTT America
Group, unless the Parties mutually agree otherwise.

4.6 NTT America shall be responsible for all costs
associated with setting up and maintaining the customer care/technical
support center developed for the sole purpose of supporting the NTT
America customer base, including direct payment and reimbursement of
all expenses associated with the same, including without limitation
salaries and pro-rata facilities expenses as agreed upon by the
relevant Working Group.

5. TRAINING

Verio shall provide comprehensive training to employees of
members of the NTT America Group on Verio's services, the underlying
internetworking technologies, and relevant Internet-related protocols
in conjunction with Verio's standard customary training programs.

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<PAGE> 27
ATTACHMENT B

SERVICE LEVEL COMMITMENTS

SERVICE LEVELS.

Verio and NTT America shall create a Working Group in accordance with Section
6.2 of the Agreement to identify appropriate technical measurements of Verio's
provisioning of Resell Services to NTT America's customers, including service
outages, which measurements shall be set forth in this Attachment B by the
mutual agreement of the Parties.

SERVICE LEVEL FAILURES.

The Working Group shall address outages and down time. Subject to the
provisions of the last sentence of this paragraph, the Parties acknowledge that
it is appropriate for Verio to provide members of the NTT America Group with an
outage credit with respect to down time incurred by their customers as a result
of any failure of Verio's network in an amount equal to the outage credit which
a member of the NTT America Group is required to provide to its customers as a
result of the same. The Working Group shall evaluate and agree upon the
appropriate outage measurements for the determination of such outage credit.
The outage credit to be offered to NTT America Group member customers, when
mutually agreed upon by the Parties, shall be reimbursed by Verio to the extent
paid by members of the NTT America Group to their respective customers.

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<PAGE> 28
ATTACHMENT C

MARKETING PLAN

1. BRANDING

NTT America shall have the right to market the Resell Services under a
brand name to be determined by NTT America.

2. MARKETING MATERIALS

Verio and NTT America will coordinate the development and production
of marketing materials. The Parties shall combine their efforts and resources
and share costs with respect to product advertising, technical pre-sales
support, and other promotional activities, provided any such cooperative
efforts shall be subject to mutual agreement by the Parties.

3. SALES AND PROMOTION / SALES PROCESSES

3.1 Sales Force. NTT America shall maintain a sales force that
shall serve as the single contact point for all NTT America customers.

3.2 Promotion. NTT America shall be solely responsible for
promoting the sale of the Resell Services in the United States to NTT America's
customers; provided, however, that the foregoing shall not be construed to
limit Verio's ability to sell its services to third parties including NTT
America customers. Verio shall provide NTT America with technical information,
marketing assistance, technical sales support and marketing tools as shall be
determined by the relevant Working Group in order to market the Resell
Services.

3.3 Account Representative. Verio shall assign to an NTT America
designated account representative such support responsibilities as shall be
determined by the relevant Working Group. Such account representative will
assist NTT America and NTT America customers throughout the term of this
Agreement.

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<PAGE> 29
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

ATTACHMENT D

VERIO'S PRICING SCHEDULE

Verio shall extend to members of the NTT America Group [ *** ]
certain indicated discounts off of Verio's local, regional, and national prices
(to the extent such pricing structures have been developed by Verio) but the
prices charged to members of the NTT America Group [ *** ] shall be [ *** ]
[ *** ]. In
the event that Verio has no other strategic partners, Verio shall extend to
members of the NTT America Group [ *** ].

SERVICE NON-RECURRING PORTION MONTHLY RECURRING

a. Resell Services [***] [***]

b. [ *** ] [ *** ] [ *** ]

c. Equipment [ *** ] [***]

d. Consulting [***] [ *** ]

e. [ *** ] [ *** ] [ *** ]
[ *** ]

f. [ *** ] [ *** ] [ *** ]
[ *** ]

Members of the NTT America Group, in their sole discretion, may supply their own
equipment for the above services.

- ----------

(1) [ *** ]
(2) [ *** ]

- 29 -

<PAGE> 30
THE INFORMATION BELOW MARKED (***) HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE
COMMISSION.

Each Party shall provide consulting services to the other Party at the standard
hourly rate agreed to herein or based on a Custom Quote by either Party.

Legend

The terms used above shall have the following meanings:

National List Price: Prices for services that apply on a nationwide
basis, when available.

Custom Quote: The actual price for the service to be developed on a
case by case basis.

ICB: Individual case basis, which price is to be determined by Verio
based on a [ *** ].

RBOC Tariff: Prices which are established and published per Regional
Bell Operating Companies (RBOC) for a tariffed service, such as T1.

Standard Hourly Rate: The rate charged by Verio to its other resellers.

- 30 -
<PAGE> 31

ATTACHMENT E

NTT AMERICA AFFILIATES

1. ntta.com, inc.

2. [OTHERS TO BE ADDED BY NTT AMERICA PURSUANT TO SECTION 1.22 ABOVE]

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<PAGE> 32

ATTACHMENT F

FIREWALL POLICY

The Parties agree that Verio and members of the NTT America Group will maintain
and abide by a formal Firewall Policy, which may be amended from time to time by
mutual agreement and as to which each Party will also develop more detailed
compliance rules, procedures, and methodologies. Each Party shall ensure that
each of their relevant employees is given a copy of this Policy and of any
amendment hereto and also a current copy of that Party's more detailed rules,
procedures, and methodologies. Such employees shall periodically certify in
writing that they have read this Policy and these materials and agree to abide
thereby. Each Party shall select an employee responsible for overseeing the
implementation of the Policy and for responding to questions from employees
regarding the Policy.

Under this Policy, each Party will erect and maintain "firewalls" at their
respective companies to ensure that if one Party's nonpublic, confidential, and
proprietary business information, particularly information relating to that
Party's specific customers and customer contracts or bids and its prices,
pricing plans and policies, and retail selling activities, is disclosed to the
other Party, that information will not be disclosed to any persons at the other
Party who are responsible for developing that other Party's own customer
contracts or bids, prices, pricing plans and policies, and retail selling
activities.

For example, if Verio performs billing services for NTT America, only the
persons at Verio with the need to have access to that NTT America customer
billing information in order to perform the billing service function for NTT
America shall have access to that information and that NTT America information
shall not be disclosed to other persons at Verio who price and sell Verio's
services to customers. A comparable approach shall obtain if, for example, one
Party performs maintenance, trouble ticketing, or technical assistance for the
other Party and necessarily will have access to that other Party's confidential
business information in order to perform the service.

Additionally, when the Parties jointly develop and produce general or brand
marketing and promotional materials, they shall ensure that that cooperative
effort does not involve the exchange of one or both Parties' nonpublic,
confidential, and proprietary information relating to specific customers,
customer contracts or bids, prices, pricing plans and policies, or retail
selling activities.

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<PAGE> 1
EXHIBIT 10.32

VERIO INC.

1998 NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN

1. Purposes of the Plan. The purposes of this stock incentive plan are
to attract and retain the best available Non-Employee Directors, to provide them
additional incentives, and to promote the success of the Company's business.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.

(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.

(c) "Applicable Laws" means the legal requirements relating to
the administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.

(d) "Award" means the grant of an Option, Restricted Stock,
Shares or other rights or benefits under the Plan.

(e) "Award Agreement" means the written agreement evidencing
the grant of an Award executed by the Company and the Grantee, including any
amendments thereto.

(f) "Board" means the Board of Directors of the Company.

(g) "Change in Control" means a change in ownership or control
of the Company effected through either of the following transactions:

(i) the direct or indirect acquisition by any person
or related group of persons (other than an acquisition from or by the Company or
by a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or

(ii) a change in the composition of the Board over a
period of thirty-six (36) months or less such that a majority of the Board
members (rounded up to the next whole

<PAGE> 2

number) ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who are Continuing Directors.

(h) "Code" means the Internal Revenue Code of 1986, as
amended.

(i) "Committee" means any committee appointed by the Board to
administer the Plan.

(j) "Common Stock" means the common stock of the Company.

(k) "Company" means Verio Inc., a Delaware corporation.

(l) "Consultant" means any person who is engaged by the
Company or any Related Entity to render consulting or advisory services as an
independent contractor and is compensated for such services.

(m) "Continuing Directors" means members of the Board who
either (i) have been Board members continuously for a period of at least
thirty-six (36) months or (ii) have been Board members for less than thirty-six
(36) months and were elected or nominated for election as Board members by at
least a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.

(n) "Continuous Service" means that the Grantee's service as a
Director is not interrupted or terminated. The Continuous Service of a Grantee
shall not be considered interrupted or terminated in the case of (i) any
approved leave of absence or (ii) terminating service as a Director followed
within thirty (30) days of such termination by commencing service to the Company
or a Related Entity as an Employee or a Consultant until the time such service
as an Employee or Consultant is terminated. An approved leave of absence shall
include sick leave, military leave, or any other authorized personal leave.

(o) "Corporate Transaction" means any of the following
transactions:

(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;

(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Company (including the capital stock
of the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company;

(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger; or

(iv) any person or related group of persons (other
than the Company or by a Company-sponsored employee benefit plan) who becomes
the beneficial owner (within the

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<PAGE> 3

meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities (whether or not in a transaction also constituting a
Change in Control), but excluding any such transaction that the Administrator
determines shall not be a Corporate Transaction.

(p) "Director" means a member of the Board.

(q) "Disability" means that a Grantee is unable to serve as a
Director by reason of any medically determinable physical or mental impairment.
A Grantee will not be considered to have incurred a Disability unless he or she
furnishes proof of such condition sufficient to satisfy the Administrator, in
its sole discretion.

(r) "Employee" means any person, including an Officer or
Director, who is an employee of the Company or any Related Entity. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

(s) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

(t) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

(i) Where there exists a public market for the Common
Stock, the Fair Market Value shall be (A) the closing price for a Share for the
last market trading day prior to the time of the determination (or, if no
closing price was reported on that date, on the last trading date on which a
closing price was reported) on the stock exchange determined by the
Administrator to be the primary market for the Common Stock or the Nasdaq
National Market, whichever is applicable or (B) if the Common Stock is not
traded on any such exchange or national market system, the average of the
closing bid and asked prices of a Share on the Nasdaq Small Cap Market for the
day prior to the time of the determination (or, if no such prices were reported
on that date, on the last date on which such prices were reported), in each
case, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;

(ii) In the absence of an established market of the
type described in (i), above, for the Common Stock, the Fair Market Value
thereof shall be determined by the Administrator in good faith; or

(iii) On the Registration Date, the Fair Market Value
shall be the price at which the Board, or if applicable, the Pricing Committee
of the Board, and the underwriters agree to offer the Common Stock in the
initial public offering of the Common Stock, net of discounts and underwriting
commissions.

(u) "Grantee" means a Non-Employee Director who receives an
Award under the Plan.

(v) "Non-Employee Director" means a Director who is not an
Employee.

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<PAGE> 4

(w) "Non-Qualified Stock Option" means an Option not intended
to qualify as an incentive stock option within the meaning of Section 422 of the
Code.

(x) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

(y) "Option" means a stock option granted pursuant to the
Plan.

(z) "Plan" means this 1998 Non-Employee Director Stock
Incentive Plan.

(aa) "Registration Date" means the effective date of the
registration statement for the sale of Common Stock to the general public filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.

(bb) "Related Entity" means any parent, subsidiary and any
business, corporation, partnership, limited liability company or other entity in
which the Company, a parent or a subsidiary holds a substantial ownership
interest, directly or indirectly.

(cc) "Restricted Stock" means Shares issued under the Plan to
the Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established under the Plan or by the
Administrator.

(dd) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.

(ee) "Share" means a share of the Common Stock.

3. Stock Subject to the Plan.

(a) Subject to the provisions of Section 8, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards is 550,000
Shares. The Shares to be issued pursuant to Awards may be authorized, but
unissued, or reacquired Common Stock.

(b) Any Shares covered by an Award (or portion of an Award)
which is forfeited or canceled, expires or is settled in cash, shall be deemed
not to have been issued for purposes of determining the maximum aggregate number
of Shares which may be issued under the Plan. If any unissued Shares are
retained by the Company upon exercise of an Award in order to satisfy the
exercise price for such Award or any withholding taxes due with respect to such
Award, such retained Shares subject to such Award shall become available for
future issuance under the Plan (unless the Plan has terminated). Shares that
actually have been issued under the Plan pursuant to an Award shall not be
returned to the Plan and shall not become available for future issuance under
the Plan, except that if unvested Shares are forfeited, or repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.

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<PAGE> 5

4. Administration of the Plan.

(a) Plan Administrator.

(i) Administration. The Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws and to permit
such grants and related transactions under the Plan to be exempt from Section
16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board.

(ii) Administration Errors. In the event an Award is
granted in a manner inconsistent with the provisions of this subsection (a),
such Award shall be presumptively valid as of its grant date to the extent
permitted by the Applicable Laws. (b) Powers of the Administrator. Subject to
Applicable Laws and the provisions of the Plan (including any other powers given
to the Administrator hereunder), and except as otherwise provided by the Board,
the Administrator shall have the authority, in its discretion:

(i) to approve forms of Award Agreement for use under
the Plan;

(ii) to determine the terms and conditions consistent
with the terms of the Plan of any Award granted hereunder;

(iii) to amend the terms of any outstanding Award
granted under the Plan, including a reduction in the exercise price (or base
amount on which appreciation is measured) of any Award to reflect a reduction in
the Fair Market Value of the Common Stock since the grant date of the Award,
provided that any amendment that would adversely affect the Grantee's rights
under an outstanding Award shall not be made without the Grantee's written
consent;

(iv) to construe and interpret the terms of the Plan
and Awards granted pursuant to the Plan; and

(v) to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.

(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.

5. Automatic Option Grant Program.

(a) Eligibility. Each Non-Employee Director shall be entitled
to receive Options to the acquire of shares of Common Stock upon the terms and
conditions of this Automatic Option Grant Program.

(b) Date of Grant and Number of Shares. A Non-Qualified Stock
Option to purchase 30,000 shares of Common Stock shall be granted automatically
("Initial Grant") to each Non-Employee Director, such Initial Grant to be made
(i) to the then-existing Non-Employee

5
<PAGE> 6

Directors upon the Registration Date and (ii) to other Non-Employee Directors
elected or appointed to the Board after the Registration Date upon the date each
such Non-Employee Director first becomes a Non-Employee Director. In addition,
immediately following each annual meeting of the Company's stockholders, each
Non-Employee Director who continues as a Non-Employee Director following such
annual meeting shall be granted automatically a Non-Qualified Stock Option to
purchase 3,000 shares of Common Stock ("Subsequent Grant"); provided that no
Subsequent Grant shall be made to any Non-Employee Director who has an
outstanding Initial Grant that is not then fully vested. Each such Subsequent
Grant shall be made on the date of the annual stockholders' meeting in question.

(c) Vesting. Each Initial Grant shall vest and become
exercisable as to one-third (1/3) of the shares of Common Stock subject to such
Option twelve (12) months after the grant date and an additional one-third (1/3)
of the shares of Common Stock subject to such Option shall vest on each yearly
anniversary of the grant date thereafter, such that the Option will be fully
exercisable three (3) years after its date of grant. Each Subsequent Grant shall
be fully vested and exercisable as to all of the shares of Common Stock subject
to such Option twelve (12) months after the grant date of the Option.

(d) Corporate Transactions/Changes in Control.

(i) In the event of a Corporate Transaction,
immediately prior to the specified effective date of such Corporate Transaction,
(A) each Initial Grant which is at the time outstanding to the extent not vested
automatically shall vest and become exercisable as to a number of shares equal
to one-third (1/3) of the total number of shares of Common Stock subject to such
Option and (B) each Subsequent Grant which is at the time outstanding
automatically shall become fully vested and exercisable as to all of the shares
of Common Stock subject to such Option. Effective upon the consummation of the
Corporate Transaction, all outstanding Options under the Plan shall terminate.
However, all such Options shall not terminate if the Options are assumed by the
successor corporation or parent thereof in connection with the Corporate
Transaction.

(ii) In the event of a Change in Control (other than
a Change in Control which also is a Corporate Transaction), immediately prior to
the specified effective date of such Change in Control, (A) each Initial Grant
which is at the time outstanding to the extent not vested automatically shall
vest and become exercisable as to a number of shares equal to one-third (1/3) of
the total number of shares of Common Stock subject to such Option and (B) each
Subsequent Grant which is at the time outstanding automatically shall become
fully vested and exercisable as to all of the shares of Common Stock subject to
such Option.

(e) Exercise of Option Following Termination of Service. In
the event of termination of a Grantee's Continuous Service for any reason other
than Disability or death, such Grantee may, but only within three (3) months
after the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Award Agreement), exercise
his or her Option to the extent that the Grantee was entitled to exercise it at
the date of such termination or to such other extent as may be determined by the
Administrator. If the

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<PAGE> 7

Grantee should die within three (3) months after the date of such termination,
the Grantee's estate or the person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option to the extent that the Grantee
was entitled to exercise it at the date of such termination within twelve (12)
months of the Grantee's date of death, but in no event later than the expiration
date of the term of such Option as set forth in the Award Agreement.

(f) Disability of Grantee. In the event of termination of a
Grantee's Continuous Service as a result of his or her Disability, such Grantee
may, but only within twelve (12) months from the date of such termination (and
in no event later than the expiration date of the term of such Option as set
forth in the Award Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination. To the extent that the
Grantee is not entitled to exercise the Option at the date of termination, or if
Grantee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.

(g) Death of Grantee. In the event of the death of a Grantee,
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement), by the Grantee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent that the Grantee was entitled to exercise the Option at
the date of death. If, at the time of death, the Grantee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Grantee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate.

(h) Term of Option. The term of each Option awarded under this
Automatic Option Grant Program shall be eight (8) years from the date of grant
thereof.

(i) Transferability of Option. Each Option awarded under this
Automatic Option Grant Program shall be transferable to the extent provided in
the Award Agreement.

(j) Exercise Price. The exercise price for each Option awarded
under this Automatic Option Grant Program shall be one hundred percent (100%) of
the Fair Market Value per Share on the date of grant.

(k) Consideration. Subject to Applicable Laws, the
consideration to be paid for the Shares to be issued upon exercise of an Option
under this Automatic Option Grant Program shall be the following:

(i) cash;

(ii) check;

(iii) surrender of Shares or delivery of a properly
executed form of attestation of ownership of Shares as the Administrator may
require (including withholding of Shares otherwise deliverable upon exercise of
the Option) which have a Fair Market Value on the

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<PAGE> 8

date of surrender or attestation equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised (but only to the extent that
such exercise of the Option would not result in an accounting compensation
charge with respect to the Shares used to pay the exercise price unless
otherwise determined by the Administrator);

(iv) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or

(v) any combination of the foregoing methods of
payment.

6. Stock Fee Program.

(a) Eligibility. Each Non-Employee Director shall be eligible
to elect to apply all or any portion of the annual retainer fee and meeting fees
otherwise payable to such individual in cash to the acquisition of shares of
Common Stock upon the terms and conditions of this Stock Fee Program.

(b) Election Procedure.

(i) Filing. A Non-Employee Director must make a
stock-in-lieu-of-fee election prior to the start of the calendar year for which
the election is to be effective. The first calendar year for which any such
election may be filed shall be the 1999 calendar year. Each election, once
filed, shall be revocable prior to the start of the calendar year for which the
election is to be effective. Thereafter, the election is irrevocable. The
election for any upcoming calendar year may be filed at any time prior to the
start of that year, but in no event later than December 31 of the immediately
preceding calendar year. A Non-Employee Director may file a standing election to
be in effect for two (2) or more consecutive calendar years or to remain in
effect indefinitely until revoked by written instrument filed with the
Administrator prior to the start of the first calendar year for which such
standing election is no longer to remain in effect.

(ii) Election Form. The election must be filed with
the Administrator on the appropriate form provided for this purpose. On the
election form, a Non-Employee Director must indicate the percentage or dollar
amount of his or her annual retainer fee and/or his or her meeting fees to be
applied to the acquisition of Shares.

(i) Issue Date for Annual Retainer Fee Shares. On the
first trading day following the date any portion of the annual retainer fee is
otherwise due to be paid, in a calendar year for which the election is
effective, the portion of the annual retainer fee subject to such election shall
automatically be applied to the acquisition of shares of Common Stock by
dividing the elected dollar amount by the Fair Market Value per Share. The
number of issuable Shares shall be rounded down to the next whole Share, and
such Shares shall be issued to the Non-Employee Director.

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<PAGE> 9

(ii) Issue Date for Meeting Shares. On the first
trading day following any meeting, in a calendar year for which the election is
effective, the portion of the meeting fee subject to such election shall
automatically be applied to the acquisition of shares of Common Stock by
dividing the elected dollar amount by the Fair Market Value per Share. The
number of issuable Shares shall be rounded down to the next whole Share, and
such Shares shall be issued to the Non-Employee Director.

7. Conditions Upon Issuance of Shares.

(a) Satisfaction of Applicable Laws. Shares shall not be
issued pursuant to the exercise of an Award unless the exercise of such Award
and the issuance and delivery of such Shares pursuant thereto shall comply with
all Applicable Laws, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.

(b) Investment Representation. As a condition to the exercise
of an Award, the Company may require the person exercising such Award to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any Applicable Laws.

(c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations. Upon exercise
of an Award, the Company shall withhold or collect from Grantee an amount
sufficient to satisfy such tax obligations.

8. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise price of each such outstanding
Award, as well as any other terms that the Administrator determines require
adjustment shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Shares, merger, consolidation,
acquisition of the property or equity securities of the Company, any separation
of the Company (including a spin-off or other distribution of equity securities
or property of the Company), reorganization (whether or not such reorganization
comes within the definition of Code Section 368), partial or complete
liquidation, or any other similar event resulting in an increase or decrease in
the number of issued Shares. Except as the Administrator determines, no issuance
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason hereof
shall be made with respect to, the number or price of Shares subject to an
Award.

9. Effective Date and Term of Plan. The Plan shall become effective
upon the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Awards may be granted under the Plan upon its
becoming effective.

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<PAGE> 10

10. Amendment, Suspension or Termination of the Plan.

(a) The Board may at any time amend, suspend or terminate the
Plan. To the extent necessary to comply with Applicable Laws, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.

(b) No Award may be granted during any suspension of the Plan
or after termination of the Plan.

(c) Any amendment, suspension or termination of the Plan
(including termination of the Plan under Section 9, above) shall not affect
Awards already granted, and such Awards shall remain in full force and effect as
if the Plan had not been amended, suspended or terminated, unless mutually
agreed otherwise between the Grantee and the Administrator, which agreement must
be in writing and signed by the Grantee and the Company.

11. Reservation of Shares.

(a) The Company, during the term of the Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.

(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Verio Inc.:

We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the Prospectus.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Denver, Colorado

April 23, 1998

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
NorthWestNet, Inc.:

We consent to the use of our report relating to the financial statements of
NorthWestNet, Inc. as of June 30, 1996 and for the six months ended June 30,
1996 and the eight months ended February 28, 1997, and the financial statements
of NorthWest Academic Computing Consortium, Inc. as of June 30, 1995 and for the
year ended June 30, 1995 and the six months ended December 31, 1995, included
herein and to the reference to our firm under the heading "Experts" in the
prospectus.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Seattle, Washington

April 23, 1998