VERIO INC, DEF 14A, 2000-03-31

VERIO INC
DEF 14A, 2000-03-31
COMPUTER PROCESSING & DATA PREPARATION

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SCHEDULE 14A
(RULE 14A-101)

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

VERIO INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

N/A
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(2) Aggregate number of securities to which transaction applies:

N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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[VERIO LOGO]
8005 SOUTH CHESTER STREET, SUITE 200
ENGLEWOOD, COLORADO 80112

March 31, 2000

Dear Stockholder,

I am pleased to invite you to the Annual Meeting of Stockholders of Verio
Inc. The meeting will be held on Thursday, April 27, 2000, starting at 1:00
p.m., Mountain Daylight Time, at the Inverness Hotel & Golf Club, 200 Inverness
Drive West, Englewood, Colorado 80112.

Important information concerning the matters to be acted upon at the Annual
Meeting is contained in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement. After careful consideration, our Board of
Directors has unanimously approved the five proposals described in the Proxy
Statement and recommends that you vote FOR each proposal. A copy of our Annual
Report to Stockholders for the year 1999 also is included in this mailing.

The Board of Directors has fixed the close of business on March 14, 2000 as
the record date for determining those stockholders who are entitled to notice of
and to vote at the Annual Meeting and any adjournment thereof.

Your vote is important to us. Registered stockholders can vote their shares
over the Internet, by using a toll-free telephone number or by mailing back a
traditional proxy card. Voting over the Internet, by telephone or written proxy
will ensure your representation at the Annual Meeting if you do not attend in
person. Instructions for using these convenient services are provided on the
proxy card. Mailing your completed proxy card or using Verio's Internet or
telephone voting procedures will not prevent you from voting in person at the
Annual Meeting if you wish to do so.

Members of our Board of Directors and management look forward to meeting
personally those stockholders who attend the Annual Meeting in person.

Sincerely yours,

/s/ JUSTIN L. JASCHKE
Justin L. Jaschke
Chief Executive Officer
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VERIO INC.
8005 SOUTH CHESTER STREET, SUITE 200
ENGLEWOOD, COLORADO 80112

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 2000

To the Stockholders of VERIO INC.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Verio Inc., a Delaware corporation (the "Company" or "Verio"), will
be held at the Inverness Hotel & Golf Club, 200 Inverness Drive West, Englewood,
Colorado 80112, on Thursday, April 27, 2000, at 1:00 p.m., Mountain Daylight
Time, for the following purposes:

1. ELECTION OF DIRECTORS. To elect two Class II Directors of the
Company to serve until the 2003 Annual Meeting of Stockholders or until
their successors are elected and qualified;

2. AMEND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED COMMON SHARES. To approve an amendment to the Restated
Certificate of Incorporation of the Company to increase the number of
shares of common stock, par value $.001 per share, which the Company is
authorized to issue from one hundred twenty-five million (125,000,000)
shares to seven hundred fifty million (750,000,000) shares;

3. AMEND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED PREFERRED SHARES. To approve an amendment to the Restated
Certificate of Incorporation of the Company to increase the number of
shares of preferred stock, par value $.001 per share, which the Company is
authorized to issue from twelve million five hundred thousand (12,500,000)
shares to twenty million (20,000,000) shares;

4. APPROVAL AND RATIFICATION OF AMENDMENTS TO THE 1998 STOCK INCENTIVE
PLAN. To increase the number of shares reserved for issuance under the 1998
Stock Incentive Plan by 7,500,000 shares, adopt a limit on the maximum
number of shares with respect to which options may be granted to any
grantee in any fiscal year of the Company and certain other administrative
provisions to comply with the performance-based compensation exception to
the deduction limit of Section 162(m) of the Internal Revenue Code of 1986,
as amended, as well as certain other amendments that do not require
stockholder approval;

5. SELECTION OF INDEPENDENT AUDITORS. To ratify the appointment of
KPMG LLP as the independent auditors for the Company for the year ending
December 31, 2000; and

6. OTHER BUSINESS. To transact such other business as may properly
come before the Annual Meeting and any adjournment or postponement thereof.

The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.

The Board of Directors has fixed the close of business on March 14, 2000 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting or any adjournment or postponement thereof.
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WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED, USE VERIO'S INTERNET VOTING
PROCEDURES OR CAST YOUR VOTE VIA TELEPHONE, TO ENSURE YOUR REPRESENTATION AND
THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING. IF YOU SEND IN YOUR PROXY CARD
OR USE VERIO'S INTERNET OR TELEPHONE VOTING PROCEDURES AND THEN DECIDE TO ATTEND
THE ANNUAL MEETING TO VOTE YOUR SHARES IN PERSON, YOU MAY STILL DO SO. YOUR
PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE PROXY
STATEMENT.

By Order of the Board of Directors

/s/ JUSTIN L. JASCHKE
Justin L. Jaschke
Chief Executive Officer

Englewood, Colorado
March 31, 2000
<PAGE> 5

Mailed to Stockholders
on or about March 31, 2000

VERIO INC.
8005 SOUTH CHESTER STREET, SUITE 200
ENGLEWOOD, COLORADO 80112

PROXY STATEMENT

GENERAL INFORMATION

This Proxy Statement is furnished to the stockholders of Verio Inc., a
Delaware corporation (the "Company" or "Verio"), in connection with the
solicitation by the Board of Directors (the "Board" or "Board of Directors") of
the Company of proxies in the accompanying form for use in voting at the Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held on
Thursday, April 27, 2000 at 1:00 p.m., Mountain Daylight Time, at the Inverness
Hotel & Golf Club, 200 Inverness Drive West, Englewood, Colorado 80112, and any
adjournment or postponement thereof. The shares represented by the proxies
received, properly marked, dated, executed and not revoked will be voted at the
Annual Meeting.

REVOCABILITY OF PROXY

Any proxy given pursuant to this solicitation and any votes cast using
Verio's Internet or telephone voting procedures may be revoked by the person
giving it at any time before it is exercised by: (1) delivering to the Company
(to the attention of Steven W. Sackman, the Company's Assistant Secretary) a
written notice of revocation or a duly executed proxy bearing a later date; (2)
casting a later vote using the Internet or telephone voting procedures; or (3)
attending the Annual Meeting and voting in person.

SOLICITATION AND VOTING PROCEDURES

The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation materials regarding the Annual Meeting to beneficial owners of
Verio's common stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and regular
employees, none of whom will receive additional compensation for assisting with
the solicitation. Additionally, solicitation of proxies of brokers, banks,
nominees and institutional investors will be made pursuant to the special
engagement of Skinner & Co., Inc. at a cost to the Company of $5,000, which
combines fees and out-of-pocket expenses, but excludes bulk bank and broker
shipping costs.

The close of business on March 14, 2000 has been fixed as the record date
(the "Record Date") for determining the holders of shares of common stock of the
Company entitled to notice of and to vote at the Annual Meeting. As of the close
of business on the Record Date, the Company had 78,724,424 shares of common
stock outstanding and entitled to vote at the Annual Meeting, held by 385
stockholders of record. The presence at the Annual Meeting of a majority, or
39,362,213 of these shares of common stock of the Company, either in person or
by proxy, will constitute a quorum for the transaction of business at the Annual
Meeting. Each outstanding share of common stock on the Record Date is entitled
to one vote on all matters. Directors shall be elected by a plurality of the
votes cast.

If any stockholder is unable to attend the Annual Meeting, such stockholder
may vote by proxy. The enclosed proxy is solicited by the Board, and, when
returned properly completed, will be voted as you direct on your proxy card. In
the discretion of the proxy holder, shares represented by such proxies will be
voted upon any other business as may properly come before the Annual Meeting. An
automated system administered by the Company's transfer agent will tabulate
affirmative and negative votes, abstentions and broker non-votes. An employee of
the transfer agent will tabulate votes cast in person at the Annual Meeting.
Abstentions and

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broker non-votes are each included in the determination of the number of shares
present and voting for quorum purposes, and each is tabulated separately. The
ratification of the independent auditors for the Company for the current year
will require the affirmative vote of a majority of the shares of Verio's common
stock present or represented and entitled to vote at the Annual Meeting. The
amendments to the Restated Certificate of Incorporation to increase,
respectively, the number of authorized shares of common stock and preferred
stock, as well as the amendments to the 1998 Stock Incentive Plan, will require
the affirmative vote of a majority of the shares of Verio's outstanding common
stock. Because abstentions are treated as shares present or represented and
entitled to vote for the purposes of determining whether a matter has been
approved by the stockholders, abstentions have the same effect as negative
votes. Broker non-votes and shares as to which proxy authority has been withheld
with respect to any matter are not deemed to be entitled to vote for purposes of
determining whether stockholder approval of that matter has been obtained and
effectively count as votes against Proposal No. 2, Proposal No. 3 and Proposal
No. 4, the amendments to the Restated Certificate of Incorporation and the
amendments to the 1998 Stock Incentive Plan. However, with respect to Proposal
No. 5, requiring the affirmative vote of a majority of the shares present and
entitled to vote, broker non-votes shall have no effect. With respect to
Proposal No. 1, requiring a plurality of the votes cast by stockholders entitled
to vote who are present in person or by proxy, broker non-votes have no effect.

VOTING BY TELEPHONE OR THE INTERNET

Stockholders can save the Company expense by voting their shares over the
telephone or by voting on the Internet. The law of Delaware, under which the
Company is incorporated, specifically permits electronically transmitted
proxies, provided that each such proxy contains or is submitted with information
from which the inspectors of election can determine that such proxy was
authorized by the stockholder. (General Corporation Law of the State of
Delaware, Section 212(c)). The voting procedures available to stockholders for
the Annual Meeting are designed to authenticate each stockholder by use of a
control number, to allow stockholders to vote their shares and to confirm that
their instructions have been properly recorded.

Stockholders may go to HTTP://WWW.EPROXY.COM/VRIO/ to vote on the Internet.
They will be required to provide the company number and control number contained
on their proxy cards. The voter will then be asked to complete an electronic
proxy card. The votes will be generated on the computer screen and the voter
will be prompted to submit or revise them as desired. Any stockholder using a
touch-tone telephone may also vote by calling 1-(800) 240-6326 (toll-free) and
following the recorded instructions.

Most beneficial owners whose stock is held in street name receive voting
instruction forms from their banks, brokers or other agents, rather than the
Company's proxy card. Beneficial owners may also be able to vote by telephone or
the Internet. They should follow the instructions on the form they receive from
their bank, broker, or other agent.

The method of voting used will not limit a stockholder's right to attend
the Annual Meeting.

RECEIVING PROXY MATERIALS ON THE INTERNET

Stockholders may sign up on the Internet to access future proxy materials
and other stockholder communications on the Internet instead of receiving
printed materials by mail. This will reduce the Company's printing and postage
costs. In order to access the communications electronically, you must have an
e-mail account, access to the Internet through an Internet service provider and
a web browser that supports secure connections. You can access the Internet site
at HTTP://WWW.EPROXY.COM/VRIO/ for additional information and to sign up. You
will be asked to enter the company number and control number contained on your
proxy card.

When proxy materials for the Annual Meeting to be held in the year 2001 are
ready for distribution, those who have accepted electronic access will receive a
proxy card with instructions for viewing proxy materials and for voting.
Acceptance of electronic receipt will remain in effect until it is withdrawn. It
can be withdrawn at any time by going to the consent site at
HTTP://WWW.ECONSENT.COM/VRIO/.

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Many brokerage firms and banks are also offering electronic proxy materials
to their clients. If you are a beneficial owner of Verio common stock that is
held for you by a broker or bank, you may contact that broker or bank to find
out whether this service is available to you.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Company's Bylaws authorize the number of directors to be not less than
five nor more than eleven. The Board currently consists of seven members. The
Company's Board of Directors is divided into three classes: Class I, Class II
and Class III. Each class serves staggered terms with the initial term of each
class expiring, respectively, at the first, second and third succeeding annual
meeting of the stockholders of the Company held following the Company's initial
public offering in May 1998. The Board is currently composed of two Class II
Directors (Messrs. Steven C. Halstedt and James C. Allen), whose terms will
expire at the Annual Meeting and who have been nominated by the Company's Board
to continue to serve as Class II Directors for a three-year term following the
Annual Meeting; three Class III Directors (Messrs. Justin L. Jaschke, Trygve E.
Myhren and Yukimasa Ito), whose terms will expire upon the election and
qualification of directors at the annual meeting of stockholders to be held in
2001; and two Class I Directors (Messrs. Arthur L. Cahoon and Paul J. Salem ),
whose terms will expire upon the election and qualification of directors at the
annual meeting of stockholders to be held in 2002. At each annual meeting of
stockholders, directors will be elected for full terms of three years to succeed
those directors whose terms are expiring.

In October 1999, George J. Still, Jr. resigned as a Class II Director and
in February 2000, Herbert R. Hribar resigned as a Class I Director. The
remaining directors on the Board did not appoint any persons to fill those
resulting Class I and Class II vacancies.

At the Annual Meeting, the stockholders will elect two Class II Directors,
who will serve a three-year term until the annual meeting of stockholders to be
held in 2003 or until a successor is elected or appointed and qualified or until
such director's earlier resignation or removal. If any nominee is unable or
unwilling to serve as a director, proxies may be voted for a substitute nominee
designated by the present Board. The Board has no reason to believe that the
persons named below will be unable or unwilling to serve as nominees or as
directors if elected. Proxies received will be voted "FOR" the election of all
nominees unless otherwise directed. Pursuant to applicable Delaware corporation
law, assuming the presence of a quorum, two directors will be elected from among
those persons duly nominated for such positions by a plurality of the votes
actually cast by stockholders entitled to vote at the meeting who are present in
person or by proxy. Thus, nominees who receive the first and second highest
number of votes in favor of their election will be elected, regardless of the
number of abstentions or broker non-votes.

Certain information about each of the Class II nominees is furnished below:

Steven C. Halstedt has served as Chairman of the Board since we were formed
in March 1996. Mr. Halstedt is a co-founder of The Centennial Funds. Mr.
Halstedt has 18 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., Gabriel Communications, Inc.
and VeloCom, Inc. He is a former Chairman of the Board of OneComm Corporation,
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 Connecticut School of Law. He was a Platoon Leader
and Battalion Operations Officer in a U.S. Army Combat Engineer Battalion in
Vietnam.

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James C. Allen has served as a director of Verio since May 1996. Mr. Allen
is an Investment Director and member of the general partner of Meritage Private
Equity Fund. Mr. Allen served as CEO of Brooks Fiber Properties, Inc. from April
1993 until its acquisition by MCI WorldCom in February 1998. Mr. Allen has 25
years of experience as an entrepreneur, operator, financier, expert witness and
advisor in cable television and broadband telecommunications. Prior to joining
Brooks in 1993, 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 Telecom 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 is a member of the board of directors of MCI
WorldCom, Inc. and Completel, LLC. Mr. Allen also previously was a member of the
board of directors of MetroNet Communications Corp., a local exchange carrier.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES NAMED ABOVE.

PROPOSAL NO. 2

APPROVAL OF AN AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK

The Company's stockholders are being asked to act upon a proposal to
approve an amendment to the Company's Restated Certificate of Incorporation to
increase the number of shares of common stock, par value $.001 per share, which
the Company is authorized to issue from one hundred twenty-five million
(125,000,000) shares to seven hundred fifty million (750,000,000) shares. On
February 17, 2000, the Board of Directors approved this amendment to the
Company's Restated Certificate of Incorporation, subject to stockholder
approval. The Board has directed that the proposal to approve this amendment to
the Restated Certificate of Incorporation be submitted to the Company's
stockholders for consideration and action.

The text of the proposed amendment to the Restated Certificate of
Incorporation to increase the authorized number of shares of common stock
described in this Proposal No. 2 is set forth in Exhibit A attached to this
Proxy Statement and is incorporated by reference herein.

If the amendment to the Restated Certificate of Incorporation is approved
by the stockholders, the amendment will become effective upon filing a
Certificate of Amendment of the Company's Restated Certificate of Incorporation
with the Secretary of State of the State of Delaware reflecting the increase in
authorized shares.

PURPOSES AND EFFECTS OF THE INCREASE IN THE AUTHORIZED NUMBER OF SHARES OF
COMMON STOCK

The amendment to the Restated Certificate of Incorporation described in
this Proposal No. 2 would increase the number of shares of common stock that the
Company is authorized to issue from one hundred twenty-five million
(125,000,000) shares to seven hundred fifty million (750,000,000) shares. The
Company believes that the availability of the additional shares will provide it
with the flexibility to meet business needs as they arise, to take advantage of
favorable opportunities to raise additional capital or effect acquisitions, and
to respond to a changing corporate environment. For example, shares of stock may
be required in order to effect such things as financings, corporate mergers or
acquisitions, an increase in the number of shares reserved under any of the
Company's stock option or stock purchase plans, stock dividends, stock splits or
other corporate purposes. At present, the Company has no specific plans,
agreements or understandings to undertake any such actions that would involve
the issuance of additional shares of common stock. No further action or
authorization by the stockholders would be necessary prior to the issuance of
additional shares unless applicable laws or regulations require such approval.

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Stockholders should note that certain disadvantages may result from the
adoption of this Proposal No. 2. After the proposed amendment to the Restated
Certificate of Incorporation is effected, there would be a greater number of
shares of common stock available for issuance by the Company, and individual
stockholders could therefore experience a significant reduction in the
stockholder's relative percentage interest in the Company with respect to
earnings per share, voting, liquidation value and book and market value per
share if the additional authorized shares are issued.

The availability for issuance of additional shares of the Company's common
stock would also enable the Board to render more difficult or discourage an
attempt to obtain control of the Company. For example, the issuance of shares in
a public or private sale, merger or similar transaction would increase the
number of outstanding shares, thereby possibly diluting the interest of a party
attempting to obtain control of the Company.

Each additional share of common stock authorized by the amendment to the
Restated Certificate of Incorporation described in this Proposal No. 2 would
have the same rights and privileges as each share of common stock currently
authorized or outstanding.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF COMMON STOCK.

PROPOSAL NO. 3

APPROVAL OF AN AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF PREFERRED STOCK

The Company's stockholders are being asked to act upon a proposal to
approve an amendment to the Company's Restated Certificate of Incorporation, to
increase the number of shares of preferred stock, par value $.001 per share,
which the Company is authorized to issue from twelve million five hundred
thousand (12,500,000) shares to twenty million (20,000,000) shares. On February
17, 2000, the Board of Directors approved this amendment to the Company's
Restated Certificate of Incorporation, subject to stockholder approval. The
Board has directed that the proposal to approve this amendment to the Restated
Certificate of Incorporation be submitted to the Company's stockholders for
consideration and action.

The text of the proposed amendment to the Restated Certificate of
Incorporation to increase the authorized number of shares of preferred stock
described in this Proposal No. 3 is set forth in Exhibit B attached to this
Proxy Statement and is incorporated by reference herein.

PURPOSES AND EFFECTS OF THE INCREASE IN THE AUTHORIZED NUMBER OF SHARES OF
PREFERRED STOCK

The amendment to the Restated Certificate of Incorporation described in
this Proposal No. 3 would increase the number of shares of preferred stock that
the Company is authorized to issue from twelve million five hundred thousand
(12,500,000) shares to twenty million (20,000,000) shares. The Company believes
that the availability of the additional shares will provide it with the
flexibility to meet business needs as they arise, to take advantage of favorable
market opportunities and to respond to a changing corporate environment. For
example, shares of stock may be required in order to effect such things as
financings, corporate mergers or acquisitions or other corporate purposes. At
present, the Company has no specific plans, agreements or understandings to
undertake any such actions that would involve the issuance of additional shares
of preferred

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stock. No further action or authorization by the stockholders would be necessary
prior to the issuance of additional shares unless applicable laws or regulations
otherwise require such approval in connection with a particular transaction
involving the issuance of such shares.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF PREFERRED STOCK.

PROPOSAL NO. 4

APPROVAL AND RATIFICATION OF AMENDMENTS
TO THE 1998 STOCK INCENTIVE PLAN

The Company's stockholders are being asked to approve amendments to the
Company's 1998 Stock Incentive Plan. The proposed amendments to the 1998 Stock
Incentive Plan will (a) increase the number of shares reserved for issuance
under the 1998 Stock Incentive Plan by 7,500,000 shares and (b) adopt a limit on
the maximum number of shares with respect to which options may be granted to any
grantee in any fiscal year of the Company and certain other administrative
provisions to comply with the performance-based compensation exception to the
deduction limit of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").

The Board of Directors believes that the Company's long term success is
dependent upon the ability of the Company to attract and retain highly qualified
individuals who, by virtue of their ability and qualifications, make important
contributions to the Company. The amendments to the 1998 Stock Incentive Plan
will enable the Company to continue to grant longer-term incentives in the form
of stock options as needed in order to continue to attract and retain employees
in our highly competitive industry. The 1998 Stock Incentive Plan is intended to
enhance the Company's ability to provide individuals with awards and incentives
commensurate with their contributions and competitive with those offered by
other employers. The stock options granted under this plan increase stockholder
value by further aligning the interests of these individuals with the interests
of the Company's stockholders, by providing our employees an opportunity to
benefit from stock price appreciation that generally accompanies improved
financial performance.

Since Verio's inception, options have constituted an important and
significant component of the compensation offered to employees of the Company.
Especially in the highly competitive Internet, telecommunications and high
technology industries, the ability to attract initially, and retain over the
longer term, highly qualified employees is essential to our Company's success.
The grant of stock options in these industries is often the primary
consideration of individual employees in making employment decisions, both at
the time of initial employment and later when they consider possible employment
alternatives. As a result, in order for Verio to be competitive in attracting
and retaining employees -- often our most important and valuable assets -- it is
essential that we have a sufficient number of options available for grant under
our 1998 Stock Incentive Plan going forward.

During 1999, our Board of Directors undertook an evaluation through an
independent consulting company of the overall compensation levels of the
company's employees and officers relative to other comparable companies,
including many of our competitors. This evaluation disclosed that overall, our
current compensation levels and programs, including specifically our overall
option grants, are in keeping with those of our peers and generally in the
industry. The evaluation also resulted in recommendations for adjustments in
specified compensation levels, including option grants, in order to better
ensure the competitiveness of the compensation level of certain of our employees
and officers. We expect that we will continue to evaluate our compensation
levels going forward in order to continue to ensure that we can retain current
employees and attract new employees who are essential to our continued growth
and success.

The Compensation Committee of our Board carefully considers the appropriate
level of stock option grants to be awarded in connection with new employee
hires, and to current employees in connection with ongoing incentive awards as
earlier grants vest and become exercisable. The Compensation Committee takes

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into account, in addition to the option grant levels required in order for us to
successfully attract and retain employees, other factors such as the potential
dilutive impact to our stockholders, the overall ratio of our outstanding option
grants to total outstanding shares, and the similar ratios of our competitors
and peers. As a result, the additional award authority for which we are
requesting approval in this proposal will be utilized over time, as awards are
made in accordance with the mechanisms and guidelines established by our Board,
after considering this and various other relevant factors.

The affirmative vote of a majority of the shares present in person or by
proxy at the Annual Meeting and entitled to vote is required for adoption of
Proposal No. 4.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE AMENDMENTS TO THE 1998 STOCK INCENTIVE PLAN

The following summary of the 1998 Stock Incentive Plan, including the
proposed amendments, is subject in its entirety to the specific language of the
1998 Stock Incentive Plan, a copy of which is attached hereto as Exhibit C and
which is also available to any stockholder upon request.

GENERAL DESCRIPTION

The 1998 Stock Incentive Plan (the "Plan") was approved by the Board of
Directors on February 18, 1998. On March 19, 1998, the Board adopted and
approved an amendment and restatement of the Plan to increase the number of
shares available for issuance under the Plan. The Plan, as amended and restated,
was approved by the stockholders of the Company as of April 10, 1998. On
February 17, 2000, the Board of Directors approved amendments to the Plan,
conditioned upon and not to take effect until approval by the Company's
stockholders, to (a) increase the number of shares of common stock reserved for
issuance under the Plan by 7,500,000 shares and (b) to adopt a limit on the
maximum number of shares with respect to which options may be granted to any
grantee in any fiscal year of the Company and certain other administrative
provisions to comply with the performance-based compensation exception to the
deduction limit of Section 162(m) of the Code.

The Plan permits the grant of "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Code only to employees of the Company or any
parent or subsidiary corporation of the Company. Non-qualified stock options may
be granted to employees, directors and consultants. As of February 29, 2000,
options to purchase a total of 13,265,797 shares were outstanding under the Plan
at a weighted average exercise price of $19.31 per share, and 933,662 shares
remained available for future grant under the Plan. As of that same date, the
number of employees, directors and consultants eligible to receive grants under
the Plan was approximately 2,000 persons.

The Plan provides for the grant of options, including ISOs and
non-qualified stock options (collectively, the "Awards") with an exercise
privilege at a fixed price related to the common stock and/or the passage of
time, the occurrence of one or more events, or the satisfaction of performance
criteria or other conditions.

Amendment to Increase Shares Reserved. As of March 1, 2000, the number of
shares reserved for issuance under the Plan is 14,199,459. This number equals
the original 12,398,600 shares authorized for issuance at the time the Plan was
implemented, plus another 1,800,859 shares that, since the implementation of the
Plan, have been cancelled, forfeited or expired under two separate stock
incentive plans under which options were granted to employees of the Company
prior to the implementation of the Plan. Under the express provisions of the
Plan, as and to the extent that options granted under the two earlier plans are
forfeited, expire or are cancelled without delivery of shares, or which
otherwise result in the forfeiture of shares back to Verio, there is an
automatic corresponding increase in the shares authorized for issuance under the
Plan. As a result, the level of authority under the Plan has increased, and will
continue to increase, as options that were granted under those earlier plans
expire or are forfeited or cancelled. The proposed amendment to the Plan
provides that the number of shares reserved for issuance will be increased by
7,500,000 shares, bringing the total reserve for issuance to 19,898,600, plus
the number of shares cancelled or forfeited or that expire under the two earlier
plans. With the forfeitures, cancellations, and expirations that have occurred
as of February 29, 2000, this

7
<PAGE> 12

means that, with the effectiveness of the proposed plan amendment, the total
share authority under the Plan will be 21,699,459. Under the current terms of
the Plan, this number will continue to automatically increase as and to the
extent that further options expire or are cancelled or forfeited under those two
earlier plans. As of February 29, 2000, the total number of options that remain
outstanding under those two earlier plans is 2,491,500.

Amendment to Adopt Code Section 162(m) Limitations. The Board, subject to
stockholder approval, adopted an amendment to the Plan to limit the number of
options which may be awarded to an employee in any fiscal year to 500,000
shares. However, in connection with his or her initial commencement of services
with the Company, a participant in the Plan may be granted stock options for up
to an additional 500,000 shares, which shall not count against the limit set
forth in the previous sentence. The purpose of the amendment is to ensure that
any options granted under the Plan after the 2000 Annual Meeting will qualify as
"performance-based compensation" under Section 162(m) of the Code.

Under Code Section 162(m) no deduction is allowed in any taxable year of
the Company for compensation in excess of $1 million paid to its chief executive
officer and each of its four most highly paid other executive officers who are
serving in such capacities as of the last day of such taxable year. An exception
to this rule applies to compensation that is paid pursuant to a stock incentive
plan approved by the Company's stockholders that specifies, among other things,
the maximum number of shares with respect to which options may be granted to
eligible employees under such plan during a specified period. Compensation paid
pursuant to options granted under such a plan and with an exercise price equal
to the fair market value of Company common stock on the date of grant is deemed
to be inherently performance-based, since such awards provide value to employees
only if the stock price appreciates. Although Code Section 162(m) generally
became effective in 1994, a special rule allows options granted under the Plan
to be treated as qualifying under Code Section 162(m) without having a
per-person share limit until the stockholders approve a material modification of
the Plan, after the initial public offering occurs, such as the increase in the
number of shares of common stock which may be issued under the Plan.

If the stockholders do not approve the Code Section 162(m) amendment, any
compensation expense of the Company associated with the options granted under
the Plan in excess of the shares currently available for issuance (together with
all other non-performance based compensation) in excess of $1 million for any of
the Company's five highest paid officers will not be deductible under the Code.

Other Amendments. The amendment and restatement of the Plan also includes
the following other amendments which are not subject to approval by the
stockholders of the Company. The Board approved an amendment to eliminate the
authority to grant awards other than options. Prior to the amendment, stock
appreciation rights, dividend equivalent rights, restricted stock, performance
units, and performance shares could be granted under the Plan. The Board also
set the maximum term of each Award at eight years. Prior to the amendment, the
maximum term of each Award under the Plan was determined by the Plan
administrator, provided that the term of an ISO could not exceed 10 years.
However, in the case of an ISO granted to an optionee who, at the time the
option is granted, owns stock representing more than 10% of the voting power of
all classes of stock of the Company or any subsidiary or parent, the maximum
term of the ISO is five years or such shorter term as may be provided in the
option agreement. Last, the Board approved an amendment to require that the
exercise price of all awards under the Plan must equal or exceed 100% of the
fair market value per share on the date of grant. Prior to the amendment, the
exercise price of non-qualified stock options was permitted to equal 85% of the
fair market value per share on the date of grant.

Administration. The Plan is administered, with respect to grants to
directors, officers, consultants, and other employees, by the Compensation
Committee, which has been designated by the Board as the "Administrator" of the
Plan. The Compensation Committee is constituted in such a manner as to satisfy
applicable laws, including Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended ("Rule 16b-3"). With respect to Awards under the Plan
subject to Code Section 162(m), the Compensation Committee is comprised solely
of two or more "outside directors" as defined under Code Section 162(m) and
applicable tax regulations. For grants of Awards to individuals not subject to
Rule 16b-3 and Code Section 162(m), the Board may authorize one or more officers
to grant such Awards.

8
<PAGE> 13

Amendment and Termination. The Board may at any time amend, suspend or
terminate the Plan. To the extent necessary to comply with 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 under the Plan granted to
residents therein, the Company will obtain stockholder approval of any amendment
to the Plan in such a manner and to such a degree as required. The Plan will
terminate on February 17, 2008 unless previously terminated by the Board.

Other Terms. Stock options granted under the Plan may be either ISOs under
the provisions of Section 422 of the Code, or non-qualified stock options. ISOs
may be granted only to employees of the Company or any parent or subsidiary
corporation of the Company. Non-qualified stock options may be granted to
employees, directors and consultants. Under the Plan, Awards may be granted to
such employees, directors or consultants who are residing in foreign
jurisdictions as the Administrator may determine from time to time.

The Plan authorizes the Administrator to select the employees, directors
and consultants of the Company to whom Awards may be granted and to determine
the terms and conditions of any Award; however, the term of an ISO may not be
for more than eight years (or five years in the case of ISOs granted to any
grantee who owns stock representing more than 10% of the combined voting power
of the Company or any parent or subsidiary corporation of the Company). The Plan
authorizes the Administrator to grant Awards at an exercise price determined by
the Administrator. In the case of ISOs, such price cannot be less than 100% (or
110%, in the case of ISOs granted to any grantee who owns stock representing
more than 10% of the combined voting power of the Company or any parent or
subsidiary corporation of the Company) of the fair market value of the common
stock on the date the option is granted. The exercise price of non-qualified
stock options shall not be less than 100% of the fair market value. The exercise
price is generally payable in cash or, in certain circumstances, with a
promissory note, with such documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of an Award and delivery to the
Company of the sale or loan proceeds required to pay the exercise price, or with
shares of common stock. The aggregate fair market value of the common stock with
respect to any ISOs that are exercisable for the first time by an eligible
employee in any calendar year may not exceed $100,000.

The Awards may be granted subject to vesting schedules and restrictions on
transfer and repurchase or forfeiture rights in favor of the Company as
specified in the agreements to be issued under the Plan. The Plan also permits
the Administrator to include a provision whereby the grantee may elect, at any
time while an employee, director or consultant, to exercise any part or all of
the Award prior to full vesting of the Award.

Under the Plan, ISOs may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised during the lifetime of the grantee
only by the grantee. However, the Plan permits the designation of beneficiaries
by holders of ISOs. Other Awards are transferable to the extent provided in the
Award agreement.

Under the Plan, the Administrator may establish one or more programs under
the Plan to permit selected grantees the opportunity to elect to defer receipt
of consideration payable under an Award. The Administrator also may establish
under the Plan separate programs for the grant of particular forms of Awards to
one or more classes of grantees.

Certain Federal Tax Consequences. The grant of a non-qualified stock option
under the Plan does not result in any federal income tax consequences to the
optionee or to the Company. Upon exercise of a non-qualified stock option, the
optionee is subject to income taxes at the rate applicable to ordinary
compensation income on the difference between the option exercise price and the
fair market value of the shares on the date of exercise. This income is subject
to withholding for federal income and employment tax purposes. The Company is
entitled to an income tax deduction in the amount of the income recognized by
the optionee. Any gain or loss on the optionee's subsequent disposition of the
shares of common stock will receive long or short-term capital gain or loss
treatment, depending on whether the shares are held for more than one year
following exercise. The Company does not receive a tax deduction for any such
gain.

9
<PAGE> 14

The grant of an ISO under the Plan does not result in any federal income
tax consequences to the optionee or to the Company. An optionee recognizes no
federal taxable income upon exercising an ISO (subject to the alternative
minimum tax rules discussed below), and the Company receives no deduction at the
time of exercise. In the event of a disposition of stock acquired upon exercise
of an ISO, the tax consequences depend upon how long the optionee has held the
shares of common stock. If the optionee does not dispose of the shares within
two years after the ISO was granted, nor within one year after the ISO was
exercised, the optionee will recognize a long-term capital gain (or loss) equal
to the difference between the sale price of the shares and the exercise price.
The Company is not entitled to any deduction under these circumstances.

If the optionee fails to satisfy either of the foregoing holding periods,
he or she must recognize ordinary income in the year of the disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is the lesser of (i) the difference between the amount realized
on the disposition and the exercise price, or (ii) the difference between the
fair market value of the stock on the exercise date and the exercise price. Any
gain in excess of the amount taxed as ordinary income will be treated as a long
or short-term capital gain, depending on whether the stock was held for more
than one year. The Company, in the year of the disqualifying disposition, is
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee.

The "spread" under an ISO -- i.e., the difference between the fair market
value of the shares at exercise and the exercise price -- is classified as an
item of adjustment in the year of exercise for purposes of the alternative
minimum tax.

THE FOREGOING IS ONLY A SUMMARY OF THE CURRENT EFFECT OF FEDERAL INCOME
TAXATION UPON THE GRANTEE AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED
UNDER THE PLAN. REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE
CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF A
GRANTEE'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY TO WHICH THE GRANTEE MAY BE SUBJECT.

Amended Plan Benefits. As of the date of this Proxy Statement, no executive
officer, director and no associates of any executive officer or director, has
been granted any options subject to stockholder approval of the proposed
amendment. The benefits to be received pursuant to the Plan amendments by the
Company's executive officers, directors and employees are not determinable at
this time.

PROPOSAL NO. 5

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

KPMG LLP served as the Company's independent auditors in 1999, and have
been appointed by the Board to continue as the Company's independent auditors
for the Company's fiscal year ending December 31, 2000.

Although the appointment of KPMG LLP is not required to be submitted to a
vote of the stockholders, the Board believes it appropriate as a matter of
policy to request that the stockholders ratify the appointment of the
independent public accountants for the fiscal year ending December 31, 2000. In
the event a majority of the votes cast at the meeting are not voted in favor of
ratification, the adverse vote will be considered as a direction to the Board of
Directors of the Company to select other auditors for the fiscal year ending
December 31, 2000.

A representative of KPMG LLP is expected to be present at the Annual
Meeting. The representative will have an opportunity to make a statement and
will be able to respond to appropriate questions submitted either orally or in
writing at the meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.

10
<PAGE> 15

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of Verio's common
stock, as of the Record Date, unless otherwise indicated, by:

(1) each stockholder known by Verio to own beneficially more than five
percent, in the aggregate, of Verio's common stock;

(2) each director of Verio who owns shares of Verio's common stock;

(3) the named executive officers determined for the fiscal year ended
December 31, 1999 who own shares of Verio's common stock;

(4) all executive officers and directors of Verio as a group who own
shares of Verio's common stock; and

(5) the number of shares of Verio's common stock subject to options or
warrants owned by any of the above-mentioned persons that are currently
exercisable or exercisable within 60 days of the Record Date.

The beneficial ownership is calculated based on 78,724,424 total shares of
common stock outstanding as of the Record Date. The information concerning share
numbers provided in this section has been adjusted to reflect the Company's
two-for-one common stock split that was effected on August 20, 1999. In
presenting 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 the Record Date 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 below 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 person's name.

Putnam Investments, Inc., on behalf of itself, Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc. filed a Schedule 13G/A,
dated February 18, 2000, which discloses that as of December 31, 1999, Putnam
Investments, Inc. had shared voting power over 51,307 shares and shared
dispositive power over 7,097,107 shares of Verio's common stock.

MCI WorldCom, formerly known as World Com, may be deemed to indirectly
beneficially own the shares owned by Brooks Fiber Properties, Inc. as a result
of the acquisition of Brooks Fiber Properties, Inc. by WorldCom, which resulted
in Brooks Fiber Properties, Inc. becoming a wholly owned subsidiary of MCI
WorldCom.

AMVESCAP PLC filed a Schedule 13G, dated February 4, 2000, on behalf of
itself and certain related persons and entities, which discloses that as of
December 31, 1999, AMVESCAP PLC had shared dispositive power over 4,115,403
shares of Verio's common stock.

FMR Corp., on behalf of itself and certain related persons and entities,
holds 4,067,430 shares of Verio's common stock, of which FMR Corp. has sole
voting power over 338,530 shares and sole dispositive power over 4,067,430
shares. The number of shares in the following table is based upon information
provided to the Company by FMR Corp.

Mr. Halstedt holds 68,988 shares of Verio's common stock personally. Mr.
Halstedt disclaims beneficial ownership of the options exercisable for 60,000
shares of Verio's common stock which were granted to him pursuant to the 1998
Non-Employee Director Stock Incentive Plan (of which options exercisable for
20,000 shares vested on May 11, 1999 and options exercisable for 20,000 shares
will vest on May 11, 2000). By contract with Centennial Holdings, Inc., of which
he is an officer and director, Mr. Halstedt is required to transfer any economic
benefit deriving from such options to Centennial Holdings, Inc.

The shares of Verio's common stock held by Mr. Allen include 61,680 shares
that he transferred to the James C. Allen Revocable Trust. In accordance with
the rules of the Exchange Act, Mr. Allen may be deemed to be the beneficial
owner of such shares.

11
<PAGE> 16

On September 30, 1998, Mr. Myhren assigned to Myhren Media, Inc. the
options exercisable for 60,000 shares of Verio's common stock which were granted
to him pursuant to the 1998 Non-Employee Director Stock Incentive Plan (of which
options exercisable for 20,000 shares vested on May 11, 1999 and options
exercisable for 20,000 shares will vest on May 11, 2000). Mr. Myhren is the
President of Myhren Media, Inc. and may be deemed to indirectly beneficially own
these options. Mr. Myhren disclaims beneficial ownership of these options.

Mr. Salem holds 4,348 shares of Verio's common stock personally. On
February 16, 2000, Mr. Salem transferred 197,071 shares of Verio common stock to
the Navyn 2000 Securities Trust. In accordance with the rules of the Exchange
Act, Mr. Salem may be deemed to be the beneficial owner of such shares. On
October 9, 1998, Mr. Salem assigned to Providence Equity Partners Inc. the
options exercisable for 60,000 shares of Verio's common stock which were granted
to him pursuant to the 1998 Non-Employee Director Stock Incentive Plan (of which
options exercisable for 20,000 shares vested on May 11, 1999 and options
exercisable for 20,000 shares will vest on May 11, 2000). Providence Equity
Partners Inc. exercised these 20,000 vested stock options on May 12, 1999. Mr.
Salem is Managing Director of Providence Equity Partners Inc. and may be deemed
to indirectly beneficially own these options. Mr. Salem disclaims beneficial
ownership of these options.

The shares of Verio's common stock held by Mr. Cahoon do not include the
43,784 shares held of record by Pam Fitch as Trustee of the Arthur Logan Cahoon
Grantor Retained Annuity Trust dated May 29, 1998. Mr. Cahoon may be deemed to
indirectly beneficially own the shares held by the Trust. Mr. Cahoon disclaims
beneficial ownership of these shares. On December 28, 1999, Mr. Cahoon
transferred (i) 13,472 shares of Verio common stock, (ii) warrants exercisable
for 913,894 shares of Verio common stock and (iii) the options exercisable for
60,000 shares of Verio common stock which were granted to him pursuant to the
1998 Non-Employee Director Stock Incentive Plan (of which options exercisable
for 20,000 shares vested on January 5, 2000) to the Arthur L. Cahoon Investments
Trust, UA 12/23/99, David A. Damico, Trustee. In accordance with the rules of
the Exchange Act, Mr. Cahoon may be deemed to be the beneficial owner of such
shares.

<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY EXERCISABLE
HOLDERS OWNED OWNED OPTIONS/WARRANTS
- ------- ------------ ------------ ----------------
<S> <C> <C> <C>
Nippon Telegraph and Telephone Corporation............. 8,987,754 11.4% --
Global Communications Headquarters
Tokyo Opera City Tower
20-2 Nishi-Shinjuku 3-chome
Shinjuku-ku
Tokyo 163-14, Japan
Putnam Investments, Inc. .............................. 7,097,107 9.0% --
One Post Office Square
Boston, Massachusetts 02109
Brooks Fiber Properties, Inc........................... 4,169,942 5.2% 1,408,320
500 Clinton Center Drive
Clinton, Mississippi 39056
AMVESCAP PLC........................................... 4,115,403 5.2% --
11 Devonshire Square
London EC2M 4YR, England
FMR Corp............................................... 4,067,430 5.1% --
82 Devonshire Street
Boston, Massachusetts 02109
Steven C. Halstedt..................................... 68,988 * --
Justin L. Jaschke...................................... 963,568 1.2% 600,000
James C. Allen......................................... 101,680 * 40,000
Trygve E. Myhren....................................... 120,000 * 100,000
Paul J. Salem.......................................... 201,419 * --
Arthur L. Cahoon....................................... 947,366 1.2% 933,894
Yukimasa Ito........................................... -- -- --
Chris J. DeMarche...................................... 299,018 * 155,334
Carla Hamre Donelson................................... 235,030 * 202,000
Peter B. Fritzinger.................................... 143,406 * 105,000
All executive officers and directors as a group (11
persons)............................................... 3,234,233 3.9% 2,262,210
</TABLE>

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

* Less than 1%

12
<PAGE> 17

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information with respect to the Board of
Directors and executive officers, as well as certain other members of senior
management, of Verio as of the Record Date:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Steven C. Halstedt......... 53 Chairman of the Board
Justin L. Jaschke.......... 42 Chief Executive Officer, Director
James C. Allen............. 53 Director
Trygve E. Myhren........... 63 Director
Paul J. Salem.............. 36 Director
Yukimasa Ito............... 44 Director
Arthur L. Cahoon........... 44 Director
Sean G. Brophy............. 41 Vice President of Corporate Development
Chris J. DeMarche.......... 43 Chief Technical Officer
Carla Hamre Donelson....... 44 Vice President, General Counsel and Secretary
Isabel Ehringer............ 36 Vice President of Technology Services
Peter B. Fritzinger........ 41 Chief Financial Officer
Barbara L. Goworowski...... 39 Vice President of Marketing and Chief Marketing Officer
Douglas R. Schneider....... 37 President of Web Services
Edric N. Starbird.......... 34 Vice President of Customer Operations
James P. Treuting.......... 38 President of eBusiness Services
</TABLE>

All of the officers identified above serve at the discretion of the Board.
The following are brief biographies of these individuals (other than Messrs.
Halstedt and Allen, whose biographies are included above in Proposal No. 1 in
connection with their recommended re-election at the Annual Meeting).

Justin L. Jaschke has served as Chief Executive Officer of Verio since we
were formed in March 1996. He also is a member of the Board. Prior to forming
Verio, Mr. Jaschke served as Chief Operating Officer for Nextel Communications
following its merger with OneComm in July of 1995. Mr. Jaschke served as
OneComm's President and as a member of its board of directors from the time that
he joined that company in April 1993 until the company's merger with Nextel. Mr.
Jaschke currently 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.

Trygve E. Myhren has served as a director of Verio since April 1997. Mr.
Myhren is President of Myhren Media, Inc., a private investment firm
concentrating in media, telecommunications, software and Internet-related 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, 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, Inc.,
CableLabs, J.D. Edwards, Inc., WNP, Inc., Founders Funds and The University of
Denver. Previously, Mr. Myhren served as chairman of the National Cable
Television Association, 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 Federal Communications Commission'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.

13
<PAGE> 18

Paul J. Salem has served as a director of Verio since December 1996. Mr.
Salem is 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. From February 1992 to
December 1996, Mr. Salem was a Vice President at Narragansett Capital, Inc., an
investment management company. He is currently a director of AT&T Canada, Inc.,
Mpower Communications and Tele1Europe AB. 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 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.

Yukimasa Ito has been a director of Verio since September 1998. Mr. Ito is
Vice President, Global IP Business of NTT Communications Corp. From November
1997 until October 1999, Mr. Ito was Vice President, Service Planning of NTT
Worldwide Telecommunications Inc., a corporation specializing in providing
various international telecommunications services to end-users. NTT
Communications Corp. is a subsidiary of NTT which, in turn, is an affiliate of
Verio. From August 1994 to October 1997, Mr. Ito was Vice President, Service
Planning of NTT PC Communications, Inc. and from August 1991 until July 1994, he
was Director, Corporate Planning of NTT America, Inc. Mr. Ito has worked for NTT
or its subsidiaries since 1980. Mr. Ito holds a Bachelor of Engineering degree
from Waseda University and a Master of Business Administration from the
University of Washington. In 1990, Mr. Ito was a M.Sc. Sloan Fellow at Stanford
University.

Arthur L. Cahoon was appointed to the Board upon completion of the Hiway
acquisition in January 1999. Mr. Cahoon is President of Rock Creek Capital, an
investment company. Mr. Cahoon previously served as Chairman of Hiway's board of
directors, CEO and a director of Hiway since May 1998. From October 1997 to May
1998, he was Chairman of Hiway Florida. Since March 1993, he has served as
general partner of Rock Creek Partners, Ltd., an investment company, and
executive vice president of James Dahl & Co., an investment banking company.
Since January 1995, Mr. Cahoon also has served as Executive Vice President of
Timberland Investment Services, LLP, an investment management company which he
co-founded. Mr. Cahoon is a member of the board of directors of Mobile America.
In addition, from June 1995 to June 1996, he served as President of QuinStone
Industries, Inc., a manufacturing company. Prior to March 1993, Mr. Cahoon
served as Executive Vice President and CFO of Cain & Bultman, Inc., a wholesale
distributor. Mr. Cahoon holds a Bachelor in Business Administration degree in
accounting and finance from Stetson University.

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 Verio 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.

Chris J. DeMarche has been Chief Technical Officer of Verio since joining
Verio 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 and designing and implementing wireless communication
networks. Mr. DeMarche also worked in advanced
14
<PAGE> 19

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
the 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 Verio 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. 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.

Isabel Ehringer has served as Vice President of Technology Services since
November 1999. She joined Verio in November 1996, serving initially as the
President of our Northern California regional operations and then of our Western
U.S. operations. In that capacity, Ms. Ehringer was responsible for integrating
the operations of local and regional ISPs that we acquired in California,
Oregon, New Mexico and Washington, and managing regional sales, marketing, and
customer operations. Prior to joining Verio, Ms. Ehringer served as Vice
President of Information Technology for Nextel Communications, Inc. from 1991 to
November 1996. Prior to that, Ms. Ehringer was Director of Development Projects
for McCaw Communications, which later became AT&T Wireless. Ms. Ehringer
received her Bachelor of Science degree in Electrical Engineering and Computer
Science from the University of California at Berkeley.

Peter B. Fritzinger has served as Chief Financial Officer of Verio since
June 1997. From November 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 of 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.

Barbara L. Goworowski was appointed as Verio's Vice President of Marketing
and Chief Marketing Officer in October 1999. Ms. Goworowski is responsible for
leading Verio's worldwide marketing organization, including product marketing,
product management, marketing communications, advertising and public relations.
Previously, Ms. Goworowski served as Vice President of Marketing for Ameritech
Corporation from 1996 to October 1999. She has more than 15 years of marketing
experience, including several executive positions at Ameritech Corporation and
US West, Inc. Ms. Goworowski holds a Master of Business Administration degree
from DePaul University and a Bachelor of Science degree in marketing from
Marquette University.

Douglas R. Schneider has served as President of Web Services since April
1999, managing the day-to-day aspects of Verio's shared and dedicated hosting,
e-commerce, and application hosting operations. He joined Verio in May 1997 as
President of Verio Colorado, heading our efforts to establish and build a Rocky
Mountain regional presence, and subsequently was appointed President of our
Rocky Mountain and Western regional operations. From 1994 to 1997, Mr. Schneider
was President of AllCall, a regional distribution company he co-founded that
performed customized equipment fulfillment services for OneComm, Nextel, and
their dealer channels in the Rocky Mountain and Midwest states. From 1991 to
1994, he served in marketing and sales roles with CellularOne. Mr. Schneider
received his Master of Business Administration degree from the Kellogg School of
Management at Northwestern University and his Bachelor of Science degree in
Mechanical Engineering from the University of California at Davis.

Edric N. Starbird was appointed as Verio's Vice President of Customer
Operations in October 1999. Mr. Starbird was Vice President of Enterprise
Operations for MediaOne from October 1997 to August 1999,
15
<PAGE> 20

where he was responsible for customer operations, strategy and operational
improvements in 12 markets, responsible for 6,000 employees and a $600 million
annual budget. Prior to MediaOne, Mr. Starbird was Executive Director of Market
Strategy Development for US West Media Group where he oversaw domestic and
international broadband and wireless opportunities. Mr. Starbird also has
extensive consulting experience in the telecommunications industry through his
four years of work at ATKearny, EDS-MCS, and Ernst & Young. Mr. Starbird
received his Master of Business Administration degree from Columbia Business
School and holds a Bachelor of Science in Industrial Engineering from Stanford
University.

James P. Treuting has served as President of eBusiness Services since
December 1999. In this role, he manages the day-to-day aspects of Verio's
Internet access and co-location operations. Previously, he served as Vice
President of Sales and Field Marketing from September 1999, and prior to that
served as the regional President for Verio's Central U.S., Southeast and Western
regions. Mr. Treuting joined Verio in October 1997 when Verio acquired
Communique, Inc., an ISP headquartered in New Orleans, where he served as
Chairman and CEO of that company from 1994 until its acquisition by Verio. At
Communique, Mr. Treuting was responsible for overall leadership and direction
and directly managed all marketing, operations, technical support, and customer
care operations. From 1992 to 1994, Mr. Treuting worked for Conway Computer
Consultants, where he held several key leadership positions including Divisional
Manager for the Louisiana Division, which grew 700% during his tenure. From 1984
to 1992, Mr. Treuting worked for IBM, where he was awarded the 100% Quota
Achievement Award in each year with direct sales responsibilities and the IBM
Golden Circle Award for being in the top one percent of IBM's sales force. Mr.
Treuting received his Bachelor of Business Administration degree from Loyola
University of the South.

RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS

There are no family relationships among any of the directors or executive
officers of the Company.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

During 1999, the Board met nine times and acted by written consent three
times. No director attended fewer than 75% of the aggregate of either (1) the
total number of Board meetings held during the period for which he was a
director, except for Mr. Allen, or (2) the total number of committee meetings of
the Board, on which he served, held during the period for which he was a
director.

During 1999, the Board had five committees: an Executive Committee, a
Finance Committee, a Compensation Committee, an Audit Committee and a Nominating
Committee.

During 1999, the Executive Committee held no meetings and acted by written
consent three times. From January 1, 1999 through April 14, 1999, the Executive
Committee was composed of Messrs. Halstedt and Jaschke. Herbert R. Hribar was
subsequently appointed to the Executive Committee effective on April 15, 1999
and served in such capacity until his resignation as President, Chief Operating
Officer and a director of Verio on February 4, 2000. The Executive Committee is
responsible for reviewing and, where appropriate, authorizing corporate action
with respect to the conduct of the business of Verio between Board meetings.

The Finance Committee held two meetings in 1999. From January 1, 1999
through April 14, 1999, the Finance Committee was composed of Messrs. Halstedt,
Jaschke, Still and Myhren. The Finance Committee was reconstituted effective as
of April 15, 1999, so that its members now include Messrs. Allen, Jaschke and
Salem. The Finance Committee is responsible for reviewing and, where
appropriate, authorizing certain corporate actions with respect to the finances
of Verio and certain acquisitions of affiliates not involving the issuance of
stock.

The Compensation Committee held six meetings in 1999. From January 1, 1999
through April 14, 1999, the Compensation Committee was composed of Messrs. Allen
and Myhren, as well as Stephen W. Schovee, who served on the Board from the time
of Verio's inception until his resignation in January 1999. The membership of
the Compensation Committee was modified on April 15, 1999 to include Messrs.
Myhren and Cahoon, as well as George J. Still, Jr., who served on the Board from
the time of Verio's inception until his resignation in October 1999. The
Compensation Committee is responsible for reviewing and establishing the

16
<PAGE> 21

compensation structure for Verio'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 Audit Committee held one meeting in 1999. From January 1, 1999 through
April 14, 1999, the Audit Committee was composed of Mr. Myhren, as well as
Stephen W. Schovee, until his resignation from the Verio Board in January 1999.
Effective as of April 15, 1999, the Audit Committee membership was changed to
consist of Messrs. Cahoon and Halstedt. The Audit Committee recommends the firm
to be appointed as independent accountants to audit Verio's financial
statements, discussing the scope and results of the audit with the independent
accountants, reviewing the functions of management and independent accountants
with respect to Verio's financial statements and performing such other related
duties and functions as are deemed appropriate by the Audit Committee and the
Board. The Audit Committee has a written charter that has been adopted by the
Board.

During 1999, the Nominating Committee, which was established in April 1999,
held no meetings and did not act by written consent. The Nominating Committee is
composed of Messrs. Halstedt and Jaschke. George J. Still, Jr. also served on
the Nominating Committee from its establishment until his resignation from the
Board in October 1999. The Nominating Committee is tasked with making
recommendations to the Board concerning the recruitment and selection of
potential Board candidates. In addition, this committee assesses the performance
of the Board, reviews the size and composition of the Board and its committees,
and makes appropriate recommendations with respect to possible changes.

DIRECTORS COMPENSATION

During calendar year 1999, each non-employee director received 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 was $500 per meeting, whether attended in person or by
telephone. A director may elect to receive these payments in the form of common
stock. In April 1998, the Company adopted the 1998 Non-Employee Director Stock
Incentive Plan ("Director Option Plan") under which options may be granted and
shares of common stock may be issued to non-employee directors in order to
better attract and retain highly qualified outside directors. Under the terms of
the Director Option Plan, upon the effective date of the registration statement
filed with the Securities and Exchange Commission in connection with the
Company's initial public offering, each non-employee director was automatically
granted an option to acquire 60,000 shares of common stock at an exercise price
per share equal to the price per share in the initial public offering of the
common stock less underwriting discounts and commissions. Such options 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 initial public offering at the time of their election or appointment also
were automatically granted an option to acquire 60,000 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. In accordance with these terms, on May 11,
1998 (the effective date of our IPO registration statement), each of Messrs.
Halstedt, Allen, Myhren and Salem were granted options to purchase 60,000 shares
of common stock, at an exercise price of $10.75 per share under the Director
Option Plan. (That number of shares and the exercise price have been adjusted to
reflect the Company's two-for-one common stock split that was effected on August
20, 1999.) Thereafter, automatically on their respective appointments to the
Board, on September 11, 1998, Mr. Ito was granted an option to purchase 60,000
shares of common stock, at an exercise price of $10.25 per share, and on January
5, 1999, Mr. Cahoon was granted an option to purchase 60,000 shares of common
stock, at an exercise price of $11.375 per share, under the Director Option
Plan. Each of Messrs. Halstedt, Myhren, Salem, Ito and Cahoon have assigned
their respective options to Centennial Holdings, Inc., Myhren Media, Inc.,
Providence Equity Partners Inc., NTT Rocky, Inc. and the Arthur L. Cahoon
Investments Trust, UA 12/23/99, David A. Damico, Trustee, respectively.

Under the initial terms of the Director Option Plan, after the initial
three year vesting period for the automatic 60,000 options, non-employee
directors would receive automatic annual grants of options to acquire

17
<PAGE> 22

an additional 6,000 shares of common stock at an exercise price equal to the
fair market value of the common stock at the date of grant. Such additional
options vest and become exercisable on the first anniversary of the grant date.

On December 15, 1999, the Compensation Committee adopted a proposal to
modify the non-employee director compensation policy, effective as of January 1,
2000, increasing the annual retainer fee from $5,000 to $15,000 (paid
quarterly), while eliminating the payment of all individual Board and committee
meeting fees. Non-employee Board members will still have the ability to elect
annually to apply the retainer fee to the automatic purchase of the Company's
common stock. The Compensation Committee also recommended that the Director
Option Plan be amended to provide for an initial grant of 50,000 stock options
when a new Board member is appointed to the Board, with these options vesting
over the same three-year period as under the initial plan terms, and with
subsequent annual grants of 6,000 options being made annually beginning with the
first annual stockholders meeting to take place following a Board member's first
full year of service on the Board (i.e., without waiting until the initial grant
is fully vested.) Both of these proposals were approved by the Board on December
16, 1999.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons who own more than 10% of the Company's common stock (collectively,
"Reporting Persons") to file reports of ownership and changes in ownership of
the Company's common stock with the Securities and Exchange Commission and The
Nasdaq Stock Market, Inc. Copies of these reports are also required to be
delivered to the Company.

The Company believes, based solely on its review of the copies of such
reports received or written representations from certain Reporting Persons, that
during the fiscal year ended December 31, 1999, Mr. Cahoon was inadvertently
late in filing a Form 3 reporting his election as a director of the Company.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

EXECUTIVE COMPENSATION

The following table sets forth certain summary information for the years
ended December 31, 1999, 1998 and 1997, respectively, concerning the
compensation paid and awarded to (a) Verio's Chief Executive Officer and (b)
Verio's four most highly compensated executive officers whose salaries and
bonuses exceeded $100,000 who were serving as executive officers as of December
31, 1999. These individuals are referred to collectively as the "Named Executive
Officers."

As part of the Company's standard cash compensation package offered to all
employees (including the Named Executive Officers), the Company provides
targeted annual cash bonuses, the payment of which is based on the Company's
overall achievement of performance goals established by the Board at the
beginning of the year. Actual performance by the Company is measured against
those goals at or following the end of the year, and the actual amount of the
targeted bonus levels paid is determined based on actual performance relative to
those objectives.

Salary information for 1997 for Mr. Fritzinger and for 1998 for Mr. Hribar
reflect compensation paid to each in his principal position commencing in June
1997 and July 1998, respectively. The bonus amount paid to Mr. Hribar in 1988
includes a signing bonus of $125,000, plus a "gross up" for taxes, paid by Verio
at the time of his initial employment in July 1998. Information shown under "All
Other Compensation" represents the cost of providing relocation benefits to
Messrs. Hribar and Fritzinger.

18
<PAGE> 23

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------
----------------------------- RESTRICTED SECURITIES
FISCAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#) COMPENSATIONS($)
- --------------------------- ------ --------- -------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke................ 1999 307,575 -- -- 620,000 --
Chief Executive Officer 1998 221,041 -- -- 300,000 --
1997 175,003 66,500 85,000 -- --
Herbert R. Hribar(1)............. 1999 454,299 -- -- 500,000 --
President and Chief 1998 125,004 235,998 -- 350,000 29,646
Operating Officer 1997 -- -- -- -- --
Chris J. DeMarche................ 1999 191,825 -- -- 35,000 --
Chief Technical Officer 1998 173,541 -- -- 100,000 --
1997 160,004 60,800 25,000 20,000 --
Carla Hamre Donelson............. 1999 192,867 -- -- 40,000 --
Vice President, General 1998 173,541 -- -- 140,000 --
Counsel and Secretary 1997 160,004 57,760 -- 20,000 --
Peter B. Fritzinger.............. 1999 194,950 -- -- 100,000 --
Chief Financial Officer 1998 173,541 -- -- 110,000 --
1997 89,443 31,287 -- 75,000 70,267
</TABLE>

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

(1) Mr. Hribar, who served as President and Chief Operating Officer of Verio for
all of 1999, subsequently resigned on February 4, 2000.

STOCK OPTIONS GRANTED IN 1999

The following table contains information concerning the grant of stock
options by Verio under Verio's stock option plans to the Named Executive
Officers in 1999. All stock options were granted at an exercise price equal to
the market price of the common stock on the last trading day before the date of
grant.

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 Securities and Exchange Commission and do not represent
Verio'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.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM($)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR(%) ($/SHARE) DATE 5% 10%
- ---- ---------- -------------- --------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke........ 120,000 1.4% $ 15.50 Mar. 03, 2007 3,959,688 4,236,816
500,000 6.0% $25.565 Jun. 16, 2007 11,466,200 12,620,900
Herbert R. Hribar........ 300,000 3.6% $ 15.50 Mar. 03, 2007 9,899,220 10,592,040
200,000 2.4% $25.565 Jun. 16, 2007 4,586,480 5,048,360
Chris J. DeMarche........ 35,000 0.4% $ 29.75 Oct. 14, 2007 656,159 736,988
Carla Hamre Donelson..... 40,000 0.5% $ 29.75 Oct. 14, 2007 749,896 842,272
Peter B. Fritzinger...... 100,000 1.2% $ 29.75 Oct. 14, 2007 1,874,740 2,105,680
</TABLE>

19
<PAGE> 24

FISCAL YEAR-END OPTION VALUES

The following table sets forth certain information with respect to the
Named Executive Officers regarding the stock options exercised during 1999. It
shows the aggregate number of unexercised options to purchase common stock
granted in all years and held by the Named Executive Officers as of December 31,
1999, 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, 1999. The value of unexercised options at
year-end is based on the December 31, 1999 closing price of $46.188 per share of
common stock as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke...... -- -- 430,000 1,150,000 18,215,840 34,678,700
Herbert R. Hribar...... -- -- 56,600 1,025,000 2,005,666 32,601,575
Chris J. DeMarche...... 66,666 1,858,315 107,334 241,000 4,331,542 8,611,058
Carla Hamre Donelson... -- -- 182,000 298,000 7,478,216 10,447,024
Peter B. Fritzinger.... 30,000 622,500 85,000 355,000 3,315,980 11,591,740
</TABLE>

EMPLOYMENT AGREEMENTS

As a general matter, Verio does not enter into employment agreements, and
has not entered into employment agreements with any of its officers. Rather, the
employment relationship with each officer is "at will." However, in connection
with the initial employment of each officer, Verio and the officer executed an
offer letter in which the general compensation and benefits provided to the
officer are outlined, including base salary, targeted annual bonus, option
grants, employee benefits and severance. The compensation levels established in
such offer letters are subject to change from time to time at the discretion of
the Compensation Committee.

COMPENSATION PROTECTION AGREEMENTS

Verio has entered into compensation protection agreements with each of the
Named Executive Officers and certain additional officers of Verio. Each of the
compensation protection agreements contain substantially similar terms. The
compensation protection agreements are for a term of three years, subject to
automatic yearly extensions. In no event will the compensation protection
agreements terminate within 12 months of a change in control of Verio. For
purposes of the compensation protection agreements, a "change in control"
includes any of the following:

- An acquisition, other than directly from Verio, of any voting securities
of Verio by any person immediately after which such person has beneficial
ownership (as defined in the Exchange Act) of 40% or more of the combined
voting power of Verio'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;

- If the individuals who, as of the date the compensation protection
agreements were approved by the Board, were members of the Board, cease
for any reason to constitute at least a majority of the Board (subject to
certain provisos);

- Approval by stockholders of Verio of a merger, consolidation or
reorganization involving Verio, unless such merger, consolidation or
reorganization satisfies certain specified conditions;

- Any other merger, consolidation or reorganization that at least
two-thirds of the incumbent Board determines constitutes a change in
control; and

- 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

20
<PAGE> 25

to effect a change in control and who subsequently effectuates a change
in control, or if such termination 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.

In the following circumstances involving termination of employment within
12 months following a change in control, a protected officer who is so
terminated will receive the following compensation and benefits:

- If a protected officer's employment with Verio is terminated within 12
months following a change in control by Verio for cause or by reason of
the protected officer's disability (as defined in the compensation
protection agreements), death or retirement, or by the protected officer
other than for good reason (as defined in the compensation protection
agreements), then Verio must pay to the protected officer the accrued
compensation due through the date of termination. Accrued compensation
includes base salary, reimbursement for reasonable and necessary expenses
incurred by the protected officer on behalf of Verio during the period
ending on the termination date, and vacation pay.

- 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:

-- his or her accrued compensation;

-- a bonus amount equal to the product of a fraction, the numerator of
which is the number of days in Verio'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;

-- an amount equal to two times the sum of the protected officer's
annual base salary in effect immediately prior to the change in
control, plus the bonus amount paid pursuant to the immediately
preceding provision (except that the amount paid to Mr. Jaschke will
be three times that sum);

-- until the third anniversary of the termination date, the same rights
with respect to benefits provided by Verio as were provided to the
protected officer as of the effective date of the compensation
protection agreement, or, if greater, at any time within 90 days
preceding the date of the change in control; and

-- the immediate vesting and removal of all restrictions on any
outstanding incentive awards granted to the protected officer under
Verio's stock option and other stock incentive plans or arrangements.

The compensation protection agreements further provide that the protected
officers are not 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 Verio's employee benefit plans and
other applicable programs, policies and practices then in effect. The
compensation protection agreements contain a "gross-up" provision pursuant to
which any severance payment, which would be subject to certain excise taxes
occurring as a result of a change in control, would include an additional
gross-up payment resulting in the protected officer retaining an additional
amount equal to these excise taxes.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

From January 1, 1999 through April 14, 1999, the Compensation Committee was
composed of Messrs. Allen and Myhren, as well as Stephen W. Schovee, who served
on the Board from the time of Verio's inception until his resignation in January
1999. The membership of the Compensation Committee was modified on April 15,
1999 to consist of Messrs. Myhren and Cahoon, as well as George J. Still, Jr.,
who served in that capacity until his resignation in October 1999. Mr. Myhren
serves as the chairman of the Compensation Committee. No member of this
Committee is a present or former officer or employee of the Company or any of
its subsidiaries. No member of this Committee served on the board of directors
or
21
<PAGE> 26

compensation committee of any entity which has one or more executive officers
serving as a member of the Board or Compensation Committee.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act, that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report and the Performance Graph which follows
shall not be deemed to be incorporated by reference into any such filings.

The Compensation Committee of Verio's Board of Directors, which is
comprised solely of independent, non-employee Board members, has the authority
and responsibility to establish the overall compensation strategy for Verio,
including salary and bonus levels, to administer our incentive compensation and
benefit plans, 401(k) plans, and stock option and purchase plans, and to review
and make recommendations to the Board with respect to the compensation of our
executives. Trygve Myhren and Arthur Cahoon are the current members of the
Compensation Committee.

COMPENSATION POLICY

Verio's overall compensation philosophy is to provide a competitive
compensation program that enables us to attract, reward, incent, and retain
highly capable executives and other employees who have the skills and experience
necessary to promote the short and long-term financial performance and growth of
the Company. Our compensation program is designed to link the annual
compensation received by our executives to Verio's financial performance, growth
and achievement of other strategic and operational goals established annually by
our Board. In addition, our officers receive longer-term incentives, provided
principally in the form of stock options, thereby aligning their interests with
those of Verio's stockholders.

Our executive compensation consists of three principal components, the
amounts of which are established in order to provide overall compensation that
is comparable to that offered by similarly situated companies. These components
include:

- a base salary;

- an annual cash bonus opportunity that is dependent on the achievement of
company-wide performance objectives established annually by the Board;
and

- awards of stock options to provide a long-term incentive that aligns
management's interests with stockholders' interests.

During 1999, the Compensation Committee engaged an independent consulting
firm to evaluate our overall compensation program to determine its
competitiveness and appropriateness based on an analysis of the compensation
programs and levels of other comparable companies. Specifically, the consultant
evaluated the salary, bonus and long-term incentive levels of our officers,
comparing the levels paid by Verio to our officers to those levels paid by
numerous other similarly situated companies. This comparison took into account
relative market capitalization, industry, revenue and growth levels, and other
relevant factors for Verio and the comparison companies. Based on this
evaluation, and the recommendations of the consultant resulting from this
evaluation, the Compensation Committee determined that certain compensation
adjustments, both to annual salary and option levels, were appropriate for
certain executive officers as well as other employees. As a result, certain
salary levels were adjusted and additional option grants were made during 1999
to executive officers. Details of the stock options granted to certain executive
officers in 1999 are provided in the table entitled "Stock Options Granted in
1999" above.

Salary. The base salaries of our executive officers are initially
established, and thereafter periodically reviewed and adjusted, by the
Compensation Committee. When setting and adjusting base salary levels, in a
manner consistent with the Compensation Committee's policy outlined above, the
Compensation Committee takes into account, in addition to the performance of the
individual executive officer, which is the primary consideration, other relevant
factors such as competitive market conditions for executive compensation,
22
<PAGE> 27

Verio's financial and stock price performance, historical compensation levels,
and internal comparability considerations.

Bonus. Each executive officer (as well as each employee of Verio generally)
is provided an annual cash bonus opportunity that is typically a targeted
percentage of base salary. At the beginning of each year, the Board establishes
performance objectives for the year. The actual amount of the bonus paid is
determined at the end of the year based on the Company's actual performance
against those objectives. While the specific performance objectives vary from
year to year, the general approach in establishing the objectives is to (1)
foster a single company attitude across our operations, (2) emphasize the
importance of teamwork and the interdependent efforts required for success while
also recognizing individual performance, (3) compensate based on actual results
measured against established goals, and (4) provide fair, objective and easily
measurable performance parameters.

For the year ended December 31, 1999, the performance objectives
established for the payment of bonuses were based primarily on the achievement
of specific, internally established, financial performance thresholds determined
at the beginning of the year that were based on projected revenue and EBITDA
levels to be reached by year end. In evaluating our actual performance against
the designated objectives for the year, the Compensation Committee determined
that Verio's actual performance against the internally targeted financial
criteria warranted payment of bonuses at 80% of the full targeted levels. The
Committee determined that at the more senior employee level, including
management, bonuses will be paid in the form of fully vested stock option
grants, while the remaining employees will receive their bonuses paid 60% in
cash and 40% in fully vested stock options. It is anticipated that these option
grants will be made during the first half of 2000. In keeping with the
requirements of Verio's 1998 Stock Incentive Plan, these option grants will be
at an exercise price equal to the trading price of Verio's common stock at the
time of the grant. The number of options that will be granted will be based on a
formula of six options for every $100 of bonus, a formula that was derived based
in part on a Black Sholes valuation methodology applied to the options. The
Board of Directors or the Compensation Committee in the future will continue to
establish performance criteria with respect to bonuses paid to executive
officers for any given fiscal year, which will vary based on Verio's operations,
prospects and strategy at the time.

Long-term Incentive Compensation. Verio believes that stock option grants:

- align executive officer interests with stockholder interests by creating
a direct link between compensation and stockholder return;

- give executive officers a significant, long-term interest in our success;

- provide each executive officer with a significant incentive to manage
Verio's operations from the perspective of an owner with an equity stake
in the business; and

- help retain key executive officers in a competitive market for executive
talent.

Our 1998 Stock Incentive Plan authorizes the Board, or a committee of the
Board, to grant stock options to employees, directors, consultants and executive
officers of Verio. Stock option grants generally are made to all of our
employees, including executive officers, at the time of initial employment.
Thereafter, additional grants may be made to individual employees, including
executive officers, from time to time, in order to continue to incent retention
and long-term performance. Additional options are not necessarily granted to
each executive officer during each year, but rather are made based on factors
such as individual performance, Verio's overall growth and financial
performance, the number of unvested options held by the individual at the time,
and various competitive factors. The relative weight given to these various
factors may vary from individual to individual, at the Committee's discretion.

Options granted to executive officers generally are subject to vesting
provisions, so that the options vest over a four-year period, in equal annual
increments beginning on the first annual anniversary of the date of the grant
and on the three subsequent annual anniversaries. Vesting typically is subject
to acceleration upon the occurrence of certain events, such as a change of
control of Verio, and in certain cases coupled with the termination, or
effective termination, of the executive's employment. The options generally have
an eight-year
23
<PAGE> 28

term. Prior to the adoption of the 1998 Stock Incentive Plan, grants of options
to the Company's employees, including the executive officers, were made under
two earlier plans. Options granted under those plans were for a 10-year term,
and generally were made on a 20% per year, five-year vesting schedule. This
vesting schedule likewise is subject to acceleration upon the occurrence of
certain events.

Compensation of Chief Executive Officer. The Compensation Committee
establishes, and periodically adjusts, the base salary of Mr. Jaschke, who has
served as Verio's Chief Executive Officer since our formation in March 1996,
with the objective of compensating him fairly based on his individual efforts
and the overall performance and success of Verio, while maintaining the
competitiveness of his base salary with salaries paid to similarly situated
chief executive officers. Typical of its policy with respect to base salaries
provided to employees generally, it has been the Committee's intent to provide
Mr. Jaschke with a level of stability and certainty each year in the form of a
base salary that is not tied specifically to the achievement of established
criteria, while payment of Mr. Jaschke's annual performance bonus is determined
based on the same annually determined company-wide performance factors as those
that apply to all of Verio's employees. Mr. Jaschke's compensation, including
his annual salary and option levels, were evaluated and adjusted as part of the
Compensation Committee's overall evaluation of Verio's compensation policies and
levels during 1999. As discussed above, performance-based bonuses for 1999 will
be paid to the executive officers, including Mr. Jaschke, at 80% of the targeted
levels for 1999, and will be paid in the form of the grant of stock options
during the first half of 2000 on the terms described above. Mr. Jaschke received
grants of options to purchase a total of 620,000 shares of the Company's stock
during 1999.

Compensation Policy Regarding Deductibility. Section 162(m) of the Internal
Revenue Code, enacted in 1993, generally disallows a tax deduction to publicly
held companies for compensation exceeding $1 million paid to certain of the
company's executive officers. The limitation applies only to compensation that
is not considered to be performance-based. The non-performance based
compensation paid to Verio's executive officers in 1999 did not exceed the $1
million limit per officer. The 1998 Stock Incentive Plan is structured so that
any compensation deemed paid to an executive officer in connection with the
exercise of option grants made under that plan will qualify as performance-based
compensation which is not subject to the $1 million limitation. The Compensation
Committee currently intends to limit the dollar amount of all other compensation
payable to the Company's executive officers to no more than $1 million. The
Compensation Committee is aware of the limitations imposed by Section 162(m),
and the exemptions available therefrom, and will address the issue of
deductibility when and if circumstances warrant and may use such exemptions in
addition to the exemption contemplated under the 1998 Stock Incentive Plan.

Submitted by the Compensation Committee:

Trygve E. Myhren
Arthur L. Cahoon

24
<PAGE> 29

STOCK PERFORMANCE GRAPH

The graph below compares the cumulative total stockholder return on the
Company's common stock with the cumulative total return on The Nasdaq Composite
Index and The Nasdaq Telecommunications Index. The period shown commences on May
12, 1998, the date that the Company's common stock was registered under Section
12 of the Exchange Act, and ends on December 31, 1999, the end of the Company's
last fiscal year. The graph assumes an investment of $100 on May 12, 1998, and
the reinvestment of any dividends.

The comparisons in the graph below are based upon historical data and are
not indicative of, nor intended to forecast, future performance of the Company's
common stock.

COMPARISON OF CUMULATIVE
TOTAL RETURN TO STOCKHOLDERS
MAY 12, 1998 TO DECEMBER 31, 1999

PERFORMANCE GRAPH

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
5/12/98 5/31/98 6/30/98 7/31/98 8/31/98 9/30/98 10/31/98 11/30/98 12/31/98 1/31/99
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Verio Inc. 100.00 84.53 91.92 104.39 81.76 91.46 51.27 70.21 82.68 119.64
NASDAQ Composite Index 100.00 95.63 101.86 100.66 80.60 91.06 95.23 104.80 117.88 134.71
NASDAQ Telecom Index 100.00 98.92 107.91 112.01 85.33 95.00 104.10 110.96 130.90 151.20
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
2/28/99 3/31/99 4/30/99 5/31/99 6/30/99 7/31/99 8/31/99 9/30/99 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Verio Inc. 104.86 170.45 262.36 200.47 256.82 263.51 274.84 229.10 275.76
NASDAQ Composite Index 123.00 132.32 136.70 132.81 144.40 141.84 147.26 147.63 159.47
NASDAQ Telecom Index 149.69 161.58 171.05 170.47 171.20 167.13 163.08 163.28 193.79

<CAPTION>
- ------------------------------------ -------------------
11/30/99 12/31/99
- ------------------------------------ -------------------
<S> <C> <C>
Verio Inc. 265.60 341.35
NASDAQ Composite Index 179.35 217.02
NASDAQ Telecom Index 214.52 258.87
</TABLE>

25
<PAGE> 30

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

As a condition to the closing of the acquisition of Best Internet
Communications, Inc. (which does business as Hiway Technologies and which Verio
refers to as "Hiway"), which occurred on January 5, 1999, all related party
indebtedness was to be repaid to Hiway on or prior to closing. However, Verio
agreed to waive the condition that Arthur L. Cahoon repay his indebtedness to
Hiway in the principal amount of $280,409 with interest at the then prime rate.

VIANet.Works, Inc. Verio has invested a total of approximately $8.25
million in convertible preferred stock of VIANet.Works, Inc. which represents
approximately 5.9% of the outstanding capital stock of VIANet.Works after the
recent completion of that company's IPO in February 2000. Mr. Halstedt, who
serves on Verio's Board of Directors, served as a member of VIANet.Works' Board
of Directors until September 1999, when he resigned from that Board. Mr. Hribar,
who served on Verio's Board of Directors during 1999, also served on
VIANet.Works' Board until April 1999, when he resigned from that Board.

OTHER TRANSACTIONS

NTT. In September 1999, Verio announced that it had entered into an
agreement with NTT Communications, part of the Nippon Telegraph and Telephone
group of telecommunications companies, to provide Verio's Web hosting services
to the Japanese market. As of the Record Date, Nippon Telegraph and Telephone
Corporation holds 8,987,754 shares of Verio's common stock, representing
approximately 11% of our outstanding stock. Under the agreement, the entire NTT
group of companies will be able to market Verio's Web hosting services to
businesses in Japan on a co-branded, "Powered by Verio" basis. NTT paid a
one-time, up front license fee payment of $1.3 million at the time the agreement
was signed, and in the future will pay ongoing monthly fees based on actual
services sold. Verio and NTT are continuing to work together to plan and develop
NTT Communications' new data center in Tokyo, from which Verio's Web hosting
services will be offered by NTT in Japan. We currently expect to launch the
co-branded services in Japan in the spring of 2000.

STOCKHOLDER PROPOSALS

The Company's Restated Certificate of Incorporation and Bylaws require any
stockholder who wishes to bring any proposal before a meeting of stockholders or
to nominate a person to serve as a director to give written notice thereof and
certain related information to the Secretary of the Company not less than 30
days nor more than 60 days prior to the date one year from the date of the
immediately preceding annual meeting, if such proposal or nomination is to be
submitted at an annual meeting, provided, that in the event that less than 40
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder, to be timely, must be so
received not later than the close of business on the tenth day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth, as
to each matter the stockholder proposes to bring before the annual meeting, (1)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (2)
the name and record address of the stockholder proposing such business, (3) the
class and number of shares of the corporation which are beneficially owned by
the stockholder, and (4) any material interest of the stockholder in such
business.

Management does not know of any matters which are likely to be brought
before the Annual Meeting other than those referred to in this Proxy Statement.
However, in the event that any other matters properly come before the Annual
Meeting, the persons named in the enclosed proxy will vote in accordance with
their judgment on such matters.

The presiding officer at the Annual Meeting may determine that any
stockholder proposal is not permissible under, or was not made in accordance
with, the foregoing procedures or is otherwise not in

26
<PAGE> 31

accordance with law and, if he so determines, he may refuse to allow the
stockholder proposal or nomination to be considered at the Annual Meeting.

Under the rules of the Securities and Exchange Commission, stockholder
proposals intended to be presented at the next annual meeting (to be held in
2001) must be received by the Secretary of the Company on or before January 19,
2001 in order to be included in the proxy statement and proxy for that meeting.
Proposals should be directed to the Secretary, Verio Inc., 8005 South Chester
Street, Suite 200, Englewood, Colorado 80112.

A copy of the Company's Annual Report to Stockholders, which includes
financial statements and related data, accompanies this Proxy Statement.

OTHER MATTERS

The Board of Directors knows of no other business which will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in respect thereof in accordance with the judgment of the persons voting the
proxies.

It is important that your shares be represented at the Annual Meeting.
Stockholders are urged to mark, date, execute and promptly return the
accompanying proxy card in the enclosed envelope, or to vote using Verio's
telephone or Internet voting procedures.

By Order of the Board of Directors,

/s/ JUSTIN L. JASCHKE
Justin L. Jaschke
Chief Executive Officer

March 31, 2000
Englewood, Colorado

27
<PAGE> 32

EXHIBIT A

CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
VERIO INC.

VERIO INC., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That at a meeting of the Board of Directors of VERIO INC. (the
"Corporation"), duly held on February 17, 2000, resolutions were duly adopted
setting forth a proposed amendment of the Certificate of Incorporation of said
Corporation, declaring said amendment to be advisable. The resolution setting
forth the proposed amendment is as follows:

RESOLVED, that the Certificate of Incorporation of this Corporation be, and
it hereby is, amended by deleting the first paragraph of Article Four thereof
and replacing it with the following:

"ARTICLE FOUR

1. CAPITAL STOCK

The total number of shares of all classes of stock that the Corporation is
authorized to issue is seven hundred sixty-two million five hundred thousand
(762,500,000) shares, consisting of seven hundred fifty million (750,000,000)
shares of Common Stock, par value $.001 per share, and twelve million five
hundred thousand (12,500,000) shares of Preferred Stock, par value $.001 per
share."

SECOND: That thereafter, the annual meeting of the stockholders of said
Corporation was duly called and held, upon notice in accordance with Sections
211 and 222 of the General Corporation Law of the State of Delaware at which
meeting the necessary number of shares as required by statute was voted in favor
of the amendment.

THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.

IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer of
the Corporation, for the purpose of amending the Certificate of Incorporation of
the Corporation pursuant to Section 242 of the General Corporation Law of the
State of Delaware, does make and file this Certificate, hereby declaring and
certifying that the facts herein stated are true, and accordingly has hereunto
set his hand this day of , 2000.

VERIO INC.

By: /s/ JUSTIN L. JASCHKE
----------------------------------
Justin L. Jaschke
Chief Executive Officer

A-1
<PAGE> 33

EXHIBIT B

CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF VERIO INC.

VERIO INC, a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

RESOLVED, that the Certificate of Incorporation of this Corporation be, and
it hereby is, amended by deleting the first paragraph of Article Four thereof
and replacing it with the following:

"ARTICLE FOUR

1. CAPITAL STOCK

The total number of shares of all classes of stock that the Corporation is
authorized to issue is one hundred forty-five million (145,000,000) shares,
consisting of one hundred twenty-five million (125,000,000) shares of Common
Stock, par value $.001 per share, and twenty million (20,000,000) shares of
Preferred Stock, par value $.001 per share."

THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

FOURTH: That the capital of said Corporation shall not be reduced under or
by reason of said amendment.

VERIO INC.

By: /s/ JUSTIN L. JASCHKE
----------------------------------
Justin L. Jaschke
Chief Executive Officer

B-1
<PAGE> 34

EXHIBIT C

VERIO INC.

1998 STOCK INCENTIVE PLAN

Adopted on February 18, 1998
Amended and Restated on March 19, 1998
Amended and Restated on February 17, 2000

1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel, to provide additional incentive
to Employees, Directors and Consultants 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.

(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) "Code" means the Internal Revenue Code of 1986, as amended.

(h) "Committee" means any committee appointed by the Board to
administer the Plan.

(i) "Common Stock" means the common stock of the Company.

(j) "Company" means Verio Inc., a Delaware corporation.

(k) "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.

(l) "Continuous Status as an Employee, Director or Consultant" means
that the provision of services to the Company or a Related Entity in any
capacity of Employee, Director or Consultant, is not interrupted or
terminated. Continuous Status as an Employee, Director or Consultant shall
not be considered interrupted in the case of (i) any approved leave of
absence, (ii) transfers between locations of the Company or among the
Company, any Related Entity, or any successor, in any capacity of Employee,
Director or Consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director or Consultant (except as otherwise provided
in the Award Agreement). An approved leave of absence shall include sick
leave, military leave, or any other authorized personal leave. For purposes
of Incentive Stock Options, no such leave may exceed ninety (90) days,
unless reemployment upon expiration of such leave is guaranteed by statute
or contract.

(m) "Conversion Date" shall mean the date on which shares of the
Company's Series D Preferred Stock are automatically converted to Common
Stock pursuant to the provisions of the Certificate of Designation
Establishing Series D Preferred Stock of Verio Inc.

(n) "Covered Employee" means an Employee who is a "covered employee"
under Section 162(m)(3) of the Code.

(o) "Director" means a member of the Board.

C-1
<PAGE> 35

(p) "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.

(q) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(r) "Fair Market Value" means, as of any date, the value of Common
Stock or other property 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; or

(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.

(iii) In the case of property other than Common Stock, the Fair
Market Value thereof shall be determined by the Administrator in good
faith.

(s) "Grantee" means an Employee, Director or Consultant who receives
an Award under the Plan.

(t) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

(u) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

(v) "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.

(w) "Option" means a stock option granted pursuant to the Plan.

(x) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

(y) "Performance-Based Compensation" means compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.

(z) "Plan" means this 1998 Stock Incentive Plan.

(aa) "Prior Plans" means the Company's 1996 Stock Option Plan and the
Company's 1997 California Stock Option Plan.

(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) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor thereto.

(dd) "Series D-1 share" means a share of Series D-1 Convertible
Preferred Stock of the Company.

(ee) "Share" shall be deemed to refer to both a share of the Common
Stock and a Series D-1 share, unless specifically indicated otherwise.
C-2
<PAGE> 36

(ff) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan.

(a) Prior to the Conversion Date, subject to the provisions of Section 10,
below, the maximum aggregate number of Shares which may be issued pursuant to
all Awards is 165,000 Series D-1 shares and 1,749,300 shares of Common Stock
together with any Shares that are represented by Awards under the Company's 1996
Stock Option Plan which are forfeited, expire or are cancelled without delivery
of Shares or which result in the forfeiture of Shares back to the Company
following the date of adoption of this Plan. Notwithstanding the foregoing,
subject to the provisions of Section 10, below, the maximum aggregate number of
Shares available for grant of Incentive Stock Options prior to the Conversion
Date shall be 165,000 Series D-1 shares and 1,749,300 shares of Common Stock.
The Shares to be issued pursuant to Awards may be authorized, but unissued, or
reacquired Shares.

(b) On and after the Conversion Date, subject to the provisions of Section
10, below, the maximum aggregate number of Shares which may be issued pursuant
to all Awards is 19,898,600 shares of Common Stock, increased by (i) any Shares
available for future awards under the Company's 1997 California Stock Option
Plan as of the Conversion Date and (ii) any Shares that are represented by
Awards under the Prior Plans which are forfeited, expire or are cancelled
without delivery of Shares or which result in the forfeiture of Shares back to
the Company on or after the Conversion Date. Notwithstanding the foregoing,
subject to the provisions of Section 10, below, the maximum aggregate number of
Shares available for the grant of Incentive Stock Options on and after the
Conversion Date shall be 19,898,600 shares of Common Stock. The Shares to be
issued pursuant to Awards may be authorized, but unissued, or reacquired Shares.

(c) Any Shares covered by an Award (or portion of an Award) which is
forfeited or cancelled, 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. 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.

4. Administration of the Plan.

(a) Plan Administrator.

(i) Administration With Respect to Directors and Officers. With
respect to grants of Awards to Directors or Employees who are also Officers
or Directors of the Company, 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 With Respect to Consultants and Other
Employees. With respect to grants of Awards to Employees or Consultants who
are neither Directors nor Officers of the Company, 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. Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. The Board
may authorize one or more Officers to grant such Awards and may limit such
authority as the Board determines from time to time.

(iii) Administration With Respect to Covered
Employees. Notwithstanding the foregoing, grants of Awards to any Covered
Employee intended to qualify as Performance-Based Compensation shall be
made only by a Committee (or subcommittee of a Committee) which is
comprised solely of two or more

C-3
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Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to
Covered Employees, references to the "Administrator" or to a "Committee"
shall be deemed to be references to such Committee or subcommittee.

(iv) 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 select the Employees, Directors and Consultants to whom Awards
may be granted from time to time hereunder;

(ii) to determine whether and to what extent Awards are granted
hereunder;

(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;

(iv) to approve forms of Award Agreement for use under the Plan;

(v) to determine the terms and conditions of any Award granted
hereunder, including terms relating to acceleration or termination of
Awards in the event of one or more types of transactions involving the
ownership of the Company, a Subsidiary or Related Entity;

(vi) to amend the terms of any outstanding Award granted under the
Plan, 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 and that any amendment to reduce the exercise price of any
outstanding Option to reflect a reduction in the Fair Market Value per
Share since the grant date of the Option shall not be made without the
approval of the Company's stockholders;

(vii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan;

(viii) to establish additional terms, conditions, rules or procedures
to accommodate the rules or laws of applicable foreign jurisdictions and to
afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with
the provisions of the Plan; and

(ix) 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. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.

6. Terms and Conditions of Awards.

(a) Designation of Award. Each Award shall be designated as either an
Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of Shares
subject to Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar year (under all
plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options, to the extent of the Shares covered thereby in excess of the foregoing
limitation, shall be treated as Non-Qualified Stock Options. For this purpose,
Incentive

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Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of the Shares shall be determined as of the
date the Option with respect to such Shares is granted.

(b) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.

(c) Deferral of Award Payment. The Administrator may establish one or more
programs under the Plan to permit selected Grantees the opportunity to elect to
defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle the
Grantee to payment or receipt of Shares or other consideration under an Award.
The Administrator may establish the election procedures, the timing of such
elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.

(d) Separate Programs. The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards to
one or more classes of Grantees on such terms and conditions as determined by
the Administrator from time to time.

(e) Acquisitions and Other Transactions. The Administrator may issue Awards
under the Plan in settlement, assumption or substitution for, outstanding awards
or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.

(f) Individual Option Limit. The maximum number of Shares with respect to
which Options may be granted to any Grantee in any fiscal year of the Company
shall be five hundred thousand (500,000) Shares. In connection with a Grantee's
commencement of service to the Company or a Related Entity, a Grantee may be
granted Options for up to an additional five hundred thousand (500,000) Shares
which shall not count against the limit set forth in the previous sentence. The
foregoing limitations shall be adjusted proportionately in connection with any
change in the Company's capitalization pursuant to Section 10, below. To the
extent required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitations with respect to a Grantee, if any Option is
cancelled, the cancelled Option shall continue to count against the maximum
number of Shares with respect to which Options may be granted to the Grantee.

(g) Early Exercise. The Award may, but need not, include a provision
whereby the Grantee may elect at any time while an Employee, Director or
Consultant to exercise any part or all of the Award prior to full vesting of the
Award. Any unvested Shares received pursuant to such exercise may be subject to
a repurchase right in favor of the Company or to any other restriction the
Administrator determines to be appropriate.

(h) Term of Award. The term of each Award shall be the term stated in the
Award Agreement, provided, however, that the term of an Award shall be no more
than eight (8) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to a Grantee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Award Agreement.

(i) Transferability of Awards. Incentive Stock Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and
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<PAGE> 39

may be exercised, during the lifetime of the Grantee, only by the Grantee;
provided, however, that the Grantee may designate a beneficiary of the Grantee's
Incentive Stock Option in the event of the Grantee's death on a beneficiary
designation form provided by the Administrator. Other Awards shall be
transferable to the extent provided in the Award Agreement.

(j) Time of Granting Awards. The date of grant of an Award shall for all
purposes be the date on which the Administrator makes the determination to grant
such Award, or such other date as is determined by the Administrator. Notice of
the grant determination shall be given to each Employee, Director or Consultant
to whom an Award is so granted within a reasonable time after the date of such
grant.

(k) Conversion of Awards. Any Award granted with respect to Series D-1
shares shall convert automatically, without further action by the Company or the
Grantee, into an Award with respect to Common Stock upon automatic conversion of
outstanding Series D-1 shares into Common Stock pursuant to the provisions of
the certificate of designation establishing the Company's Series D Preferred
Stock.

7. Award Exercise or Purchase Price, Consideration and Taxes.

(a) Exercise or Purchase Price. The exercise or purchase price, if any, for
an Award shall be as follows:

(i) In the case of an Incentive Stock Option:

(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be not less
than one hundred ten percent (110%) of the Fair Market Value per Share
on the date of grant.

(B) granted to any Employee other than an Employee described in the
preceding paragraph, the per Share exercise price shall be not less than
one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.

(ii) In the case of other Awards, the per Share exercise price shall
be not less than one-hundred percent (100%) of the Fair Market Value per
Share on the date of grant.

(iii) Notwithstanding the provisions of (i) and (ii), above, in the
case of an Award issued pursuant to Section 6(e) hereof, the exercise or
purchase price for the Award shall be determined in accordance with the
principles of Section 424(a) of the Code.

(b) Consideration. Subject to Applicable Laws, the consideration to be paid
for the Shares to be issued upon exercise or purchase of an Award including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan 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
Award) which have a Fair Market Value on the date of surrender or
attestation equal to the aggregate exercise price of the Shares as to which
said Award shall be exercised (but only to the extent that such exercise of
the Award 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 Award 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.

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<PAGE> 40

(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, including, without
limitation, obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Incentive Stock Option. Upon
exercise of an Award, the Company shall withhold or collect from Grantee an
amount sufficient to satisfy such tax obligations.

8. Exercise of Award.

(a) Procedure for Exercise; Rights as a Stockholder.

(i) Any Award granted hereunder shall be exercisable at such times and
under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement.

(ii) An Award shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Award by the person entitled to exercise the Award and full payment for
the Shares with respect to which the Award is exercised has been received
by the Company. Until the issuance (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to Shares subject to an Award, notwithstanding the exercise of an
Option or other Award. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Award. No adjustment will
be made for a dividend or other right for which the record date is prior to
the date the stock certificate is issued, except as provided in the Award
Agreement or Section 10, below.

(b) Exercise of Award Following Termination of Employment, Director or
Consulting Relationship.

(i) An Award may not be exercised after the termination date of such
Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Status as an Employee, Director or
Consultant only to the extent provided in the Award Agreement.

(ii) Where the Award Agreement permits a Grantee to exercise an Award
following the termination of the Grantee's Continuous Status as an
Employee, Director or Consultant for a specified period, the Award shall
terminate to the extent not exercised on the last day of the specified
period or the last day of the original term of the Award, whichever occurs
first.

(iii) Any Award designated as an Incentive Stock Option to the extent
not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Status as an Employee, Director or Consultant shall convert automatically
to a Non-Qualified Stock Option and thereafter shall be exercisable as such
to the extent exercisable by its terms for the period specified in the
Award Agreement.

(c) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Award previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Grantee at the time that such offer is made.

9. Conditions Upon Issuance of Shares.

(a) 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) 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.

10. 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

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<PAGE> 41

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.

11. 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.

12. 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 11, 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.

13. 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.

14. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to continuation of
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.

15. Stockholder Approval. The Plan became effective when adopted by the
Board on February 18, 1998. On March 19, 1998, the Board adopted and approved an
amendment and restatement of the Plan to increase the number of Shares available
for issuance under the Plan. The Plan as amended and restated was approved by
the stockholders of the Company as of April 10, 1998. On February 17, 2000, the
Board adopted and approved an amendment and restatement of the Plan (a) to
increase the number of Shares available for issuance under the Plan and (b) to
adopt a limit on the maximum number of Shares with respect to which Options may
be granted to any Grantee in any fiscal year of the Company and certain other
administrative provisions to comply with the performance-based compensation
exception to the deduction limit of Section 162(m) of the Code, which amendments
are subject to approval by the stockholders of the Company. The amendment and
restatement of the Plan included the following other amendments which are not
subject to approval by the stockholders of the Company. The Board approved
amendments to the Plan (x) to eliminate the authority to grant Awards other than
Options, (y) to limit the maximum term of each Award to eight (8) years and (z)
to require that the exercise price of Awards equal or exceed one hundred percent
(100%) of the Fair Market Value per Share on the date of grant.
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VERIO INC.

ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR 1999
FINANCIAL AND OTHER INFORMATION

BUSINESS.

From time to time, Verio may report, through its press releases and/or
Securities and Exchange Commission filings, certain matters that would be
characterized as forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act") that are subject to
risks and uncertainties that could cause actual results to differ materially
from those projected. Certain of these risks and uncertainties are beyond
management's control. This report contains statements that constitute
forward-looking statements. These statements appear in a number of places in
this report 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. Readers 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 information contained in this report identifies certain
important factors that could cause such differences, beginning on page 20 below
and elsewhere in this report.

OVERVIEW

Verio is the world's largest operator of Web sites for businesses and a
leading provider of comprehensive Internet services with an emphasis on serving
the small and medium sized business market. We offer customers a broad range of
Internet solutions, including:

- Telecommunication circuits -- permitting our customers to make
connections to and transmit data over the Internet.

- Web hosting services -- providing our customers with a presence on the
Internet in the form of a Web site. We offer a complete suite of Web
hosting services, including shared and dedicated server hosting for
customers who prefer that we provide the server hardware, as well as
co-location services where customers bring their own servers to a Verio
data center.

- Domain name registration -- providing a fast, on-line process for our
customers to reserve their personalized Web address (such as
www.yourcompany.com).

- Electronic commerce services -- enabling our customers to conduct
transactions with their customers and vendors over the Internet.

- Application hosting services -- providing our customers with the
functionality and features of business-focused software and database
applications on a shared or rented basis via the Internet. These
applications support and automate office systems and business processes,
such as financial reporting, payroll, sales order entry, shipping,
inventory management and customer service systems.

- Secure Internet communication links -- permitting our customers to
establish "virtual private networks" in order to engage in private and
secure Internet communication with their employees, vendors, customers
and suppliers.

- Other enhanced value Internet services, such as automated Web site
development tools and templates.

We believe that small and medium sized businesses represent an attractive
target market for the provision of Internet services because of this market's
low current penetration levels and the expanding Internet needs of these
businesses. Because of their limited internal technical resources and operating
scale, small and medium sized businesses are increasingly looking to outsource
Internet and information technology functions at a reasonable cost. They also
typically seek suppliers of Internet services that can address a wide range of
their Internet needs. We believe that these businesses currently are
under-served by both the local and other national Internet service providers.
While the other national Internet service providers typically lack the local
<PAGE> 43

presence to provide hands-on support, local Internet service providers often
lack the requisite scale and resources to provide a full range of products and
services at acceptable quality and pricing levels. We believe that we have a
competitive advantage in serving small and medium sized business customers. We
combine our technical expertise and hands-on support provided through our local
sales and engineering personnel with a broad set of Internet solutions, the
quality and economic efficiency of our national network, operational
infrastructure and financial strength. Most significantly, the breadth of
products and services that we offer allows our customers to look to us as their
"one-stop" provider for all of their rapidly evolving Internet access and
Web-dependent needs.

Since our incorporation in March 1996, Verio has grown rapidly,
establishing a global presence through the acquisition, integration and organic
growth of over 50 local, regional, national and international providers of
Internet connectivity, Web hosting and other enhanced value Internet products
and services. We integrate the operations we acquire onto our national network
and common administrative support services in order to capture economies of
scale, derive operational efficiency and control, and improve the quality,
consistency and scalability of our services. Currently, we provide Web hosting
services to customers in over 170 countries and offer locally based sales and
engineering support for our Internet services in 41 of the top 50 metropolitan
statistical areas in the U.S.

We are now the largest Web hosting company in the world based on the number
of domain names -- such as yourcompany.com -- that we host. To drive continued
growth, we have created a powerful global sales and marketing engine that
includes:

- direct sales through over 240 sales professionals;

- online sales through our www.verio.com Web site;

- telemarketing operations;

- over 5,000 resellers and referral partners in the U.S. and over 170 other
countries;

- private label and co-branded distribution relationships with major
telecommunications companies; and

- preferential marketing agreements with leading Internet on-line
companies.

As of December 31, 1999, Verio served over 300,000 customer accounts, hosting
over 340,000 Web sites. For the three months ended December 31, 1999, we had
revenues of approximately $73.0 million, over half of which was derived from our
Web hosting and other enhanced value Internet services.

RECENT DEVELOPMENTS

In January 2000, we announced our new $350 million capital budget for 2000
in connection with our plan to significantly expand our web hosting and
co-location physical infrastructure, systems and personnel. Of that budgeted
amount, approximately $300 million relates to the expansion of hosting
operations, including $200 million for new and expanded hosting centers, $45
million for additional servers, and the balance for product development,
software licenses, IT systems, a new Web operations control center, and
leasehold improvements. Approximately $50 million has been budgeted for network
equipment, systems and facilities to support the growth of our high speed access
business. We expect that all of these expenditures will be funded with cash on
hand.

At the same time, we announced operational efforts underway to expand our
European Web hosting business. Our already leading position in the European Web
hosting business is comprised of more than 1,200 resellers, private label and
co-branded Web hosting and e-commerce distribution agreements with large,
European-based telecommunications companies, equity investments in Web hosting
companies in the top four European commercial markets, and an exclusive
marketing relationship with AOL UK, CompuServe and Netscape Online in the UK.
Our expansion plans in Europe, which we expect will add approximately $20
million in operating costs in 2000, include adding more Powered by Verio and
other distribution partners throughout the key European markets, acquiring
hosting facilities, hiring additional local sales and technical

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support staff, increasing local brand recognition through marketing and
advertising campaigns, and pursuing additional hosting acquisitions.

In February 2000, we announced an agreement with Oracle that allows us to
offer the Oracle8i(TM) database on a hosted, remote access basis to our
customers. This new service will enable small and medium sized businesses to
utilize the world's leading database and to access it via the Internet in a
cost-effective and customizable manner, while easing in-house application
implementation issues. We are working with Oracle to implement these new
services, which we hope to make available in the third quarter of 2000. We plan
to promote these application services, along with our Web hosting services, to
Oracle's channel partners as well as our own resellers worldwide.

In March 2000, we invested $30 million in Agilera.com, a subsidiary of
CIBER, Inc., the largest publicly held enterprise software implementor.
Agilera.com is a next generation application service provider that delivers
customized e-business and enterprise solutions to emerging and middle-market
companies. In connection with our investment, we entered into a commercial
agreement with Agilera.com under which we will provide fundamental
infrastructure to Agilera.com, including Internet connectivity through our Tier
One network, as well as the servers, data center facilities and managed services
necessary for it to offer its hosted applications.

BACKGROUND OF OUR BUSINESS

Internet access, Web hosting, electronic commerce services and application
hosting services are among the fastest growing segments of the
telecommunications services market. The availability of Internet access,
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 Internet users.

In order to capitalize on the power of the Internet, businesses must adopt
one or both of the fundamental Internet service platforms: Internet access and
an Internet Web site. Internet access provides a company with the
telecommunications circuits necessary to allow a company to connect to the
Internet, communicate with employees, customers and suppliers and other Internet
users, transfer electronic mail, and access the wealth of information available
over the Internet. A Web site provides a company with a corporate presence on
the Internet and an ability to sell goods and services over the Internet. This
computer-based site allows a company to post information about itself that is
easily accessible to all Internet users. Businesses are increasingly adding a
variety of enhanced services and applications to their basic Internet access and
Web site platforms, in order to more fully capitalize on the power of the
Internet. These services and applications allow them to more efficiently
communicate company information, expand and enhance their distribution channels,
increase productivity through back-office automation and reduce costs.

Verio expects this trend to continue as enhanced value Internet services
continue to be developed, improve and proliferate, and as Internet usage
continues to expand. For example, once a company has basic Internet access, by
then connecting each of the company's office locations and providing them with
security tools, such as data encryption, the company can implement a secure
Internet communication link permitting its employees, vendors, customers, and
other designated individuals to engage in secure, private communications over
the Internet. Further, by provisioning its Web site with enhanced application
tools, the company can automate business processes such as sales order entry,
shipping, inventory management and customer service from this site. When
conducting electronic commerce over a Web site, a company typically will add
security, shopping cart, and payment processing capabilities to its basic Web
site.

Industry analysts have reported that small and medium sized businesses
represent a potential market of over seven million customers in the U.S. Verio
has specifically targeted the small and medium sized business market for the
provision of our Internet services because:

- A small percentage of this market currently utilizes the Internet, but
that number is increasing rapidly and is expected to be one of the
fastest growing segments of the Internet industry.

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- These businesses have rapidly expanding Internet needs as they and their
customers increasingly look to the Internet for information, as a
standard mode of communication, and to conduct business in increasingly
sophisticated and cost-effective ways.

- These companies often look to an Internet service provider to fulfill
these needs because they typically lack the technology expertise,
information technology resources, capital, personnel, or ability to bear
the time-to-market and operational risks required to install, maintain
and monitor their own Web servers and Internet access.

- In selecting an Internet service provider, these businesses often prefer
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.

- Businesses that have outsourced their Internet requirements tend to
become quite dependent on their Internet provider and tend to change
Internet providers relatively infrequently.

The Internet service provider market is segmented into large national or
multinational providers, such as Verio, which typically are full service
providers, and regional and local providers which generally offer a smaller
range of services and products and lack the ability to meet all the needs of a
business customer. Full service Internet providers also typically resell
capacity on their network to regional and local providers who rely on the larger
providers for Internet access. The largest full service providers, like Verio,
have what are referred to as "Tier One" networks, which exchange Internet
traffic on a cost-free basis at multiple public peering points known as network
access points, as well as through private peering arrangements that provide a
higher-quality inter-network exchange of data traffic. As the number of Internet
service providers has grown, the requirements to operate as a Tier One network
have increased, resulting in a higher barrier to achieving Tier One provider
status.

OUR BUSINESS STRATEGY

Our business strategy of combining national scale with local presence was
specifically developed to serve the needs of the small and medium sized business
market. In formulating its business strategy, Verio concluded that the large,
national Internet service providers lacked the local presence to provide
customized hands-on support, while the smaller, local Internet service providers
did not have the requisite scale and resources to provide a full range of
services at acceptable quality and pricing levels. We believe that Verio has a
competitive advantage in serving these business customers because we have
combined the technical expertise and hands-on support, provided through our
local sales and engineering personnel, with the quality and economic efficiency
of our national network, operational infrastructure and financial strength.

Verio's goal is to be the premier, full-service provider of Internet
services to small and medium sized businesses. The key elements of our strategy
in accomplishing this goal are:

- Build Scale, Market Presence and Service Offerings through Acquisitions
and Strategic Relationships. We rapidly accumulated operational scale and
scope, establishing ourselves as a leading provider of Internet solutions
for businesses by acquiring and investing in local and regional Internet
service providers and regional, national and global Web hosting
companies, and forging strategic relationships with key product, service
and distribution partners. As a result, we have one of the most extensive
access and Web hosting product suites targeted at the small and medium
sized business market and are now one of the largest providers of
Internet services to this market based on the following current
statistics:

- We host more domain names than any other company in the world.

- We are one of the largest providers of dedicated servers with over 2,000
servers hosted.

- We host more than 10,000 e-commerce enabled Web sites.

- We are one of the largest Web hosting companies in Europe.

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- We are one of the largest registrars of .com, .net and .org domain
names.

- We operate one of the Tier One Internet networks in the U.S.

- We host over 1,000 databases on a shared, hosted application basis.

We intend to continue to expand our market presence, focusing primarily on
strengthening our Web hosting, e-commerce, application hosting and other
enhanced value service capabilities through further acquisitions,
investments and strategic relationships. In connection with certain key
vendor, supplier, customer and distribution partner relationships, where
we consider it particularly strategic or opportunistic and appropriate to
do so, we have and may continue to make equity investments in these
partners to establish or cement a key relationship, to obtain better
terms, or to take advantage of appreciation opportunities.

- Integrate Operations and Leverage National Infrastructure to Reduce Costs
and Improve Quality. We continue to improve our efficiency, service
reliability, quality and scalability by:

- integrating the Internet operations we acquire onto core national
service platforms for Internet access and Web hosting;

- focusing regional operations on sales, distribution and customer
support; and

- leveraging a common set of national systems and support services.

We integrate the regional networks we acquire and connect them to Verio's
Tier One national backbone, support the entire network with network
management and monitoring services from our network operations center,
consolidate point of presence facilities, aggregate traffic on higher
capacity, lower cost telecommunication circuits, consolidate engineering
and network operations staffs, increase network redundancy and ensure
consistency of network operations. Similarly, we integrate our Web hosting
operations onto common national platforms with regional data centers
connected to Verio's Tier One national backbone and monitored by Verio's
Web and network operations centers. Through this integration, we capture
economies of scale, drive operational efficiency, ensure operational
control and improve the quality, consistency and scalability of our
services. We have leveraged our scale to negotiate advantageous national
volume purchasing agreements with key vendors such as Cisco Systems, Qwest
Communications, Juniper Networks and Foundry.

- Build Brand Recognition, Expand Distribution Channels and Leverage Local
Support to Drive Growth. We believe that brand recognition is, and will
continue to be, an important decision factor among small and medium sized
businesses in choosing an Internet solutions provider. In conjunction
with the integration of our acquired operations, we have re-branded our
consolidated regional operations under the Verio name. We are building
national Verio brand recognition by aggressively marketing our full range
of services through a national advertising campaign using traditional
media, on-line campaigns and trade shows, strategic co-marketing
relationships and a coordinated public relations program. In March 1999,
we entered into a strategic media relationship with America Online, Inc.
in order to substantially expand Verio's national brand name recognition.
Under this agreement, for a three-year period, Verio has acquired
exclusive rights to market its Web hosting and business-focused
electronic commerce services on America Online's four key on-line media
properties in the U.S. In June 1999, we entered into a similar one-year
agreement with AOL UK, under which we have exclusive marketing rights for
our Web hosting, electronic commerce, and domain name registration
services in the AOL UK and CompuServe UK services. This agreement has
since been expanded to encompass the Netscape Online service in the UK as
well. Recently, we launched our "Powered by Verio" distribution program
under which major telecommunications carriers and other companies with a
significant business customer base can offer Verio's Web hosting and
electronic commerce services on a co-branded basis to their customers
using the "Powered by Verio" logo. Internationally, we have executed such
an agreement with NTT Communications, a wholly owned subsidiary of Nippon
Telegraph and Telephone Corporation, under which the entire group of NTT
affiliated companies can

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offer our Web hosting services in Japan, and with Infostrada for
distribution of our Web hosting and electronic commerce services in
Italy. In the U.S., we have entered into a similar agreement with Qwest
Communications under which Verio is the preferred provider of shared
hosting services to Qwest and will supply e-commerce solutions based on
our hosting platform. In addition to the "Powered by Verio" distribution
program, we also market our Internet access and Web hosting services
through distribution relationships with major telecommunications carriers
who offer Verio's services on a private-label basis to their customer
base. We currently have over 240 direct sales professionals, over 350
local engineers and customer support technicians and over 5,000 resellers
and referral partners. We expect to continue to expand this sales and
distribution force and increase its effectiveness through national
training, sales support, advertising and marketing programs. We also
market our services nationally through direct mail, telemarketing and
on-line marketing campaigns.

- Develop and Offer Enhanced Value Products and Services to Increase
Revenues. While basic Internet access and Web hosting constitute the
predominant services offered by Verio today, small and medium sized
businesses are increasingly looking for enhanced value products and
services that allow them to further leverage the power of the Internet to
expand markets, increase productivity and reduce costs. We believe that
our large existing customer base and strong, balanced position in both
the Internet access and Web hosting service platforms give us a
competitive edge in offering high-margin, enhanced value Internet
services and bundled packages to meet the evolving needs of our current
and future customers. As a result, we believe that we will be able to
derive increased revenue from these customers and increase profitability
by selling an expanding array of enhanced value Internet services, as
well as better performing Web sites and additional Internet data
transmission capacity capabilities to support these services. Examples of
these Web-based enhanced value Internet services include:

- electronic commerce services;

- hosted applications, providing office system and business process
automation capabilities, such as remotely hosted e-mail databases, and
software applications for accounting, inventory management and similar
systems;

- Web-based e-mail;

- audio and video streaming applications;

- automated Web site development tools and templates; and

- redundant "hot" sites, which are multiple presence Web sites that are
replicated and hosted across multiple national and international data
centers.

We currently offer high capacity data transmission digital subscriber line
(commonly known as "DSL") circuits as an access option through relationships
with DSL providers and plan to offer additional alternative Internet access
options, as well as intranets and extranets incorporating both Internet access
and Web-hosting capabilities. Intranets are intra-company networks that rely on
Internet-based technologies to provide secure links among corporate offices and
secure access to company data. Extranets expand the network to selected business
partners through secured links on the Internet. We also offer enhanced value
Internet security capabilities and professional consulting services to support a
variety of methods or processes to handle our customers' unique Internet
requirements. We expect to provide these further enhanced value Internet
services through a combination of internal development and packaging,
acquisitions and new relationships with other Internet hardware, software and
service companies.

PRODUCTS AND SERVICES

Verio currently offers a comprehensive range of business Internet services,
including its core Internet access and Web hosting services, as well as a
variety of related enhanced value products and services that enhance these core
offerings. Verio offers a core suite of products and services nationally, with
additional specific products offered in designated markets based on factors such
as unique needs within a particular market and local telecommunications tariffs.
As our customers' needs evolve, Verio intends to continue to
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develop a broad range of enhanced value products and services independently,
through acquisition, and through strategic relationships with key vendors.

Web Hosting Services. A Web site provides a company with a tangible
identity and interactive presence on the Internet. This computer-based site
allows a company to post information about itself that is easily accessible to
all Internet users. Web sites are also the basis for providing electronic
commerce, where a company can advertise and sell its products and services.
Verio offers a comprehensive range of core Web site hosting products, as well as
a growing suite of enhanced Web site hosting products, including electronic
commerce solutions, hosted database applications, and other hosted applications.
Generally, our customers elect to outsource to us the hardware and software
provisioning that is necessary to host a Web site, where we can provide these
services from our highly reliable data center environments. However, for our
customers with the resources and desire to provide their own computer equipment
and software, we offer data center space and services, allowing them to house
their equipment in one of our sophisticated, secure and managed facilities.

Our core Web hosting services currently include:

- Shared Server Web Hosting: Shared servers allow Web hosting of multiple
accounts or multiple Web sites on a single computer system. Verio offers
a series of shared server Web hosting plans that allow individuals and
businesses to establish a sophisticated presence on the Internet at a
reasonable cost, leveraging Verio's expertise and equipment to deploy an
effective Web site on computers that are owned and maintained by Verio in
one of its data centers and monitored seven days a week, twenty-four
hours a day. In order to allow customers to use their Web site as an
effective interface for communication, we provide additional services
bundled into our shared server hosting plans. For example, our shared
server customers are provided various Web-based electronic mail options,
support for Microsoft FrontPage(TM) extensions and a variety of unique
Web site development tools as part of the basic Web hosting account. The
higher priced shared server Web hosting offerings, including our
proprietary Virtual Server technology, provide customers additional
enhanced value Internet services, functionality and resources. Each
successive pricing tier allocates the customer more disk storage and
increases the monthly data transfer limit. In addition, the more advanced
plans offer Real Audio(TM), Real Video(TM) and mSQL(TM) database support
and support for electronic commerce-enabled Web sites which we host on
Microsoft NT as well as various UNIX-based platforms.

- Shared Server Support Tools: We have implemented a variety of tools to
allow our shared server customers to manage and enhance their sites more
effectively and update their Web sites remotely. Typically, the Web
hosting plans feature detailed Web statistics and access to raw log
files, giving customers the ability to track the performance and evaluate
the effectiveness of their Web sites. Higher tier plans offer customers
their own configuration files, point of presence server and simple mail
transfer protocol gateway. In addition, we provide a number of popular
custom gateway interface scripts that allow customers to easily put into
use hit counters, guest books, mail forms and other useful graphics, and
also support custom gateway interface scripts that enable customers to
build additional functionality into their Web sites. We offer numerous
tools that give a customer increased control over managing its Web site,
allowing them to change passwords, set electronic mail forwarding
options, view Web site statistics and check account and billing
information. Additionally, all shared servers have regular back-up
procedures to protect customer files.

- Dedicated Server Web Hosting: Dedicated servers allow Web hosting of a
single Web site on one computer system. Verio offers dedicated server Web
hosting solutions for larger customers that prefer not to host their Web
sites on a shared server. This solution, which provides substantially
more server and network resources than those available from a shared
server, gives customers the ability to run complex applications without
the additional information technology administration costs and
considerations that customers would experience if they managed their own
servers and Web sites internally. The dedicated server Web hosting
solutions provide the customer with a Microsoft NT or UNIX-based server
that is owned and maintained by Verio in one of its data centers and
monitored seven days a week, twenty-four hours a day. We maintain spare
equipment and back up data regularly. Our

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acquisition of digitalNATION in July 1999 substantially expanded our
dedicated server customer base and capabilities.

- Co-location Services: For customers that require the resources of a
dedicated server, but prefer to retain physical access to and ownership
of their server, our co-location services offer customers the ability to
locate their servers in a secure location, provisioned with managed
services such as environmental controls, system monitoring and a
high-speed connection from their server to the Internet. These data
center facilities typically are designed to provide an uninterrupted
power source, a back-up diesel generator, climate control and monitoring
seven days a week, twenty-four hours a day.

- Domain Name Registration: Each business or individual that desires a
personalized Web address must first reserve a domain name (such as
www.yourcompany.com). We are a world leader in providing this important
service of registering .com, .net and .org domain names. We believe that
offering this service provides us a marketing advantage when these domain
name registration customers then select a Web hosting provider. In
December 1999, Verio launched a new, direct, domain name registration
process, designed to automate and expedite the registration process.
Verio currently hosts more than 550,000 registered .com, .net and .org
domains.

The enhanced value Web hosting services that we currently provide include:

- Electronic Commerce Solutions: Electronic commerce services provide
businesses the ability to sell products and services on the Internet. The
electronic commerce capability can be added to an existing Web site or it
can be the basis for a Web site, starting with the customer's product
catalog. The principle basic components of an electronic commerce-enabled
Web site include:

- a hosted Web site;

- a catalog of the products to be sold from the site, including prices and
inventory; a secure means of accepting orders from customers visiting
the site;

- a secure means of accepting payment for those orders -- a means of
calculating the appropriate tax and shipping costs attributable to the
order;

- transaction reporting capability; and

- a means of reconciling these transactions with the company's accounting
records.

Verio currently offers a variety of electronic commerce packages, from an
entry level product designed for a merchant with a very limited number of
products to sell that does not require real time payment clearing, to high
end products for the more sophisticated merchant who desires an unlimited
number of products to be sold and requires secure, on-line, real time
payment settlement. We have relationships with numerous providers of the
various components of our electronic commerce solutions, including tools
for catalog and site creation, merchant accounts, digital certificates,
transaction processing and numerous additional components that are
required to build a completely commerce-enabled Web site.

In addition, we have an agreement with Excite@home, a leading provider of
fully integrated, "one-stop" electronic commerce solutions, and a related
agreement with First Data Merchant Services Corporation, one of the
nation's leading providers of Internet payment processing solutions, in
order to offer complete electronic commerce services to businesses. These
VerioStore(TM) plans offer small and medium-sized businesses a complete,
affordable and easy way to set up virtual storefronts on the Web,
including on-line product catalogs, a search engine, cash register,
shopping cart, shipping and sales tax calculations, on-line merchant
account establishment and a fully-integrated payment gateway.

In February 2000, we announced an agreement with Lycos Inc., one of the
most visited Web destinations in the world, under which Verio and Lycos
are jointly marketing Lycos Shop membership to thousands of existing and
potential on-line merchants. Lycos Shop is an on-line shopping destination
that has assembled thousands of stores integrated with online auctions and
classified ads. The co-branded e-commerce packages offered under the
agreement include Web-site hosting and e-mail services provided by Verio,
and Open Market's store creation software that enables merchants to "point

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and click" to easily build and operate a virtual storefront, thereby
allowing them to begin selling through the site almost immediately to the
millions of Lycos Shop customers. Also included are an on-line merchant
account application and credit card processing software, which allow
merchants to conduct secure and reliable transactions over the Internet.

- Application Hosting: Our application hosting services provide our
customers with the functionality and features of business-focused
software and database applications by allowing them to access these
applications, hosted on our servers, via the Internet, in a
cost-effective and customizable manner. These applications support and
automate back-office systems -- such as financial reporting, payroll,
sales order entry, shipping, inventory management and customer service
systems -- as well as front office systems -- such as customer
relationship management and sales force automation -- on a more
cost-effective basis than if customers had to license these applications
directly from the software vendor and host them on their own servers. In
that situation, customers have to pay substantial up-front license fees
and incur the cost of server hardware and supporting IT infrastructure
and support services. Many independent software vendors are re-writing or
adapting their software products to work over the Internet using a shared
or rented model in order to facilitate remote running and management of
key business software systems. By allowing us to host these applications
on a "rented" basis, which the customer can then access remotely through
our Tier One national Internet backbone, we alleviate the traditional
up-front capital and license costs and IT infrastructure limitations, as
well as in-house application implementation issues for our customers. In
February 2000, we announced an agreement with Oracle to offer the
Oracle8i(R) database in a hosted environment. Under the agreement, Verio
and Oracle will work together to implement hosted database application
services, with expected availability in the third quarter of 2000. In
March 2000, we invested $30 million in Agilera.com, a subsidiary of
CIBER, Inc. In connection with that investment, Agilera.com entered into
a commercial arrangement with us, under which Verio will provide
Agilera.com with Internet connectivity through our Tier One backbone as
well as the servers, data center space and managed services necessary to
offer its hosted applications. We believe that our sophisticated hosting
infrastructure, supported by our Tier One national backbone, makes us
particularly well-suited to provide these essential platform services to
other application service providers such as Agilera.com. As a result, in
addition to offering hosted applications directly to our customers, we
expect to continue to actively market these infrastructure services to
other application service providers who are looking for a proven,
scalable, and reliable platform from which to offer their application
capabilities.

- Web Site Design: Web site design is the development of the Web site
content that will be displayed on the Web site when it is being viewed on
the Internet. While we rely principally on our resellers to create the
Web sites for our customers, we do offer Web design services to a select
set of our higher end customers. This may entail development of a basic
Web page to a sophisticated electronic commerce Web site.

We believe that more advanced Web site-based application products will continue
to expand as businesses require more sophisticated on-line commerce and system
automation capabilities. We continue to assess potential opportunities to extend
new offerings as they become available and evaluate our ability to implement
these solutions in a cost-effective way while maintaining quality of service for
our customers. We are continually seeking to acquire technology from third
parties to incorporate with our existing solutions to provide increasing
functionality to our e-commerce and hosted application product offerings, as
well as exploring additional Web-based services through internal development. In
particular, our efforts are focused on:

- expanded Web site-based electronic commerce capabilities;

- expanded Web site-based system automation and database application
capabilities;

- "virtual offices"-- which is the creation of Web-based work groups
through the use of common data, applications or other links;

- Web-based faxing and electronic mail;

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- audio and video applications;

- automated Web site development tools and templates;

- basic automated marketing tools; and

- multiple presence Web site hosting across multiple national and
international data centers.

Internet Access Services. Verio offers a variety of core Internet access
solutions, providing basic connectivity to the Internet, as well as a suite of
enhanced value products and services enabling our customers to expand their
basic Internet connectivity capability. For example, these additional services
allow customers to send and receive e-mail or engage in private, secure data
transmissions between remote offices. These products are offered in bundled and
unbundled packages.

Our core Internet access services currently include:

- Basic Internet access: Our basic Internet access service currently
includes dial-up access at speeds ranging from 28.8 to 56 kilobytes per
second, integrated services digital network (commonly known as "ISDN")
connections providing 64 to 128 kilobytes per second access, DSL access
providing 144 kilobytes per second to over 1 megabytes per second, and
frame relay and leased line connectivity at speeds ranging from 28.8
kilobytes per second to 155 megabytes per second.

- Hardware products: As we provision access services, we provide necessary
hardware, including routers, servers and other products as needed by the
particular customer. Our national purchasing and leasing relationships
with a variety of equipment partners provide improved hardware pricing,
lower cost leasing arrangements and bundled service offerings.

- Software products: Our software products include browsers, set-up disks
and other solutions that permit customers to more effectively and easily
navigate and utilize the Internet.

- Configuration services: Our configuration solutions encompass services
such as domain name server support, supplying telecommunication circuits,
Internet protocol address space assignment, router set-up, electronic
mail configuration, router security configuration and other similar
set-up services.

Our enhanced value Internet access services currently include:

- E-mail: We provide e-mail services that permit customers to send and
receive electronic mail messages. These services are offered either using
the customer's domain name or through Verio's generic domain name. In
order to provide our customers with the latest developments in e-mail and
messaging services, we are in the process of converting our over 800,000
e-mail boxes to a centralized e-mail system supported by technology
licensed to us by Netscape Communications Corporation.

- Secure Internet Communication Links: Many companies today have private
data communication networks to transfer data between office locations.
These networks tend to be built on expensive leased telecommunication
lines. The Internet offers companies a cost-effective alternative to
private leased lines through secure Internet communication links -- often
referred to as a virtual private network or "VPN" -- which are designed
to provide secure transmission of private traffic through the Internet
and prevent unauthorized access to a computer from outside the immediate
internal network. We currently offer our customers a number of security
solutions, including Axent Raptor's Firewall, IRE's SafeNet(TM), and
WatchGuard's Firebox II(TM), and we continue to evaluate additional
products to meet our customers' needs in this area.

- Security: Security solutions are a vital component for most businesses
connected to the Internet as they are designed to prevent unauthorized
access to computers from outside the immediate internal network and
provide for secure Internet communication transmission. These solutions
include:

- firewalls -- software or hardware that prevents unauthorized access to a
computer from outside the immediate internal network;

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- packet filter -- a method of screening, eliminating and prioritizing
packets of data to prevent unauthorized access to a network;

- proxy servers -- a server designed to intercept inbound data and process
it prior to use on an internal network; and

- encryption -- manipulation of data into a secret format to prevent
anyone but the intended recipient from recognizing the data accurately.

These solutions give the customer the ability to prevent intruders from
accessing its corporate network, authenticate the identity of users
attempting to gain access to the customer's local area network or Web
site, and provide secured transmission of company data through the
Internet. We currently offer a comprehensive set of such security products
from WatchGuard Technologies, Inc., a leading provider of Internet
security solutions, as well as other vendors. Additionally, we offer a
"managed" security solution that provides ongoing detection and prevention
of intrusions. We plan to expand our security product line with new
solutions that simplify, reduce costs, or offer greater functionality as
they become commercially available. Our managed security services
solutions are designed to protect small and medium sized businesses from
electronic intruders and dynamic on-line risks. Based on WatchGuard's
LiveSecurity for MSS(TM) security system, our managed security services
safeguard businesses by monitoring their security around the clock,
reducing the demands on internal administrators.

Businesses are increasingly seeking to use the Internet for an expanding
array of telecommunication services. We continue to evaluate opportunities to
serve these more sophisticated Internet access needs by deploying additional
enhanced value Internet access-based services as they become commercially
available. For example, we are participating in trials for the deployment of new
access technologies, such as wireless access.

MARKETING

Verio's marketing organization focuses on stimulating demand for Verio's
services and extending Verio's brands, and is responsible for advertising,
marketing communications and public relations. We have consolidated the
operations and marketing efforts of our acquired operations under the Verio
brand name, although in certain instances, such as where an acquired operation
has established particularly strong brand identity or where we want to
differentiate products and services offered through certain distribution
channels, we may continue to market particular products and services under
another name. Recently, we have focused significant effort on marketing
campaigns and brand recognition, relying on a combination of traditional media
and on-line advertising. We focus our traditional media efforts on
advertisements in major business and technical publications, television
commercials, radio spots and direct mail. We have undertaken national public
relations efforts to raise the awareness and visibility of Verio through a
national print, radio and television advertising campaign. We have also
undertaken joint marketing efforts with vendor partners such as NorthPoint
Communications, whose DSL services we offer in over 20 cities nationwide. Our
on-line marketing program consists of general rotation and keyword-specific Web
banner advertisements. We became one of the world's largest Internet domain name
registrars and Web hosting companies by pioneering domain name registration
services and establishing preferential Web-based marketing relationships with
leading Internet media, search engine and portal companies such as America
Online, Netscape, Lycos and others. Other marketing vehicles include collateral
materials, trade shows, direct response programs and management of our Web site.
Public relations focuses on cultivating industry analyst and media relationships
with the goal of securing broad media coverage and public recognition of the
Verio brand name.

On March 4, 1999, we entered into a strategic media agreement with America
Online under which, for a three year period, Verio has acquired exclusive rights
to market its Web hosting and business-focused electronic commerce services on
America Online's four key on-line media properties in the U.S.: America Online,
CompuServe, AOL.com and America Online's Digital City. The agreement also
included the transition of America Online PrimeHost and CompuServe BusinessWeb
customers to Verio for continued Web hosting service. Through this agreement
Verio receives significant on-line advertising and promotion of a co-branded
Verio and America Online Web site that offers a broad range of Verio Web hosting
products and

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electronic commerce solutions. In June 1999, we entered into a similar one-year
agreement with AOL UK, under which we have exclusive marketing rights for our
Web hosting, electronic commerce, and domain name registration services in the
AOL UK and CompuServe UK services. This relationship was expanded in August 1999
to encompass the Netscape Online service in the UK as well.

SALES AND DISTRIBUTION

Verio utilizes multiple distribution channels in order to extend its reach
and leverage the service capabilities and brand names of its channel partners.
Verio uses a combination of direct sales, on-line marketing, telemarketing,
value-added resellers and private label and co-branded distribution partners.

Direct Sales. We have a sales force of more than 240 professionals. These
sales representatives have a strong Internet technical background, understand
the local telecommunication tariffs and the needs of their local business
community. Because these representatives are locally-based, they are able to
meet face-to-face to discuss a particular customer's Internet needs and
technical requirements and develop tailored solutions. We have developed
programs at the national level to attract and train high quality, motivated
sales representatives that have the necessary technical skills, experience and
knowledge. 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, we plan to continue to expand our direct sales force. At the local
level, direct marketing techniques are being used to target customers 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. We work with key vendors to assist in
these direct marketing efforts. We co-market with these vendors through direct
mail programs, joint seminar development and joint trade show involvement. We
also operate a centralized outbound and inbound telemarketing sales capability
targeted at offering Web hosting services.

On-line Sales. We directly offer our products and services on-line through
our www.verio.com Web site. We have an extensive on-line marketing program
consisting of general rotation and keyword-specific Web banner advertisements
which stimulate interest in and leads for our products and services. Much of
this on-line activity directs prospects to our on-line Web sites from which
prospects may make a product selection and order a product on-line. We are able
to generate a substantial amount of sales of our Web hosting products through
this selling technique as a result of the high degree of automation built into
our Web site provisioning process.

Resellers and Indirect Sales. We believe that indirect sales channels
contribute significantly to our growth, and have developed three primary
reseller partner programs that provide us with a formal indirect distribution
strategy. Through these programs, we have a worldwide indirect distribution
channel with over 5,000 resellers and referral partners in the U.S. and over 170
other countries. These programs include:

- Authorized Solutions Partner Program: This program offers our resellers
the ability to share in the ongoing revenue stream of customers they
bring to Verio. Authorized Solutions Partners include computer resellers,
value-added resellers, systems integrators and other organizations
focused on providing information technology hardware, software and
services to the business community. Our resellers typically have an
established relationship with the prospective customer base and a sales
force capable of selling Internet services as part of the partner's suite
of services.

- Referral Partner Program: These partners include organizations such as
Web designers, advertising agencies and telecommunication resellers. We
target organizations that are less capable of, or interested in, selling
Internet services, or for whom Internet services fall outside their core
business interests.

- Co-Branded and Private Label Distribution Programs: We have agreements
with a number of large telecommunications providers under which these
wholesale distribution partners can offer Verio's products and services.
Recently, we launched our "Powered by Verio" distribution program under
which major telecommunications carriers and other companies with a
significant business customer

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base can offer Verio's Web hosting and e-commerce services on a
co-branded basis to their customers using the "Powered by Verio" logo.
For example, we have executed such an agreement with NTT Communications,
a wholly owned subsidiary of Nippon Telegraph and Telephone Corporation,
under which the entire group of NTT affiliated companies may distribute
our Web hosting services in Japan, and with Infostrada for distribution
of our Web hosting and e-commerce services in Italy. In the U.S., we
entered into an agreement with Qwest Communications, under which Verio is
the preferred provider of shared Web hosting services to Qwest, and also
will supply e-commerce solutions based on our hosting platform. We also
have similar arrangements in which the distribution partner is allowed to
offer our services under its own brand. We have this type of agreement
with a number of the regional bell operating companies and a large
European telecommunications company. The benefits that we derive from
these programs include greater market reach without fixed overhead costs
and the ability to use partners to assist in the delivery of complete
solutions to meet customer needs. We are actively pursuing the expansion
of these distribution programs both domestically and internationally.

TECHNOLOGY AND NETWORK OPERATIONS

Overview. Verio owns and operates a national network that provides a high
capacity, highly reliable data transmission path connecting Verio's customers to
the Internet. Verio's national network interconnects over 200 local point of
presence facilities across the U.S., of which approximately 30 are national
nodes. By aggregating our capacity onto one national network, we continue to
increase our operational control and efficiency, reduce costs, and provide
redundancy and higher quality service. In this way, we are able to address some
of the most significant challenges that an Internet service provider 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 regional, national and international Internet service
network providers, sophisticated network management tools and engineering
support services. The reliability of the national network is the result of many
factors, including redundant high-speed routers and other critical hardware,
carrier class facilities with back-up power, fire suppression and climate
control, and redundant telecommunications lines. With our substantial national
capacity, network support capabilities, and peering relationships, Verio has
achieved "Tier One" status as one of the largest national, full service Internet
network providers.

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National Network. Following is a diagram of Verio's national network as of
December 31, 1999:

U.S. Map

The national network architecture includes a presence at all of the major
public national exchange points and redundant network nodes to link our regional
networks to the national network at regional connecting points, representing
many of Verio's extensive private peering points. Each of these locations uses
leading router technology. The equipment is located in facilities leased from a
variety of telecommunications providers, including MCI WorldCom, Sprint and
others. These access points are linked using a nationwide clear line network
infrastructure ranging in capacity from DS-3 to OC-12. This network capacity is
leased primarily from Qwest and a variety of other national telecommunications
providers, including Sprint and MCI WorldCom. This combination of clear channel
circuits and router architecture makes the network reliable by diversifying the
path of Internet traffic and maintaining redundant paths. Regional networks
either co-locate at these access nodes or lease connectivity from a local
service provider such as a regional bell operating company or other local
exchange carrier to connect the regional points of presence to our national
network.

Multiple national access nodes facilitate connection of our regional
operations to our national network. We continue to add additional private
peering points and access nodes as we acquire more Internet service providers,
expand operations and further increase network capacity as the need for
additional Internet data transmission capacity arises.

In September 1999, we entered into a 20-year capacity and services
agreement with Qwest Communications to acquire long haul fiber capacity and
ancillary services on Qwest's nationwide MacroCapacity(SM) Fiber Network. This
agreement, which was amended and expanded in December 1999, required that we
prepay $65.5 million by December 31, 1999 for the capacity we acquire. In
addition, we have a five-year capacity agreement with Qwest, running from
September 30, 1999, that provides us with the flexibility to deploy circuits for
shorter term capacity needs. We also are party to a number of other long haul
capacity agreements with additional telecommunications providers. These
agreements are for various terms and at varied pricing.

We believe that the currently installed Cisco and Juniper Networks routers
will be sufficient to support our traffic routing needs up to and beyond OC-3
and OC-12 speeds.

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Peering Relationships. Peering is the Internet practice under which
Internet service providers exchange each other's traffic without the payment of
settlement charges. Verio has established public or private peering
relationships with the major national Internet service providers, as well as
with many smaller domestic and international networks, and continues to evaluate
additional private peering proposals. By implementing our own national network
and establishing peering relationships with other national Internet service
providers, we believe we can lower the cost of our Internet transit and increase
the performance and reliability of our network operations. With approximately
100 peering partners, including all of the largest Internet service providers,
Verio's network is considered a "Tier One" national network. 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 Internet data transmission traffic at a higher capacity and in a
more efficient manner rather than to risk congestion and equipment failure at
public exchange points.

The basis on which the large national providers 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
providers 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. We believe 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. Global network capabilities also may become a requirement. In the
future, we may have to comply with new and more stringent peering requirements
in order to maintain our peering relationships. As a result, no assurance can be
given that peering relationships will continue to be made available to us.

Web Hosting Operations. We have developed high-performance, reliable,
secure and scalable Web hosting solutions that we believe provide us with a
significant competitive advantage. These solutions consist of multiple
proprietary Web hosting platforms that incorporate automated functionality and a
highly reliable network infrastructure that includes multiple data centers
monitored by our network operations center 24 hours per day, seven days a week.
Our strategy in developing our Web hosting solutions focuses on utilizing
proprietary technological innovations that we integrate with third-party
software and hardware to configure integrated solutions.

Web Hosting Platform. We have established multiple proprietary Web hosting
platforms. As a result we can host up to 2,000 Web sites on a single server in
our most efficient platform. Although industry-standard Web servers can enable
Web hosting, we believe that efficiently managing large numbers of Web sites and
users on a single shared server, and operating hundreds of such servers, is
technically difficult and requires significant technological innovations.
Accordingly, we have focused our technology development efforts on ensuring the
scalability of our hosting platforms and creating various proprietary operating
system-level tools to facilitate a high-density customer-to-server ratio. We
also have customized or developed Web server applications designed to improve
performance in a shared server environment, as well as resource monitoring tools
designed to report and address scarcity of shared central processing units and
memory resources. Our solution easily allows server groups to be added
seamlessly and monitored centrally wherever they are located. To address the
diverse requirements of our customers, we offer Web hosting services on a range
of operating systems and computing platforms.

We also have developed proprietary software that allows us to provide our
services on an efficient and cost-effective basis by automating the following
back-end functions:

- order-taking and processing;

- customer billing via credit cards, check, bank transfer and accounts
receivable;

- account provisioning and activation;

- server management and monitoring;

- coordination of the electronic mail subsystem to integrate
electronic mail forwarding, multiple electronic mail accounts on a
single Web site and auto-responders;

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- delegated administration to support distributor-dealer-customer
hierarchy of all data; and

- support for third-party feature "plug-ins."

In addition, we provide a front-end interface that allows our customers to
set up accounts, change account parameters, check Web site statistics quickly
and easily and verify billing information. "TQ software" was engineered to
maximize automation to achieve high levels of scalability. Further, the modular
design allows additional server groups to be easily supported. Language and
branding independence enable international value-added resellers and original
equipment manufacturers to localize for foreign languages and customize the
interface quickly and with minimal effort.

Data Centers. Our current primary data centers are located in Orem, Utah;
San Francisco and Mountain View, California; Seattle, Washington; Dallas, Texas;
Boca Raton, Florida; Vienna and Dulles, Virginia; Boston Massachusetts; and
Philadelphia, Pennsylvania. We also host servers in various other locations
around the U.S. Our data centers include environmental controls, back-up power
generators, redundant high capacity connections to the Internet, routers and
switches, and continuous monitoring capabilities to ensure high-quality service
with minimal interruptions. In January 2000, we announced plans to significantly
expand our Web hosting and co-location physical infrastructure, systems and
personnel, including a planned $200 million expansion program for the data
centers where we house our hosting servers and offer co-location services. This
planned data center expansion totals approximately 650,000 square feet in 21
locations, including 80,000 square feet in Virginia and 5 other large facilities
averaging 60,000 square feet in Seattle, the San Francisco Bay Area, Dallas,
Chicago, and New York. Ten of these facilities are expected to be complete by
mid-2000. The balance are expected to be completed around the end of 2000, at
which time we expect to have approximately 40 hosting centers located throughout
the U.S. The larger facilities will be used to provide all types of Web and
application hosting, as well as co-location services.

National Network Management. We consider world-class network management an
essential capability for network monitoring and expansion, maintaining high
customer satisfaction and improving network quality. We have established a
network operations center to allow continuous monitoring of the network 24 hours
per day, 7 days per week. Our network operations center also provides a single
point of contact for real-time network status information and customer technical
problem resolution. The network operations center is designed to provide
real-time alarming, event correlation, traffic management and forecasting, and
distributed notification of the network events and network status. We use many
leading edge systems to provide the network operations center capabilities.

Telecommunications Supplier Arrangements. We have negotiated national level
telecommunication arrangements with local exchange carriers, such as MCI
WorldCom, providing favorable terms for local transport. We plan to expand
national purchasing and leasing benefits, as well as technical planning and
support to improve the performance, reliability and economics of our networks.
National level purchasing benefits include both cost and vendor performance
issues, as well providing spare equipment and additional technical support from
suppliers. National level distribution agreements have been negotiated with a
number of additional national-scope suppliers. Specialized facility lease
agreements have also been established with companies such as Qwest, Sprint, MCI
WorldCom and Digital Equipment Corporation. We are pursuing additional vendor
and telecommunications relationships in an effort to reduce the cost of
equipment and improve network quality.

NATIONAL SUPPORT SERVICES

In addition to our national network and network monitoring capability, we
have developed and implemented three critical national support services designed
to increase operational efficiencies and enhance the quality, consistency and
scalability of our services. These support services include 24 hours per day, 7
days per week customer technical support and service, financial information
management through a central, standardized accounting system and a sophisticated
billing and collections system. We integrate the operations we acquire into
these common administrative support services in order to capture economies of
scale, derive operational efficiency and control and improve the quality,
consistency and scalability of our services while

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allowing local personnel to focus on relationships with customers. As of
December 31, 1999, 93% of all companies acquired by us prior to 1999 had been
migrated to our national services.

Customer Technical Support. Our customer care combines the responsiveness
and on-site capabilities of our local operations with the scale economies of a
national customer support center. Our network operations center in Dallas,
Texas, enables us to provide responsiveness 24 hours per day, 7 days per week
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 support center team is using a leading customer support
trouble ticketing and workflow management system offered by Vantive Corporation
to monitor and support our network and Internet access operations, and an
internally developed product to monitor and support our Web hosting operations.
These systems enable us to track, route, and report on customer issues. They
also provide significant benefits in ensuring quality and timely care to
customers. Based on information received through the trouble ticketing system
and the centralized billing and collections system, we are able to monitor
network reliability and outage experiences. To date, this information reflects
that the outages experienced by our customers, for the most part, are
attributable to ordinary course of business service interruptions,
telecommunication network capacity demands, and the customer's hardware and
software functionality issues. In certain instances, our customers experienced
downtime and outages in the course of our conversion of systems and processes
associated with our integration and consolidation efforts. Verio offers service
warranties in connection with certain of its products and services that provide
for payment credits in the event of specified circumstances such as unscheduled
service interruptions or downtime that exceed specified levels. In the future,
we expect that we may offer expanded service level commitments with respect to
our products and services as they become more standard and, therefore, necessary
in order for us to be or remain competitive. To date, Verio has provided credits
resulting from network outages and system failures in certain circumstances, but
the amount of these credits has not been material. Certain of the entities that
we have acquired have offered and implemented various service credit policies,
some of which remain in effect with respect to customers of those acquired
entities. However, credits required as a result of those policies to date have
not been material. We will continue to monitor network outage experiences and
expect to record appropriate reserves if the level of outage credits becomes
material.

Financial Information Management. We have converted most of our acquired
operations to the PeopleSoft(TM) financial reporting system and the ADP
payroll/human resources system in order to provide a central, standardized
accounting system. These systems enable us to cost effectively increase the
productivity and quality of administrative support by standardizing operational
systems such as payroll, payables, purchasing and financial reporting.

Billing and Collections. We have implemented the Kenan Systems' EC Arbor
billing solution for most of our operations. This billing system offers high
quality, flexibility, cost-effectiveness and scalability. Kenan Systems is a
leading billing solutions provider to the telecommunications industry, providing
accurate, timely, and easy-to-understand invoicing.

INTERNATIONAL OPERATIONS

Through our Web hosting acquisitions and distribution and reseller
relationships, Verio has gained a substantial international Web hosting
presence. We now serve customers in over 170 countries and we estimate that
approximately 10% of our revenues currently are derived from international
sources. Hiway owned minority and majority interests in certain entities that
provide Web hosting and other enhanced Internet services in various foreign
countries. Upon the completion of the Hiway acquisition, Verio acquired the
majority and minority equity positions held by Hiway at that time. To capitalize
on opportunities presented by the rapidly emerging European business Internet
market, Verio has begun to significantly expand its Web hosting operations in
Europe. We have a leading position in shared server hosting throughout Europe,
and our expansion plans are designed to leverage our local presence and leading
Web hosting products and platforms. We have recently begun to offer dedicated
hosting services in Europe and plan to introduce application hosting products to
the European market in the near term. Our already strong European market
position is comprised of more than 1,200 resellers, a private label distribution
relationship with Swisscom AG, a co-branded "Powered by Verio" distribution
relationship with Italian telecommunications company Infostrada, a wholly
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owned subsidiary of the Mannesmann Group, ownership of or equity investments in
Web hosting companies in the top four European markets and an exclusive
marketing relationship with AOL UK, CompuServe and Netscape Online in the UK. We
have recently acquired the remaining 40% interest in our RapidSite UK subsidiary
and now own 100% of that entity. We also own 100% of WWW-Service
Online-Dienstleistungen GmbH, which offers Web hosting and related services in
Germany, as well as minority interests in Web hosting companies in France and
Spain. We may seek to acquire the remaining equity of the other partially owned
international entities in the future. However, we also may decide to leave some
equity in our international subsidiaries in the hands of local owners in order
to retain their continued services and expertise in managing these distant
operations. Our expansion plans in Europe include adding more "Powered by Verio"
and other distribution partners throughout the key European markets, acquiring
hosting facilities, hiring additional local sales and technical support staff,
increasing local brand recognition through marketing and advertising campaigns
and pursuing additional hosting acquisitions in Europe.

COMPETITION

The market for Internet access, Web hosting and related services is
extremely competitive. Verio 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:

- national, regional and local Internet service providers;

- other independent providers of Web hosting, e-commerce, and other
enhanced value Internet services;

- global, national, and regional long distance and local exchange
telecommunications companies;

- cable television companies;

- direct broadcast satellite and wireless communications providers;

- on-line service providers; and

- computer hardware and software manufacturers and vendors.

Our competitors may operate in any one or more of these areas and include
companies such as AT&T, Cable & Wireless, Concentric Network, Digex, Exodus
Communications, Frontier/Global Center and PSINet.

Verio believes that the following are the primary competitive factors in
this market:

- secure and reliable national network and technology platforms with
sufficient capacity, quality of service and scalability to support
continued growth;

- knowledgeable and effective sales force, and broad and effective
distribution channels;

- knowledgeable and capable technical support personnel, and prompt and
efficient customer care services;

- Internet system engineering and other technical expertise;

- competitive prices;

- timely introductions of new products and services;

- sufficient financial resources; and

- recognized and trusted brand name.

Many of our competitors have significantly greater market presence, brand
recognition, and financial, technical, network capacity and personnel resources
than we do. All of the major long distance companies, also known as
interexchange carriers, offer Internet access services that compete with us. The
reforms in the

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federal regulation of the telecommunications industry brought about by the
Telecommunications Act of 1996 created greater opportunities for local exchange
carriers, including the regional bell operating companies, to enter the Internet
access market. In order to address the Internet access requirements of the
current business customers of long distance and local carriers, there is a move
toward integrating horizontally through acquisitions of, joint ventures with,
and the wholesale purchase of Internet access from, Internet service providers
by these telecommunications companies. In addition, many of the major cable
companies and other alternative service providers -- such as those companies
utilizing wireless terrestrial and satellite-based service technologies -- have
announced plans to offer Internet access and related services. Accordingly, we
expect that we will experience increased competition from traditional and
emerging telecommunications providers. Many of these companies, in addition to
their substantially greater network coverage, market presence, and financial,
technical and personnel resources, also have large existing commercial customer
bases. Furthermore, they may have the ability to bundle Internet access with
basic local and long distance telecommunications services. This bundling of
services may have an adverse effect on our ability to compete effectively with
them and may result in pricing pressure on us that would adversely affect our
financial condition and results of operations.

The recent deployment and further planned deployment of broadband services
and high capacity data transmission capabilities by cable and telephone
companies through new technologies such as cable modems and various digital
subscriber lines create further competitive pressure in Verio's business. While
these providers initially targeted the residential consumer, more recently a
number of digital subscriber lines providers have announced their intent to
offer digital subscriber lines services to our target business market. This may
significantly affect the pricing of our Internet access service offerings.
Similar to the co-marketing arrangement that we entered into with NorthPoint
Communications in early 1999, a number of digital subscriber lines providers
have launched their services in conjunction with Internet service providers,
allowing those providers to offer Internet access over digital subscriber line
circuits. These digital subscriber line circuits compete with our dedicated
connectivity offerings because they provide higher speed and lower latency
Internet connections than a standard dialup phone connection.

EMPLOYEES

As of December 31, 1999, Verio employed approximately 1,870 people,
including full-time and part-time employees at our corporate headquarters in
Colorado, our network operations and customer support center in Texas and at our
distributed operational offices across the country and around the world. We
consider our employee relations to be good. None of our employees are covered by
a collective bargaining agreement.

TRADEMARKS, TRADE NAMES AND OTHER INTELLECTUAL PROPERTY RIGHTS

We rely on various copyright, trademark, service mark, and trade secret
laws and contractual restrictions in order to establish and protect certain
proprietary rights that are important in our business. We obtained federal
trademark protection for "Verio" on May 25, 1999. On September 2, 1998, Verio
filed for protection of the service mark "The New World of Business." These
applications are pending and there is no assurance that they will be granted. We
have also filed for trademark protection for the Verio mark in the European
Economic Community and Japan. Additionally, corporate name reservations for the
name "Verio Inc." have been filed in all fifty states. Hiway Technologies(R) and
Best Internet Communications(R) are registered trademarks of Hiway. Hiway(TM),
HWAY(TM), A Home Page(TM) and RapidSite(TM) are trademarks of Hiway. TABNET(R)
is a registered trademark of TABNet. TABNet has applied for federal trademark
protection for the following marks: 1-800-WEB SITE(TM), NETANNOUNCE(TM),
NTX(TM), and TAB.NET(TM).

We also rely on many technologies that we license from third parties that
support our internal systems and operations, or that are incorporated in the
products and services that we offer our customers. For example, we license
software for our billing, financial accounting and reporting, and other
back-office systems, from vendors such as Oracle that we in turn provide to
customers on a hosted application basis, and from various technology providers
that enable specific aspects of the electronic commerce services that we offer
our customers. There can be no assurance that these third party technology
licenses will continue to be available to

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us on commercially reasonable terms. The loss of such technology could require
us to obtain substitute technology of lower quality or performance standards, or
at greater cost, which could harm our business.

GOVERNMENT REGULATION

We are not currently subject to direct federal, state or local government
regulation, other than regulations applicable to businesses generally. There
currently is only a small body of laws and regulations directly applicable to
the provision of access to or commerce services on the Internet. For example, in
late 1998, Congress enacted the Digital Millennium Copyright Act, which includes
a limitation on liability of on-line service providers for copyright
infringement for transmitting, routing or providing connections, storage or
caching of data at the direction of a user. This limitation on liability applies
if the service provider has no actual knowledge that the particular data
infringed on third party intellectual property rights and if certain other
conditions are met. Because this law is relatively new, we are not sure how it
will be applied to limit any liability that we may face in the future for
possible copyright infringement-related issues that arise in connection with the
services we provide. This law also requires that service providers follow
certain notice and take-down procedures with respect to allegedly infringing
materials in order to take advantage of the limitation on liability provided by
the Act. We are in the process of implementing these sorts of procedures across
our operations. Certain provisions of the Communications Decency Act, which
imposes criminal penalties for using an interactive computer service for
transmitting obscene or indecent communications, have been found
unconstitutional by the U.S. Supreme Court. Other federal legislation, that was
enacted to require limitations on access to pornography and other material
deemed harmful to minors, also was determined to violate the First Amendment,
but that decision is on appeal. We are unable to predict the outcome of this
appeal, or whether other similar legislation will be enacted or enforced. In
addition, the Federal Trade Commission has adopted final rules that are to
become effective April 21, 2000, regarding the Children's Online Privacy
Protection Act's prohibition of unfair and deceptive acts and practices in
connection with the collection and use of personal information from and about
children on the Internet. The rules provide that Web sites directed at children
under 13 years of age must obtain verifiable parental consent before collecting
personal information from children and must take other measures intended to
safeguard children's privacy. Additional requirements may be imposed on Web site
operations relating to the use, dissemination and collection of personal
information.

Despite the enactment of the Digital Millennium Copyright Act, the law
relating to the liability of Internet access and Web hosting providers for
information hosted on or disseminated through their networks remains largely
unsettled. It is possible that claims could be made against on-line service
providers under both U.S. and foreign law based on matters such as defamation,
obscenity, negligence or other legal theories, as well as intellectual property
infringement, based on the nature and content of the data disseminated through
or hosted on their networks. Numerous private lawsuits have been initiated in
which such liability is sought to be imposed against on-line service providers.

We have adopted a standard acceptable use policy that applies to all of our
customers, that prohibits them from posting, transmitting, or storing material
on or through our services that we determine to be in violation of third party
intellectual property rights. Our acceptable use policy also imposes other
restrictions on our customers in connection with the use of our services,
including prohibitions on illegal activity or other activity that is destructive
or potentially destructive to our business or reputation or to our customers. We
initially designed and continue to evolve our acceptable use policy to promote
the security, reliability and privacy of our systems and network. However we
cannot assure that our policy will accomplish this goal or shield us from
liability under the Digital Millennium Copyright Act or otherwise with respect
to the activities of, or the content hosted or transmitted by, our customers or
other Internet users.

Because of the increased popularity and use of the Internet, it is likely
that a number of additional laws and regulations may be adopted at the federal,
state and local levels, governing such issues as user privacy, freedom of
expression, pricing, taxation, advertising, intellectual property rights,
information security and the convergence of traditional telecommunications
services with on-line services and Internet communications. Legislation
addressing such things as on-line security, privacy, mass unsolicited commercial
e-mail messages, and the regulation of sales of products, such as
pharmaceuticals, firearms, drug paraphernalia and gambling is
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proposed regularly in many states and in Congress. The implementation of any
such legislation could result in direct or indirect regulation of on-line
service providers generally, including Verio. In that case, it is likely that we
would have to implement additional policies and procedures designed to assure
our compliance with the particular legislation. Further, the adoption of such
laws and regulations might decrease growth of the Internet generally, which in
turn could negatively impact our business. In addition, applicability to the
Internet of existing laws governing such things as property ownership,
intellectual property rights, taxation, obscenity, defamation, libel and
personal property is uncertain. Because so many of the existing laws on these
topics were adopted prior to the advent of the Internet and related
technologies, as a result they do not contemplate, address or readily apply to
the unique issues that the Internet and its use create.

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MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The common stock of Verio is traded on the Nasdaq National Market (Nasdaq
Symbol: VRIO). The following table presents for the periods indicated the high
and low bid prices for our common stock, as reported by the Nasdaq National
Market.

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
------------------
HIGH/ASK LOW/BID
-------- -------
<S> <C> <C>
First Quarter............................................... $28.61 $10.50
Second Quarter.............................................. $39.00 $20.81
Third Quarter............................................... $42.50 $24.81
Fourth Quarter.............................................. $55.63 $27.50
</TABLE>

On March 14, 2000, the closing price of our common stock as reported on the
Nasdaq National Market was $50.94 per share. As of March 14, 2000, there were
approximately 385 holders of record of our common stock.

We have never declared or paid any dividends on our common stock and do not
expect to pay dividends in the foreseeable future. Verio's current policy is to
retain all of its earnings to finance future growth and acquisitions.
Furthermore, the terms of the indentures relating to each of the November 1999
Notes, the November 1998 Notes, the March 1998 Notes and the 1997 Notes, as well
as the $100.0 million revolving credit facility, place limitations on our
ability to pay dividends. Future dividends, if any, will be at the discretion of
our board of directors and will depend upon, among other things, our operations,
capital requirements and surplus, general financial condition, contractual
restrictions and such other factors as our board of directors may deem relevant.

In July 1999, we issued 7.2 million shares of 6.75% Series A Convertible
Preferred Stock, with a liquidation preference of $50.00 per share, for
approximate net proceeds of $347.3 million. The shares of preferred stock are
convertible to shares of common stock at $48.2813 per share. The convertible
preferred stock may be redeemed, at our option, at a redemption premium of
102.0% of the liquidation preference, plus accumulated and unpaid dividends on
or after August 1, 2001, but prior to August 1, 2002, if the trading price of
our common stock equals or exceeds $72.4219 per share for a specified period. In
addition to the payments described above, holders will receive a payment equal
to the present value of the dividends that would thereafter have been payable on
the convertible preferred stock through and including August 1, 2002. Except as
described above, we may not redeem the convertible preferred stock prior to
August 1, 2002. Beginning on August 1, 2002, we may redeem the convertible
preferred stock initially at a redemption premium of 103.8571% of the
liquidation preference and thereafter at prices declining to 100.0% on or after
August 1, 2006, plus, in each case, all accumulated and unpaid dividends. Verio
may effect any redemption, in whole or in part, by delivering cash, shares of
our common stock or a combination thereof. At the closing of this offering, the
initial purchasers of the convertible preferred stock deposited approximately
$24.3 million into an account from which quarterly cash payments will be made,
or which may be used, at Verio's option, to purchase shares of our common stock
from us for delivery to holders in lieu of cash payments. The deposit account
will expire on August 1, 2000 unless it is earlier terminated and is reflected
in restricted cash. Subsequent to August 1, 2000, dividends will accrue on a
cumulative basis at 6.75% per annum.

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SELECTED FINANCIAL DATA.

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The selected historical consolidated financial data as of December 31,
1996, 1997, 1998 and 1999, and for the period from inception (March 1, 1996) to
December 31, 1996 and the years ended December 31, 1997, 1998 and 1999 has been
derived from our audited Consolidated Financial Statements.

The information contained below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Consolidated Financial Statements and the notes thereto
included elsewhere in this Annual Report on Form 10-K. Results of operations for
the period from inception (March 1, 1996) to December 31, 1996 and the years
ended December 31, 1997, 1998 and 1999 are not necessarily indicative of results
of operations for future periods. Our development and expansion activities,
including acquisitions, during the periods shown below may significantly affect
the comparability of this data from one period to another.

We define EBITDA as earnings (loss) from operations before interest, taxes,
depreciation, amortization and provision for loss on write-offs of investments
in Internet service providers and fixed assets and includes non-cash stock
option compensation and severance costs. The primary measure of operating
performance is net earnings (loss) and not EBITDA. Although EBITDA is a measure
commonly used in our industry, it should not be considered 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, our definition of EBITDA may not be comparable to other
similarly titled measures of other companies.

For purposes of presenting capital expenditures, we have excluded equipment
and leasehold improvements acquired in our business acquisitions.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(MARCH 1, 1996) TO YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998 1999
------------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue........................... $2,365 $ 35,692 $ 120,653 $ 258,336
Total costs and expenses................ 8,645 75,981 211,671 376,403
------ -------- --------- ---------
Loss from operations.................... (6,280) $(40,289) $ (91,018) $(118,067)
====== ======== ========= =========
Loss before extraordinary item.......... (5,122) $(46,069) $(111,854) $(181,906)
====== ======== ========= =========
Net loss................................ (5,122) $(46,069) $(121,955) $(181,906)
====== ======== ========= =========
Net loss attributable to common
stockholders.......................... (5,145) $(46,329) $(122,042) $(192,774)
====== ======== ========= =========
Loss per common share -- basic and
diluted:
Loss per common share before
extraordinary item................. (2.65) $ (20.24) $ (2.62) $ (2.56)
====== ======== ========= =========
Loss per common share................. (2.65) $ (20.24) $ (2.85) $ (2.56)
====== ======== ========= =========
Weighted average common shares
outstanding -- basic and diluted...... 1,944 2,290 42,752 75,372
</TABLE>

23
<PAGE> 65

<TABLE>
<CAPTION>
AS OF
-------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998 1999
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............... $66,467 $ 62,662 $433,424 $ 506,055
Securities available for sale........... -- 9,924 143,963 358,969
Restricted cash and securities.......... -- 40,554 14,805 20,481
Goodwill, net........................... 8,736 83,216 236,696 546,936
Total assets............................ 82,628 246,471 933,712 1,763,724
Long-term debt and capital lease
obligations, net of discount.......... 106 142,321 674,618 1,086,681
Redeemable preferred stock.............. 76,877 97,249 -- --
Stockholders' equity (deficit).......... (4,055) (27,001) 202,681 533,123
</TABLE>

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<PAGE> 66

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

The following discussion and analysis should be read in conjunction with
the financial statements and related notes included elsewhere in this Form 10-K.
This discussion contains forward-looking statements based on current
expectations, which involve risks and uncertainties. Actual results and the
timing of certain events could differ materially from the forward-looking
statements as a result of a number of factors including those referred to in
Factors Affecting Future Operating Results.

OVERVIEW

Our Company was founded in March 1996. Since then, we have rapidly
established a global presence by acquiring and growing Internet service
providers with a business customer focus. We are the world-wide leader in
hosting domain-based Web sites and a leading provider of high speed connectivity
and enhanced services such as electronic commerce and virtual private networks
based on secure Internet communications links, to small and medium sized
businesses. As of December 31, 1999 we served over 300,000 customer accounts,
including over 340,000 hosted Web sites, and had total revenue of approximately
$258.3 million for the year ended December 31, 1999.

From the time of our inception we have raised substantial amounts of
capital through the private placement and public sale of various debt and equity
securities. The proceeds of these financings were used to invest in and acquire
Internet service, Web hosting, and related service providers, to fund
operations, and to build a national infrastructure including a national network,
network operations center, data centers and other hosting facilities, and
billing, customer care and financial reporting systems. During 1999, we sold
$360.0 million of our Series A convertible preferred stock to institutional
investors, and raised $400.0 million by issuing additional senior notes to
institutional investors. We expect to use the proceeds of these offerings to
further our strategic acquisition and investment strategy and to fund our
operations.

In January 2000, we announced our new $350 million capital budget for 2000
in connection with our plan to significantly expand our Web hosting and
co-location physical infrastructure, systems and personnel. Of that budgeted
amount, approximately $300 million relates to the expansion of hosting
operations, including $200 million for new and expanded hosting centers, $45
million for additional servers, and the balance for product development,
software licenses, IT systems, a new Web operations control center, and
leasehold improvements. Approximately $50 million has been budgeted for network
equipment, systems and facilities to support the growth of our high speed access
business. We expect that all of these expenditures will be funded with cash on
hand.

Since inception, we have completed over 50 acquisitions, all using the
purchase method of accounting. As a result, we have recorded significant amounts
of goodwill, which totaled $626.2 million, gross, at December 31, 1999. We have
undertaken to consolidate the ownership and management of the acquired
operations into nationally managed functional areas, such as sales, marketing,
customer care, network and finance. In addition, we are deploying systems for
sales force automation, operations, customer support, accounting and other
back-office functions in order to be more efficient. Although we have incurred
and continue to incur significant costs in these efforts, we expect to realize
substantial long term cost savings as a result. We have incurred net losses
since we were formed. For the period from inception to December 31, 1996, and
the years ended December 31, 1997, 1998 and 1999, we reported net losses
attributable to common stockholders of $5.1 million, $46.3 million, $122.0
million and $192.8 million, respectively.

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<PAGE> 67

RESULTS OF OPERATIONS

The following table presents operating data, as a percentage of total
revenue, for the years ended December 31, 1997, 1998 and 1999. This information
is from our Consolidated Financial Statements included in this Annual Report on
Form 10-K. This information should be read in conjunction with the Financial
Statements and Notes thereto:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenue:
Internet connectivity..................................... 66 % 63 % 47 %
Enhanced services and other............................... 34 % 37 % 53 %
---- ---- ---
Total revenue..................................... 100 % 100 % 100 %
Costs and expenses:
Cost of service........................................... 45 % 45 % 31 %
Sales and marketing....................................... 30 % 27 % 23 %
General and administrative................................ 108 % 70 % 49 %
Depreciation and amortization............................. 30 % 33 % 43 %
---- ---- ---
Total costs and expenses.......................... 213 % 175 % 146 %
---- ---- ---
Loss from operations.............................. (113)% (75)% (46)%
Other income (expense):
Interest income........................................... 17 % 12 % 9 %
Interest expense and other................................ (33)% (30)% (34)%
Equity in losses of affiliates............................ (5)% -- --
---- ---- ---
Loss before minority interests and extraordinary
item............................................ (134)% (93)% (71)%
Minority interests.......................................... 5 % -- --
---- ---- ---
Loss before extraordinary item.................... (129)% (93)% (71)%
Extraordinary item -- loss related to debt repurchase....... -- (8)% --
---- ---- ---
Net loss.......................................... (129)% (101)% (71)%
Accretion of preferred stock to liquidation value and Return
on convertible preferred stock............................ (1)% -- (4)%
---- ---- ---
Net loss attributable to common stockholders...... (130)% (101)% (75)%
==== ==== ===
</TABLE>

Revenue

Most of our revenue is received from business customers who purchase Web
hosting products, high-speed Internet connectivity, and other enhanced value
Internet services. Verio offers a broad range of connectivity options to its
customers including dedicated, digital subscriber lines, integrated services
digital network, frame relay and dial-up connections. Connectivity customers
typically sign a contract for one year of service and pay fixed, recurring
monthly service charges plus a one-time setup fee under those agreements. These
charges vary depending on the type of service, the length of the contract and
local market conditions. Our Web hosting customers typically pay fixed,
recurring monthly service charges plus a one-time setup fee. These charges vary
depending on the amount of disk space and transit required by the customer.
Other enhanced services include:

- e-commerce;

- virtual private networks permitting our customers to engage in private
and secure Internet communication with their employees, vendors,
customers and suppliers;

- security services;

- co-location services, which include leased space, connectivity and
support services in specialized facilities for customers that wish to
place their own equipment and software in our secure, controlled
facilities;

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<PAGE> 68

- consulting; and,

- the sales of equipment and customer circuits.

Revenue for all products is recognized as the service is provided. Amounts
billed relating to future periods are recorded as deferred revenue and amortized
monthly as services are rendered.

We have experienced some seasonality in our internal revenue growth, with
the period of higher growth being the fall and winter. Verio's focus is on
services that generate recurring revenue from small and mid-sized business
customers. Revenue from business customers currently represents approximately
90% of revenue, and approximately 85% of revenue is recurring. No single
customer represents more than 2% of revenue.

Cost of Service

Cost of service consists primarily of local telecommunications expense.
Local telecommunications expense is primarily the cost of transporting data
between a customer's place of business, Verio's local points of presence and a
national point of presence. Cost of service also includes Internet access
expense and the cost of equipment sold to customers. Internet access expense is
the cost that we pay to lease fiber capacity that we use to carry our customers'
data between national points of presence on the Internet. Most of the Internet
businesses and operations we have acquired were parties to various local
telecommunications and Internet access contracts with third parties when we
acquired them. We are in the process of converting that traffic carried by third
parties to our own network.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries, commissions and
advertising.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and
related benefits, rent and utilities. Such expenses also include the expenses of
general management, engineering, customer care and accounting.

In 1998, Verio incurred significant one-time expenses in connection with
the operational consolidation and integration of its acquisitions. These
expenses included approximately $1.9 million, primarily related to severance
costs in connection with the elimination of approximately 250 positions that
were no longer necessary due to the efficiencies of the national services. These
terminations were completed as of December 31, 1999.

General and administrative expenses are expected to continue to increase in
absolute dollars, but decrease as a percentage of total revenue as revenue
growth continues to outpace general expenses. Verio's scalable systems limit the
number of additional personnel and the need for additional office space to
support incremental revenue. We expect these systems will result in the ability
to add significant additional revenue at low incremental costs. Although we
expect to continue to reduce our operating losses as a percentage of revenue,
there can be no assurance that we will be able to do so, or that the rate of any
reduction in losses will be as rapid as we expect. One-time integration expenses
are expected to continue as the integration of previously acquired companies is
not yet complete, and due to the cost of integrating future acquisitions.

Depreciation and Amortization

Depreciation is provided over the estimated useful lives of assets ranging
from three to five 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. Debt issuance costs are amortized
over the life of the debt. Other intangibles consist primarily of the costs
associated with customer acquisitions and non-compete agreements and are
amortized over a three-year period or the life of the agreement. As of December
31, 1999, the Company had entered into a 20-year capacity agreement with Qwest
to acquire fiber capacity on Qwest's fiber optic network for $65.5 million which
was paid in cash as of December 31, 1999. This payment will be

27
<PAGE> 69

depreciated over the life of the agreement. Additional acquisitions and
investments are expected to cause depreciation and goodwill amortization to
increase significantly in the future.

Other expenses

Other expenses consist primarily of interest expense and interest income.

Year ended December 31, 1998 compared to the year ended December 31, 1999

Total revenue increased 114% from $120.7 million for the year ended
December 31, 1998 to $258.3 million for the year ended December 31, 1999.
Acquisitions completed after December 31, 1998 and internal growth both
contributed significantly to this increase. Revenue from Web hosting and other
Internet enhanced value services increased from 37% of revenue for the year
ended December 31, 1998 to 53% for the year ended December 31, 1999, and is
expected to continue to grow as a percent of revenue. The increase in revenue
from Web hosting and other enhanced value Internet services is primarily the
result of acquisitions we made at the end of 1998 and in 1999 (including Hiway
and digitalNATION).

Cost of service increased $25.3 million, or 47%, from $54.0 million for the
year ended December 31, 1998 to $79.3 million for the year ended December 31,
1999, due to acquisitions and internal growth. However, as a percentage of
revenue, cost of service decreased from 45% for the year ended December 31, 1998
to 31% for the year ended December 31, 1999. This improvement is due primarily
to the scale efficiencies of our local and national networks and the shift in
our revenue mix to products with higher gross margin, such as Web hosting. As
Verio continues to grow, we expect our cost of service to continue to increase
in absolute dollars. However, we also expect cost of service to decrease as a
percentage of total revenue, as Verio's revenue mix shifts to higher margin Web
hosting and other enhanced value Internet services and as traffic is shifted
from third party networks to the Verio network.

Sales and marketing expenses increased $27.3 million from $33.3 million for
the year ended December 31, 1998 to $60.6 million for the year ended December
31, 1999, due to increases in the number of direct sales representatives,
indirect channel managers and marketing personnel and increased brand
advertising. However, as a percent of revenue, sales and marketing expenses
decreased from 27% for the year ended December 31, 1998 to 23% for the year
ended December 31, 1999. As Verio seeks to accelerate our revenue growth, we
also expect sales and marketing expense to increase in total dollars but to
remain flat as a percentage of revenue.

General and administrative expenses increased $42.4 million from $84.6
million for the year ended December 31, 1998, to $127.0 million for the year
ended December 31, 1999, primarily due to acquisitions. However, as a percentage
of revenue, general and administrative expenses decreased from 70% to 49%, which
was the result of efficiencies realized by integrating the operations of
numerous acquisitions and the shift in product mix toward Web hosting, which has
lower general and administrative costs. In the near term, as a result of planned
investments in new and expanded data centers, scalable web hosting operations
and international operations, Verio expects significant increases in general and
administrative expenses, both in absolute dollars and as a percentage of
revenue.

Depreciation and amortization expenses increased $69.8 million, or 176%,
from the year ended December 31, 1998 to December 31, 1999, primarily due to
increases in equipment and leasehold improvements and goodwill. As of December
31, 1999, the Company had entered into a 20-year capacity agreement with Qwest
to acquire fiber capacity on Qwest's fiber optic network. Required prepayments
under this agreement totalling $65.5 million were paid in cash by December 31,
1999. This payment will be depreciated over the life of the agreement.
Depreciation expense is expected to increase significantly as a result of the
$350 million capital improvements program planned for 2000.

Interest and other expenses increased from $35.9 million for the year ended
December 31, 1998 to $87.2 million for the year ended December 31, 1999,
primarily due to the issuance of the November 1998 Notes and the November 1999
Notes. Interest income increased from $14.6 million for the year ended December
31, 1998 to $23.3 million for the year ended December 31, 1999 due to increased
cash balances

28
<PAGE> 70

resulting from these debt offerings and issuance of $360.0 million in preferred
stock in July 1999. See "-- Liquidity and Capital Resources."

During the year ended December 31, 1998, an extraordinary loss of $10.1
million was recorded in connection with the refinancing of $50.0 million of the
1997 Notes. See "-- Liquidity and Capital Resources."

Other comprehensive income increased $89.6 million from the year ended
December 31, 1998 to December 31, 1999, primarily due to the unrealized gain on
investments in publicly traded equity securities.

Year ended December 31, 1997 compared to the year ended December 31, 1998

Total revenue increased 238% from $35.7 million for the year ended December
31, 1997 to $120.7 million for the year ended December 31, 1998. Acquisitions
completed after December 31, 1997 contributed significantly to this increase,
adding $41.4 million of the $85.0 million increase.

Cost of service increased $38.0 million from $16.0 million for the year
ended December 31, 1997 to $54.0 million for the year ended December 31, 1998,
primarily due to acquisitions. However, as a percentage of revenue, cost of
service remained constant at 45%, as the increases in cost and capacity of the
new national network were offset by the lower per unit cost of these facilities.

Sales and marketing expenses decreased from 30% of total revenue for the
year ended December 31, 1997 to 27% for the year ended December 31, 1998, due in
part to efficiencies gained from the regionalization and nationalization of
certain sales and marketing functions. These savings were partially offset by
increased expenses related to an increase in the number of direct sales
representatives and marketing personnel, and the initiation of a national
advertising campaign.

General and administrative expenses increased $46.0 million from $38.6
million for the year ended December 31, 1997 to $84.6 million for the year ended
December 31, 1998, primarily due to acquisitions. However, as a percentage of
revenue, general and administrative expenses decreased from 108% to 70%, which
was the result of efficiencies realized by combining and integrating the
operations of numerous acquisitions onto Verio's national systems.

Depreciation and amortization expenses increased $29.1 million, or 274%,
from the year ended December 31, 1997 to December 31, 1998, primarily due to
increases in equipment and leasehold improvements and goodwill.

Interest expenses increased from $11.8 million for the year ended December
31, 1997 to $35.9 million for the year ended December 31, 1998, primarily as a
result of the issuance of the 1997 Notes, the March 1998 Notes and the November
1998 Notes. Interest income increased from $6.1 million for the year ended
December 31, 1997 to $14.6 million for the year ended December 31, 1998 due to
increased cash balances resulting from the debt offerings and the sale of stock.
See "-- Liquidity and Capital Resources."

During the year ended December 31, 1997, Verio recognized equity in losses
of affiliates of $2.0 million under the equity method of accounting for
investments owned 50% or less. Such losses were not significant for the year
ended December 31, 1998. See note 1 to the Consolidated Financial Statements of
the Company.

CASH FLOW ANALYSIS

Year ended December 31, 1998 compared to the year ended December 31, 1999

The most significant changes in cash balances and cash flows between 1998
and 1999 are explained by acquisitions, the issuance of the March 1998 Notes,
the November 1998 Notes, the November 1999 Notes and the issuance of preferred
stock. The acquisitions of Hiway in January 1999 and digitalNATION in July 1999
resulted in an aggregate cash outflow of approximately $276.0 million and also
caused amortization to increase approximately $26.4 million between the two
years. The issuance of $175.0 million of 10 3/8% debt in March 1998, $400.0
million of 11 1/4% debt in November 1998, $400.0 million of 10 5/8% debt in
November 1999 and $360.0 million in gross proceeds from the issuance of
preferred stock in July 1999 caused cash balances and interest expenses to
increase significantly. The upfront payment totaling $65.5 million to Qwest was
the

29
<PAGE> 71

most significant capital expenditure during 1999. The $10.1 million
extraordinary charge during the year ended December 31, 1998 related to the
repurchase of $50.0 million of the 1997 Notes. Cash flows used by operations as
a percentage of revenue improved from (53%) to (27%) from the year ended
December 31, 1998 to the year ended December 31, 1999. Cash provided by working
capital items was $5.1 million for the year ended December 31, 1998, compared to
$1.5 million for the year ended December 31, 1999.

Year ended December 31, 1997 compared to the year ended December 31, 1998

Net cash used by operating activities was $64.2 million during the year
ended December 31, 1998, which includes cash provided by working capital items
of $5.1 million. Sources of cash included approximately $120.8 million net
proceeds from our IPO, $100.0 million from the sale of common stock to an
affiliate of NTT, $175.0 million from the March 1998 Notes and $400.0 million
from the November 1998 Notes. Cash used during 1998 was primarily for business
combinations and capital expenditures, and totaled $151.1 million and $23.1
million for these items, respectively. Verio also used approximately $54.5
million of the proceeds from the March 1998 Notes to repurchase $50.0 million
principal amount of the 1997 Notes.

LIQUIDITY AND CAPITAL RESOURCES

Our business strategy has required, and is expected to continue to require,
substantial capital to fund acquisitions and investments, capital expenditures
and interest expense.

In 1996, we raised approximately $78.1 million from the sale of preferred
stock and approximately $1.1 million from the sale of common stock. In 1997, we
raised approximately $20.0 million from the sale of preferred stock, and issued
0.7 million shares of preferred stock in connection with an acquisition.

On June 24, 1997, we completed the placement of $150.0 million principal
amount of the 1997 Notes and attached warrants. One hundred and fifty thousand
units were issued, each consisting of $1,000 principal amount of notes and eight
warrants. The 1997 Notes mature on June 15, 2004 and interest, at the annual
rate of 13 1/2%, is payable semi-annually in arrears on June 15 and December 15
of each year. Each warrant entitles the holder thereof to purchase 3.52 shares
of Verio's common stock at a price of $.005 per share, for a total of 4,224,960
shares. The warrants and the 1997 Notes were separated on December 15, 1997.
Concurrent with the completion of the sale of the 1997 Notes, we were required
to deposit funds into an escrow account in an amount that together with interest
was sufficient to fund the first five interest payments. The final interest
payment from the escrow account was made on December 15, 1999. The 1997 Notes
are redeemable at our option commencing June 15, 2002. The 1997 Notes are senior
unsecured obligations ranking equally in right of payment with all existing and
future unsecured and senior indebtedness.

On March 25, 1998, we completed the placement of $175.0 million principal
amount of the March 1998 Notes. The March 1998 Notes are senior unsecured
obligations ranking equally in right of payment with all existing and future
unsecured and senior indebtedness and mature on April 1, 2005. Interest on the
March 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
March 1998 Notes are redeemable at our option commencing April 1, 2002. Verio
used approximately $54.5 million of the proceeds from the March 1998 Notes to
repurchase $50.0 million principal amount of 1997 Notes. Upon consummation of
the sale of the March 1998 Notes and the repurchase, $13.3 million of escrowed
interest funds were released to us.

At various times during the first four months of 1998, we issued 1.5
million additional shares of Series D-1 preferred stock in connection with the
purchases of substantially all the remaining unowned interests in our
subsidiaries and affiliates.

In May 1998, we completed our initial public offering, selling an aggregate
of 11.5 million shares of common stock, including the partial exercise of the
over-allotment option by the initial purchasers in the initial public offering,
for net proceeds of approximately $120.8 million, after deducting underwriting
discounts, commissions and expenses. Concurrently with our initial public
offering, we completed the sale of 9.0 million shares of common stock to an
affiliate of Nippon Telegraph and Telephone Corporation for net proceeds of
approximately $100.0 million.

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<PAGE> 72

On November 25, 1998, we sold $400.0 million principal amount of the
November 1998 Notes, for net proceeds of approximately $389.0 million. Interest
at the annual rate of 11 1/4% is payable semi-annually in arrears on June 1 and
December 1 of each year, commencing June 1, 1999. We have the option of
redeeming the November 1998 Notes starting December 1, 2003.

In August 1999, Verio replaced its earlier $70.0 million revolving credit
facility with a new $100.0 million revolving credit facility with a group of
commercial lending institutions. This facility is secured by substantially all
of the stock of our subsidiaries and by an agreement with Qwest pursuant to
which Verio may lease fiber capacity from time to time. The credit facility
requires no payments of principal until its maturity on June 30, 2002. The terms
of the credit facility provide for borrowings at a margin of 2% above the LIBOR.
There is a commitment fee of 1/2 of 1% per annum on the undrawn amount of the
credit facility. We have made no borrowings under the credit facility.

The credit facility contains a number of other restrictions, including
limitations on our ability to:

- engage in businesses other than the Internet service business;

- place liens on our assets; and

- pay cash dividends.

In addition, under the credit facility, our indebtedness (less cash) may
not exceed 2.35 times our annualized pro forma revenue for the most recent
quarter. We currently have the ability to borrow the full $100.0 million
commitment. We are required to pay back any amounts borrowed under the credit
facility with the proceeds of new indebtedness, certain asset sales, free cash
flow in excess of $5.0 million in any quarter, or the net proceeds from
insurance claims.

In July 1999, we issued 7.2 million shares of 6.75% Series A Convertible
Preferred Stock, with a liquidation preference of $50.00 per share, for
approximate net proceeds of $347.3 million. The shares of preferred stock are
convertible to shares of common stock at $48.2813 per share. The convertible
preferred stock may be redeemed, at our option, at a redemption premium of
102.0% of the liquidation preference, plus accumulated and unpaid dividends on
or after August 1, 2001, but prior to August 1, 2002, if the trading price of
our common stock equals or exceeds $72.4219 per share for a specified period. In
addition to the payments described above, holders will receive a payment equal
to the present value of the dividends that would thereafter have been payable on
the convertible preferred stock through and including August 1, 2002. Except as
described above, we may not redeem the convertible preferred stock prior to
August 1, 2002. Beginning on August 1, 2002, we may redeem the convertible
preferred stock initially at a redemption premium of 103.8571% of the
liquidation preference and thereafter at prices declining to 100.0% on or after
August 1, 2006, plus, in each case, all accumulated and unpaid dividends. Verio
may effect any redemption, in whole or in part, by delivering cash, shares of
our common stock, or a combination thereof. At the closing of this offering, the
initial purchasers of the convertible preferred stock deposited approximately
$24.3 million into an account from which quarterly cash payments will be made,
or which may be used, at Verio's option, to purchase shares of our common stock
from us for delivery to holders in lieu of cash payments. The deposit account
will expire on August 1, 2000 unless it is earlier terminated and is reflected
in restricted cash. Subsequent to August 1, 2000, dividends will accrue on a
cumulative basis at 6.75% per annum.

On November 19, 1999, we sold $400.0 million principal amount of the
November 1999 Notes, for net proceeds of approximately $388.0 million. Interest
at the annual rate of 10 5/8% is payable semi-annually in arrears on May 15 and
November 15 of each year commencing May 15, 2000. We have the option of
redeeming the November 1999 Notes starting November 15, 2004.

The 1997 Notes, the March 1998 Notes and the November 1998 Notes contain
terms, other than the rate of interest and maturity, that are substantially
similar. The terms of the indentures governing these Notes impose significant
limitations on our ability to incur additional indebtedness unless we have
issued additional equity, or if our Consolidated Pro Forma Interest Coverage
Ratio, as defined in the indentures, 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, and if the ratio of
our total debt to consolidated annualized pro forma operating cash flow is not
higher than 6:1.
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<PAGE> 73

The indentures contain a number of other restrictions, including, among
others, limitations on our ability to:

- engage or make investments in businesses other than the Internet service
business;

- place liens on or dispose of our assets; and

- pay cash dividends.

If a change of control with respect to Verio occurs, we are required to
make an offer to purchase all the Notes then outstanding at a price equal to
101% of the respective principal amount of the notes, plus accrued and unpaid
interest. We are in compliance with the provisions of all of our debt
agreements.

As of December 31, 1999, we had approximately $885.5 million in cash and
cash equivalents and securities available for sale (including $20.5 million of
restricted cash). Our business plan for 2000 currently anticipates investing
approximately $350.0 million over the year for capital expenditures.
Approximately $300.0 million is budgeted for the expansion of hosting
operations. Specifically, the expenditures include $200.0 million for new and
expanded hosting centers, $45.0 million for additional servers, and the balance
for product development, software licenses, IT systems, a new Web operations
control center and leasehold improvements. Approximately $50.0 million of
capital has been budgeted for network equipment, systems and facilities to
support the growth of our high-speed access business.

We also have significant debt service requirements. At December 31, 1999
our long-term liabilities were $1,098.8 million, and the expected annual
interest expense associated with the 1997 Notes, March 1998 Notes, the November
1998 Notes and the November 1999 Notes is approximately $119.2 million. The
interest expense and principal repayment obligations associated with our debt
could have a significant effect on our future operations.

Our anticipated expenditures are inherently uncertain and will vary widely
based on many factors including operating performance and working capital
requirements, the cost of additional acquisitions and investments, the
requirements for capital equipment to operate our business and our ability to
raise additional funds. Accordingly, we may need significant amounts of cash in
excess of our plan, and no assurance can be given as to the actual amounts of
our future expenditures. We will have to increase revenue without a commensurate
increase in costs to generate sufficient cash to enable us to meet our debt
service obligations. There can be no assurance that we will have sufficient
financial resources if operating losses increase or additional acquisition or
other investment opportunities become available.

We expect to meet our capital needs for the next 12 months with cash on
hand, and beyond 12 months, with the proceeds from the sale or issuance of
capital stock, the credit facility, lease financing and additional debt. We
regularly examine financing alternatives based on prevailing market conditions
and expect to access the capital markets from time to time based on our current
and anticipated cash needs and market opportunities. Over the longer term, we
will be dependent on obtaining positive operating cash flow and, to the extent
cash flow is not sufficient, the availability of additional financing, to meet
our debt service obligations. Insufficient funding may require us to delay or
abandon some of our planned future expansion or expenditures, which could have a
material adverse effect on our growth and ability to realize economies of scale.
In addition, our operating flexibility with respect to certain business
activities is limited by covenants associated with our indebtedness. There can
be no assurance that such covenants will not adversely affect our ability to
finance our future operations or capital needs or to engage in business
activities that may be in our interest.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS 133). Statement of Financial Accounting Standards
No. 137, Accounting for Derivative Instruments and Hedging Activities --
Deferral of the Effective Date of SFAS 133 -- An Amendment of SFAS 133, has
delayed the effective date of SFAS 133 to fiscal years beginning after June 15,
2000. The adoption of these pronouncements did not and is not expected to have a
significant effect on the Company's financial position or results of operations.
32
<PAGE> 74

IMPACT OF YEAR 2000

The commonly referred to Year 2000 or Y2K issue results from the fact that
many computer programs and systems were developed without considering the
possible impact of a change in the century designation that occurred on January
1, 2000. As a result, these programs and systems use only two digits instead of
four to identify the year in the date field. Many people were concerned that
essential systems and programs might not properly recognize this date and
therefore could generate wrong data, calculate erroneous results, or fail if the
issue remained uncorrected. As a result of these concerns, we undertook a
pervasive inventory, internal and third party compliance assessment, and
service-level testing effort across all of our operations. Based on these
initiatives we discovered certain non-material Y2K compliance issues and took
appropriate corrective actions in advance of January 1, 2000. On January 1, 2000
and since that time, we have not experienced any significant Year 2000 problems
in connection with any of our systems or operations. Based on that experience,
we do not expect that we will encounter any significant latent Y2K-related
problems in the future. As of December 31, 1999, we had spent approximately $1
million in the aggregate in connection with our Y2K assessment and remediation
efforts. These costs included external costs primarily associated with outside
consultants, and hardware and software remediation costs incurred in connection
with the compliance program. These costs do not include internal costs for
employee time spent on the project, and various system upgrades that we
implemented and that otherwise would be part of our overall capital expenditure
program.

FORWARD-LOOKING STATEMENTS

The statements included in the discussion and analysis above that are not
historical or factual are "forward-looking statements" (as that term is defined
in the Private Securities Litigation Reform Act of 1995). The safe harbor
provisions provided in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, apply to
forward-looking statements made by Verio. These statements 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. Management cautions the reader that these
forward-looking statements addressing the timing, costs and scope of our
acquisition of, or investments in, existing affiliates, the revenue and
profitability levels of the affiliates in which we invest, the anticipated
reduction in operating costs resulting from the integration and optimization of
those affiliates, and other matters contained herein or therein from time to
time 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 on current
expectations and a variety of assumptions relating to the business of Verio,
which, although we consider them reasonable, may not be realized. Because of the
number and range of the assumptions underlying Verio's projections and forward-
looking statements, many of which are subject to significant uncertainties and
contingencies that are beyond the reasonable control of Verio, some of the
assumptions will not materialize and unanticipated events and circumstances may
occur subsequent to the date of this report. Therefore, the actual experience of
Verio and results achieved during the period covered by any particular
projections or forward-looking statements may differ substantially from those
projected.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The following discussion relates to Verio's exposure to market risk related
to changes in interest rates, foreign currency exchange rates and security
prices. This discussion contains forward-looking statements that are subject to
risks and uncertainties. Actual results may differ materially due to a number of
factors.

INTEREST RATE RISK

At December 31, 1999, Verio had cash and cash equivalents and securities
available for sale of approximately $885.5 million (including restricted cash of
$20.5 million). These securities available for sale include highly liquid
investments in debt obligations of highly rated entities with maturities of
between one and 360 days and equity securities. The investments in debt
obligations of $107.4 million are subject to interest
33
<PAGE> 75

rate risk and will fall in value if market interest rates increase. Verio
expects to hold these investments in debt obligations until maturity, and
therefore expects to realize the full value of these investments, even though
changes in interest rates may affect their value prior to maturity. If interest
rates decline over time, this will result in a reduction of our interest income
as our cash is reinvested at lower rates.

Verio has debt that is substantial in relation to its stockholders' equity
and cash flow. At December 31, 1999, Verio had long-term liabilities in the
aggregate amount of $1,098.8 million, representing 67% of its total
capitalization. The majority of Verio's long-term debt is comprised of fixed
rate debt resulting from the issuance of the 1997 Notes, the March 1998 Notes,
the November 1998 Notes and the November 1999 Notes. A change of interest rates
would not affect our obligations under these agreements. Increases in market
interest rates would increase the interest expense associated with any future
borrowings under our bank credit facility.

FOREIGN CURRENCY RATE RISK

Verio does not currently have any significant foreign currency exposure.
However, a portion of our revenue (approximately 10%) is generated from sources
outside the United States. Some of these transactions are denominated in local
currencies, and any currency devaluation would affect the amount of revenues
that Verio would receive from its international operations. As these operations
represent a small portion of Verio's revenue, we do not have any significant
overall currency exposure at December 31, 1999. Verio does not hedge against
foreign currency rate changes.

On January 1, 1999, 11 of 15 member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the euro, and adopted the euro as their common legal currency (the "Euro
Conversion"). Verio has not commenced any assessment of the effects of the Euro
Conversion. Based on the size of our international investments, any effect is
not expected to be material.

SECURITY PRICES

Verio is also exposed to changes in stock prices as a result of its
holdings in publicly traded equity securities. Changes in stock prices can be
expected to vary as a result of general market conditions, technological
changes, specific industry changes and other factors.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.

None.

34
<PAGE> 76

VERIO INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations and Comprehensive
Losses for the years ended December 31, 1997, 1998 and
1999...................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1997, 1998 and 1999...... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Independent Auditors' Report on Financial Statement
Schedule.................................................. S-1
Schedule II: Valuation and Qualifying Accounts.............. S-2
</TABLE>

F-1
<PAGE> 77

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, 1998 and 1999, and the related consolidated
statements of operations and comprehensive loss, stockholders' equity (deficit),
and cash flows for each of the years in the three-year period ended December 31,
1999. 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, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.

/s/ KPMG LLP

Denver, Colorado
March 9, 2000

F-2
<PAGE> 78

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
------------ ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 433,424 $ 506,055
Securities available for sale............................. 143,963 358,969
Restricted cash and securities (note 4 and 6)............. 13,629 18,801
Trade receivables, net of allowance for doubtful accounts
of $4,763 and $8,694.................................... 15,084 32,642
Prepaid expenses and other................................ 7,831 14,386
--------- ----------
Total current assets............................... 613,931 930,853
Restricted cash and securities (note 4 and 6)............... 1,176 1,680
Investments in affiliates, at cost (note 2)................. 8,298 8,957
Prepaid marketing expense (note 2).......................... -- 17,247
Equipment and leasehold improvements (note 3)............... 77,118 269,132
Less accumulated depreciation and amortization.............. (26,672) (64,002)
--------- ----------
Net equipment and leasehold improvements.................. 50,446 205,130
Other assets:
Goodwill, net of accumulated amortization of $21,614 and
$79,263 (note 2)........................................ 236,696 546,936
Debt issuance costs, net of accumulated amortization of
$1,710 and $3,934....................................... 18,542 28,362
Other, net of accumulated amortization of $624 and $8,262
(note 2)................................................ 4,623 24,559
--------- ----------
Total assets....................................... $ 933,712 $1,763,724
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 10,501 $ 29,807
Accrued expenses.......................................... 14,228 42,223
Accrued interest payable.................................. 9,634 18,620
Line of credit, notes payable and current portion of
long-term debt (note 4)................................. 3,329 945
Current portion of capital lease obligations (note 5)..... 5,848 15,447
Deferred revenue.......................................... 12,512 24,800
--------- ----------
Total current liabilities.......................... 56,052 131,842
Long-term debt, less current portion, net of discount (note
4)........................................................ 668,177 1,070,601
Capital lease obligations, less current portion (note 5).... 6,441 16,080
Other long-term liabilities (note 2)........................ -- 12,078
--------- ----------
Total liabilities.................................. 730,670 1,230,601
--------- ----------
Minority interests in subsidiaries (note 2)................. 361 --
Stockholders' equity (note 7):
Preferred stock, 12,500,000 shares authorized; 7,200,000
outstanding of 6.75% Series A Convertible Preferred
(aggregate liquidation preference $360,000) (note 6).... -- 347,304
Common stock, $.001 par value; 250,000,000 shares
authorized; 66,292,020 and 77,769,395 shares issued and
outstanding at December 31, 1998 and 1999............... 66 78
Additional paid-in capital................................ 376,131 462,480
Accumulated deficit....................................... (173,516) (366,290)
Accumulated other comprehensive income.................... -- 89,551
--------- ----------
Total stockholders' equity......................... 202,681 533,123
--------- ----------
Commitments and contingencies (note 5)
Total liabilities and stockholders' equity......... $ 933,712 $1,763,724
========= ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 79

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSES

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenue:
Internet connectivity:
Dedicated........................................... $ 16,383 $ 53,274 $ 95,674
Dial-up............................................. 7,093 22,865 24,997
Enhanced services and other............................ 12,216 44,514 137,665
--------- ---------- ---------
Total revenue.................................. 35,692 120,653 258,336
Costs and expenses:
Cost of service........................................ 15,974 54,023 79,288
Sales and marketing.................................... 10,744 33,320 60,623
General and administrative and other (note 7).......... 38,639 84,602 126,987
Depreciation and amortization.......................... 10,624 39,726 109,505
--------- ---------- ---------
Total costs and expenses....................... 75,981 211,671 376,403
--------- ---------- ---------
Loss from operations................................ (40,289) (91,018) (118,067)
Other income (expense):
Interest income........................................ 6,080 14,628 23,344
Interest expense....................................... (11,826) (35,946) (87,183)
Equity in losses of affiliates......................... (1,958) -- --
--------- ---------- ---------
Loss before minority interests and extraordinary
item.............................................. (47,993) (112,336) (181,906)
Minority interests....................................... 1,924 482 --
--------- ---------- ---------
Loss before extraordinary item......................... (46,069) (111,854) (181,906)
Extraordinary item -- loss related to debt repurchase
(note 4)............................................... -- (10,101) --
--------- ---------- ---------
Net loss....................................... (46,069) (121,955) (181,906)
Accretion of preferred stock to liquidation value and
return on convertible preferred stock (note 6)......... (260) (87) (10,868)
--------- ---------- ---------
Net loss attributable to common stockholders... $ (46,329) $ (122,042) $(192,774)
========= ========== =========
Weighted average number of common shares
outstanding -- basic and diluted....................... 2,290 42,752 75,372
========= ========== =========
Loss per common share -- basic and diluted:
Loss per common share before extraordinary item........ $ (20.24) $ (2.62) $ (2.56)
Extraordinary item..................................... -- (0.23) --
--------- ---------- ---------
Loss per common share............................... $ (20.24) $ (2.85) $ (2.56)
========= ========== =========
Net loss................................................. $ (46,069) $ (121,955) $(181,906)
--------- ---------- ---------
Other comprehensive income (losses):
Foreign currency translation loss...................... -- -- (153)
Unrealized gains on securities......................... -- -- 89,704
--------- ---------- ---------
Other comprehensive income............................... -- -- 89,551
--------- ---------- ---------
Total comprehensive losses..................... $ (46,069) $ (121,955) $ (92,355)
========= ========== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 80

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
PREFERRED -------------------- PAID-IN ACCUMULATED COMPREHENSIVE
STOCK SHARES AMOUNT CAPITAL DEFICIT INCOME TOTAL
--------- ---------- ------- ---------- ----------- ------------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1997.............. $ -- 2,180,000 $ 2 $ 1,088 $ (5,145) $ -- $ (4,055)
Issuance of common stock for exercise of
options................................ -- 152,400 -- 148 -- -- 148
Issuance of common stock for cash........ -- 176,666 -- 360 -- -- 360
Warrants issued in connection with debt
offering (note 4)...................... -- -- -- 12,675 -- -- 12,675
Issuance of preferred stock in business
combination (note 6)................... 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 2,509,066 2 14,271 (51,474) -- (27,001)
Issuance of common stock for:
Exercise of options.................... -- 315,770 1 664 -- -- 665
Exercise of warrants................... -- 1,313,976 1 5 -- -- 6
Employee purchases..................... -- 143,094 -- 988 -- -- 988
Issuance of common stock in initial
public offering, net of expenses (note
7)..................................... -- 11,470,000 12 120,806 -- -- 120,818
Issuance of common stock to private
investor (note 7)...................... -- 8,987,754 9 99,990 -- -- 99,999
Issuance of Series D-1 preferred stock in
business combinations (notes 2 and
6)..................................... 26,726 -- -- -- -- -- 26,726
Accretion of redeemable preferred stock
to liquidation value................... -- -- -- -- (87) -- (87)
Issuance of common stock pursuant to
conversion of Series D-1 preferred
stock (note 6)......................... (36,926) 4,429,026 4 36,922 -- -- --
Issuance of common stock pursuant to
Conversion of Series A, B and C
redeemable preferred stock (note 6).... -- 37,123,334 37 97,269 -- -- 97,306
Issuance of common stock options in
business combinations (note 2)......... -- -- -- 1,937 -- -- 1,937
Stock option related compensation and
severance costs (note 7)............... -- -- -- 3,279 -- -- 3,279
Net loss................................. (121,955) (121,955)
-------- ---------- --- -------- --------- ------- --------
BALANCES AT DECEMBER 31, 1998............ $ -- 66,292,020 66 376,131 (173,516) -- 202,681
Issuance of common stock for:
Exercise of options.................... -- 2,404,210 2 10,601 -- -- 10,603
Exercise of warrants................... -- 1,657,437 2 914 -- -- 916
Employee purchases..................... -- 360,276 1 2,811 -- -- 2,812
Exercise of warrants issued pursuant to
a
non-cash exchange of notes........... -- 715,760 1 2,357 -- -- 2,358
Stock issued pursuant to the acquisition
of Best Internet Communications, Inc.
(note 2)............................... -- 6,289,692 6 50,314 -- -- 50,320
Issuance of common stock, options and
warrants in business combinations (note
2)..................................... -- 50,000 -- 17,612 -- -- 17,612
Issuance of convertible preferred stock,
net of issuance costs.................. 347,304 -- -- -- -- -- 347,304
Stock option related compensation and
severance costs (note 7)............... -- -- -- 1,740 -- -- 1,740
Other comprehensive income............... -- -- -- -- -- 89,551 89,551
Return on convertible preferred stock.... -- -- -- -- (10,868) -- (10,868)
Net loss................................. -- -- -- -- (181,906) -- (181,906)
-------- ---------- --- -------- --------- ------- ---------
BALANCES AT DECEMBER 31, 1999............ $347,304 77,769,395 $78 $462,480 $(366,290) $89,551 $ 533,123
======== ========== === ======== ========= ======= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 81

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (46,069) $(121,955) $(181,906)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization........................... 10,624 39,726 109,505
Minority interests' share of losses..................... (1,924) (482) --
Stock option related compensation and severance costs... -- 3,279 1,740
Other................................................... -- -- (377)
Equity in losses of affiliates.......................... 1,958 -- --
Extraordinary item -- loss related to debt repurchase... -- 10,101 --
Changes in operating assets and liabilities, excluding
effects of business combinations:
Receivables........................................... (1,561) (2,058) (12,895)
Prepaid expenses and other current assets............. (2,305) (1,283) (9,630)
Accounts payable...................................... (1,656) (1,766) 15,779
Accrued expenses...................................... 3,082 654 2,877
Accrued interest payable.............................. 844 9,674 (1,008)
Deferred revenue...................................... 1,684 (129) 6,336
--------- --------- ---------
Net cash used by operating activities.............. (35,323) (64,239) (69,579)
--------- --------- ---------
Cash flows from investing activities:
Acquisition of equipment and leasehold improvements....... (14,547) (23,058) (146,840)
Acquisition of net assets in business combinations and
investments in affiliates, net of cash acquired......... (64,023) (151,119) (321,572)
Change in restricted cash and securities.................. (40,554) 25,750 (5,343)
Purchase of securities available for sale, net............ (9,924) (134,039) (105,522)
Other..................................................... (1,206) (2,425) (12,389)
--------- --------- ---------
Net cash used by investing activities................... (130,254) (284,891) (591,666)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from lines of credit, notes payable and long-term
debt, net of issuance costs............................. 145,512 559,340 387,081
Repayments of lines of credit and notes payable........... (3,468) (57,885) (3,177)
Repayments of capital lease obligations................... (950) (4,039) (11,663)
Proceeds from issuance of common and preferred stock, net
of issuance costs....................................... 20,678 222,476 361,635
--------- --------- ---------
Net cash provided by financing activities............... 161,772 719,892 733,876
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents.... (3,805) 370,762 72,631
Cash and cash equivalents:
Beginning of year......................................... 66,467 62,662 433,424
--------- --------- ---------
End of year............................................... $ 62,662 $ 433,424 $ 506,055
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 10,982 $ 27,156 $ 83,019
========= ========= =========
Cash paid for return on convertible preferred stock....... $ -- $ -- $ 6,075
========= ========= =========
Supplemental disclosures of non-cash investing and financing
activities:
Equipment acquired through capital lease obligations...... $ 3,301 $ 11,027 $ 29,293
========= ========= =========
Acquisition of net assets in business combinations through
issuance of notes payable............................... $ 4,718 $ -- $ --
========= ========= =========
Acquisition of net assets in business combinations through
issuance of preferred stock, common stock and preferred
stock options........................................... $ 10,200 $ 28,663 $ 67,932
========= ========= =========
Warrants issued in connection with debt offering.......... $ 12,675 $ -- $ --
========= ========= =========
Other liabilities incurred for prepaid marketing expense
and acquisition of customers through AOL agreement...... $ -- $ -- $ 25,000
========= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 82

VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization and Basis of Presentation

Verio Inc. (Verio or the Company) was incorporated on March 1, 1996. Verio
commenced operations in April 1996 and had no activity other than the sale of
common stock to founders prior to April 1, 1996. Since then, Verio has rapidly
established a global presence by acquiring and growing Internet service
providers with a business customer focus. Verio is the world-wide leader in
hosting domain-based Web sites and is a leading provider of high speed
connectivity and enhanced services such as electronic commerce and virtual
private networks to small and medium sized businesses. Verio operates in one
business segment and has operations in the United States, Europe and Asia.
International operations were not significant in 1997, 1998, and approximated
10% of total revenue in 1999.

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 amounts of revenue and expenses during
the reporting period. Actual results could differ significantly from those
estimates.

(b) Cash and Cash Equivalents, Restricted Cash and Securities Available for
Sale

Verio 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, 1998 and 1999 are U.S. government, municipal and corporate debt
securities, money market accounts and commercial paper totaling $433.4 million
and $506.1 million respectively, with maturities ranging from thirty to ninety
days. Verio's securities available for sale consist of readily marketable debt
securities with remaining maturities of more than 90 days and less than 360 days
at time of purchase, commercial paper and equity securities. Verio has
classified a portion of its investment portfolio as available for sale
securities. Available for sale securities are stated at fair value with
unrealized gains and losses included in other comprehensive income. Realized
gains and losses are determined on a specific identification basis. Securities
available for sale consisted of the following as of December 31:

<TABLE>
<CAPTION>
FAIR VALUE
----------------- 1999
1998 1999 INTEREST RATES
------- ------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Commercial paper........................................ 68,627 149,958 --
Corporate notes and bonds............................... 9,794 47,600 6.125% to 9.500%
Medium term notes....................................... 56,944 52,821 6.125% to 9.500%
Equity securities....................................... -- 108,537 --
Other................................................... 8,598 53 --
------- -------
143,963 358,969
======= =======
</TABLE>

At December 31, 1998, the amortized cost of these securities approximated
market value. In 1999, unrealized gains were approximately $89.7 million,
primarily related to equity securities.

Restricted cash and securities include U.S. government securities which are
considered to be securities held to maturity and recorded at cost. At December
31, 1998 and 1999, 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. The cost of the 20-year capacity agreement with
Qwest Communications Corporation ("Qwest") will be depreciated using the

F-7
<PAGE> 83
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

straight line method over the life of the agreement. Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life of the
asset.

(d) Investments in Affiliates

Investments in affiliates generally represent newly issued preferred or
common shares of various affiliates. During the year ended December 31, 1997,
Verio recognized equity in losses of affiliates of $1,958,000. Such losses were
not significant for the years ended December 31, 1998 and 1999.

(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) Debt Issuance Costs

Debt issuance costs are amortized over the terms of the related debt.

(g) Long-Lived Assets

Verio evaluates the carrying value of its long-lived assets, including
goodwill, 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 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.

(h) Revenue Recognition

Revenue related to Internet and enhanced services is recognized as the
services are provided, and deferred and amortized to operations for amounts
billed relating to future periods. 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.

(i) Peering Relationships

Verio 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 the culmination of an earnings process.
Accordingly, these arrangements are not reflected in the operations of Verio.

(j) Income Taxes

Verio 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

F-8
<PAGE> 84
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
difference is expected to reverse.

(k) Stock-Based Compensation

Verio accounts for its stock-based 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).
Verio 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 subsequent to January 1, 1996.

(l) Loss Per Share

Loss per share ("EPS") is presented in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
128). Under SFAS 128, basic EPS excludes dilution for potential common stock and
is computed by dividing income or loss available to common stockholders 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.
Basic and diluted EPS are the same in 1997, 1998 and 1999, as all potential
common stock instruments, consisting of options, warrants and convertible
preferred stock, are antidilutive.

(m) Reclassifications

Certain prior year amounts have been reclassified for comparability with
the 1999 presentation.

F-9
<PAGE> 85
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2) BUSINESS COMBINATIONS, INVESTMENTS IN AFFILIATES AND ASSET ACQUISITIONS

During the year ended December 31, 1997, Verio completed 24 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 the
acquired businesses are included in Verio's consolidated statement of operations
from the dates of acquisition. Eighteen subsidiaries were acquired and newly
consolidated during 1997. In addition, Verio formed two new start-up
subsidiaries. Summary information regarding these acquisitions is as follows:

Consolidated acquisitions in 1997:

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

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

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

F-10
<PAGE> 86
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Unconsolidated investments in 1997:

<TABLE>
<CAPTION>
TOTAL OWNERSHIP
OWNERSHIP INTEREST AT APPROXIMATE
INTEREST DECEMBER 31, PURCHASE
BUSINESS NAME ACQUISITION DATE PURCHASE(A) 1997(A) PRICE(E)
- ------------- ---------------- ----------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Pacific Rim Network, Inc. .......... February 4, 1997 27% 27%(b) $ 150
Internet Engineering Associates,
Inc. ............................. March 4, 1997 20% 20%(b) 206
Internet Online, Inc. .............. March 5, 1997 35% 35%(b) 1,050
Structured Network Systems, Inc..... March 6, 1997 20% 20%(b) 150
National Knowledge Networks, Inc.... November 7, 1997 15% 41%(b) 599
Signet Partners, Inc. .............. November 20, 1997 16% 41%(b) 414
------
$2,569
Acquisition costs..................................................................... 253
------
$2,822
======
</TABLE>

F-11
<PAGE> 87
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the year ended December 31, 1998, Verio purchased additional
investments in 11 of its partially-owned affiliates and acquired 15 new internet
service providers for a combination of cash and Series D-1 Preferred Stock. All
acquisitions were accounted for using the purchase method of accounting. For
those businesses acquired and consolidated, the results of operations are
included in Verio's consolidated statement of operations from the dates of
acquisition. Summary information regarding the 1998 business combinations is as
follows:

Consolidated acquisitions in 1998:

<TABLE>
<CAPTION>
TOTAL OWNERSHIP
OWNERSHIP INTEREST AT APPROXIMATE
INTEREST DECEMBER 31, PURCHASE
BUSINESS NAME ACQUISITION DATE PURCHASED(A) 1998(A) PRICE(E)
- ------------- ---------------- ------------ --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Signet Partners, Inc. .............. January 30, 1998 14% -- --
February 26, 1998 45% 100% $ 1,925
Pacific Rim Network, Inc. .......... February 16, 1998 73% 100% 730
Clark Internet Services, Inc. ...... February 25, 1998 49% 100% 3,863
Internet Engineering Associates,
Inc............................... February 25, 1998 80% 100% 1,608
On-Ramp Technologies, Inc. ......... February 26, 1998 45% 100% 11,849
National Knowledge Networks, Inc.... February 27, 1998 59% 100% 2,092
Access One, Inc. ................... February 27, 1998 80% 100% 5,601
NSNet, Inc. ........................ February 27, 1998 100% 100% 3,661
NorthWestNet, Inc. ................. March 6, 1998 15% 100% 4,803
LI Net, Inc. ....................... April 9, 1998 100% 100% 6,500
STARnet, L.L.C. .................... April 14, 1998 100% 100% 3,500
Computing Engineers Inc. ........... April 15, 1998 100% 100% 9,000
Florida Internet Corporation........ April 15, 1998 100% 100% 2,200
Structured Network Systems, Inc. ... April 16, 1998 80% 100% 1,250
Compute Intensive Inc. ............. April 24, 1998 45% 100% 14,260
Matrix Online Media, Inc. .......... May 5, 1998 100% 100% 4,000
PacketWorks, Inc. .................. June 19, 1998 100% 100% 852
Internet Online, Inc. .............. June 30, 1998 65% 100% 4,200
NTX, Inc. (TABNet).................. July 7, 1998 100% 100% 45,800
MagicNet, Inc. ..................... July 23, 1998 100% 100% 3,300
Smart.Connect (a division of
FiberServices, Inc.).............. August 5, 1998 100% 100% 1,009
TerraNet............................ August 7, 1998 100% 100% 4,271
Internet Now, Inc. ................. August 20, 1998 100% 100% 998
WWW Service AG...................... October 21, 1998 80% 80% 8,430
Tinkleman Enterprises, Inc.
(NYNet)........................... December 3, 1998 100% 100% 7,000
QualNet, Inc. (Internet Access
Group, Inc. and Great Plains Net,
Inc.)............................. December 31, 1998 100% 100% 15,535
--------
168,237
Acquisition costs...................................................................... 6,255
--------
$174,492
========
</TABLE>

F-12
<PAGE> 88
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<S> <C>
Equipment................................................. $ 6,586
Goodwill.................................................. 171,499
Net current liabilities................................... (3,593)
--------
Total purchase price............................ $174,492
========
</TABLE>

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

(a) Represented 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) Represented ownership of preferred stock of affiliate or subsidiary.

(d) Represented acquisition of net assets.

(e) Purchase prices are comprised of cash, notes payable, the issuance of
shares of Series D-1 preferred stock, and the granting of an option to
purchase shares of Series D-1 preferred stock. The value of such shares,
which were converted to common stock of Verio in May 1998, as described in
note 6, was generally determined by Verio'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.

In January 1999, Verio completed the acquisition of all the outstanding
common stock of Best Internet Communications, Inc. (which does business as Hiway
Technologies, Inc. ("Hiway")) for total consideration of approximately $241.5
million, including $176.0 million in cash and approximately 9.8 million shares
of Verio common stock. In February 1999, Verio completed the acquisition of Web
Communications, LLC for approximately $8.0 million in cash. In July 1999, Verio
acquired all of the outstanding stock of Computer Services Group, Inc. (which
does business as digitalNATION) for $100.0 million in cash. In December 1999,
Verio purchased 31% of one of its start-up subsidiaries for 50,000 shares of
common stock bringing Verio's ownership to 100% and also purchased the remainder
of a subsidiary majority owned by Hiway for approximately $3.5 million in cash.
All acquisitions were accounted for using the purchase method of accounting. For
those businesses acquired and consolidated, the results of operations for the
acquired businesses are included in Verio's consolidated statement of operations
from the dates of acquisition. Summary information regarding the 1999 business
combinations is as follows:

Consolidated acquisitions in 1999:

<TABLE>
<CAPTION>
OWNERSHIP
INTEREST APPROXIMATE
BUSINESS NAME ACQUISITION DATE PURCHASED PURCHASE PRICE
- ------------- ---------------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Best Internet Communications, Inc. ........... January 5, 1999 100% $241,505
Web Communications, LLC....................... February 19, 1999 100% 8,000
Computer Services Group, Inc.
(digitalNATION)............................. July 13, 1999 100% 100,000
--------
$349,505
Acquisition costs........................................................... 5,276
--------
$354,781
========
</TABLE>

F-13
<PAGE> 89
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<S> <C>
Equipment................................................. $ 19,110
Goodwill.................................................. 349,944
Net current liabilities................................... (14,273)
--------
Total purchase price............................ $354,781
========
</TABLE>

The following presents the condensed unaudited pro forma results of
operations of Verio as though the above noted acquisitions had occurred at the
beginning of the respective period in which the acquisition occurred, as well as
at the beginning of the immediately preceding period:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1998 1999
----------- -----------
(IN THOUSANDS, EXCEPT FOR
PER SHARE DATA)
<S> <C> <C>
Revenue..................................................... $ 194,806 $ 263,697
Net loss.................................................... (149,091) (186,459)
Net loss attributable to common stockholders................ (149,178) (197,327)
Loss per common share -- basic and diluted.................. $ (3.04) $ (2.61)
</TABLE>

The pro forma results do not necessarily represent results that would have
occurred if the consolidated acquisitions had occurred at the beginning of the
respective periods nor are they necessarily indicative of the results of future
operations.

Investment in affiliates at December 31, 1999 consists primarily of the
Company's cost-based investment in VIANet.Works, Inc.

Effective March 4, 1999, Verio entered into an agreement with America
Online, Inc. ("AOL"). Under this three-year agreement, Verio will purchase
advertising promotions from AOL to promote Verio's Web hosting and related
business-focused commerce products and services on AOL's four key U.S. on-line
media properties. Verio's promotional rights with respect to Web hosting and
designated electronic commerce products and services are exclusive during this
period on these four specified sites. AOL has also conveyed its Prime Host and
CompuServe BusinessWeb hosting customers to Verio. Verio agreed to make
guaranteed payments totaling $42.5 million over the first two years of the
agreement, with AOL participating in future revenue under specified
circumstances defined in the agreement. The first payment of $17.5 million was
made in March 1999. The guaranteed payments to AOL have been allocated to
subscribers and prepaid advertising costs based on the estimated fair values of
the assets acquired, and are amortized over a three year period. At December 31,
1999, $25.0 million was due under the agreement and is included in current and
other long-term liabilities.

(3) EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- --------
<S> <C> <C>
Internet access and computer equipment...................... $66,408 $175,111
Fiber capacity.............................................. -- 65,477
Furniture, fixtures and computer software................... 5,823 9,062
Leasehold improvements...................................... 4,887 19,482
------- --------
$77,118 $269,132
======= ========
</TABLE>

F-14
<PAGE> 90
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total depreciation and amortization expense was $6.9 million, $19.5 million
and $41.8 million for the years ended December 31, 1997, 1998 and 1999,
respectively.

As of December 31, 1999, the Company had entered into a 20-year capacity
agreement with Qwest to acquire fiber capacity on Qwest's fiber optic network
for $65.5 million which is being depreciated using the straight-line method over
the life of the agreement.

(4) DEBT

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

<TABLE>
<CAPTION>
1998 1999
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
10 5/8% Senior Notes due 2009(a)............................ $ -- $ 400,000
11 1/4% Senior Notes due 2008(b)............................ 400,000 400,000
10 3/8% Senior Notes due 2005(c)............................ 175,000 175,000
13 1/2% Senior Notes due in 2004, net of unamortized
discount of $7,296 and 6,375 as of December 31, 1998 and
December 31, 1999, respectively(d)........................ 92,704 93,625
Unsecured notes payable bearing interest primarily at 7%,
due in 1998, 1999 and 2000................................ 1,418 945
Other....................................................... 2,384 1,976
-------- ----------
671,506 1,071,546
Less current portion........................................ (3,329) (945)
-------- ----------
Long-term debt, less current portion........................ $668,177 $1,070,601
======== ==========
</TABLE>

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

(a) On November 19, 1999, Verio completed the private placement of $400.0
million principal amount of senior notes (the "November 1999 Notes"). The
November 1999 Notes are redeemable at the option of Verio commencing
November 15, 2004. The November 1999 Notes mature on November 15, 2009.
Interest on the November 1999 Notes is payable semi-annually in arrears on
May 15 and November 15 of each year, commencing May 15, 2000. The November
1999 Notes are senior unsecured obligations of Verio ranking equally in
right of payment with all existing and future unsecured and senior
indebtedness.

(b) On November 25, 1998, Verio completed the private placement of $400.0
million principal amount of senior notes (the "November 1998 Notes"). The
November 1998 Notes are redeemable at the option of Verio commencing
December 1, 2003. The November 1998 Notes mature on December 1, 2008.
Interest on the November 1998 Notes is payable semi-annually in arrears on
June 1 and December 1 of each year, commencing June 1, 1999. The November
1998 Notes are senior unsecured obligations of Verio ranking equally in
right of payment with all existing and future unsecured and senior
indebtedness. The November 1998 Notes contain terms that are substantially
similar to the March 1998 Notes and the 1997 Notes.

(c) On March 25, 1998, Verio completed the private placement of $175.0 million
principal amount of senior notes (the "March 1998 Notes"). The March 1998
Notes are redeemable at the option of Verio commencing April 1, 2002. The
March 1998 Notes mature on April 1, 2005. Interest on the March 1998 Notes
is payable semi-annually in arrears on April 1 and October 1 of each year,
commencing October 1, 1998. The March 1998 Notes are senior unsecured
obligations of Verio ranking equally in right of payment with all existing
and future unsecured and senior indebtedness. The March 1998 Notes contain
terms that are substantially similar to the 1997 Notes. Verio used
approximately $54.5 million of the proceeds plus accrued interest to
repurchase $50.0 million principal amount of the 1997 Notes. As a result,
Verio was refunded approximately $13.3 million from the escrow account for
the 1997 Notes, of

F-15
<PAGE> 91
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

which approximately $1.9 million was used to pay accrued and unpaid
interest. This transaction resulted in an extraordinary loss of $10.1
million.

(d) In June 1997, Verio completed a debt offering of $150.0 million, 13 1/2%
Senior Notes due 2004 (the "1997 Notes") and warrants to purchase 4,224,960
shares of common stock at $.005 per share, expiring on June 15, 2004.
Interest on the 1997 Notes is payable semi-annually on June 15 and December
15 of each year. The value attributed to the warrants was recorded as debt
discount and is being amortized to interest expense using the interest
method over the term of the 1997 Notes. Upon closing, Verio 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 $13.1 million at December 31
1998. The 1997 Notes are redeemable on or after June 15, 2002 at 103% of
the face value, decreasing to face value at maturity.

If a change of control with respect to Verio occurs, Verio is required to
make an offer to purchase all the Notes then outstanding at a price equal to
101% of the respective principal amount of the Notes, plus accrued and unpaid
interest. In addition, the terms of the Notes restrict our ability to pay cash
dividends on Verio's stock.

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

<TABLE>
<S> <C>
2000..................................................... $ 945
2001..................................................... --
2002..................................................... 1,976
2003..................................................... --
2004..................................................... 100,000
Thereafter............................................... 968,625
----------
$1,071,546
==========
</TABLE>

Verio has an agreement with a group of commercial lending institutions to
provide an aggregate of up to $100.0 million pursuant to a three-year revolving
credit financing facility secured by substantially all of the stock of Verio's
subsidiaries and by an agreement with Qwest pursuant to which Verio may lease
fiber capacity from time to time. The credit financing facility expires on June
30, 2002 with interest at 2% above the LIBOR. There is a commitment fee of 1/2%
per annum on the undrawn amount of the credit facility. No borrowings are
outstanding under this facility as of December 31, 1999.

F-16
<PAGE> 92
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) LEASES, COMMITMENTS AND CONTINGENCIES

Verio 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 2009. Future minimum annual lease
payments under these leases as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
2000........................................... $ 17,334 $10,925
2001........................................... 13,364 9,959
2002........................................... 4,893 9,387
2003........................................... 38 6,426
2004........................................... -- 4,956
Thereafter..................................... -- 12,626
-------- -------
Total minimum payments............... 35,629 $54,279
=======
Less amount representing interest and taxes.... (4,102)
--------
Present value of net minimum lease
payments........................... 31,527
Less current portion........................... (15,447)
--------
$ 16,080
========
</TABLE>

Rent expense for the years ended December 31, 1997, 1998 and 1999 was $1.9
million, $4.0 million and $11.6 million, respectively.

Verio had an outstanding irrevocable letter of credit in the amount of $1.3
million as of December 31, 1999. This letter of credit is to collateralize a
Verio lease obligation to a third party. Restricted cash in the amount of
approximately $1.3 million secures the letter of credit.

The Company is subject to litigation and claims incidental to its business.
While it is not feasible to predict or determine the financial outcome of these
matters, management does not believe they should result in a materially adverse
effect on the Company's financial position, results of operations or liquidity.

(6) REDEEMABLE PREFERRED STOCK

Series A, B and C preferred shares were issued at $3, $6 and $8 per share
for total proceeds of $18,100,001, $60,170,004 and $20,000,000, respectively, in
1996 and 1997. The Series A, B, and C preferred shares were subject to mandatory
redemption and were convertible into common stock, initially on a one-for-one
basis. In December 1997, Verio also issued 680,000 shares of Series D-1
preferred stock at $15 per share in connection with an acquisition. The Series
D-1 preferred shares were not mandatorily redeemable. From January 1, 1998
through April 30, 1998, Verio issued 1,534,513 additional shares of Series D-1
preferred stock with values ranging from $15 to $22 per share in connection with
business combinations. In connection with Verio's initial public offering of
common stock discussed in note 7, all outstanding preferred shares were
converted to common stock in May 1998.

(7) STOCKHOLDERS' EQUITY

Common Stock Offerings and Stock Split

On May 15, 1998, Verio completed its initial public offering of common
stock. Verio issued 11.5 million shares for net proceeds, after offering costs,
of approximately $120.8 million.

F-17
<PAGE> 93
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Concurrent with the above offering, Verio also sold an additional 9.0
million shares to a strategic investor for total proceeds of approximately
$100.0 million.

A two-for-one stock split, which was effective on August 20, 1999 for
stockholders of record at the close of business on August 3, 1999, is reflected
in the accompanying financial statements for all periods presented.

Preferred Stock

In July 1999 Verio issued 7.2 million shares of its 6.75% Series A
Convertible Preferred Stock, with a liquidation preference of $50.00 per share,
for approximate net proceeds of $347.3 million. The shares of preferred stock
are convertible to shares of common stock at $48.2813 per share. The convertible
preferred stock may be redeemed, at the Company's option, at a redemption
premium of 102.0% of the liquidation preference, plus accumulated and unpaid
dividends on or after August 1, 2001, but prior to August 1, 2002, if the
trading price of Verio common stock equals or exceeds $72.4219 per share for a
specified period. In addition to the payments described above, holders will
receive a payment equal to the present value of the dividends that would
thereafter have been payable on the convertible preferred stock through and
including August 1, 2002. Except as described above, the Company may not redeem
the convertible preferred stock prior to August 1, 2002. Beginning on August 1,
2002, Verio may redeem the convertible preferred stock initially at a redemption
premium of 103.8571% of the liquidation preference and thereafter at prices
declining to 100.0% on and after August 1, 2006, plus, in each case, all
accumulated and unpaid dividends. Verio may effect any redemption, in whole or
in part, by delivering cash, shares of common stock or a combination thereof. At
the closing of this offering, the initial purchasers of the convertible
preferred stock deposited approximately $24.3 million into an account from which
four, equal quarterly cash payments will be made to the preferred stockholders
of record in the form of a return of capital, or which, at Verio's election, may
be used to purchase shares of Verio common stock for delivery to holders in lieu
of cash payments. The deposit account will expire on August 1, 2000 unless it is
earlier terminated and is reflected in restricted cash on the consolidated
balance sheet. Subsequent to August 1, 2000, dividends will accrue on a
cumulative basis at 6.75% per annum.

Stock-Based Compensation Plans

Verio has established incentive stock option plans (the Plans) whereby, at
the discretion of the Board of Directors (the Board), Verio may grant stock
options to employees of Verio and its controlled subsidiaries. As of December
31, 1999, Verio had reserved 18.4 million shares for issuance under the Plans.
Prior to Verio's initial public offering, the option price was determined by the
Board at the time the option was granted, with such price being not less than
the estimated fair value of Verio's common stock. Options granted subsequent to
the initial public offering are granted at fair value based on quoted prices for
Verio's common stock. As of December 31, 1999 options had been granted and
remained outstanding under the Plans entitling the holders to purchase
approximately 14.8 million shares of Verio's common stock, at exercise prices
ranging from $0.46 to $46.19 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. Certain options granted
prior to March 1998 may be exercised prior to their scheduled vesting date, but
are subject to a repurchase by Verio at the exercise price until the scheduled
vesting date. In addition, Verio has established an non-employee director stock
incentive plan (the "Director Plan"), under which non-employee directors are
granted stock options in order to incent them to serve the Company. As of
December 31, 1999, Verio has reserved 1.1 million shares for issuance under the
Director Plan. Options granted under the Director Plan are granted at fair value
based on quoted prices for Verio's common stock. As of December 31, 1999,
options had been granted and remained outstanding under the Director Plan
entitling the holders to purchase approximately 360,000 shares of Verio's common
stock.

F-18
<PAGE> 94
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes option activity for the years ended December
31, 1997, 1998 and 1999, including activity under all of the Plans and the
Director Plan:

<TABLE>
<CAPTION>
1997 1998 1999
-------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
year............... 1,415,400 $1.42 4,369,500 $2.77 13,202,698 $ 7.88
Granted.............. 3,495,100 3.27 11,501,128 9.23 8,307,312 24.26
Exercised............ (152,400) 0.98 (315,770) 2.10 (2,404,210) 4.45
Canceled............. (388,600) 3.05 (2,352,160) 6.03 (3,960,352) 13.95
--------- ---------- ----------
Outstanding at end of
year............... 4,369,500 $2.77 13,202,698 $7.88 15,145,448 $15.48
========= ========== ==========
Options exercisable
at year end........ 109,400 $2.84 1,215,692 $2.43 3,172,797 $ 6.81
</TABLE>

A summary of the range of exercise prices and the weighted-average
contractual life of outstanding stock options at December 31, 1999 is as
follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ----------------------------
WEIGHTED
AVERAGE
NUMBER WEIGHTED REMAINING WEIGHTED
OUTSTANDING AVERAGE CONTRACTUAL NUMBER AVERAGE
RANGE OF DECEMBER 31, EXERCISE LIFE EXERCISABLE EXERCISE
EXERCISE PRICES 1999 PRICE (YEARS) DECEMBER 31, 1999 PRICE
- --------------- ------------ -------- ----------- ----------------- --------
<S> <C> <C> <C> <C> <C>
$ 0.46-$ 4.25.................. 2,163,242 $ 2.55 7.5 1,237,549 $ 2.35
6.38- 9.50.................. 3,052,072 $ 7.37 6.5 796,412 $ 7.33
10.25- 14.57.................. 4,877,017 $11.29 6.7 1,114,004 $11.10
15.03- 29.75.................. 3,009,144 $26.02 7.5 22,830 $18.06
31.81- 46.19.................. 2,043,973 $35.79 7.5 2,002 $33.93
---------- ---------
$ 0.46-$46.19.................. 15,145,448 $15.48 7.0 3,172,797 $ 6.81
========== =========
</TABLE>

During the years ended December 31, 1997, 1998 and 1999, the per share
weighted-average fair value of stock options granted was $0.54, $5.77 and
$14.82, respectively, on the dates of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions: no
dividends, volatility of 0% in 1997, 95% in 1998 and 91% in 1999, risk-free
interest rate of 6.0% in 1997 and 1998, and 6.46% in 1999, and an expected life
of three years. If Verio had recorded compensation expense for the years ended
December 31, 1997, 1998 and 1999, based on the fair value of the options at the
grant date under SFAS No. 123, net loss attributable to common stockholders
would increase to $46.7 million, $137.2 million and $238.8 million,
respectively, and basic and diluted net loss per common share would increase to
$20.39, $3.21 and $3.17, respectively.

Since inception, Verio has generally granted stock options with exercise
prices equal to the fair value of the underlying common stock, as determined by
Verio's Board of Directors and based on Verio's other equity transactions prior
to the initial public offering, and quoted prices of Verio's common stock
thereafter. Accordingly, Verio had not recorded compensation expense related to
the granting of stock options in 1997 and through February 28, 1998. Subsequent
to February 28, 1998, Verio granted options to employees with exercise prices
less than Verio's estimated price per share in the initial public offering.
Accordingly, Verio is recognizing compensation expense totaling approximately
$7.2 million, as adjusted for forfeitures, pro rata over the forty-eight month
vesting period of the options. This compensation expense totaled approximately

F-19
<PAGE> 95
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$1.9 million and $1.7 million for the years ended December 31, 1998 and 1999,
respectively, and is recorded in general and administrative and other expenses
in the consolidated statements of operations and comprehensive losses. In
addition, Verio incurred $1.4 million in compensation expense during the year
ended December 31, 1998 related to accelerated vesting of options.

(8) INCOME TAXES

Income tax benefit for the years ended December 31 differs from the amounts
that would result from applying the federal statutory rate of 35% as follows (in
thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Expected tax benefit................................. $(16,124) $(42,684) $(63,667)
State income taxes, net of federal benefit........... (1,612) (4,268) (4,730)
Nondeductible goodwill amortization.................. 845 5,532 14,415
Change in valuation allowance for deferred tax
assets, exclusive of effect of acquired net
operating losses................................... 16,741 39,185 57,600
Nondeductible portion of loss related to debt
repurchase......................................... -- 1,415 --
Other, net........................................... 150 820 (3,618)
-------- -------- --------
Actual income tax benefit............................ $ -- $ -- $ --
======== ======== ========
</TABLE>

Temporary differences that give rise to significant components of deferred
tax assets as of December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- ---------
<S> <C> <C>
Net operating loss carryforwards, including acquisitions.... $ 51,263 $ 102,462
Receivables, due to allowance for doubtful accounts for tax
purposes only............................................. 789 2,627
Difference in amortization period for deductible goodwill... 1,154 2,438
Equipment and leasehold improvements due to differences in
depreciation.............................................. 2,775 5,942
Compensation expense related to stock options for financial
statement purposes only................................... 1,493 2,185
Other, net.................................................. 729 149
-------- ---------
Gross deferred tax asset............................... 58,203 115,803
Valuation allowance......................................... (58,203) (115,803)
-------- ---------
Net deferred tax asset............................ $ -- $ --
======== =========
</TABLE>

At December 31, 1999, Verio has a net operating loss carryforward for
federal income tax purposes of approximately $262.7 million, which is available
to offset future federal taxable income, if any, through 2019. As a result of
various equity transactions during 1996, 1997, 1998 and 1999, management
believes Verio 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 realization of the net operating loss
carryforward, no tax benefit for losses has been recorded by Verio and a
valuation allowance has been recorded for the entire amount of Verio's deferred
tax asset.

F-20
<PAGE> 96
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

Financial instruments that potentially subject Verio to concentrations of
credit risk consist primarily of cash, cash equivalents and accounts receivable.
As of December 31, 1998 and 1999, Verio had no significant concentrations of
credit risk. Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising Verio's customer base
and the relatively minor balances of each individual account. At December 31,
1998 and 1999, the fair values of Verio's financial instruments approximate
their carrying values, based on their terms and interest rates and quoted market
prices.

(10) EMPLOYEE BENEFIT PLAN

Verio has a 401(k) Plan (the Plan) for all full time employees. Verio may
make discretionary contributions to the Plan on behalf of employees who meet
certain contribution eligibility requirements defined under the terms of the
Plan. Verio did not make any contributions to the Plan during 1997, 1998 or
1999.

(11) QUARTERLY FINANCIAL DATA (UNAUDITED)

Summary quarterly financial information for Verio is as follows. (in
thousands except per share data):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------
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 attributable to
common stockholders....... (4,677) (9,274) (13,250) (19,128) (46,329)
Loss per common share --
basic and diluted......... (2.15) (4.16) (5.63) (8.32) (20.24)
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------
1998 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
- ---- -------- -------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue..................... $ 21,198 $ 28,541 $ 33,804 $ 37,110 $ 120,653
Loss from operations........ (14,718) (21,327) (29,140) (25,833) (91,018)
Loss before extraordinary
item...................... (18,217) (26,294) (33,606) (33,737) (111,854)
Net loss attributable to
common stockholders....... (28,383) (26,316) (33,606) (33,737) (122,042)
Loss per common share before
extraordinary
item -- basic and
diluted................... (7.23) (0.72) (0.52) (0.51) (2.62)
Loss per common share --
basic and diluted......... (11.22) (0.72) (0.52) (0.51) (2.85)
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------
1999 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
- ---- -------- -------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue..................... $ 55,124 $ 61,936 $ 68,326 $ 72,950 $ 258,336
Loss from operations........ (29,532) (29,071) (26,726) (32,738) (118,067)
Loss before extraordinary
item...................... (45,112) (45,693) (41,939) (49,162) (181,906)
Net loss attributable to
common stockholders....... (45,112) (45,693) (46,732) (55,237) (192,774)
Loss per common share --
basic and diluted......... (0.62) (0.61) (0.61) (0.71) (2.56)
</TABLE>

F-21
<PAGE> 97

(This page intentionally left blank)
<PAGE> 98

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

Under date of March 9, 2000, we reported on the consolidated balance sheets
of Verio Inc. and subsidiaries as of December 31, 1998 and 1999, and the related
consolidated statements of operations and comprehensive loss, stockholders'
equity (deficit), and cash flows for each of the years in the three-year period
ended December 31, 1999, which are included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement Schedule II -- Valuation and Qualifying
Accounts. This consolidated financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.

In our opinion, such consolidated 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.

/s/ KPMG LLP

Denver, Colorado
March 9, 2000

S-1
<PAGE> 99

SCHEDULE II
VERIO INC.

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO ADDITIONS
BEGINNING OF COSTS FROM BALANCE AT
DESCRIPTION YEAR AND EXPENSES ACQUISITIONS DEDUCTIONS END OF YEAR
- ----------- ------------ ------------ ------------ ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful
accounts...................... $ 117 $ 948 $ 623 $ (455) $1,233
Year ended December 31, 1998:
Allowance for doubtful
accounts...................... $1,233 $3,204 $1,586 $(1,260) $4,763
Year ended December 31, 1999:
Allowance for doubtful
accounts...................... $4,763 $9,572 $2,154 $(7,795) $8,694
</TABLE>

See accompanying independent auditors' report.

S-2
<PAGE> 100
sf-682333

THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF VERIO INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 2000

The undersigned stockholder of VERIO INC., a Delaware corporation
("Verio"), hereby (1) acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement, each dated March 31, 2000, and the Annual
Report to Stockholders for the year 1999, and (2) appoints Justin L. Jaschke,
Carla Hamre Donelson and Peter B. Fritzinger, or any one of them, proxies, with
full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 2000 Annual Meeting of
Stockholders of Verio to be held on April 27, 2000 at 1:00 p.m., Mountain
Daylight Time, at the Inverness Hotel & Golf Club, 200 Inverness Drive West,
Englewood, Colorado 80112, and at any adjournment or adjournments thereof, and
to vote all shares of common stock of Verio which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
below.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED BELOW, FOR THE
TWO RESPECTIVE AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION OF VERIO,
FOR THE APPROVAL AND RATIFICATION OF AMENDMENTS TO THE 1998 STOCK INCENTIVE
PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT
AUDITORS OF VERIO, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.

<PAGE> 101
<TABLE>
<S> <C>
-----------------------------------------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
COMPANY #
CONTROL #
-----------------------------------------------------
</TABLE>

Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.

VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326

- Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.

- You will be prompted to enter your 3-digit Company Number and your
7-digit Control Number which is located above to obtain your records and
create an electronic ballot.

VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/VRIO/

- Use the Internet to vote your proxy 24 hours a day, 7 days a week.

- You will be prompted to enter your 3-digit Company Number and your
7-digit Control Number which is located above to obtain your records and
create an electronic ballot.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-prepaid
envelope we have provided.

IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD

THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR ITEMS 1, 2, 3, 4 AND 5.

1. ELECTION OF DIRECTORS:

<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as indicated) nominees listed below
</TABLE>

IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE THROUGH
SUCH NOMINEE'S NAME LISTED BELOW.

STEVEN C. HALSTEDT
JAMES C. ALLEN

2. PROPOSAL TO APPROVE AN AMENDMENT TO VERIO'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR
ISSUANCE FROM 125,000,000 TO 750,000,000:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. PROPOSAL TO APPROVE AN AMENDMENT TO VERIO'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF SHARES OF PREFERRED STOCK AUTHORIZED FOR
ISSUANCE FROM 12,500,000 TO 20,000,000:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. PROPOSAL TO APPROVE AND RATIFY AMENDMENTS TO VERIO'S 1998 STOCK
INCENTIVE PLAN:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

5. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT
AUDITORS OF VERIO FOR FISCAL YEAR 2000:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

I PLAN TO ATTEND THE MEETING [ ] YES [ ] NO

DATED: , 2000
--------------------

--------------------------------------
(Signature)

This Proxy should be marked, dated and
signed by the stockholder(s) exactly
as his or her name appears hereon,
and returned promptly in the enclosed
envelope. When signing as executor,
administrator, attorney, trustee or
guardian, please give your full title
as such. If a corporation, please sign
in full corporate name by president or
other authorized person. If a
partnership, please sign in full
partnership name by authorized person.
If shares are held by joint tenants or
as community property, both should
sign.

[FOLD AND DETACH HERE]