BROADCAST COM INC, S-1/A, 1998-06-25

BROADCAST COM INC
S-1/A, 1998-06-25
COMMUNICATIONS SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1998

REGISTRATION NO. 333-52877
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
broadcast.com inc.

(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 7375 75-2600532
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
TODD R. WAGNER
CHIEF EXECUTIVE OFFICER
BROADCAST.COM INC.
2914 TAYLOR STREET 2914 TAYLOR STREET
DALLAS, TEXAS 75226 DALLAS, TEXAS 75226
(214) 748-6660 (214) 748-6660
(Address, including zip code, and telephone (Name, address, including zip code, and
number, telephone number,
including area code, of registrant's principal including area code, of agent for service)
executive offices)
</TABLE>

---------------------
Copies to:

<TABLE>
<S> <C>
SEAN P. GRIFFITHS, ESQ. NEIL WOLFF, ESQ.
GIBSON, DUNN & CRUTCHER LLP WILSON SONSINI GOODRICH & ROSATI
200 PARK AVENUE PROFESSIONAL CORPORATION
NEW YORK, NEW YORK 10166 650 PAGE MILL RD
(212) 351-4000 PALO ALTO, CA 94304-1050
(650) 493-9300
</TABLE>

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]

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

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

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

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
===================================================================================================================
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
OF SECURITIES REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE(1) FEE(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value...................... 2,875,000 $13.00 $37,375,000 $701
===================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) under the Securities Act of 1933.

(2) A registration fee of $10,325 has already been paid in connection with the
initial filing of the Registration Statement.

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

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

PROSPECTUS (Subject to Completion)

Issued June 25, 1998

2,500,000 Shares

[broadcast.com LOGO]
(formerly AudioNet, Inc.)

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

ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF
THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE
WILL BE BETWEEN $11 AND $13 PER SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION OF
THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
THE SHARES OF COMMON STOCK OFFERED HEREBY HAVE BEEN APPROVED FOR QUOTATION ON
THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL "BCST" SUBJECT TO OFFICIAL NOTICE OF
ISSUANCE.

------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5 HEREOF.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

PRICE $ A SHARE
------------------------

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

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

(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."

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

(3) The Company and the Selling Stockholder have granted the Underwriters an
option, exercisable within 30 days of the date hereof, to purchase up to
an aggregate of 375,000 additional Shares at the price to public less
underwriting discounts and commissions for the purpose of covering
over-allotments, if any. If the Underwriters exercise such option in
full, the total price to public, underwriting discounts and commissions,
proceeds to Company and proceeds to Selling Stockholder will be
$ , $ , $ and $ , respectively. See
"Underwriters."

------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the
Underwriters. It is expected that delivery of the Shares will be made on or
about , 1998, at the office of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately available
funds.
------------------------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

HAMBRECHT & QUIST

, 1998

<PAGE> 3

[Artwork]

[Description of Artwork: Panel #1 includes down the left margin a broadcast.com
Channel Guide. The remainder of the page includes screen shots of 15 Web pages
highlighting broadcast.com content.]

[Panel #1 copy:]

WELCOME TO broadcast.com, THE LEADING AGGREGATOR AND BROADCASTER OF
STREAMING MEDIA PROGRAMMING ON THE WEB. The Company delivers hundreds of live
and on-demand audio and video programs to hundreds of thousands of users.

(1) LARGE AGGREGATION OF STREAMING MEDIA CONTENT

The broadcast.com Web sites offer a large and comprehensive selection of
audio and video programming.

LIVE RADIO

WBAL page

Police Scanner page

WSIX page

- 345+ radio stations and networks

LIVE TV

WFAA page

Court TV page

NetShow Player (Video)

- 17 television stations and cable networks

SPORTS

PGA page

Florida Seminoles page

NHL page

SuperBowl page

RealPlayer (RealVideo)

- Game broadcasts of 350+ college and professional sports teams

MUSIC & CD JUKEBOX

Willie Nelson page

Blockbuster Rockfest page

RealPlayer (RealAudio)

- 2,100+ full-length music CDs

NEWS

CNN page

BBC page

- News and information broadcasts

broadcast.com FIRSTS:

- First live commercial radio station

- First live sporting event

- First live corporate quarterly earnings call

- First live stockholders meeting

[Description of Artwork: Panel #2 includes down the right margin the logos of 15
of the Company's business services customers. The remainder of the page includes
screen shots of nine Web pages highlighting business services broadcasts.]

[Panel #2 copy:]

(2) LEADING PROVIDER OF INTERNET BUSINESS SERVICES BROADCASTS

Broadcast.com provides cost-effective Internet and intranet broadcasting
services to businesses and other organizations, including turnkey production of
live and archived press conferences, earnings conference calls,

<PAGE> 4

investor conferences, trade shows, stockholder meetings, product introductions,
training sessions, distance learning telecourses and media events.

SCREEN SHOTS:

HARVARD CONFERENCE ON INTERNET & SOCIETY

RealPlayer (RealVideo)

A 113TH AT&T ANNUAL SHAREHOLDERS MEETING

B SYBASE ADAPTIVE SERVER LAUNCH WEBCAST

C COMERICA BANK ECONOMIC FORUM

D MICROSOFT DIRECT ACCESS SEMINARS

E AMERICA ONLINE EARNINGS CALL

F BREAKFAST WITH DELL TECHNOLOGY BRIEFS

G BELL & HOWELL'S 1998 ANNUAL SHAREHOLDERS
MEETING

LOGOS

SELECTED BUSINESS SERVICES CUSTOMERS

AOL

AT&T

Bell & Howell

Comerica

Dell

ElOnline

Charles Schwab

Genzyme

Microsoft

Motorola

PR Newswire

Sybase

Texaco

Texas Instruments

Yahoo!

[Artwork in Panel #3: Panel #3 includes screen shots of Web pages highlighting
the Company's differentiated, interactive, multimedia advertising as well as a
map of the United States with dots representing the Company's radio station and
network and television station and cable network broadcast partners.]

[Panel #3 copy]

(3) DIFFERENTIATED, INTERACTIVE, MULTIMEDIA ADVERTISING

Unlike Web sites that offer only text-based banner ads, broadcast.com
offers multimedia packages incorporating custom audio and video applications
such as gateway ads with guaranteed click-thrus, channel and event sponsorships
and multimedia and traditional banner ads.

TITLE: AUDIO AND VIDEO GATEWAY ADS WITH GUARANTEED CLICK-THRUS

Image: KXL News/Talk radio station, IBM gateway ad

TITLE: CHANNEL AND EVENT SPONSORSHIPS

Image: Kentucky Wildcats Men's Bball page with CBS Sportsline logo

TITLE: MULTIMEDIA AND TRADITIONAL BANNER ADS

Images:

Nextcard Visa 125X125 button

Quick & Reilly 468X60 banner

Dell 120X60 button

<PAGE> 5

TRADITIONAL MEDIA ADVERTISING

Using commercial spots the Company receives from its radio and television
station providers, the Company provides advertisers with the opportunity to
bundle Web and traditional media advertising.

OVER 360 RADIO AND TV AFFILIATES

[Panel #4 Artwork: Panel #4 includes a graphic representing how the Company
receives, manages and broadcasts content. Panel #4 also includes a graphic
illustrating its branded distribution and certain strategic relationships.]

[Panel #4 Copy:]

(4) LEADING INTERNET BROADCAST NETWORK INFRASTRUCTURE

CONTENT IN

Private frame relay and T-1 Aggregation Network

[icons]:

Satellite feed

Video feed

Audio feed

Analog

Digital

CONTENT RECEIVED, MONITORED AND ENCODED FOR DELIVERY

broadcast.com

- 22 satellite receiving dishes

- 24 X 7 Broadcast Center

- 580 multimedia streaming servers support 500 simultaneous live events

MULTICAST

Building the first large-scale commercial multicast network which
provides the Company access to over 400,000 dial-up multicast ports

UNICAST

Multiple 45 Mbps and 155Mbps connections

UUNet

Sprint

MCI

GTEI

CONTENT OUT

- Daily average of 400,000+ unique users

- broadcast.com principal Web site ranked in top 20 among all
News/Information/Entertainment sites (source: Media Metrix)

(5) BRANDED DISTRIBUTION

Broadcast.com drives traffic to its sites and enhances brand awareness
through strategic relationships with key Internet companies. The Company has
established increased visibility among Internet users through its relationships
with Yahoo!, RealNetworks, and Microsoft, among others.

<PAGE> 6

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

2
<PAGE> 7

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.

THE COMPANY

Broadcast.com inc. (formerly AudioNet, Inc.) is the leading aggregator and
broadcaster of streaming media programming on the Web with the network
infrastructure and expertise to deliver or "stream" hundreds of live and
on-demand audio and video programs over the Internet to hundreds of thousands of
users. The Company's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming, including sports, talk and music
radio, television, business events, full-length CDs, news, commentary and
full-length audio-books. The Company broadcasts on the Internet 24 hours a day
seven days a week, and its programming includes more than 345 radio stations and
networks, 17 television stations and cable networks and game broadcasts and
other programming for over 350 college and professional sports teams. The
Company licenses such programming from content providers, in most cases under
exclusive, multi-year agreements. The Company's Business Services Group provides
cost-effective Internet and intranet broadcasting services to businesses and
other organizations. These business services include the turnkey production of
press conferences, earnings conference calls, investor conferences, trade shows,
stockholder meetings, product introductions, training sessions, distance
learning telecourses and media events. In addition to its business services, the
Company derives revenues from the sale of advertising on its Web sites,
including gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads, as well as the sale of
radio and television ad spots the Company receives from stations in exchange for
broadcasting their programming over the Internet. In March 1998, the Company's
Web sites served a daily average of over 400,000 unique users and its principal
Web site was ranked in the top 20 among all News/Information/Entertainment sites
according to Media Metrix.

THE OFFERING

Common Stock offered................ 2,500,000 shares

Common Stock to be outstanding after
the offering........................ 16,883,451 shares(1)

Use of proceeds..................... For general corporate purposes,
including capital expenditures, working
capital and strategic acquisitions. See
"Use of Proceeds."

Nasdaq National Market symbol....... BCST

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

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED THREE MONTHS ENDED
(MAY 19, 1995) DECEMBER 31, MARCH 31,
TO DECEMBER 31, ----------------- ---------------------
1995 1996 1997 1997 1998
--------------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues........................................ $ -- $ 1,756 $ 6,856 $ 1,087 $ 3,176
Cost of revenues (excluding depreciation and
amortization)................................. -- 1,301 2,950 469 1,225
Total operating expenses........................ 268 3,520 10,593 1,742 4,948
Net operating loss.............................. (268) (3,065) (6,687) (1,124) (2,997)
Net loss........................................ (268) (2,989) (6,474) (1,063) (2,722)
Basic and diluted net loss per share(2)......... $ (.04) $ (.31) $ (.55) $ (.09) $ (.19)
Shares used in the net loss per share
calculations(2)............................... 6,020 9,569 11,680 11,428 14,076
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
AS
ACTUAL ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $22,400 $49,300
Total assets................................................ 30,134 57,034
Total stockholders' equity.................................. 28,306 55,206
</TABLE>

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

(1) Based on the number of shares outstanding as of March 31, 1998. Excludes (i)
2,004,352 shares of Common Stock issuable upon the exercise of options then
outstanding, with a weighted average exercise price of $5.58 per share, (ii)
1,145,460 shares available for future issuance under the Company's stock
plans as of March 31, 1998, (iii) an additional 1,000,000 shares of Common
Stock reserved for issuance under the Company's 1998 Stock Option Plan,
pursuant to an amendment approved in June 1998, and (iv) 250,000 shares of
Common Stock reserved for issuance under the Company's Employee Stock
Purchase Plan approved in June 1998. Also excludes (i) 218,096 shares of
Common Stock subject to outstanding warrants and (ii) additional warrants to
purchase 104,220 shares of Common Stock which will expire upon the
consummation of this offering. See "Capitalization," "Management--Director
Compensation," "--Employee Benefit Plans" and Note 6 of Notes to Financial
Statements.

(2) See Note 8 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in per share calculations.

(3) As adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $12.00
per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company. See "Use
of Proceeds" and "Capitalization."

3
<PAGE> 8

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

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

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
The Company........................... 18
Use of Proceeds....................... 20
Dividend Policy....................... 20
Capitalization........................ 21
Dilution.............................. 22
Selected Financial Data............... 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business.............................. 32
Management............................ 48
Certain Transactions.................. 56
Principal and Selling Stockholders.... 58
Description of Capital Stock.......... 59
Shares Eligible for Future Sale....... 62
Underwriters.......................... 64
Legal Matters......................... 66
Experts............................... 66
Available Information................. 66
Index to Financial Statements......... F-1
</TABLE>

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

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

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

broadcast.com, AudioNet and the broadcast.com logo are trademarks or
registered trademarks of the Company. This Prospectus also includes trademarks
of companies other than the Company.

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

Unless the context otherwise requires, the terms "broadcast.com" and the
"Company" refer to broadcast.com inc., a Delaware corporation. Except as
otherwise noted herein, information in this Prospectus assumes (i) no exercise
of the Underwriters' over-allotment option and (ii) the sixty-for-one split of
the Company's Common Stock effected in the form of a stock dividend in April
1997.

4
<PAGE> 9

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully before purchasing the
shares of Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth below.

Limited Operating History; History of Losses and Anticipation of Future
Losses. The Company commenced broadcasting live audio programming on the Web in
September 1995 and live video programming in March 1997. The Company first
recognized business services revenues and Web advertising revenues in January
1996 and traditional media advertising revenues in January 1997 and has recorded
a net loss for each year since its inception. As of March 31, 1998, the Company
had an accumulated deficit of $12.5 million. Accordingly, the Company has a
limited operating history on which to base an evaluation of its business and
prospects. The Company and its prospects must be considered in light of the
risks, difficulties and uncertainties frequently encountered by companies in an
early stage of development, particularly companies in new and rapidly evolving
markets such as the market for Internet content, business services and
advertising. To achieve and sustain profitability, the Company believes it must,
among other things, (i) provide compelling and unique content to Internet users,
(ii) successfully market and sell its business services, (iii) effectively
develop new and maintain existing relationships with advertisers, content
providers, business customers and advertising agencies, (iv) continue to develop
and upgrade its technology and network infrastructure, (v) respond to
competitive developments, (vi) successfully introduce enhancements to its
existing products and services to address new technologies and standards, (vii)
effectively sell its inventory of radio and television ad spots and (viii)
attract, retain and motivate qualified personnel. The Company's operating
results are also dependent on factors outside the control of the Company, such
as the availability of compelling content and the development of broadband
networks that support multimedia streaming. There can be no assurance that the
Company will be successful in addressing these risks, and failure to do so could
have a material adverse effect on the Company's business, results of operations
and financial condition. Additionally, the limited operating history of the
Company makes the prediction of future operating results difficult or
impossible, and there can be no assurance that the Company's revenues will
increase or even continue at their current level, or that the Company will
achieve or maintain profitability or generate sufficient cash from operations in
future periods. The Company expects to continue to incur significant losses on a
quarterly and annual basis for the foreseeable future. For these and other
reasons, there can be no assurance that the Company will ever achieve
profitability or, if profitability is achieved, that it can be sustained. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Unpredictability of Future Revenues; Potential Fluctuations in Quarterly
Operating Results. Because of the Company's limited operating history and the
emerging nature of the markets in which it competes, the Company is unable to
forecast accurately its revenues. The market for the Company's business services
and the long-term acceptance of Web-based advertising are uncertain. The Company
currently intends to increase substantially its operating expenses in order to,
among other things, (i) expand its distribution network capacity, (ii) fund
increased sales and marketing activities, (iii) acquire additional content, (iv)
develop and upgrade technology and (v) purchase equipment for its operations.
The Company's expense levels are based, in part, on its expectations with regard
to future revenues, and to a large extent such expenses are fixed, particularly
in the short term. To the extent the Company is unsuccessful in increasing its
revenues, the Company may be unable to appropriately adjust spending in a timely
manner to compensate for any unexpected revenue shortfall or will have to reduce
its operating expenses, causing it to forego potential revenue generating
activities, either of which could cause a material adverse effect in the
Company's business, results of operations and financial condition.

The Company's quarterly operating results may fluctuate significantly in
the future as a result of a variety of factors, many of which are outside the
Company's control. Factors that may affect the Company's quarterly operating
results include (i) the cost of acquiring and the availability of content, (ii)
the demand for the Company's business services, (iii) demand for Internet
advertising, (iv) seasonal trends in Internet and advertising placements, (v)
the advertising cycles for, or the addition or loss of, individual advertisers,
(vi) the
5
<PAGE> 10

level of traffic on the Company's Web sites, (vii) the amount and timing of
capital expenditures and other costs relating to the expansion of the Company's
operations, (viii) price competition or pricing changes in Internet broadcasting
services, such as the Company's business services, and in Internet advertising,
(ix) the seasonality of the content of the Company's broadcasts, such as
sporting and other events, (x) the level of and seasonal trends in the use of
the Internet, (xi) technical difficulties or system downtime, (xii) the cost to
acquire sufficient bandwidth or to integrate efficient broadcast technologies,
such as multicasting, to meet the Company's needs, (xiii) the mix of unicasting
and multicasting from the Company's Web sites (see "--Scalability of Number of
Users"), (xiv) the introduction of new products or services by the Company or
its competitors and (xv) general economic conditions and economic conditions
specific to the Internet, such as electronic commerce and online media. Any one
of these factors could cause the Company's revenues and operating results to
vary significantly in the future. In addition, as a strategic response to
changes in the competitive environment, the Company may from time to time make
certain pricing, service or marketing decisions or acquisitions that could cause
significant declines in the Company's quarterly operating results.

The Company expects that its revenues will be higher leading up to and
during major United States sport seasons for sports that the Company broadcasts,
such as the NHL and college football, and lower at other times of the year. The
Company believes that advertising sales in traditional media, such as
television, generally are lower in the first and third calendar quarters of each
year, and that advertising expenditures fluctuate significantly with economic
cycles. Depending on the extent to which the Internet is accepted as an
advertising medium, seasonality and cyclicality in the level of Internet
advertising expenditures could become more pronounced than it is currently. As a
result, the Company believes that its revenues from Web and traditional media
advertising sales have been affected by these cyclical factors and the Company
expects its Web and traditional media advertising sales generally to follow the
quarterly trends of traditional media advertising. The foregoing factors could
have a material adverse effect on the Company's business, results of operations
and financial condition.

Due to all of the foregoing factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Furthermore, it is possible that the Company's operating results in one or more
quarters will fail to meet the expectations of securities analysts or investors.
In such event, the price of the Common Stock could be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Dependence on Content Providers; License Fees Payable to Content
Providers. The Company's future success depends in large part upon its ability
to aggregate and deliver compelling content over the Internet. The Company
typically does not create its own content. Rather, the Company relies on third
party content providers, such as radio and television stations and cable
networks, businesses and other organizations, universities and record labels for
compelling and entertaining content. The Company's ability to maintain its
existing relationships with such content providers and to build new
relationships with additional content providers is critical to the success of
its business. Although many of the Company's agreements with third party content
providers are for initial terms of more than two years, the content providers
may choose not to renew such agreements or may terminate such agreements prior
to the expiration of their terms if the Company fails to fulfill its contractual
obligations. The Company's inability to secure licenses from content providers
or performance rights societies or the termination of a significant number of
content provider agreements would decrease the availability of content that the
Company can offer users. This may result in decreased traffic on the Company's
Web sites and, as a result, decreased advertising revenue, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.

The Company's agreements with certain of its content providers are
nonexclusive, and many of the Company's competitors offer, or could offer,
content that is similar to or the same as that obtained by the Company from such
nonexclusive content providers. Such direct competition could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "--Competition."

License fees payable to content providers and performance rights societies
and other licensing agencies may increase as the Company continues to aggregate
content and as competition for such content increases.

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There can be no assurance that the Company's content providers, performance
rights societies and other licensing agencies will enter into prospective
agreements with the Company on the same or similar terms as those currently in
effect or on terms acceptable to the Company if no agreement is in effect. If
the Company is required to pay increased licensing fees, such increased payments
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "--Government Regulation and Legal
Uncertainty."

Uncertain Acceptance of the Company's Business Services. The Company's
ability to establish and maintain a leadership position in Internet and intranet
broadcasting for businesses and in the distribution of other live and on-demand
events will depend on, among other things, (i) the Company's success in
providing quality programming at low and high bit rates over the Internet, (ii)
the Company's marketing and sales efforts, (iii) market acceptance of the
Company's current and future service offerings, (iv) the reliability of the
Company's networks and services and (v) the extent to which end users are able
to receive the Company's broadcasts at adequate bit rates to provide for high
quality services, none of which can be assured. The Company operates in a market
that is at a very early stage of development, is rapidly evolving and is
characterized by an increasing number of market entrants who have introduced or
developed competing broadcasting and distribution services. As is typical in the
case of a new and rapidly evolving industry, demand and market acceptance for
recently introduced services are subject to a high level of uncertainty and
risk. Sales of the Company's business services may require an extended sales
effort in certain cases. In addition, potential customers must accept the
Company's audio and video broadcast services as a viable alternative to
face-to-face meetings, traditional media, traditional business communications
tools, such as audio teleconferences and video conferencing, and conventional
classroom-based learning. Because the market for the Company's business services
is new and evolving, it is difficult to predict the size of this market and its
growth rate, if any. In addition, it is not known whether businesses and other
organizations will utilize the Internet to any significant degree as a means of
broadcasting business and other events. There can be no assurance that the
market for the Company's business services will continue to develop or be
sustainable. If the market fails to develop, develops more slowly than expected
or becomes saturated with competitors, or if the Company's Web sites do not
achieve or sustain market acceptance, the Company's business, results of
operations and financial condition could be materially adversely affected.

Uncertain Acceptance of Streaming Media Technology. The Company's success
depends on the market acceptance of streaming media technology provided by
companies such as RealNetworks, Inc. ("RealNetworks") and Microsoft Corporation
("Microsoft"). Prior to the advent of streaming technology, Internet users could
not initiate the playback of audio or video clips until such content was
downloaded in its entirety, resulting in significant waiting times. As a result,
live broadcasts of audio and video content over the Internet or intranets were
not possible. Early streaming media technology suffered from poor audio quality,
and video streaming at 28.8 kbps (thousands of bits per second) currently is of
lower quality than traditional media broadcasts. In addition, congestion over
the Internet and packet loss may interrupt audio and video streams, resulting in
unsatisfying user experiences. In order to receive streamed media adequately,
users generally must have multimedia PCs with certain microprocessor
requirements and at least 28.8 kbps Internet access and streaming media
software. Users typically electronically download such software and install it
on their PCs. Such installation may require technical expertise that some users
do not possess. In addition, older versions of certain Web browsers may need to
be reconfigured in order to receive streaming media from the Company's Web
sites. Furthermore, in order for users to receive streaming media over corporate
intranets, information systems managers may need to reconfigure such intranets.
Because of bandwidth constraints on corporate intranets, some information
systems managers may block reception of streamed media. Widespread adoption of
streaming media technology depends on overcoming these obstacles, improving
audio and video quality and educating customers and users in the use of
streaming media technology. If streaming media technology fails to achieve broad
commercial acceptance or such acceptance is delayed, the Company's business,
results of operations and financial condition could be materially adversely
affected. See "--Competition."

Uncertain Acceptance of the Internet as an Advertising Medium. The market
for Internet advertising has only recently begun to develop, is rapidly evolving
and is characterized by an increasing number of market entrants. As is typical
in the case of a new and rapidly evolving industry, demand and market acceptance
for

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<PAGE> 12

recently introduced products and services are subject to a high level of
uncertainty. The Company's ability to generate advertising revenue will depend
on, among other factors, (i) the development of the Internet as an advertising
medium, (ii) pricing of advertising on other Web sites, (iii) the amount of
traffic on the Company's Web sites, (iv) the Company's ability to achieve and
demonstrate user and member demographic characteristics that are attractive to
advertisers, (v) the development and expansion of the Company's advertising
sales force and (vi) the establishment and maintenance of desirable advertising
sales agency relationships. Most potential advertisers and their advertising
agencies have only limited experience with the Internet as an advertising medium
and have not devoted a significant portion of their advertising expenditures to
Web-based advertising. There can be no assurance that advertisers or advertising
agencies will be persuaded to allocate or continue to allocate portions of their
budgets to Web-based advertising or, if so persuaded, that they will find such
advertising to be effective for promoting their products and services relative
to traditional print and broadcast media. No standards have yet been widely
accepted for the measurement of the effectiveness of Web-based advertising, and
there can be no assurance that such standards will develop sufficiently to
enable Web-based advertising to become a significant advertising medium.
Acceptance of the Internet among advertisers and advertising agencies will also
depend, to a large extent, on the level of use of the Internet by consumers and
upon growth in the commercial use of the Internet. If widespread commercial use
of the Internet does not develop, or if the Internet does not develop as an
effective and measurable medium for advertising, the Company's business, results
of operations and financial condition could be materially adversely affected.
See "Business--Sales and Marketing."

Management of Growth. The Company has rapidly and significantly expanded
its operations and anticipates that significant expansion of its operations will
continue to be required in order to address potential market opportunities. The
Company expanded from fewer than 10 employees on September 30, 1995, to 191
employees on June 15, 1998, and the Company expects to increase its personnel
significantly in the near future. The Company's recent growth has placed, and is
expected to continue to place, a significant strain on its managerial,
operational and financial resources and systems. To manage its growth, the
Company must implement, improve and effectively utilize its operational,
management, marketing and financial systems and train and manage its employees.
Many of the Company's senior management have only recently joined the Company.
These individuals have not previously worked together and are in the process of
integrating as a management team. There can be no assurance that the Company
will be able to manage effectively the expansion of its operations or that the
Company's current personnel, systems, procedures and controls will be adequate
to support the Company's operations. Any failure of management to manage
effectively the Company's growth could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"--Dependence on Key Personnel; Need for Additional Personnel."

Risk of System Failure, Delays and Inadequacy; Single Site. The
performance, reliability and availability of the Company's Web sites and network
infrastructure are critical to its reputation and ability to attract and retain
users, advertisers and content providers. A large portion of the Company's
network infrastructure is located at a single, leased facility in Dallas, Texas.
The Company's systems and operations are vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failure, Internet breakdowns,
break-ins, tornadoes and similar events. The Company does not presently have
redundant facilities or systems or a formal disaster recovery plan and does not
carry sufficient business interruption insurance to compensate it for losses
that may occur. Services based on sophisticated software and computer systems
often encounter development delays and the underlying software may contain
undetected errors that could cause system failures when introduced. Any system
error or failure that causes interruption in availability of content or an
increase in response time could result in a loss of potential or existing
business services customers, users, advertisers or content providers and, if
sustained or repeated, could reduce the attractiveness of the Company's Web
sites to such entities or individuals. In addition, because the Company's Web
advertising revenues are directly related to the number of advertisements
delivered by the Company to users, system interruptions that result in the
unavailability of the Company's Web sites or slower response times for users
would reduce the number of advertisements delivered and reduce revenues.

A sudden and significant increase in traffic on the Company's Web sites
could strain the capacity of the software, hardware and telecommunications
systems deployed or utilized by the Company, which could lead

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<PAGE> 13

to slower response times or system failures. The Company's operations also are
dependent upon receipt of timely feeds from its content providers, and any
failure or delay in the transmission or receipt of such feeds, whether due to
system failure of the Company, its content providers, satellites or otherwise,
could disrupt the Company's operations. The Company is also dependent upon Web
browsers, Internet Service Providers ("ISPs") and online service providers
("OSPs") to provide Internet users access to the Company's Web sites. Users may
experience difficulties accessing or using the Company's Web sites due to system
failures or delays unrelated to the Company's systems. These difficulties may
negatively affect audio and video quality or result in intermittent interruption
in programming. In addition, the Company relies on third party ISPs to provide
hosting services with respect to some of the Company's content providers. Any
sustained failure or delay could reduce the attractiveness of the Company's Web
sites to business services customers, users, advertisers and content providers.
The occurrence of any of the foregoing events could have a material adverse
effect on the Company's business, results of operations and financial condition.

Security Risks. Despite the implementation of security measures, the
Company's networks may be vulnerable to unauthorized access, computer viruses
and other disruptive problems. A party who is able to circumvent security
measures could misappropriate proprietary information or cause interruptions in
the Company's Internet operations. ISPs and OSPs have in the past experienced,
and may in the future experience, interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. The Company may be required to expend significant capital
or other resources to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Although the Company intends to
continue to implement industry-standard security measures, there can be no
assurance that measures implemented by the Company will not be circumvented in
the future. Eliminating computer viruses and alleviating other security problems
may require interruptions, delays or cessation of service to users accessing the
Company's Web sites, which could have a material adverse effect on the Company's
business, results of operations and financial condition.

Dependence on Short-Term Advertising Contracts. A substantial portion of
the Company's Web advertising revenues are derived from short-term contracts.
Consequently, many of the Company's advertising customers can cease advertising
on the Company's Web sites quickly and without penalty, thereby increasing the
Company's exposure to competitive pressures. There can be no assurance that the
Company's current advertisers will continue to purchase advertisements or that
the Company will be able to secure new advertising contracts from existing or
future customers at attractive rates or at all. Any failure of the Company to
achieve sufficient advertising revenue could have a material adverse effect on
the Company's business, results of operations and financial condition.

Competition. The market for Internet broadcasting and services is highly
competitive and the Company expects that competition will continue to intensify.
The Company competes with (i) other Web sites, Internet portals and Internet
broadcasters to acquire and provide content to attract users, (ii)
videoconferencing companies, audio conferencing companies and Internet business
services broadcasters, (iii) online services, other Web site operators and
advertising networks, as well as traditional media such as television, radio and
print, for a share of advertisers' total advertising budgets and (iv) local
radio and television stations and national radio and television networks for
sales of advertising spots. There can be no assurance that the Company will be
able to compete successfully or that the competitive pressures faced by the
Company, including those described below, will not have a material adverse
effect on the Company's business, results of operations and financial condition.

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<PAGE> 14

business and other organizations seeking Internet broadcasting and distribution
services. The Company competes with other Internet broadcasters and Web sites to
acquire Internet broadcasting rights to compelling content. The Company believes
that the principal competitive factors in attracting Internet users include the
quality of service and the relevance, timeliness, depth and breadth of content
and services offered. In the market for Internet distribution of radio and
television broadcasts, the Company competes with ISPs, radio and television
stations and networks that originate their own Internet broadcasts. RealNetworks
and MCI Communications Corporation ("MCI") announced a strategic alliance in
August 1997 involving the introduction of a service currently called Real
Broadcast Network that delivers audio and video broadcasts over the Internet. In
the area of sports content, the Company competes with CBS SportsLine and ESPNET
SportsZone. The Company also competes for the time and attention of Internet
users with thousands of Web sites operated by businesses and other
organizations, individuals, governmental agencies and educational institutions.
For example, certain Web sites may provide a collection of links to other Web
sites with streaming media content. The Company expects competition to intensify
and the number of competitors to increase significantly in the future. In
addition, as the Company expands the scope of its content and services, it will
compete directly with a greater number of Web sites and other media companies.
Because the operations and strategic plans of existing and future competitors
are undergoing rapid change, it is extremely difficult for the Company to
anticipate which companies are likely to offer competitive services in the
future.

The Company competes with videoconferencing and teleconferencing companies,
along with companies that provide Internet broadcasting services to businesses
and other organizations. Principal competitive factors include price,
transmission quality, transmission speed, reliability of service, ease of
access, ease of use, customer support, brand recognition and operating
experience. The Company's current and potential competitors may have
significantly greater financial, technical and marketing resources, longer
operating histories and greater brand recognition. Traditional videoconferencing
and teleconferencing may allow for a more interactive user experience. As prices
for videoconferencing systems decrease and transmission quality increases, the
installed base of videoconferencing systems may increase. Companies that provide
media streaming software may also enter the market for Internet broadcast
services. If media streaming technology and backbone bandwidth becomes more
readily available to companies at low prices, the Company's customers may decide
to broadcast their own programming. In particular, local exchange carriers, ISPs
and other data communication service providers may compete in the future with a
portion of or all of the Company's business services as technological
advancements facilitate the ability of these providers to offer effectively
these services. There can be no assurance that the Company will be able to
compete successfully against current or future competitors for Internet
broadcast services.

The Company also competes with online services, other Web site operators
and advertising networks, as well as traditional media such as television, radio
and print for a share of advertisers' total advertising budgets. The Company
believes that the principal competitive factors for attracting advertisers
include the number of users accessing the Company's Web sites, the demographics
of the Company's users, the Company's ability to deliver focused advertising and
interactivity through its Web sites and the overall cost-effectiveness and value
of advertising offered by the Company. There is intense competition for the sale
of advertising on high-traffic Web sites, which has resulted in a wide range of
rates quoted by different vendors for a variety of advertising services, making
it difficult to project levels of Internet advertising that will be realized
generally or by any specific company. Any competition for advertisers among
present and future Web sites, as well as competition with other traditional
media for advertising placements, could result in significant price competition.
The Company believes that the number of companies selling Web-based advertising
and the available inventory of advertising space have recently increased
substantially. Accordingly, the Company may face increased pricing pressure for
the sale of advertisements. Reduction in the Company's Web advertising revenues
would have a material adverse effect on the Company's business, results of
operations and financial condition.

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<PAGE> 15

extensive marketing campaigns, obtain a more attractive inventory of ad spots,
adopt more aggressive pricing policies and devote substantially more resources
to selling advertising inventory. The Company's traditional media advertising
sales efforts depend on the Company's ability to obtain an inventory of ad spots
across the top radio and television markets. If the Company is unable to obtain
such inventory, it could have a material adverse effect on the Company's
business, results of operations and financial condition.

Risks Associated with Traditional Media Advertising Sales. The Company is
dependent, in part, on its ability to sell its inventory of radio and television
ad spots obtained from stations in exchange for the Company's Internet broadcast
of their programming. Selling radio and television advertising is highly
competitive. The Company depends on Premiere Radio Networks, Inc. ("Premiere
Radio Networks") to sell a majority of its radio ad spots. The Company's
traditional media advertising sales efforts are focused on selling ads to
traditional national advertisers in order to avoid competing with advertising
sales efforts of its local radio and television station content providers. Sales
of ad spots to national advertisers are typically sold at a lower cost per
thousand ("CPM") than local advertising. The Company competes for traditional
media advertising sales with national radio and television networks. National
radio and television networks typically have larger and more established sales
organizations as compared to those of the Company. There can be no assurance
that Premiere Radio Networks will continue to sell effectively the Company's
inventory of ad spots or that competitive pressures with respect to traditional
media advertising sales will not have a material adverse effect on the Company's
business, results of operations and financial condition. See "--Competition."

Scalability of Number of Users. The Company's success depends on its
ability to broadcast audio and video programming to a large number of
simultaneous users. Until recently, the Company only deployed unicasting (one
user per Company originated stream) technology to broadcast audio and video
programming to users over the Internet. The Company has deployed another
broadcast technology, multicasting (multiple users per Company originated
stream), on a trial basis since September 1997 and has begun to deploy this
technology on a broader commercial basis only recently. The Company anticipates
that unicasting will continue to be used to distribute its archived and
on-demand programming and that multicasting or a similar broadcasting technology
will be used for live and other events where a large audience for the content is
expected. To increase the Company's unicast capacity, the Company will be
required to successfully expand its network infrastructure through the
acquisition and deployment of additional network equipment and bandwidth. There
can be no assurance that the Company will be successful in such expansion. The
Company believes that to be a successful Internet broadcaster it also must
successfully deploy multicasting or a similar broadcasting technology that can
deliver streaming media content to many users simultaneously through one-
to-many Internet connections. To this end, the Company has deployed
multicasting, but has not yet tested its full capacity during an actual
broadcast. The Company will be required to test, deploy and successfully scale
its multicast network infrastructure to serve mass audiences. There can be no
assurance that the Company will be successful in doing so, that multicasting
will be able to support a substantial audience or that an alternative technology
will not emerge that offers superior broadcasting technology as compared to
multicasting. In the event that multicasting technology is not successfully
deployed in a timely manner or such an alternative technology emerges, the
Company would likely be required to expend significant resources to deploy a
technology other than multicasting, which could have a material adverse effect
on the Company's results of operations during the period in which the Company
attempts such deployment. If the Company fails to scale its broadcasts to large
audiences of simultaneous users, such failure could have a material adverse
effect on the Company's business, results of operations and financial condition.

Dependence on Providers of Streaming Media Products. The Company relies on
providers of streaming media products, such as RealNetworks and Microsoft, to
provide a broad base of users with streaming media software. The Company
currently licenses software products that enable the broadcast of streaming
media from such companies and others. The Company may need to acquire additional
licenses from such streaming media companies to meet its future needs. Users are
currently able to download electronically copies of the RealNetwork's RealPlayer
and Microsoft's NetShow Player software free of charge. If providers of
streaming media products substantially increase license fees charged to the
Company for the use of their products, refuse to license such products to the
Company or begin charging users for copies of their player software, such

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<PAGE> 16

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

Dependence on Continued Growth in Use of the Internet and Streaming Media
Content on the Internet. Rapid growth in use of and interest in the Internet is
a recent phenomenon and there can be no assurance that acceptance and use of the
Internet will continue to develop or that a sufficient base of users will emerge
to support the Company's business. Future revenues of the Company will depend
largely on the widespread acceptance and use of the Internet as a source of
multimedia information and entertainment and as a vehicle for commerce in goods
and services. The Internet may not be accepted as a viable commercial medium for
broadcasting multimedia content, if at all, for a number of reasons, including
(i) potentially inadequate development of the necessary infrastructure, (ii)
inadequate development of enabling technologies, (iii) lack of acceptance of the
Internet as a medium for distributing streaming media content and (iv)
inadequate commercial support for Web-based advertising. To the extent that the
Internet continues to experience an increase in users, an increase in frequency
of use or an increase in the bandwidth requirements of users, there can be no
assurance that the Internet infrastructure will be able to support the demands
placed upon it, specifically the demands of delivering high-quality video
content. Furthermore, user experiences on the Internet are affected by access
speed. There is no assurance that broadband access technologies, such as xDSL
and cable modems, will become widely adopted. In addition, the Internet could
lose its viability as a commercial medium due to delays in the development or
adoption of new standards and protocols required to handle increased levels of
Internet activity, or due to increased government regulation. Changes in or
insufficient availability of telecommunications services to support the Internet
also could result in unacceptable response times and could adversely affect use
of the Internet generally and of the Company's Web sites in particular. If use
of the Internet does not continue to grow or grows more slowly than expected, or
if the Internet infrastructure does not effectively support the growth that may
occur, the Company's business, results of operations and financial condition
could be materially adversely affected.

Risk of Technological Change. The market for Internet broadcast services is
characterized by rapid technological developments, frequent new product
introductions and evolving industry standards. The emerging character of these
products and services and their rapid evolution will require the Company to
effectively use leading technologies, continue to develop its technological
expertise, enhance its current services and continue to improve the performance,
features and reliability of its network infrastructure. Changes in network
infrastructure, transmission and content delivery methods and underlying
software platforms and the emergence of new broadband technologies, such as xDSL
and cable modems, could dramatically change the structure and competitive
dynamic of the market for streaming media solutions. In particular,
technological developments or strategic partnerships that accelerate the
adoption of broadband access technologies or advancements in streaming and
compression technologies may require the Company to expend resources to address
these developments. There can be no assurance that the Company will be
successful in responding quickly, cost effectively and sufficiently to these or
other such developments. In addition, the widespread adoption of new Internet
technologies or standards could require substantial expenditures by the Company
to modify or adapt its Web sites and services. A failure by the Company to
rapidly respond to technological developments could have a material adverse
effect on the Company's business, results of operations and financial condition.

Dependence on Key Personnel; Need for Additional Personnel. The Company's
performance and development is substantially dependent on the continued services
of certain members of senior management, including Todd R. Wagner, Chief
Executive Officer, and Mark Cuban, President, as well as on the Company's
ability to retain and motivate its other officers and key employees. The Company
does not have "key person" life insurance policies on any of its officers or
other employees. The Company's future success also depends on its continuing
ability to attract and retain highly qualified technical personnel and
management. Competition for such personnel is intense and there can be no
assurance that the Company will be able to retain its key management and
technical employees or that it will be able to attract or retain additional
qualified technical personnel and management in the future. The inability to
attract and retain the necessary technical personnel and management could have a
material adverse effect upon the Company's business, result of operations and
financial condition. See "Management--Employment Agreements."

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Risks Associated with broadcast.com Name Change. In May 1998, the Company
changed its name from AudioNet, Inc. to broadcast.com inc. to better represent
the diversity of its programming, service offerings and solutions. The Company
believes that developing and strengthening the broadcast.com brand is critical
to achieving widespread acceptance of its broadcast services and increasing
traffic to its Web sites and that the importance of brand recognition will
increase as competition in the market for Internet broadcasting increases. The
Company has expended substantial resources in establishing brand recognition of
the name and Web address www.audionet.com. Although users accessing
www.audionet.com will automatically be taken to www.broadcast.com, the name
change may cause confusion among users and customers. If the Company fails to
promote and maintain its brand, if the Company's existing or future strategic
relationships fail to promote the Company's brand or if the Company incurs
excessive expenses in an attempt to promote and maintain its brand, then the
Company's business, results of operations and financial condition could be
materially adversely affected. There can be no assurance that the Company will
be able to enforce rights related to the broadcast.com name, that it will be
free to use the name in all jurisdictions, that there will be no challenges to
the use of that name or that it will not be required to expend significant
resources in defending the use of that name.

Government Regulation and Legal Uncertainty. Although there are currently
few laws and regulations directly applicable to the Internet, it is likely that
new laws and regulations will be adopted in the United States and elsewhere
covering issues such as music licensing, broadcast license fees, copyrights,
privacy, pricing, sales taxes and characteristics and quality of Internet
services. The adoption of restrictive laws or regulations could slow Internet
growth or expose the Company to significant liabilities associated with content
available on its Web sites. The application of existing laws and regulations
governing Internet issues such as property ownership, libel and personal privacy
is also subject to substantial uncertainty. There can be no assurance that
current or new government laws and regulations, or the application of existing
laws and regulations (including laws and regulations governing issues such as
property ownership, content, taxation, defamation and personal injury), will not
expose the Company to significant liabilities, significantly slow Internet
growth or otherwise cause a material adverse effect on the Company's business,
results of operations or financial condition.

In November 1995, the Digital Performance Right in Sound Recordings Act of
1995 (the "1995 Act") was enacted. The 1995 Act provides that the owners of
sound recordings have certain exclusive performance rights in such recordings,
and, if applicable to the Company, could require the Company to pay additional
licensing fees for its broadcasts. The Company believes, however, that its
broadcasts are exempt from such fees under the 1995 Act. No assurance, however,
can be given that the Company's belief is correct, particularly because the 1995
Act has not yet been sufficiently interpreted. An interpretation of the 1995 Act
on this or other provisions of the Act that is adverse to the Company, could
have a material adverse effect on the Company's business, results of operations
and financial condition.

The Company currently does not collect sales or other taxes with respect to
the sale of services or products in states and countries where the Company
believes it is not required to do so. The Company does collect sales and other
taxes in the states it has offices and is required by law to do so. One or more
states or countries have sought to impose sales or other tax obligations on
companies that engage in online commerce within their jurisdictions. A
successful assertion by one or more states or countries that the Company should
collect sales or other taxes on products and services, or remit payment of sales
or other taxes for prior periods, could have a material adverse effect on the
Company's business, results of operations and financial condition.

The Communications Decency Act of 1996 (the "CDA") was enacted in 1996.
Although those sections of the CDA that, among other things, proposed to impose
criminal penalties on anyone distributing "indecent" material to minors over the
Internet were held to be unconstitutional by the U.S. Supreme Court, there can
be no assurance that similar laws will not be proposed and adopted. Although the
Company does not currently distribute the types of materials that the CDA may
have deemed illegal, the nature of such similar legislation and the manner in
which it may be interpreted and enforced cannot be fully determined, and
legislation similar to the CDA could subject the Company to potential liability,
which in turn could have an adverse effect on the Company's business, financial
condition and results of operations. Such laws could also damage the growth of
the Internet generally and decrease the demand for the Company's products and
services, which

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could adversely affect the Company's business, results of operations and
financial condition. See "Business--Governmental Regulation."

Liability for Internet Content. As a distributor of Internet content, the
Company faces potential liability for negligence, copyright, patent, trademark,
defamation, indecency and other claims based on the nature and content of the
materials that it broadcasts. Such claims have been brought, and sometimes
successfully pressed, against Internet content distributors. In addition, the
Company could be exposed to liability with respect to the content or
unauthorized duplication or broadcast of content. Although the Company maintains
general liability insurance, the Company's insurance may not cover potential
claims of this type or may not be adequate to indemnify the Company for all
liability that may be imposed. In addition, although the Company generally
requires its content providers to indemnify the Company for such liability, such
indemnification may be inadequate. Any imposition of liability that is not
covered by insurance, is in excess of insurance coverage or is not covered by an
indemnification by a content provider could have a material adverse effect on
the Company's business, results of operations and financial condition. See
"--Government Regulation and Legal Uncertainty."

Intellectual Property. The Company regards its copyrights, trademarks,
trade secrets and similar intellectual property as critical to its success, and
the Company relies on a combination of copyright and trademark laws, trade
secret protection, confidentiality and non-disclosure agreements and contractual
provisions with its employees and with third parties to establish and protect
its proprietary rights. There can be no assurance that these steps will be
adequate, that the Company will be able to secure trademark registrations for
all of its marks in the United States or other countries or that third parties
will not infringe upon or misappropriate the Company's copyrights, trademarks,
service marks and similar proprietary rights. In addition, effective copyright
and trademark protection may be unenforceable or limited in certain countries,
and the global nature of the Internet makes it impossible to control the
ultimate destination of the Company's broadcasts. In the future, litigation may
be necessary to enforce and protect the Company's trade secrets, copyrights and
other intellectual property rights.

The Company may also be subject to litigation to defend against claims of
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. If competitors of the Company
prepare and file applications in the United States that claim trademarks used or
registered by the Company, the Company may oppose those applications and be
required to participate in proceedings before the United States Patent and
Trademark Office to determine priority of rights to the trademark, which could
result in substantial costs to the Company. An adverse outcome could require the
Company to license disputed rights from third parties or to cease using such
trademark. Any litigation regarding the Company's proprietary rights could be
costly and divert management's attention, result in the loss of certain of the
Company's proprietary rights, require the Company to seek licenses from third
parties and prevent the Company from selling its services, any one of which
could have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, inasmuch as the Company
licenses a substantial portion of its content from third parties, its exposure
to copyright infringement actions may increase because the Company must rely
upon such third parties for information as to the origin and ownership of such
licensed content. The Company generally obtains representations as to the
origins and ownership of such licensed content and generally obtains
indemnification to cover any breach of any such representations; however, there
can be no assurance that such representations will be accurate or that such
indemnification will adequately protect the Company. See "--Liability for
Internet Content" and "--Government Regulation and Legal Uncertainty."

In December 1997, the Company filed an application for a United States
trademark registration for "broadcast.com." There can be no assurance that the
Company will be able to secure such a registered trademark. In October 1996, the
Company was issued a United States trademark for "AudioNet." The Company intends
to pursue the registration of its trademarks based upon anticipated use
internationally. There can be no assurance that the Company will be able to
secure adequate protection for these trademarks in foreign countries. Many
countries have a "first-to-file" trademark registration system and thus the
Company may be prevented from registering its marks in certain countries if
third parties have previously filed applications to register or have registered
the same or similar marks. It is possible that competitors of the Company or
others will adopt service names similar to the Company's, thereby impeding the
Company's
14
<PAGE> 19

ability to build brand identity and possibly leading to customer confusion. In
addition, there could be potential trademark or trademark infringement claims
brought by owners of other registered trademarks or trademarks that incorporate
variations of the term broadcast.com. The inability of the Company to protect
its "broadcast.com," "AudioNet" and other marks adequately could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "--Risks Associated with broadcast.com Name Change."

As part of its confidentiality procedures, the Company generally enters
into agreements with its employees and consultants and limits access to and
distribution of its software, documentation and other proprietary information.
There can be no assurance that the steps taken by the Company will prevent
misappropriation of its proprietary information or that agreements entered into
for that purpose would be enforceable. Notwithstanding the precautions taken by
the Company, it might be possible for a third party to copy or otherwise obtain
and use the Company's proprietary information without authorization. The laws of
some countries may afford the Company little or no effective protection of its
intellectual property.

Acquisition Risk. The Company may pursue the acquisition of new or
complementary businesses, services or technologies, although it has no present
understandings, commitments or agreements with respect to any material
acquisitions or investments. Any such future acquisitions would be accompanied
by the risks commonly encountered in acquisitions of companies, including, among
other things, the difficulty of integrating the operations and personnel of the
acquired companies, the potential disruption of the Company's ongoing business,
the inability of management to incorporate successfully acquired technology and
rights into the Company's services and content offerings, additional expense
associated with amortization of acquired intangible assets, the maintenance of
uniform standards, controls, procedures and policies, and the potential
impairment of relationships with employees, customers and strategic partners.

Control by Certain Stockholders. Upon completion of this offering, the
Company's directors and executive officers will beneficially own approximately
43.8% of the outstanding Common Stock (approximately 42.3% of the outstanding
Common Stock assuming full exercise of the Underwriters' overallotment option).
As a result, these stockholders, if they act as a group, will have a significant
influence on all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions. Such control
may have the effect of delaying or preventing a change in control of the
Company. See "Principal and Selling Stockholders."

Certain Anti-Takeover Provisions. The Company's Board of Directors has the
authority to issue up to 5,000,000 shares of Preferred Stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders
of the Company. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company, may discourage bids for the Company's Common Stock at a premium over
the market price of the Common Stock and may adversely affect the market price
of, and the other rights of the holders of, the Common Stock. The Company has no
present plans to issue shares of Preferred Stock. In addition, certain
provisions of the Company's Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") and Amended and Restated Bylaws, as amended (the
"Bylaws") will have the effect of delaying, deferring or preventing a change of
control of the Company. These provisions provide, among other things, that the
Board of Directors will be divided into three classes to serve staggered
three-year terms following the first annual meeting after a public offering,
that stockholders may not take actions by written consent and that the ability
of stockholders to call special meetings will be restricted. In addition, the
Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law (the "DGCL"), which will prohibit the Company
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. The Company's indemnification agreements with directors and
officers, the Company's Restated Certificate of Incorporation and Bylaws provide
that the Company will indemnify officers and directors against losses that they
may incur in investigations and legal proceedings resulting from their services
to the Company, which may be broad enough to include services in connection

15
<PAGE> 20

with takeover defense measures. Such provisions may have the effect of
preventing changes in the management of the Company. See "Description of Capital
Stock."

No Specific Use of Proceeds. The Company has not designated any specific
use for the net proceeds from the sale by the Company of the shares of Common
Stock offered hereby. Rather, the Company intends to use the net proceeds
primarily for general corporate purposes, including working capital, capital
expenditures and strategic acquisitions. The Company has no present plans or
commitments and is not currently engaged in any negotiations with respect to
strategic acquisitions. Accordingly, management will have significant
flexibility in applying the net proceeds of this offering. The failure of
management to apply such funds effectively could have a material adverse effect
on the Company's business, results of operations and financial condition. See
"Use of Proceeds."

Year 2000 Compliance. There are issues associated with the programming code
in existing computer systems as the year 2000 approaches. The "year 2000
problem" is pervasive and complex, as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company is in the process of working with its software vendors to
assure that the Company is prepared for the year 2000. The Company has not
verified that companies doing business with it are year 2000 compliant. The
Company does not anticipate that it will incur significant operating expenses or
be required to invest heavily in computer systems improvements to be year 2000
compliant. However, significant uncertainty exists concerning the potential
costs and effects associated with any year 2000 compliance. Any year 2000
compliance problem of either the Company or its users, customers or advertisers
could have a material adverse effect on the Company's business, results of
operations and financial condition.

No Prior Public Market. Prior to this offering, there has been no public
market for the Common Stock. The initial public offering price will be
determined by negotiation between the Company and the representatives of the
Underwriters based upon several factors. The initial public offering price may
not be indicative of future market prices. See "Underwriters" for a discussion
of the factors to be considered in determining the initial public offering
price.

Possible Volatility of Stock Price. The trading price of the Common Stock
is likely to be highly volatile and could be subject to wide fluctuations in
response to factors such as actual or anticipated variations in quarterly
operating results, announcements of technological innovations, new sales formats
or new services by the Company or its competitors, changes in financial
estimates by securities analysts, conditions or trends in Internet markets,
changes in the market valuations of other Internet companies, announcements by
the Company or its competitors of significant acquisitions, strategic
partnerships, joint ventures, capital commitments, additions or departures of
key personnel, sales of Common Stock and other events or factors, many of which
are beyond the Company's control. In addition, the stock market in general, and
the market for Internet-related and technology companies in particular, has
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of such companies. The trading
prices of many technology companies' stocks are at or near historical highs and
reflect price earnings ratios substantially above historical levels. There can
be no assurance that these trading prices and price earnings ratios will be
sustained. These broad market and industry factors may materially adversely
affect the market price of the Common Stock, regardless of the Company's
operating performance. In the past, following periods of volatility in the
market price of a company's securities, securities class-action litigation has
often been instituted against such company. Such litigation, if instituted,
could result in substantial costs and a diversion of management's attention and
resources, which could have a material adverse effect on the Company's business,
results of operations and financial condition.

Shares Eligible for Future Sale; Registration Rights. Sales of a
substantial number of shares of Common Stock in the public market following this
offering could adversely affect the market price for the Company's Common Stock.
The number of shares of Common Stock available for sale in the public market is
limited by restrictions under the Securities Act of 1933, as amended (the
"Securities Act"), and lock-up agreements under which the holders of such shares
have agreed not to sell or otherwise dispose of any of their shares for a

16
<PAGE> 21

period of 180 days after the date of this Prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated. Morgan Stanley & Co. Incorporated,
may, however, in its sole discretion and at any time without prior notice,
release all or any portion of the Common Stock subject to these lock-up
agreements. Morgan Stanley & Co. Incorporated currently has no plans to release
any portion of the securities subject to lock-up agreements. In addition to the
2,500,000 shares of Common Stock offered hereby (assuming no exercise of the
Underwriters' overallotment option), there will be 14,385,071 shares of Common
Stock outstanding upon completion of this offering (assuming no exercise of
warrants or options), all of which are subject to lock-up agreements and are
"restricted shares" under the Securities Act. On the date of this Prospectus, no
shares other than the 2,500,000 shares offered hereby will be eligible for sale.
Upon expiration of the lock-up agreements 180 days after the date of this
Prospectus, an additional 13,977,905 shares will become eligible for sale in the
public market, of which all but 3,260,940 shares shall be subject to the volume
limitations and other conditions of Rule 144 adopted under the Securities Act
("Rule 144"). The remaining 407,166 shares will become eligible for sale in the
public market in March 1999, all of which shall be subject to the volume
limitations and other conditions of Rule 144. In addition, on March 31, 1998,
there were outstanding warrants to purchase 322,316 shares of the Company's
Common Stock and options exercisable for 290,919 shares of the Company's Common
Stock. In addition, the Company intends to register shortly after the date of
this Prospectus a total of 4,149,812 shares of Common Stock subject to options
outstanding or reserved for future issuance under the Company's 1996 Stock
Option Plan, 1998 Stock Option Plan and 1996 Non-Employee Directors Stock Option
Plan, and 250,000 shares of Common Stock reserved for issuance under the
Company's Employee Stock Purchase Plan. Upon expiration of the lock-up
agreements referred to above, holders of 4,533,631 shares of Common Stock and
holders of warrants to purchase 218,096 shares of Common Stock will have certain
rights to require the Company to register those shares of Common Stock and those
shares issuable upon the exercise of warrants under the Securities Act. If such
holders, by exercising their registration rights, cause a large number of shares
to be registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Company's Common Stock. See
"Description of Capital Stock--Registration Rights," "Shares Eligible for Future
Sale" and "Underwriters."

Dilution. Purchasers of the Common Stock in this offering will experience
immediate and substantial dilution of $8.74 per share (based on an assumed
public offering price of $12.00 per share). Additional dilution will occur upon
exercise of outstanding stock options. See "Dilution."

17
<PAGE> 22

THE COMPANY

Broadcast.com inc. (formerly AudioNet, Inc.) is the leading aggregator and
broadcaster of streaming media programming on the Web with the network
infrastructure and expertise to deliver or "stream" hundreds of live and
on-demand audio and video programs over the Internet to hundreds of thousands of
users. The Company's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming, including sports, talk and music
radio, television, business events, full-length CDs, news, commentary and
full-length audio-books. The Company broadcasts on the Internet 24 hours a day
seven days a week, and its programming includes more than 345 radio stations and
networks, 17 television stations and cable networks and game broadcasts and
other programming for over 350 college and professional sports teams. The
Company licenses such programming from content providers, in most cases under
exclusive, multi-year agreements. The Company's Business Services Group provides
cost-effective Internet and intranet broadcasting services to businesses and
other organizations. These business services include the turnkey production of
press conferences, earnings conference calls, investor conferences, trade shows,
stockholder meetings, product introductions, training sessions, distance
learning telecourses and media events. In addition to its business services, the
Company derives revenues from the sale of advertising on its Web sites,
including gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads, as well as the sale of
radio and television ad spots the Company receives from stations in exchange for
broadcasting their programming over the Internet. In March 1998, the Company's
Web sites served a daily average of over 400,000 unique users and its principal
Web site was ranked in the top 20 among all News/ Information/Entertainment
sites according to Media Metrix.

Broadcasting audio and video content over the Internet offers certain
opportunities that are not generally available from traditional media. Currently
available analog technology and government regulations limit the ability of
radio and television stations to broadcast beyond certain geographic areas.
Radios and televisions are not widely used in office buildings and other
workplaces, where Internet access has become commonplace. Traditional business
communication tools such as audio conferencing and videoconferencing can be
costly, non-targeted and inconvenient. In addition, traditional broadcasters are
limited in their ability to measure or identify in real time the listeners or
viewers of a program. By using the Internet, targeted streaming media content
can be broadcast to a geographically dispersed audience of customers, suppliers,
employees and stockholders at relatively low costs. Internet users can interact
with the broadcast content by responding to online surveys, voting in polls and
obtaining additional information. In addition, Internet broadcasters can provide
highly specific information about a program's audience to content providers,
advertisers and users of Internet business services. The convergence of the
Internet's capabilities and attributes has accelerated its acceptance as a
business tool, leading to rapidly growing economic opportunities in Web-based
advertising and business service offerings, including audio conferencing,
electronic commerce and video transmission, among others.

The Company believes it has accomplished numerous Internet achievements
since its initial live broadcast in September 1995, including the Internet
broadcasts of the first live commercial radio station, first live sporting
event, first live corporate quarterly earnings call and first live stockholders'
meeting. The Company's early entrance into the Internet broadcasting market has
enabled the Company to establish strong brand recognition for its broadcasts and
services and to form relationships with a diverse range of content providers.
The Company currently offers content from a variety of sources, including radio
and television, college and professional sports teams and leagues, production
and film studios and record labels. The Company has broadcast over 11,000 live
events such as the last three NFL Super Bowls and NCAA Basketball Tournaments,
the Stanley Cup Playoffs, the entire 1997-98 season for 24 of the 26 NHL teams,
game broadcasts for the entire season of over 300 college teams, the premiere
event for the movie "Titanic," Blockbuster Rockfest '97 and backstage interviews
from the 1998 Academy Awards Webcast. The Company has also amassed over 50,000
hours of on-demand broadcast programming, including over 2,100 full-length music
CDs, sports programming, talk radio and business and media events.
Broadcast.com's business services customers include the American Bar
Association, AT&T Corporation ("AT&T"), Charles Schwab Corporation ("Charles
Schwab"), Comerica Incorporated ("Comerica"), Gartner Group, Inc.
("GartnerGroup"), Harvard University, Intel Corporation ("Intel"), Microsoft,
Motorola, Inc. ("Motorola"), PR Newswire,

18
<PAGE> 23

Texas Instruments Incorporated ("Texas Instruments") and more than 290 other
organizations. Business services broadcasts have originated from 36 states and
nine countries.

The Company's objective is to enhance its leadership position in Internet
broadcasting by continuing to provide services that enable the delivery of a
broad range of streaming media content over the Internet and intranets. The
Company's strategy to achieve this objective includes enhancing and expanding
exclusive content offerings, further penetrating the business services market,
expanding network capacity, enhancing brand awareness and capturing and
developing emerging revenue opportunities.

The Company's name was changed from AudioNet, Inc. to broadcast.com inc. in
May 1998. The Company's headquarters is located at 2914 Taylor Street, Dallas,
Texas 75226. Its telephone number is 214.748.6660, fax number is 214.748.6657
and its principal Web site is located at http://www.broadcast.com. Other Company
Web sites include: www.homematters.com, www.jukebox.com, www.pluggedin.com,
www.policescanner.com, www.soapopera.com and www.sportsworld.com. Information
contained on the Company's Web sites is not part of this Prospectus.

19
<PAGE> 24

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
2,500,000 shares of Common Stock offered by the Company hereby are estimated to
be approximately $26.9 million (approximately $29.0 million, if the
Underwriters' over-allotment option is exercised in full), at an assumed initial
public offering price of $12.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company. The net proceeds are expected to be used for general corporate
purposes, including capital expenditures, working capital and strategic
acquisitions. The Company has no present plans or commitments and is not
currently engaged in any negotiations with respect to strategic acquisitions.
Prior to such use, the Company intends to invest the net proceeds from this
offering in short-term, interest-bearing, investment-grade securities. See "Risk
Factors--Use of Proceeds."

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.

20
<PAGE> 25

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1998, and as adjusted to give effect to the issuance and sale of the
shares of Common Stock offered by the Company (at an assumed initial public
offering price of $12.00 per share after deducting estimated underwriting
discounts, commissions and estimated offering expenses payable by the Company)
and the application of the net proceeds therefrom. This table should be read in
conjunction with the Company's Financial Statements and the Notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares
authorized;
no shares issued and outstanding....................... $ -- $ --
Common stock, $.01 par value; 60,000,000 shares
authorized; 14,383,451 shares issued and outstanding,
actual and 16,883,451 shares issued and outstanding, as
adjusted(1)............................................ 90 115
Additional paid-in capital................................ 40,669 67,544
Accumulated deficit....................................... (12,453) (12,453)
------- -------
Total stockholders' equity........................... 28,306 55,206
------- -------
Total capitalization.............................. $28,306 $55,206
======= =======
</TABLE>

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

(1) Excludes (i) 2,004,352 shares of Common Stock issuable upon exercise of
options outstanding on March 31, 1998, with a weighted average exercise
price of $5.58 per share, (ii) 1,145,460 shares available for future
issuance under the Company's stock plans as of March 31, 1998, (iii) an
additional 1,000,000 shares of Common Stock reserved for issuance under the
Company's 1998 Stock Option Plan, pursuant to an amendment approved in June
1998, and (iv) 250,000 shares of Common Stock reserved for issuance under
the Company's Employee Stock Purchase Plan approved in June 1998. Also
excludes (i) 218,096 shares of Common Stock subject to outstanding warrants
and (ii) additional warrants to purchase 104,220 shares of Common Stock
which will expire upon the consummation of this offering. See
"Management--Director Compensation," "--Employee Benefit Plans" and Note 6
of Notes to Financial Statements.

21
<PAGE> 26

DILUTION

The net tangible book value of the Company as of March 31, 1998 was
$28,114,512 or $1.95 per share. Net tangible book value per share is equal to
the Company's total tangible assets, less its total liabilities, divided by the
number of shares of Common Stock outstanding as of March 31, 1998. After giving
effect to the issuance and sale of the 2,500,000 shares of Common Stock offered
by the Company hereby and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company, the as
adjusted net tangible book value of the Company as of March 31, 1998 would have
been $55,014,512 or $3.26 per share. This represents an immediate increase in
net tangible book value of $1.31 per share to existing stockholders and an
immediate dilution of approximately $8.74 per share to new public investors
purchasing shares in this offering. The following table illustrates the per
share dilution to new investors:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $12.00
Net tangible book value per share as of March 31, 1998.... $ 1.95
Increase per share attributable to new public investors... 10.05
------
As adjusted net tangible book value per share after the
offering.................................................. 3.26
------
Dilution per share to new public investors.................. $ 8.74
======
</TABLE>

The following table summarizes on a pro forma basis, as of March 31, 1998,
the difference between the existing stockholders and the purchasers of shares of
Common Stock in this offering (before deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company) with respect
to the number of shares of Common Stock purchased from the Company, the total
cash consideration paid and the average price paid per share.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 14,383,451 85.2% $40,039,419 57.2% $ 2.78
New public investors................... 2,500,000 14.8 30,000,000 42.8 12.00
---------- ----- ----------- -----
Total........................ 16,883,451 100.0% $70,039,419 100.0%
========== ===== =========== =====
</TABLE>

The foregoing discussion and tables assume no exercise of any stock options
outstanding as of March 31, 1998 and no exercise of warrants to purchase 322,316
shares of Common Stock. As of March 31, 1998, there were options outstanding to
purchase a total of 2,004,352 shares of Common Stock with a weighted average
exercise price of $5.58 per share. To the extent that any of these options or
warrants are exercised, there will be further dilution to new public investors.
See "Capitalization," "Management--Director Compensation," "--Employee Benefit
Plans" and Note 6 of Notes to Financial Statements.

22
<PAGE> 27

SELECTED FINANCIAL DATA

The following table sets forth selected financial information for the
periods presented. The statement of operations data of the Company presented for
the period from inception (May 19, 1995) to December 31, 1995, years ended
December 31, 1996 and 1997 and the balance sheet data for the years then ended
are derived from the financial statements of the Company audited by Price
Waterhouse LLP, independent accountants, and are included elsewhere in this
Prospectus. The selected financial data of the Company presented for the three
months ended March 31, 1997 and 1998 were derived from the Company's unaudited
financial statements also appearing herein and which, in the opinion of Company
management, include all adjustments, consisting of normal recurring accruals and
other adjustments, necessary for the fair presentation of the financial position
and results of operations for these periods. The results of operations for the
three months ended March 31, 1998 may not be indicative of results that may be
expected for the full year ending December 31, 1998. The financial information
set forth below should be read in conjunction with, and is qualified in its
entirety by, the Financial Statements of the Company and related notes thereto
that appear elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED THREE MONTHS ENDED
INCEPTION DECEMBER 31, MARCH 31,
(MAY 19, 1995) TO ----------------- ------------------------
DECEMBER 31, 1995 1996 1997 1997 1998
----------------- ------- ------- ------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.......................... $ -- $ 1,756 $ 6,856 $ 1,087 $ 3,176
Cost of revenues (excluding
depreciation and
amortization)................... -- 1,301 2,950 469 1,225
------ ------- ------- ------- -------
-- 455 3,906 618 1,951
------ ------- ------- ------- -------
Operating expenses:
Operating and development....... -- 1,506 4,659 650 2,247
Sales and marketing............. 21 718 3,389 519 1,671
General and administrative...... 217 752 1,416 397 588
Depreciation and amortization... 30 544 1,129 176 442
------ ------- ------- ------- -------
Total operating
expenses.............. 268 3,520 10,593 1,742 4,948
------ ------- ------- ------- -------
Net operating loss...... (268) (3,065) (6,687) (1,124) (2,997)
Interest and other income......... -- 76 213 61 275
------ ------- ------- ------- -------
Net loss................ $ (268) $(2,989) $(6,474) $(1,063) $(2,722)
====== ======= ======= ======= =======
Basic and diluted net loss per
share(1)........................ $ (.04) $ (.31) $ (.55) $ (.09) $ (.19)
====== ======= ======= ======= =======
Shares used in the net loss per
share calculations(1)........... 6,020 9,564 11,680 11,428 14,076
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1995 1996 1997 1998
----- ------ ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 142 $4,580 $21,337 $22,400
Working capital (deficit)............................. (75) 4,524 23,318 24,455
Total assets.......................................... 676 8,154 28,233 30,134
Total debt............................................ -- -- -- --
Total other liabilities............................... 320 546 1,040 1,828
Total stockholders' equity (deficit).................. (214) 7,608 27,193 28,306
</TABLE>

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

(1) See Note 8 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in per share calculations.

23
<PAGE> 28

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

The following discussion should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. The
following discussion contains forward-looking statements. The Company's actual
results may differ significantly from those projected in the forward-looking
statements. Factors that might cause future results to differ materially from
those projected in the forward-looking statements include, but are not limited
to, those discussed in "Risk Factors" and elsewhere in this Prospectus.

OVERVIEW

Broadcast.com (formerly AudioNet) is the leading aggregator and broadcaster
of streaming media programming on the Web with the network infrastructure and
expertise to deliver or "stream" hundreds of live and on-demand audio and video
programs over the Internet to hundreds of thousands of users. The Company's Web
sites offer a large and comprehensive selection of live and on-demand audio and
video programming, including sports, talk and music radio, television, business
events, full-length CDs, news, commentary and full-length audio-books. During
the period from the Company's inception on May 19, 1995 through December 31,
1995 (the "Inception Period"), the Company had no revenues and its operating
activities related primarily to the investment in necessary network
infrastructure and initial planning and development of the Company's Web sites
and operations. During 1996, the Company generated revenues primarily from
business services and Web advertising and the Company's operating activities
related to the continued development of the network infrastructure required for
large-scale streaming media broadcasts, continued enhancement of its Web sites
and the opening of a sales office in New York. During 1997, the Company
significantly increased revenues from business services and Web advertising and
began generating revenues from traditional media advertising. Also during 1997,
the Company continued to expand its network infrastructure, moved to a 28,000
square foot facility, continued the enhancement of its Web sites and added
qualified sales, marketing, operations and general and administrative personnel.
During 1998, the Company added television advertising sales to its traditional
media advertising revenues, expanded its customer and user base, hired sales
directors and vice presidents, opened sales offices in Los Angeles and San
Francisco and continued to expand its network infrastructure. Throughout the
Company's existence, it has expended significant resources in the aggregation of
content by obtaining Internet broadcasting rights to audio and video
programming.

The Company derives substantially all of its revenues through the sale of
business services, Web advertising and traditional media advertising. Business
services revenues are derived from the Company's Internet and intranet
broadcasts of its customers' business, educational or other programming.
Business services revenues are recognized in the month in which the service is
provided. Web advertising revenues are derived from the sale of gateway ads with
guaranteed click-thrus, channel and event sponsorships and multimedia and
traditional banner ads. Web advertising revenues are recognized over the period
in which the advertisement is displayed on one of the Company's Web pages,
except for sponsorship sales which are recognized ratably over the term of the
sponsorship. Traditional media advertising revenues are derived from the sale of
ad spots received from radio and television stations in exchange for the Company
broadcasting their programming over the Internet and the sale of prepaid
advertising. Traditional media advertising revenues are recognized in the month
in which the spots are sold. Other revenues consist of electronic commerce sales
as well as certain programming and promotional services performed by the Company
and are recognized in the month in which the product is sold or the service is
provided.

The Company has incurred significant losses since its inception, and as of
March 31, 1998 had an accumulated deficit of approximately $12.5 million. The
Company believes that its success will depend largely on its ability to extend
its leadership position as a source for streaming media programming and business
services on the Web. Accordingly, the Company intends to invest heavily in sales
and marketing, content acquisition and continued development of its network
infrastructure. The Company expects to continue to incur substantial operating
losses for the foreseeable future.

In view of the rapidly evolving nature of the Company's business and its
limited operating history, the Company believes that period-to-period
comparisons of its revenues and operating results, including its gross

24
<PAGE> 29

profit margin and operating expenses as a percentage of total net revenues, are
not necessarily meaningful and should not be relied upon as indications of
future performance. Although the Company has experienced sequential quarterly
growth in revenues, it does not believe that its historical growth rates are
necessarily sustainable or indicative of future growth.

RESULTS OF OPERATIONS

The following table sets forth certain financial data for the periods
indicated as a percentage of total revenues. Data for the Inception Period is
not presented as the Company had no revenues in the Inception Period.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------- -------------------
1996 1997 1997 1998
------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Business services.......................... 30.5% 41.1% 41.1% 35.5%
Web advertising............................ 62.1 43.1 48.9 41.6
Traditional media advertising.............. -- 13.8 8.3 16.3
Other...................................... 7.4 2.0 1.7 6.6
------ ------ ------ ------
Total revenues..................... 100.0 100.0 100.0 100.0
Cost of revenues (excluding depreciation and
amortization).............................. 74.1 43.0 43.2 38.6
------ ------ ------ ------
25.9 57.0 56.8 61.4
------ ------ ------ ------
Operating expenses:
Operations and development................. 85.8 68.0 59.8 70.8
Sales and marketing........................ 40.9 49.4 47.8 52.6
General and administrative................. 42.7 20.6 36.5 18.5
Depreciation and amortization.............. 31.0 16.5 16.2 13.9
------ ------ ------ ------
Total operating expenses........... 200.4 154.5 160.3 155.8
------ ------ ------ ------
Net operating loss................. (174.5) (97.5) (103.5) (94.4)
Interest and other income.................... 4.3 3.1 5.7 8.7
------ ------ ------ ------
Net loss........................... (170.2)% (94.4)% (97.8)% (85.7)%
====== ====== ====== ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 AND 1998

REVENUES

Total revenues increased $2.1 million, or 192.2%, from $1.1 million to $3.2
million for the three months ended March 31, 1997 and 1998, respectively.

Business Services. Business services revenues increased $680,000, or
152.2%, from $447,000 to $1.1 million for the three months ended March 31, 1997
and 1998, respectively. Business services revenues represented 41.1% of total
revenues for the three months ended March 31, 1997 and 35.5% of total revenues
for the three months ended March 31, 1998. The increase in business services
revenues was due primarily to an increase in the number of business services
events broadcast by the Company from 125 events in the three months ended March
31, 1997 to 347 events in the three months ended March 31, 1998.

Web Advertising. Web advertising revenues increased $792,000, or 149.0%,
from $531,000 to $1.3 million for the three months ended March 31, 1997 and
1998, respectively. Web advertising revenues represented 48.9% of total revenues
for the three months ended March 31, 1997 and 41.6% of total revenues for the
three months ended March 31, 1998. Bartered Web advertising revenues increased
$24,000, or 9.2%, from $256,000 to $280,000 for the three months ended March 31,
1997 and 1998, respectively, and represented 23.6% and 8.8% of total revenues,
respectively. The Company anticipates that bartered Web advertising revenues, as
a

25
<PAGE> 30

percentage of total revenues, will continue to decline. The increase in Web
advertising revenues was due primarily to an increase in ads sold to existing
and new advertisers on the Company's Web sites, including increased sales of
gateway ads, which sell at a higher rate than traditional banner ads.

Traditional Media Advertising. Traditional media advertising revenues
increased $426,000, from $91,000 to $517,000 for the three months ended March
31, 1997 and 1998, respectively. Traditional media advertising revenues
represented 8.3% of total revenues for the three months ended March 31, 1997 and
16.3% of total revenues for the three months ended March 31, 1998. The increase
was due primarily to increased sales of ad spots acquired through the licensing
of additional radio stations.

Other. Other revenues increased $192,000, from $18,000 to $210,000 for the
three months ended March 31, 1997 and 1998, respectively, representing 1.7% and
6.6% of total revenues, respectively. The Company began selling promotional
services and electronic commerce sales increased in the first quarter of 1998.

COST OF REVENUES (EXCLUDING DEPRECIATION AND AMORTIZATION)

Cost of revenues (excluding depreciation and amortization) consists
primarily of expenses from the sale of prepaid advertising credits, bartered Web
advertising expenses, event production costs, direct personnel expenses
associated with event production and performance license fees. Cost of revenues
(excluding depreciation and amortization) increased $756,000, or 161.0%, from
$469,000 to $1.2 million for the three months ended March 31, 1997 and 1998,
respectively. Of the increase, $650,000 was due to the increase in sales of
prepaid advertising credits and performance license fees. The increase was also
due to added personnel and production costs required to support the broadcast of
additional live events. Excluding both the revenues and expenses associated with
bartered Web advertising transactions, cost of revenues (excluding depreciation
and amortization) increased from 25.7% to 32.6% of revenues for the three month
periods presented, respectively.

OPERATING EXPENSES

Operating and Development. Operating and development expenses consist
primarily of data communications expenses, personnel expenses associated with
broadcasting, software and content license fees, operating supplies and
overhead. Operating and development expenses increased $1.6 million, from
$650,000 to $2.2 million, for the three months ended March 31, 1997 and 1998,
respectively. Approximately $1.2 million of the increase was due to increased
expenditures for data communications as user traffic increased, software license
fees as the network infrastructure expanded and operations personnel to handle
additional broadcasts as the Company obtained additional Internet broadcasting
rights to programming.

Sales and Marketing. Sales and marketing expenses consist primarily of
personnel expenses associated with the sale of the Company's business services,
Web advertising and traditional media advertising, marketing of the Company's
Web sites, graphic design costs and overhead. Sales and marketing expenses
increased $1.2 million, from $519,000 to $1.7 million for the three months ended
March 31, 1997 and 1998, respectively. Approximately $1.0 million of the
increase was due to growth in the Company's sales force and marketing staff and
increased advertising expenses.

General and Administrative. General and administrative expenses consist
primarily of administrative personnel expenses, professional fees, expenditures
for applicable facilities costs and overhead. General and administrative
expenses increased $191,000, or 48.2%, from $397,000 to $588,000 for the three
months ended March 31, 1997 and 1998, respectively. The increase was due
primarily to increased personnel expenses and professional fees necessary to
support the Company's growth.

Depreciation and Amortization. Depreciation and amortization expenses
consist of depreciation of property and equipment and amortization of intangible
assets. Depreciation and amortization expenses increased $266,000, or 150.7%,
from $176,000 to $442,000 for the three months ended March 31, 1997 and 1998,
respectively. The increase was primarily due to the addition of property and
equipment as the Company

26
<PAGE> 31

expanded its network infrastructure, incurred leasehold improvement costs and
purchased equipment necessary to support the growth in personnel.

INTEREST AND OTHER INCOME

Interest and other income consist primarily of interest earnings on the
Company's cash and cash equivalents. Interest and other income increased from
$61,000 to $275,000 for the three months ended March 31, 1997 and 1998,
respectively. The increase was due to interest earned from the investment of
higher cash and cash equivalent balances derived from sales of the Company's
Common Stock in December 1997.

INCEPTION PERIOD AND YEARS ENDED DECEMBER 31, 1996 AND 1997

REVENUES

Total revenues increased $5.1 million, or 290.4%, from $1.8 million to $6.9
million in 1996 and 1997, respectively. The Company had no revenues during the
Inception Period.

Business Services. Business services revenues increased $2.3 million, from
$535,000 to $2.8 million in 1996 and 1997, respectively. Business services
revenues represented 30.5% of total revenues in 1996 and 41.1% of total revenues
in 1997. The increase in business services revenues was due primarily to an
increase in the number of business services events broadcast by the Company from
221 events in 1996 to 798 events in 1997.

Web Advertising. Web advertising revenues increased $1.9 million from $1.1
million to $3.0 million in 1996 and 1997, respectively. Web advertising revenues
represented 62.1% of total revenues in 1996 and 43.1% of total revenues in 1997.
Bartered Web advertising revenues increased $379,000, or 59.4%, from $638,000 to
$1.0 million in 1996 and 1997, respectively, and represented 36.3% and 14.8% of
total revenues, respectively. The increase in Web advertising revenues was due
primarily to an increase in ads sold to existing and new advertisers on the
Company's Web sites, including gateway ads, which the Company began selling in
the first quarter of 1997.

Traditional Media Advertising. Traditional media advertising was $942,000,
or 13.8% of total revenues in 1997, as the Company began selling its ad spots
acquired through the licensing of radio stations in the first quarter of 1997.

Other. Other revenues increased $8,000, or 6.1%, from $130,000 to $138,000
in 1996 and 1997, respectively, representing 7.4% and 2.0% of total revenues,
respectively.

COST OF REVENUES (EXCLUDING DEPRECIATION AND AMORTIZATION)

Cost of revenues (excluding depreciation and amortization) increased $1.6
million, or 126.7%, from $1.3 million to $2.9 million in 1996 and 1997,
respectively. The Company incurred no cost of revenues (excluding depreciation
and amortization) during the Inception Period. The increase was primarily due to
the increase in sales of prepaid advertising credits, barter expenses and
production and personnel costs required for the broadcasting of additional
business services events. Excluding both the revenues and expenses associated
with bartered Web advertising transactions, cost of revenues (excluding
depreciation and amortization) decreased from 59.3% to 33.1% of revenues for the
periods presented, respectively.

OPERATING EXPENSES

Operating and Development. Operating and development expenses increased
$3.2 million, from $1.5 million to $4.7 million in 1996 and 1997, respectively.
The Company did not incur operating and development expenses during the
Inception Period. Approximately $2.6 million of the increase was due to
expenditures for data communications as user traffic increased, operations
personnel to handle the additional broadcasts of the Company's additional
content, and content license fees for the acquisition of additional content.

Sales and Marketing. Sales and marketing expenses increased from $21,000 in
the Inception Period to $718,000 in 1996 to $3.4 million in 1997, an increase of
$696,000 and $2.7 million, respectively. The increases were due primarily to
growth in the Company's sales force and marketing staff.

27
<PAGE> 32

General and Administrative. General and administrative expenses increased
from $217,000 in the Inception Period to $752,000 in 1996 to $1.4 million in
1997, an increase of $535,000 and $664,000, or 247.1% and 88.4%, respectively.
The increases were due primarily to increased personnel expenses, professional
fees and building expenses necessary to support the Company's growth.

Depreciation and Amortization. Depreciation and amortization expenses
increased from $30,000 in the Inception Period to $544,000 in 1996 to $1.1
million in 1997, an increase of $514,000 and $585,000, respectively. The
increases were primarily due to the addition of property and equipment as the
Company expanded its network infrastructure, incurred leasehold improvement
costs and purchased equipment necessary to support the growth in personnel.

INTEREST AND OTHER INCOME

Interest and other income consist primarily of interest earnings on the
Company's cash and cash equivalents. Interest and other income increased from
$76,000 in 1996 to $213,000 in 1997. The Company had no interest and other
income in the Inception Period.

SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth certain unaudited quarterly statements of
operations data for the nine quarters ended March 31, 1998. This information has
been derived from the Company's unaudited financial statements, which, in
management's opinion, have been prepared on the same basis as the audited
Financial Statements, and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information for
the quarters presented. This information should be read in conjunction with the
audited Financial Statements of the Company and the Notes thereto included
elsewhere in this Prospectus. The operating results for any quarter are not
necessarily indicative of the operating results for any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31,
1996 1996 1996 1996 1997 1997 1997 1997 1998
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Business services............. $ 13 $ 78 $ 217 $ 226 $ 447 $ 794 $ 804 $ 776 $ 1,127
Web advertising............... 23 34 167 867 531 538 693 1,193 1,322
Traditional media
advertising................. -- -- -- -- 91 117 360 374 517
Other......................... 15 28 71 17 18 18 50 53 210
------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues.......... 51 140 455 1,110 1,087 1,467 1,907 2,396 3,176
Cost of revenues (excluding
depreciation and
amortization)................. 45 58 207 992 469 593 995 893 1,225
------- ------- ------- ------- ------- ------- ------- ------- -------
6 82 248 118 618 874 912 1,503 1,951
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Operations and development.... 128 233 371 774 650 1,128 1,285 1,597 2,247
Sales and marketing........... 47 106 213 351 519 780 908 1,183 1,671
General and administrative.... 46 84 273 347 398 257 338 425 589
Depreciation and
amortization................ 119 128 142 156 176 223 315 414 442
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 340 551 999 1,628 1,743 2,387 2,846 3,619 4,949
------- ------- ------- ------- ------- ------- ------- ------- -------
Net operating loss...... (334) (469) (751) (1,510) (1,125) (1,513) (1,934) (2,116) (2,998)
Interest and other income....... 1 2 17 56 62 61 39 52 276
------- ------- ------- ------- ------- ------- ------- ------- -------
Net loss................ $ (333) $ (467) $ (734) $(1,454) $(1,063) $(1,452) $(1,895) $(2,064) $(2,722)
======= ======= ======= ======= ======= ======= ======= ======= =======
Basic and diluted net loss per
share......................... $ (.04) $ (.05) $ (.07) $ (.13) $ (.09) $ (.12) $ (.16) $ (.17) $ (.19)
======= ======= ======= ======= ======= ======= ======= ======= =======
Shares used in the net loss per
share calculations............ 7,956 9,382 10,018 10,846 11,428 11,675 11,681 11,930 14,076
</TABLE>

28
<PAGE> 33

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
------------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31,
1996 1996 1996 1996 1997 1997 1997 1997 1998
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Business services............. 25.8% 55.9% 47.8% 20.4% 41.1% 54.1% 42.2% 32.4% 35.5%
Web advertising............... 44.1 24.4 36.7 78.1 48.9 36.7 36.3 49.8 41.6
Traditional media
advertising................. -- -- -- -- 8.3 8.0 18.9 15.6 16.3
Other......................... 30.1 19.7 15.5 1.5 1.7 1.2 2.6 2.2 6.6
------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues (excluding
depreciation and
amortization)................. 88.1 41.3 45.4 89.3 43.2 40.4 52.1 37.3 38.6
------- ------- ------- ------- ------- ------- ------- ------- -------
11.9 58.7 54.6 10.7 56.8 59.6 47.9 62.7 61.4
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Operations and development.... 248.3 166.9 81.7 69.7 59.8 76.9 67.4 66.6 70.8
Sales and marketing........... 91.4 75.9 46.9 31.6 47.8 53.2 47.6 49.4 52.6
General and administrative.... 89.3 60.4 60.1 31.4 36.5 17.5 17.8 17.7 18.5
Depreciation and
amortization................ 230.6 91.1 31.1 14.1 16.2 15.2 16.5 17.3 13.9
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses.............. 659.6 394.3 219.8 146.8 160.3 162.8 149.3 151.0 155.8
------- ------- ------- ------- ------- ------- ------- ------- -------
Net operating loss...... (647.7) (335.6) (165.2) (136.1) (103.5) (103.2) (101.4) (88.3) (94.4)
Interest and other income....... 1.7 1.5 3.7 5.1 5.7 4.2 2.0 2.1 8.7
------- ------- ------- ------- ------- ------- ------- ------- -------
Net loss................ (646.0)% (334.1)% (161.5)% (131.0)% (97.8)% (99.0)% (99.4)% (86.2)% (85.7)%
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

FACTORS AFFECTING OPERATING RESULTS

The Company's operating results have varied on a quarterly basis during its
short operating history and may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside the Company's control.
Factors that may affect the Company's quarterly operating results include, but
are not limited to, (i) the cost of acquiring and the availability of content,
(ii) the demand for the Company's business services, (iii) demand for Internet
advertising, (iv) seasonal trends in Internet and advertising placements, (v)
the advertising cycles for, or the addition or loss of, individual advertisers,
(vi) the level of traffic on the Company's Web sites, (vii) the amount and
timing of capital expenditures and other costs relating to the expansion of the
Company's operations, (viii) price competition or pricing changes in Internet
broadcasting services, such as the Company's Internet advertising and business
services, (ix) the seasonality of the content of the Company's broadcasts, such
as sporting and other events, (x) the level of, and seasonal trends in, the use
of the Internet, (xi) technical difficulties or system downtime, (xii) the cost
to acquire sufficient bandwidth to integrate efficient broadcast technologies,
such as multicasting, to meet the Company's needs, (xiii) the mix of unicasting
and multicasting from the Company's Web sites, (xiv) the introduction of new
products or services by the Company or its competitors and (xv) general economic
conditions and economic conditions specific to the Internet such as electronic
commerce and online media. Any one of these factors could cause the Company's
revenues and operating results to vary significantly in the future. In addition,
as a strategic response to changes in the competitive environment, the Company
may from time to time make certain pricing, service or marketing decisions or
acquisitions that could cause significant declines in the Company's quarterly
operating results.

The Company's limited operating history and the emerging nature of its
markets make prediction of future revenues difficult. The Company's expense
levels are based, in part, on its expectations with regard to future revenues,
and to a large extent such expenses are fixed, particularly in the short term.
There can be no assurance that the Company will be able to predict its future
revenues accurately and the Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in relation to the Company's expectations could cause
significant declines in the Company's quarterly operating results.

Due to all the foregoing factors, the Company's quarterly revenues and
operating results are difficult to forecast. The Company believes that its
quarterly revenues, expenses and operating results could vary significantly in
the future, and that period-to-period comparisons should not be relied upon as
indications of

29
<PAGE> 34

future performance. Due to the foregoing factors, it is likely that in some
future quarters the Company's operating results will fall below the expectations
of securities analysts and investors, which could have a material adverse effect
on the trading price of the Common Stock.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations through
private sales of Common Stock and warrants. Net proceeds from these sales from
inception to March 31, 1998 have totaled approximately $40.8 million. At March
31, 1998, the principal source of liquidity for the Company was approximately
$22.4 million of cash and cash equivalents. In April 1998, the Company entered
into an operating lease facility which provides for up to $2.5 million for
equipment, of which the Company has utilized approximately $550,000 as of April
30, 1998. In addition, in December 1997 the Company entered into a line of
credit that provides for borrowings up to $2.5 million for working capital needs
and equipment purchases. As of March 31, 1998 the Company had not made any
borrowings against this line of credit.

Net cash used in operating activities was $30,000, $4.3 million and $6.6
million in the Inception Period, 1996 and 1997, respectively. For the three
month period ended March 31, 1998, net cash used in operating activities was
$1.8 million. Net cash used in operating activities in all such periods was
primarily attributable to net losses, offset in part by increases in accounts
payable and accrued liabilities.

Net cash used in investing activities was $414,000, $1.3 million and $2.7
million in the Inception Period, 1996 and 1997, respectively. For the three
month period ended March 31, 1998, net cash used in investing activities was
$983,000. Net cash used in investing activities in all such periods was
primarily related to purchases of property and equipment.

Net cash provided by financing activities was $586,000, $10.0 million and
$26.1 million in the Inception Period, 1996 and 1997, respectively. For the
three month period ended March 31, 1998, net cash provided by financing
activities was $3.8 million. Net cash provided by financing activities resulted
primarily from the issuances of Common Stock.

The Company believes that the net proceeds from this offering, together
with its current cash and cash equivalents, will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months. The Company may need to raise additional funds through
public or private financings, or other arrangements. There can be no assurance
that such additional financings, if needed, will be available on terms
attractive to the Company, if at all. Failure of the Company to raise capital
when needed could have a material adverse effect on the Company's business,
results of operations and financial condition. If additional funds are raised
through the issuance of equity securities, the percentage ownership of the
Company's then-current stockholders would be reduced. Furthermore, such equity
securities might have rights, preferences or privileges senior to those of the
Company's Common Stock.

YEAR 2000 COMPLIANCE

There are issues associated with the programming code in existing computer
systems as the year 2000 approaches. The "year 2000 problem" is pervasive and
complex, as virtually every computer operation will be affected in some way by
the rollover of the two digit year value to 00. The issue is whether computer
systems will properly recognize date sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail. The Company is in the process of
working with its software vendors to assure that the Company is prepared for the
year 2000. The Company has not verified that companies doing business with it
are year 2000 compliant. The Company does not anticipate that it will incur
significant operating expenses or be required to invest heavily in computer
systems improvements to be year 2000 compliant. However, significant uncertainty
exists concerning the potential costs and effects associated with year 2000
compliance. Any year 2000 compliance problem of either the Company or its users,
customers or advertisers could have a material adverse effect on the Company's
business, results of operations and financial condition.

30
<PAGE> 35

NET OPERATING LOSS CARRYFORWARDS

As of December 31, 1997, the Company had available net operating loss
carryforwards totaling $10.3 million, which expire beginning in 2011. See Note 5
of Notes to the Financial Statements included elsewhere herein. The Tax Reform
Act of 1986 imposes limitations on the use of net operating loss carryforwards
if certain stock ownership changes have occurred or could occur in the future.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("FAS
130"). FAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. Reclassification of financial
statements for earlier periods provided for comparative purposes is required
upon adoption. FAS 130 is effective for fiscal years beginning after December
15, 1997. The Company has adopted FAS 130 for the year ending December 31, 1998.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosure About Segments of an
Enterprise and Related Information ("FAS 131"). FAS 131 establishes standards
for the way that public business enterprises report information about operating
segments and requires those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. FAS 131
is effective for financial statements for periods beginning after December 15,
1997. The Company will adopt the reporting requirements of FAS 131 in its
financial statements for the year ending December 31, 1998.

On March 4, 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use ("SOP 98-1"). SOP 98-1 requires computer software costs related
to internal use software that are incurred in the preliminary project stage
should be expensed as incurred. Once the capitalization criteria of SOP 98-1
have been met, external direct costs of materials and services consumed in
developing or obtaining internal-use computer software; payroll and
payroll-related costs for employees who are directly associated with and who
devote time to the internal-use computer software project (to the extent of the
time spent directly on the project); and interest costs incurred when developing
computer software for internal use should be capitalized. SOP 98-1 is effective
for financial statements for fiscal years beginning after December 15, 1998.
Accordingly, the Company will adopt SOP 98-1 in its financial statements for the
year ending December 31, 1999. The Company does not believe the adoption of SOP
98-1 will have a material effect on the Company's results of operations or
financial condition.

31
<PAGE> 36

BUSINESS

Broadcast.com inc. (formerly AudioNet, Inc.) is the leading aggregator and
broadcaster of streaming media programming on the Web with the network
infrastructure and expertise to deliver or "stream" hundreds of live and
on-demand audio and video programs over the Internet to hundreds of thousands of
users. The Company's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming, including sports, talk and music
radio, television, business events, full-length CDs, news, commentary and
full-length audio-books. The Company broadcasts on the Internet 24 hours a day
seven days a week, and its programming includes more than 345 radio stations and
networks, 17 television stations and cable networks and game broadcasts and
other programming for over 350 college and professional sports teams. The
Company licenses such programming from content providers, in most cases under
exclusive, multi-year agreements. The Company's Business Services Group provides
cost-effective Internet and intranet broadcasting services to businesses and
other organizations. These business services include the turnkey production of
press conferences, earnings conference calls, investor conferences, trade shows,
stockholder meetings, product introductions, training sessions, distance
learning telecourses and media events. In addition to its business services, the
Company derives revenues from the sale of advertising on its Web sites,
including gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads, as well as the sale of
radio and television ad spots the Company receives from stations in exchange for
broadcasting their programming over the Internet. In March 1998, the Company's
Web sites served a daily average of over 400,000 unique users and its principal
Web site was ranked in the top 20 among all News/ Information/Entertainment
sites according to Media Metrix.

The Company believes it has accomplished numerous Internet achievements
since its initial live broadcast in September 1995, including the Internet
broadcast of the first live commercial radio station, first live sporting event,
first live corporate quarterly earnings call and first live stockholders'
meeting. The Company's early entrance into the Internet broadcasting market has
enabled the Company to establish strong brand recognition for its broadcasts and
services and to form relationships with a diverse range of content providers.
The Company currently offers content from a variety of sources including radio
and television, college and professional sports teams and leagues, production
and film studios and record labels. The Company has broadcast over 11,000 live
events such as the last three NFL Super Bowls and NCAA Basketball Tournaments,
the Stanley Cup Playoffs, the entire 1997-98 season for 24 of the 26 NHL teams,
game broadcasts for the entire season of over 300 college teams, the premiere
event for the movie "Titanic," Blockbuster Rockfest '97 and backstage interviews
from the 1998 Academy Awards Webcast. The Company has also amassed over 50,000
hours of on-demand broadcast programming, including over 2,100 full-length music
CDs, sports programming, talk radio and business and media events.
Broadcast.com's business services customers include the American Bar
Association, AT&T, Charles Schwab, Comerica, GartnerGroup, Harvard University,
Intel, Microsoft, Motorola, PR Newswire, Texas Instruments and more than 290
other organizations. Business services broadcasts have originated from 36 states
and nine countries.

In May 1998, the Company changed its name from AudioNet, Inc. to
broadcast.com inc. to better represent the diversity of its programming and
services and to continue developing the Company's brand as a complete Internet
content aggregator, broadcaster and distributor.

INDUSTRY BACKGROUND

The Internet has grown rapidly in recent years, spurred by developments
such as easy-to-use Web browsers, the availability of multimedia PCs, the
adoption of more robust network architectures and the emergence of compelling
Web-based content and commerce applications. The broad acceptance of the
Internet Protocol ("IP") standard has also led to the emergence of intranets and
the development of a wide range of non-PC devices that allow users to access the
Internet and intranets. International Data Corporation ("IDC") estimates that
the number of Web users worldwide will increase from approximately 69 million at
the end of 1997 to approximately 320 million by the end of 2002.

Much of the Internet's rapid evolution towards becoming a mass medium can
be attributed to the accelerated pace of technological innovation, which has
expanded the Web's capabilities and improved users'

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experiences. Most notably, the Internet has evolved from a mass of static,
text-oriented Web pages and email services to a much richer environment, capable
of delivering graphical, interactive and multimedia content. Prior to the
development of streaming media technologies, users could not play back audio and
video clips until the content was downloaded in its entirety. As a result, live
Internet broadcasts were not possible. The development of streaming media
products from companies such as Microsoft and RealNetworks enables the
simultaneous transmission and playback (i.e., the Internet broadcast) of
continuous "streams" of audio and video content over the Internet and intranets.
These technologies have evolved to deliver audio and video over widely used 28.8
kbps narrow bandwidth modems, yet can scale in quality to take advantage of
higher speed access that is expected to be provided by xDSL, cable modems and
other emerging broadband technologies.

Broadcasting audio and video content over the Internet offers certain
opportunities that are not generally available from traditional media. Currently
available analog technology and government regulations limit the ability of
radio and television stations to broadcast beyond certain geographic areas.
Radios and televisions are not widely used in office buildings and other
workplaces, where Internet access has become commonplace. Traditional business
communication tools such as audio conferencing and videoconferencing can be
costly, non-targeted, and inconvenient. In addition, traditional broadcasters
are limited in their ability to measure or identify in real time the listeners
or viewers of a program. By using the Internet, targeted streaming media content
can be broadcast to a geographically dispersed audience of customers, suppliers,
employees and stockholders at relatively low costs. Internet users can interact
with the broadcast content by responding to online surveys, voting in polls and
obtaining additional information. In addition, Internet broadcasters can provide
highly specific information about a program's audience to content providers,
advertisers and users of Internet business services. The convergence of the
Internet's capabilities and attributes has accelerated its acceptance as a
business tool, leading to rapidly growing economic opportunities in Web-based
advertising and business service offerings, including audio conferencing,
electronic commerce and video transmission, among others.

The Company believes that several challenges must be overcome to realize
cost-effective Internet broadcasting: aggregating diverse and compelling
content, scaling Internet broadcasts from small to large audiences, deploying
new transmission and streaming technologies in a timely manner and providing
multimedia advertisements and services. In order to aggregate content, Internet
broadcasters must rapidly identify and secure licensing opportunities by
demonstrating to content providers broad based distribution and the ability to
deliver associated traffic. Successful Internet broadcasters serving a large
number of simultaneous users around the clock also need to design, develop and
integrate complex network elements, which include extensive bandwidth, streaming
licenses, equipment and technical expertise. The rapid evolution of streaming
media technologies requires Internet broadcasters to support multiple vendors,
an investment which few companies have made. The Company believes, therefore,
that a successful Internet broadcaster must develop a well-branded,
highly-trafficked Web site which offers compelling content, a network capable of
streaming audio and video programming to large audiences 24 hours a day seven
days a week and an organization which can deliver quality broadcasting services
to advertisers and businesses.

THE BROADCAST.COM SOLUTION

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believes it has established a significant brand for its broadcasts and services
on the Internet due to its breadth of content, audience size and distribution
capabilities. In addition, the Company's Web sites provide an attractive
platform for advertisers seeking to target specific users with rich, compelling
advertising solutions. Key elements of the broadcast.com solution include:

LARGE AGGREGATION OF STREAMING MEDIA CONTENT

Broadcast.com's Web sites offer a large and comprehensive selection of live
and on-demand audio and video programming on the Internet, including sports,
talk and music radio, television, business events, full-length CDs, news,
commentary and audio-books. The Company currently has Internet broadcasting
rights for more than 345 radio stations and networks, 17 television stations and
cable networks and over 350 college and professional sports teams. The Company
has also amassed over 50,000 hours of on-demand broadcast programming, including
over 2,100 full-length music CDs, sports programming, talk radio and business
and media events. Broadcast content providers include the NFL, the NHL, Major
League Baseball, CNN, BBC World Service, SFX Broadcasting, Inc. ("SFX"),
Learfield Communications, Inc. ("Learfield Communications") and over 200 record
labels. The Company believes that its content aggregation has established
www.broadcast.com as a leading destination for Internet users seeking streaming
media content and also for multimedia content providers and advertisers seeking
to reach large online audiences. This leading position, combined with the
Company's broadcast networking capabilities and experience in establishing
content relationships, further enables broadcast.com to attract compelling
programming.

LEADING PROVIDER OF INTERNET BUSINESS SERVICES BROADCASTS

The Company leverages its network infrastructure and expertise by providing
Internet and intranet broadcasting and distribution services to businesses and
other organizations. The Company's business services enable customers to conduct
cost-effective Internet or intranet broadcasts of live and on-demand business
and educational programming, including press conferences, quarterly earnings
conference calls, investor conferences, trade shows, stockholder meetings,
product introductions, training sessions, distance learning opportunities and
media events, tailored to each such customer's needs. The Company believes that
these services differentiate its content and broaden its revenue base. The
Company's business services customers include the American Bar Association,
AT&T, Charles Schwab, Comerica, GartnerGroup, Harvard University, Intel,
Microsoft, Motorola, PR Newswire, Texas Instruments and more than 290 other
organizations. Business services broadcasts have originated from 36 states and
nine countries.

LEADING INTERNET BROADCAST NETWORK INFRASTRUCTURE

The Company's network infrastructure and expertise permits the Company to
stream hundreds of live and on-demand audio and video programs over the Internet
to hundreds of thousands of users. Broadcast.com's distribution network can
support over 500 simultaneous live events and includes approximately 580
multimedia servers that support multiple streaming technologies. These servers
are linked through direct 45 Mbps (millions of bits per second) and 155 Mbps
connections to major Internet backbone providers including GTE Internetworking
("GTEI"), MCI, Sprint Corporation ("Sprint") and UUNET Technologies, Inc.
("UUNET"), which, in turn, connect to over 80% of the downstream ISPs. The
Company believes that direct connections to the major backbone providers help to
enhance the end-user experience by avoiding the congestion of public peering
points which can cause transmission delays or packet loss. The Company believes
that its broadcast network infrastructure provides it with the flexibility to
implement new software, hardware and system developments without incurring
substantial redesign costs or down time. See "--Network."

BRANDED DISTRIBUTION

The Company believes it has established a leading brand for streaming media
content through its Web sites, which have been ranked by Media Metrix as among
the Internet's most frequently visited destinations. The Company drives traffic
to its sites and enhances brand awareness through strategic relationships with
key

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Internet companies. The Company has established increased visibility among
Internet users through its relationships with Yahoo!, RealNetworks and
Microsoft, among others. See "--Strategic Relationships."

DIFFERENTIATED, INTERACTIVE MULTIMEDIA ADVERTISING

Broadcast.com offers exclusive and comprehensive audio and video
programming that can be targeted to specific audiences and demographics.
Additionally, unlike Web sites that offer only text-based banner ads, the
Company offers multimedia packages incorporating custom audio and video
applications such as gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads. Because the Company
receives commercial spots from its radio and television station content
providers, the Company also provides advertisers with the opportunity to bundle
Web and traditional media advertising. Finally, the Company offers advertisers
the ability to insert Internet-only commercials within existing broadcast.com
programming. See "--Sales and Marketing--Web Advertising."

STRATEGY

The Company's objective is to enhance its leadership position in Internet
broadcasting by aggregating comprehensive audio and video programming,
preferably on an exclusive basis, and providing services enabling the delivery
of a broad range of streaming media content over the Internet. Key elements of
the Company's strategy include the following:

ENHANCE AND EXPAND EXCLUSIVE CONTENT OFFERINGS

Broadcast.com seeks to provide the most comprehensive audio and video
programming on the Internet. To this end, the Company's objective is to acquire
exclusive, long-term Internet broadcast rights to streaming media content
provided by radio and television stations, networks and ownership groups,
college and professional sports teams and leagues, production and film studios,
record labels and other content providers.

FURTHER PENETRATE THE BUSINESS SERVICES MARKET

The Company's broadcast services enable businesses and other organizations
to improve communication with, and the dissemination of information to,
customers, suppliers, employees and the investment community. The Company
believes that its network infrastructure, combined with the local and global
reach of the Internet, provides business services customers with lower
transmission costs than conventional broadcast and communications systems and
enables these customers to access both large and small target audiences. The
Company intends to continue to rapidly expand, enhance and optimize its turnkey
broadcasting solutions to continue to enhance the broadcast experience for its
business services customers. See "--Sales and Marketing--Business Services."

EXPAND NETWORK INFRASTRUCTURE

Broadcast.com intends to expand its network infrastructure through the
acquisition and deployment of additional network equipment, bandwidth and
broadcast scaling technologies. As part of its network expansion strategy, the
Company is deploying its multicast network which is designed to provide
streaming media content to hundreds of thousands of users simultaneously through
one-to-many Internet connections. The Company has entered into agreements with
over 30 ISPs and UUNET and is building the first large-scale commercial
multicast network, which provides the Company with access to over 400,000
dial-up multicast ports. The Company is developing software to more efficiently
handle the broadcast of hundreds of simultaneous live events and has developed
proprietary software to handle broadcast blackouts, remote monitoring and remote
server access. Although streaming video over the Internet does not currently
offer broadcast television equivalent quality to a broad base of users, the
Company believes that the quality of and demand for Internet video broadcasts
will continue to improve as broadband Internet access technologies such as xDSL
and cable modems become more commonly available. Further, the Company believes
that video is an important and essential element in the future of Internet
broadcasting. Accordingly, the broadcast.com

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network has been video enabled and supports multiple leading video streaming
technologies including RealNetwork's RealVideo and Microsoft's NetShow. See
"--Network."

ENHANCE BRAND AWARENESS

In order to maximize its broadcast audience, broadcast.com (formerly
AudioNet) seeks to co-brand its programming with other popular content providers
in addition to providing access to its programming directly through its own Web
sites. These relationships typically allow the co-branding partner to present
broadcast.com's or its partners' programming through a link on the partner's Web
site. To date, the Company has focused on co-branding its sports, music and
entertainment content and intends to expand this effort to cover its news and
business programming, talk shows and audio-books. Current co-branding
arrangements include a recent Yahoo! co-promotion agreement which gives the
Company prominent co-branded access to Yahoo!'s audience. Other co-branding
relationships include RealNetworks, Microsoft, CNN, NHL and USA Today. In
addition, the Company's radio and television content providers typically grant
the Company a certain number of weekly commercial spots, which the Company can
use for self-promotion. Radio and television stations also extend brand
awareness for broadcast.com through on-air mentions during their broadcasts.

CAPTURE AND DEVELOP EMERGING REVENUE OPPORTUNITIES

Broadcast.com intends to capture strategic revenue growth opportunities as
user demand increases and technological developments become more widely adopted.
Such opportunities are expected to include pay-per-listen/view applications,
fee-based sharing of the Company's exclusive content on other Web sites and
electronic commerce opportunities.

PROGRAMMING

The Company believes its Web sites offer a large and comprehensive
selection of live and on-demand audio and video programming on the Internet,
including live continuous broadcasts of over 345 radio stations and networks, 17
television stations and cable networks, game broadcasts of more than 350 college
and professional sports teams and over 50,000 hours of on-demand programming,
including over 2,100 full-length music CDs, sports programming, talk radio and
business and media events. The www.broadcast.com Web site is organized into
content channels. The following is a description of certain elements of
broadcast.com's programming, illustrating the breadth and depth of its content:

SPORTS

The Company believes that it provides the most comprehensive live and
on-demand broadcasting of sporting events on the Internet. The Company's early
entrance into Internet broadcasting has allowed it to establish relationships
with a broad range of sports teams and leagues. Broadcast.com has the Internet
broadcasting rights for certain sporting events, including football and
basketball in most cases, for 98 colleges and universities participating in NCAA
Division IA athletics, over 95% of which are on an exclusive basis. In addition,
the Company is the exclusive streaming media partner for 24 of the 26 NHL teams
and broadcasts on behalf of Major League Baseball most regular season and
playoff games. The Company has handled the Internet broadcast for the last three
Super Bowls, the 1998 Kentucky Derby and the Boston Marathon. In the case of
such special events, the Company often broadcasts complementary programming such
as stadium announcer press box feeds and full-length post-game press conferences
with players and coaches in lieu of, or in addition to, the game broadcast.
Broadcast.com typically archives audio game broadcasts until the next game is
played so users can access sporting events they may have missed. In addition, a
"Great Games" section contains archives of a wide variety of classic match-ups
for fans to access at any time. The Company is expanding its sports coverage to
include video programming as well, including recent arrangements with the NHL
and PGA TOUR.

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The following table illustrates the breadth of the sports content the
Company is currently broadcasting, or has broadcast.

broadcast.com SPORTS PROGRAMMING

NATIONAL HOCKEY LEAGUE
Anaheim Mighty Ducks
Boston Bruins
Buffalo Sabres
Calgary Flames
Carolina Hurricanes
Colorado Avalanche
Dallas Stars
Detroit Red Wings
Edmonton Oilers
Florida Panthers
Los Angeles Kings
Montreal Canadiens
New Jersey Devils
New York Islanders
New York Rangers
Ottawa Senators
Phoenix Coyotes
Pittsburgh Penguins
San Jose Sharks
St. Louis Blues
Tampa Bay Lightning
Toronto Maple Leafs
Vancouver Canucks
Washington Capitals

MAJOR LEAGUE BASEBALL
Anaheim Angels
Arizona Diamondbacks
Baltimore Orioles
Chicago White Sox
Cincinnati Reds
Cleveland Indians
Houston Astros
New York Mets
New York Yankees
Oakland Athletics
Philadelphia Phillies
San Diego Padres
San Francisco Giants
St. Louis Cardinals
Texas Rangers

GOLF

PGA TOUR

PGA of America

Senior Tour

USGA
Golf Majors

Nike Tour

MAJOR LEAGUE SOCCER
Chicago Fire
Colorado Rapids
Columbus Crew
D.C. United
NY/NJ Metrostars
Dallas Burn
Kansas City Wizards
Los Angeles Galaxy
Miami Fusion F.C.
New England Revolution
San Jose Clash
Tampa Bay Mutiny

AUTO RACING
Selected In-car radio and events:
ARCA
CART
NASCAR Winston Cup
NASCAR Busch Series
Toyota Atlantic

PRO FOOTBALL

1997 NFL Training Camp

Arena Football

Canadian Football League

1997 Grey Cup (CFL)

NFL Europe - Audio and Video

NFL pre- and post-game

coverage

Super Bowls XXX, XXXI

and XXXII

HORSE RACING
Belmont Stakes
Kentucky Derby
Preakness Stakes
Breeder's Cup
Keeneland
Lone Star Park Racing
Meadowlands
Oaklawn
Santa Anita

PRO BASKETBALL
1996 NBA Draft
1997 Continental Basketball
Association Finals and
All-Star Game
American Basketball League
Finals and All-Star Game
NBA Championship Press
Conferences

OTHER SPORTS COVERAGE

Boston Marathon

Continental Indoor Soccer League

HBO World Championship

Boxing: Prince Hamed

vs. Kevin Kelly

Minor League Baseball

Minor League Hockey

NBC 1996 Atlanta

Olympics Interviews

Tour de France

United States Olympic

Committee Press

Conferences

NCAA COLLEGES AND UNIVERSITIES

Air Force Academy Falcons
Alabama Crimson Tide
Alaska-Fairbanks Nanooks
Arizona Wildcats
Arizona State Sun Devils
Arkansas Razorbacks
Baylor Bears
Boise State Broncos
Boston University Terriers
Brigham Young Cougars
Bucknell Bison
Cal-Berkeley Bears
Cal State Fullerton Titans
Central Florida Golden Knights
Central Michigan Chipawas
Clemson Tigers
Colorado Buffaloes
Connecticut Huskies
Cornell Big Red
Dayton Flyers
Denver Pioneers
Duke Blue Devils
East Carolina Pirates
Florida Gators
Florida State Seminoles
Fresno State Bulldogs
George Washington Colonials
Georgetown Hoyas
Georgia Bulldogs
Georgia Tech Yellow Jackets
Harvard Crimson
Hawaii Rainbows
Houston Cougars
Idaho Vandals
Illinois State Redbirds
Illinois-Chicago Flames
Indiana Hoosiers
Iowa Hawkeyes
Iowa State Cyclones
James Madison Dukes
Kansas Jayhawks
Kansas State Wildcats
Kentucky Wildcats
Lamar Cardinals
Long Beach State 49ers
Louisiana State Tigers
Louisiana Tech Bulldogs
Louisville Cardinals
Marquette Golden Eagles
Marshall Thundering Herd
Maryland Terrapins
Massachusetts Minutemen
Memphis Tigers
Miami (Florida) Hurricanes
Miami (Ohio) Redhawks
Michigan State Spartans
Mississippi Rebels
Mississippi State Bulldogs
Missouri Tigers
Naval Academy Midshipmen
UNC Tar Heels
UNC-Charlotte 49ers
Nebraska Cornhuskers
New Hampshire Wildcats
New Mexico Lobos
North Carolina St. Wolfpack
North Texas Eagles
Northern Arizona Lumberjacks
Notre Dame Fighting Irish
Ohio Bobcats
Oklahoma Sooners
Oklahoma State Cowboys
Oregon Ducks
Oregon State Beavers
Penn State Nittany Lions
Pepperdine Waves
Pittsburgh Panthers
Princeton Tigers
Purdue Boilermakers
Rhode Island Rams
Rice Owls
Rutgers Scarlet Knights
San Diego State Aztecs
San Francisco Dons
San Jose State Spartans
SE Louisiana Lions
Seton Hall Pirates
SMU Mustangs
South Carolina Gamecocks
South Florida Bulls
Southern Miss. Golden Eagles
St. John's Red Storm
St. Louis Billikens
Stanford Cardinal
SW Louisiana Cajuns
Syracuse Orangemen
TCU Horned Frogs
Tennessee Volunteers
Texas Longhorns
Texas-El Paso Miners
Texas A&M Aggies
Texas Tech Red Raiders
Toledo Rockets
Tulane Green Wave
Tulsa Hurricanes
UCLA Bruins
UNLV Rebels
USC Trojans
Utah Utes
Vanderbilt Commodores
Villanova Wildcats
Virginia Cavaliers
VA Commonwealth Rams
Virginia Tech Hokies
Wake Forest Demon Deacons
Washington Huskies
Washington State Cougars
West Virginia Mountaineers
Western Kentucky Hilltoppers
Western Michigan Broncos
William and Mary Tribe
Wisconsin Badgers
Wright State Raiders

Wyoming Cowboys

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RADIO

Broadcast.com is the leading Internet broadcaster of radio programming, and
has rights to broadcast more than 345 stations based in over 110 cities, in most
cases under exclusive multi-year agreements. The Company's relationships with
radio stations and networks provide it with content from 18 of the nation's top
20 radio markets. The Company has benefited from its ability to license radio
content from ownership groups, such as a group of over 40 stations now part of
Clear Channel Communications and a group of 72 stations which will be part of
Capstar Broadcasting Corporation ("Capstar") following completion of its
acquisition of SFX. Broadcast.com's radio programming spans all formats, from
talk shows and news programs to country music and classic rock. The Company's
audience benefits from the ability to receive local radio programming in-office
and from outside the listener's geographic area, allowing users to select from
hundreds of stations and dozens of formats. Broadcast.com archives selected talk
radio programming so users can listen to their favorite shows and hosts when
unable to listen to the live broadcast. Thousands of hours are currently
available on demand for popular nationally syndicated hosts including Dr. Laura
Schlessinger and Jim Rome.

TELEVISION

Broadcast.com has begun expanding its content aggregation strategy into
television programming. The Company currently has video Internet broadcasting
rights for 17 stations and cable networks, including Court TV and programming
originated by affiliated local television stations such as WFAA-TV Dallas, one
of ABC's top-rated local news stations. The Company provides archives of
newscasts so users can access the latest information on breaking news 24 hours a
day seven days a week from their home or office. The Company believes that the
emergence of broadband Internet access technologies such as xDSL, cable modems
and other technologies have the potential to increase the demand for and quality
of Internet-delivered video content, leading to a convergence of the Internet
and television.

BUSINESS

The Company is a leading aggregator of audio and video media business
related content. In addition to the thousands of hours of events and special
programming offered live and on demand from the Company's business services
customers, the Company has also aggregated content from other sources to provide
a complete business content channel. The Company offers hourly stock market
updates, video interviews and features from CNBC/Dow Jones Business Video,
business shows such as "Wall Street Review" and other business programming from
its selection of radio and television content providers. Broadcast.com has
broadcast quarterly earnings conference calls from companies such as Intel,
Texaco, Inc. ("Texaco"), Texas Instruments and Yahoo!; product launches from
Asymetrix Corporation ("Asymetrix"), Microsoft and Sybase, Inc. ("Sybase"); and
keynote speeches from industry leaders such as Intel's Andy Grove, Hewlett
Packard's Lewis Platt, Microsoft's Bill Gates and Dell's Michael Dell.
Broadcast.com also provides supplemental data to accompany Internet broadcasts,
such as proprietary database registration services and real-time audience
measurement. See "--Business Services."

ENTERTAINMENT

The Company provides Internet broadcasting services to entertainment and
media companies, film studios, broadcast networks and other content providers.
Content providers utilize broadcast.com's distribution network, technology,
services, Web site promotions and sizable audience base to deliver and drive
traffic to high profile events. Examples include: all live and on-demand
Webcasts of 1998 Academy Awards coverage with ABC.com, including red-carpet
arrivals and backstage interviews in their entirety (which received
approximately 600,000 video views), "The ER Live" Webcast, a co-venture between
Warner Bros. Online and NBC Multimedia, Inc. for the 1997 season premiere for
their top-rated television program and numerous broadcasts of coverage from
movie premieres and parties, including "Titanic."

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MUSIC

Through the broadcast.com Jukebox, the Company believes it offers the
largest selection of full-length CDs available for listening on demand over the
Internet, currently numbering over 2,100 titles. The Company has entered into
agreements with over 200 record labels to broadcast certain of their CDs in
their entirety. Interscope Records recently entered into an agreement to
establish broadcast.com as Interscope's preferred Internet broadcasting
solution. Broadcast.com hosts frequent "listening parties" which feature
scheduled CD broadcasts of many of Interscope's artists on www.broadcast.com,
including No Doubt and the Wallflowers. In addition, the Company plans to
broadcast an Interscope Internet-only radio station that will be available 24
hours a day and feature Interscope artists and special events. To expand its
Jukebox selections, the Company intends to continue to form relationships with
leading record companies. Broadcast.com and College Music Journal have recently
developed The Internet Broadcast Chart, a compilation of the most frequently
streamed songs from a representative sampling of Internet broadcasters. Current
customer feedback indicates that listeners use the broadcast.com Jukebox as a
way to sample new music and, in turn, purchase CDs that they enjoy. Accordingly,
the Company believes that its Jukebox will provide an attractive platform for
record labels and musicians to promote and sell their recordings over the
Internet through broadcast.com. For example, Willie Nelson has recently teamed
with broadcast.com in a co-promotion deal with Yahoo! and CDnow to promote and
sell his latest studio recording for an exclusive period on the Internet prior
to its general public release.

OTHER PROGRAMMING

The Company has aggregated thousands of hours of live and on-demand content
in several other channels, providing broadcast.com users with a comprehensive
selection of streaming media programming on the Company's Web sites. An
illustrative list follows:

<TABLE>
<CAPTION>
CHANNEL EXAMPLES
------- --------
<S> <C>
AudioBooks Over 360 full length audio-books including:
Charles Dickens' "The Lawyer and the Ghost"
Gore Vidal's "Kalki"
Education Distance Learning from University of Texas System and
Rutgers University
John F. Kennedy School of Government at Harvard University
University of Wisconsin Distance Learning Telecourse
News BBC World Service
CNN Audioselect
Over 47 leading news radio and television stations across
the country
Public Affairs C-SPAN
White House Millennium Series with Stephen Hawking
U.S. Department of State Daily Press Briefings
Special Interest policescanner.com
Best of Dr. Laura Schlessinger
Art Bell
Spiritual Focus on the Family with James Dobson
Family Life Today
For Faith and Family
Technology CMP Net Insider
The Computer Broadcast Network
The Silicon Alley Reporter
</TABLE>

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BUSINESS SERVICES

The Company's Business Services Group provides cost-effective Internet and
intranet broadcasting services to businesses and other organizations. These
business services include turnkey production of press conferences, earnings
conference calls, investor conferences, tradeshows, stockholder meetings,
product introductions, training sessions, distance learning telecourses and
media events. Since January 1997, the Company has broadcast over 1,000 business
services events for customers such as the American Bar Association, AT&T,
Charles Schwab, Comerica, GartnerGroup, Harvard University, Intel, Microsoft,
Motorola, PR Newswire, Texas Instruments and more than 290 other organizations.
Business services broadcasts have originated from 36 states and nine countries.

COST-EFFECTIVELY REACHING THE IN-OFFICE USER

The proliferation of multimedia enabled networked personal computers and
other Internet-attached devices in the workplace has created the opportunity for
businesses to use the Internet and intranet to cost-effectively broadcast
streaming media communications to access both large and small targeted
audiences. The Company is able to broadcast events to users who can view and
listen to such broadcasts uninterrupted while continuing to perform other tasks
on their computer.

DELIVERING TURNKEY BROADCASTING SOLUTIONS

The Company delivers turnkey Internet broadcasting solutions by providing
analysis, telecommunications and, if necessary, on-site equipment and personnel
to its business services customers. Based on the expertise gained from
broadcasting more than 1,000 business services and over 10,000 other live
events, the Company determines the most effective way to capture the broadcast
feed, whether by satellite, coupler or on-site with a team of its engineers.
Once captured, the broadcast feed is then integrated with other sources such as
Powerpoint presentations and computer demo screens. Potential Internet
congestion is bypassed by using a private point-to-point connection to the
Company's broadcast center. The broadcast is then distributed by streaming media
to the Internet audience via the Company's distribution network, or, if desired,
restricted to a limited audience utilizing password-protected access or player
authentication. In addition, the Company can supply its customers with the total
number of devices receiving the broadcast, the length of time such devices are
receiving the broadcast and the broadcast quality. See "--Network."

The Company has initiated pay-per-view broadcasts of major conferences for
GartnerGroup, as well as the introduction of their own branded Webcast channel,
"GartnerGroup Live!" The Company broadcasts on behalf of Microsoft "DevTalk
Live," a developer seminar, and Microsoft TV, a channel offering information
technology business solutions. The Company's innovative broadcast services
provide World Championship Wrestling's Web site additional revenue opportunities
through exclusive Internet-only pay-per-view broadcasts. Broadcast.com's turnkey
solutions are being used by the University of Wisconsin (Madison) to offer
graduate level distance learning telecourses. Broadcast.com also coordinated all
of the logistics associated with the first-ever Internet broadcast from China on
behalf of Intel.

INNOVATIVELY ENHANCING THE BROADCAST EXPERIENCE

In order to provide business services customers with immediate feedback and
to enhance the users' broadcast experience, users can interact with the
broadcast content by responding to online surveys, voting in polls and obtaining
additional information. For example, the Company has broadcast over the Internet
the last three Bell & Howell Company ("Bell & Howell") annual stockholders'
meetings. Stockholders can listen to meetings over the Internet and deliver
proxies online. In addition, the effectiveness of broadcasts can be maximized by
delivering text transcriptions, graphics, presentations and other supplemental
information during the broadcasts. Broadcast.com business services broadcasts
can also provide customers with real-time user information. Utilizing the
Company's proprietary database registration services as an enhancement to the
broadcast, corporate customers can identify the users accessing their broadcasts
in real time.

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The depth and breadth of broadcast.com's experience and expertise includes
numerous other business services events. An illustrative selection includes:

BUSINESS AND FINANCIAL SHOWS
Calico Technology Seminar Series
Catch a Rising Stock
Charles Schwab Special Event
CNBC/Dow Jones Business Video news updates
Money Go Round
Money Talk
Tiger Investments: After Hours Trading

DISTANCE LEARNING
American Academy of Ophthalmology Events
American Bar Association Tax May Meeting
American Society of CW Web Education Network
Microsoft SQL Server in Higher Education
State Bar of Texas: New Developments in Summary Judgement
U.S. Chamber of Commerce Quality Learnings Series
UT Southwestern AIDS Research Presentation

EARNINGS ANNOUNCEMENTS/INVESTOR RELATIONS
America Online
AT&T
MicroAge
Motorola
SoftQuad
Texaco
Yahoo!

KEYNOTE SPEECHES
AT&T WorldNet Service: Former President Tom Evslin
Compaq: Tradeshow events at ISPCON '98
Dell Computer: Michael Dell at Fall Internet World
Hewlett Packard: CEO Lewis Platt at Spring Internet World
IBM: John Brisbane at the WWW7 Conference
Intel: CEO Dr. Andrew Grove
Microsoft: Bill Gates, COMDEX
PRODUCT LAUNCHES
Ameritech: Clearpath Wireless Launch
Asymetrix: Cool Tools
Bell & Howell: Scanner Division
General Motors Chevy Malibu Announcement
Microsoft: Internet Explorer 4.0 Launch and NetShow 2.0 Launch
Silicon Graphics Workstation Launch
Sybase: Adaptive Server Launch

PUBLIC RELATIONS
Chicago Tribune Interactive: George Lazarus
Communications Week: Meet the Editor
Digital & Microsoft: Delivering Enterprise Solutions
General Motors: Global Update News Conference
MSNBC: Meet the Editors
NationsBank and BankAmerica merger announcement
Wall Street Journal Media Coffee

SEMINARS
Dell: Breakfast With Dell
GartnerGroup Forums
Harvard Seminar on Internet Society
IBM: Teleconference for Internet Developers
Price Waterhouse Forums and Seminars
SAS Institute: Data Mining Forum
Texas Instruments Forum '97

TRADE SHOWS/CONFERENCES
ComNet '98
Internet World
MacWorld Expo '97
National Association of Broadcasters: '97 and '98
National Investor Relations Institute: Annual Business Meeting
NetWorld + Interop '97
SuperComm '97

SALES AND MARKETING

The Company sells business services, Web advertising and traditional media
advertising through its direct sales force and through reseller arrangements.
The Company currently maintains distinct sales departments for each of these
three revenue sources. In addition, the Company maintains a marketing and public
relations department to promote the broadcast.com brand and its services.

BUSINESS SERVICES

To date, the Company has focused its business services marketing efforts on
larger companies in varied industries. Based on the success of these direct
sales efforts, broadcast.com believes that it can successfully market its
services to medium-sized and smaller businesses as well. As a result,
broadcast.com is taking advantage of existing distribution channels through
reseller arrangements with vendors such as PR Newswire, one of the largest
global and media relations distribution networks, and Trade Show Central to
market these services to a broad range of potential customers. The Company seeks
to expand its business services customer base and broadcast offerings by
targeting industries and businesses that are early adopters of technological
advancement. The hospitality industry and the growing popularity of corporate
intranets and distance learning opportunities have provided new vertical markets
for broadcast.com's streaming media solutions. The Company is expanding its
sales team, adding directors and account executives in strategic regions across
the United States to continue delivering personalized service and target new and
emerging market opportunities.

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WEB ADVERTISING

The Company's wide variety of content offers the ability to sell
advertising packages targeted to specific audiences and demographics.
Additionally, unlike Web sites that offer only text-based banner advertisements,
the Company offers multimedia packages incorporating custom audio and video
applications such as gateway ads with guaranteed click-thrus, channel and event
sponsorships and multimedia and traditional banner ads.

Gateway Ads with Guaranteed Click-Thrus. Broadcast.com provides
advertisers the opportunity to incorporate gateway ads into their Internet
advertising packages. Gateway ads are audio or video clips that are
inserted at the lead of selected programming, lasting from 15 to 30
seconds, that play prior to the audio or video content that has been
selected by the user. A guaranteed click-thru is a pop-down browser window
that automatically launches at the beginning of the gateway ad displaying
an advertiser's Web site or other targeted information. Gateway ads are
also available without guaranteed click-thrus. The Company currently sells
these advertisements at a higher CPM than traditional banner ads because of
their unique nature. Advertisers that have purchased gateway ads with
guaranteed click-thrus include Bell Atlantic, CompareNet and 3Com.

Channel and Event Sponsorships. The Company offers advertisers the
ability to sponsor one or more of its programming channels or events,
enabling advertisers to brand entire sections of the Company's Web sites. A
channel or event sponsorship can involve the rotating and permanent
placement of buttons, logos and Web site links, integrated gateway ads,
multimedia banner ads and mention on the broadcast.com home page, channel
home page and email newsletter (which has over 285,000 current subscribers
in over 150 countries). These sponsorships may also include promotional
advertisements utilizing broadcast.com's radio and television spot
inventory. Event sponsorships have been purchased by CBS SportsLine, RCA
and Microsoft. The Company typically sells these packages on a channel-by-
channel or event-by-event basis. See "--Traditional Media Advertising."

Multimedia and Traditional Banner Ads. The Company offers advertisers
the ability to integrate audio and video into their text and graphics
banner ads. The multimedia portion of the banner plays when the user clicks
on the banner. In addition, visitors to the Company's Web sites are able to
move to advertisers' Web sites while continuing to listen to or watch
broadcast.com audio or video programming. Because audio and video can
increase the impact of a banner ad, these packages are sold at a higher CPM
than traditional banner ads. Purchasers of multimedia or traditional banner
ads include Ford Motor Company, Citibank, N.A., Music Boulevard and Quick &
Reilly.

TRADITIONAL MEDIA ADVERTISING

As compensation for broadcasting radio and television station feeds, the
Company contractually receives on-air inventory of radio or television ad spots
or direct cash payments. The Company sells the majority of these advertising
spots to traditional radio and television advertisers. Premiere Radio Networks
is currently selling most of the radio ad spot inventory on behalf of the
Company. As of June 15, 1998, the Company had over 3,500 radio spots per week
available for sale.

MARKETING

The Company's marketing efforts promote the broadcast.com brand and the
Company's audio and video programming and business services. The Company
utilizes traditional media vehicles for marketing and promotional purposes,
including radio, television and print advertisements, as well as marketing
arrangements with other leading Web sites, gateway ads on the Company's Web
sites and email newsletters.

Radio and Television. The Company's radio and television content
providers typically grant the Company a certain amount of commercial spot
inventory. The commercial spots that the Company receives as part of its
radio and television hosting activities can be used by the Company for
promotion of the Company's programming and services. Radio and television
stations also extend brand awareness for broadcast.com through required
on-air mentions during their broadcasts.

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Print and Other Media. In exchange for Internet broadcasts of sporting
events, colleges and universities provide advertising space for
broadcast.com in various campus publications including game-day programs,
newsletters and alumni magazines. Broadcast.com has also received
advertising space in the official NCAA Basketball Tournament Final Four
program and the College Hockey Guide. In addition, the Company has received
billboard space at the NCAA Basketball Tournament Fanfest as well as at
other sporting events. Stadium public address announcements during certain
sporting events also extend the Company's brand awareness. The Company has
also placed advertisements in targeted trade magazines including
Broadcasting and Cable and Online Access.

Online Marketing. The Company exchanges banner ads with other high
traffic Web sites such as Infoseek, Tripod, Talk Cities, Go2Net, Los
Angeles Times, CBS SportsLine, Music Boulevard, Games Domain and Lycos. The
Company uses these opportunities to highlight its high profile live events
and drive traffic to revenue generating channels. The banner ads are also
used to promote business services customers' events in order to attract
larger audiences. The Company extends brand awareness on the Web by
requiring that its logo and distinctive "listen/view button" be placed
prominently on the Web pages of broadcast partners. A number of search
engines and live events guides feature broadcast.com such as CNET Events,
Yahoo! Events, NetGuide Live, Microsoft's NetShow Gallery and Your Personal
Net. Additionally, RealNetwork's Timecast Web site features broadcast.com
programming, often as the "Event of the Day."

Gateway Ads and Email Newsletters. The Company utilizes gateway ads to
promote upcoming broadcast.com content offerings. The Company also
distributes free semi-weekly email newsletters to over 285,000 registered
subscribers in 150 countries which highlight events for the upcoming week.
In addition, the Company utilizes the newsletter distribution list to alert
broadcast.com users to major breaking news stories that are being broadcast
on the Company's Web sites. The Company also distributes sports-focused and
music-focused newsletters, and is developing additional specialty
newsletters targeted to those interested in particular programming
channels.

STRATEGIC RELATIONSHIPS

Broadcast.com has entered into strategic relationships with content
providers, key Internet companies and technology and bandwidth providers.

CONTENT PROVIDERS

To expand its content offerings, broadcast.com has established
relationships with various strategic partners. The Company believes that
licensing content from third parties is preferable to creating content because
such licensed content has existing demand and is self-replenishing. Key
relationships include BBC World Service, CNN, Host Communications, Learfield
Communications, the NHL, Major League Baseball, a group of over 40 stations now
part of Clear Channel and a group of 72 stations which will be part of Capstar
following completion of its acquisition of SFX.

KEY INTERNET COMPANIES

Broadcast.com leverages its content aggregation and Internet broadcast
network through strategic relationships with key Internet companies to increase
traffic and brand awareness. Broadcast.com and Yahoo!, an equity investor in the
Company, recently agreed to establish a co-branded area on the Yahoo! Web site
at sports.yahoo.com to make available broadcast.com's programming and link to
listen/view pages on the www.broadcast.com Web site. Broadcast.com also has an
agreement with RealNetworks which provides for the placement of a link on the
drop-down menu item for RealNetworks' RealPlayer and RealPlayer Plus streaming
products to the Company's home page and five key channels on its sites. The
Company believes that RealNetworks' streaming products have been downloaded more
than 43 million times. In addition, Microsoft selected broadcast.com as one of
34 platinum channels on its latest Internet Explorer Web browser, which is used
by millions of people to navigate the Web. The Company believes these platinum
channels will be preset, in some form, on all versions of the new Windows '98
Operating System.

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TECHNOLOGY AND BANDWIDTH PROVIDERS

In order to scale with future audience growth, broadcast.com has entered
into an agreement with UUNET under which the Company purchased 155Mbps of
bandwidth for unicasting and additional bandwidth for multicasting which can be
configured to allow up to 500 simultaneous live events. In addition, UUNET is
part of the Company's multicasting buildout strategy. See
"--Network--Distribution."

Broadcast.com and Motorola have signed a letter of intent to create a joint
venture for the deployment of audioSENSE, a front-end audio player which is
designed to make it easier for visitors to the www.broadcast.com Web site to
navigate the Radio and Jukebox channels. For example, audioSENSE enables users
to create personal radio dials, selecting stations by location and genre. Users
can also create personal presets, similar to those on a car radio, that make it
easier to find their favorite radio stations. Through the audioSENSE player,
radio stations will be able to deliver interactive advertising products over the
Internet which the Company believes will create a new revenue stream for
broadcasters on the broadcast.com network.

NETWORK

In order to support hundreds of thousands of simultaneous streaming media
users on the Internet, the Company has developed and implemented an extensive
streaming media aggregation and distribution network, designed to ensure the
broadcast quality of the content received from broadcasters and distributed to
users.

AGGREGATION

The Company aggregates content from broadcasters through satellite feeds
and direct network connections from content providers to its broadcast center
where it is monitored for broadcast quality and encoded for delivery over the
Internet. The satellite receiving system is currently comprised of 22 satellite
dishes which can receive hundreds of simultaneous feeds from traditional
broadcasts and live events. The Company also receives radio and television
signals over a private network comprised of frame relay and T1 point-to-point
connections. This private network is designed to efficiently and securely feed
content directly from broadcasters to the Company's headquarters, thus avoiding
the congestion of public peering points on the Internet which can cause
transmission delays or packet loss. The Company believes that the use of a
private aggregation network enables the Company to control the broadcast quality
of the content it receives.

DISTRIBUTION

Currently, the Company employs both unicasting (one user per Company
originated stream) and multicasting (many users per Company originated stream)
technologies to distribute streaming media content to users over the Internet.
The Company's unicast network can provide content to tens of thousands of
simultaneous users through 580 multimedia servers which support multiple
streaming technologies. These servers are linked through direct 45Mbps and 155
Mbps connections to major Internet backbone providers including GTEI, MCI,
Sprint and UUNET, which, in turn, connect to over 80% of the downstream ISPs.
The Company believes that direct connections to these major backbone providers
enhances the user experience by avoiding the congestion of public peering points
which can cause transmission delays or packet loss.

Although the Company anticipates that unicasting will remain essential for
archived and on-demand applications, it believes that multicasting, or similar
scaling technology, is essential to the future of large-scale Internet
broadcasting to a mass audience. The Company believes multicasting is especially
suited to audio and video broadcasting and will be increasingly used in the
delivery of streaming media content. Currently, the Company is deploying its
multicast network which is designed to provide streaming media content to
hundreds of thousands of users simultaneously through one-to-many Internet
connections. The Company has entered into agreements with over 30 ISPs and UUNET
and is building the first large-scale commercial multicast network which
provides the Company access to over 400,000 dial-up multicast ports.

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COMPETITION

The market for Internet broadcasting and services is highly competitive and
the Company expects that competition will continue to intensify. The Company
competes with (i) other Web sites, Internet portals and Internet broadcasters to
acquire and provide content to attract users, (ii) videoconferencing companies,
audio conferencing companies and Internet business services broadcasters, (iii)
online services, other Web site operators and advertising networks, as well as
traditional media such as television, radio and print, for a share of
advertisers' total advertising budgets and (iv) local radio and television
stations and national radio and television networks for sales of advertising
spots. There can be no assurance that the Company will be able to compete
successfully or that the competitive pressures faced by the Company, including
those described below, will not have a material adverse effect on the Company's
business, results of operations and financial condition.

Competition among Web sites that provide compelling content, including
streaming media content, is intense and is expected to increase significantly in
the future. The Company competes against a variety of businesses that provide
content through one or more mediums, such as print, radio, television, cable
television and the Internet. Traditional media companies have not established a
significant streaming media presence on the Internet and may expend resources to
establish a more significant presence in the future. These companies have
significantly greater brand recognition and financial, technical, marketing and
other resources than the Company. The Company competes generally with other
content providers for the time and attention of users and for advertising
revenues. To compete successfully, the Company must license and then provide
sufficiently compelling and popular content to generate users, support
advertising intended to reach such users and attract business and other
organizations seeking Internet broadcasting and distribution services. The
Company believes that the principal competitive factors in attracting Internet
users include the quality of service and the relevance, timeliness, depth and
breadth of content and services offered. In the market for Internet distribution
of radio and television broadcasts, the Company competes with ISPs, radio and
television stations and networks that originate their own Internet broadcasts.
RealNetworks and MCI announced a strategic alliance in August 1997 involving the
introduction of a service currently called Real Broadcast Network that delivers
audio and video broadcasts over the Internet. In the area of sports content, the
Company competes with CBS SportsLine and ESPNET SportsZone. The Company also
competes for the time and attention of Internet users with thousands of Web
sites operated by businesses and other organizations, individuals, governmental
agencies and educational institutions. For example, certain Web sites may
provide a collection of links to other Web sites with streaming media content.
The Company expects competition to intensify and the number of competitors to
increase significantly in the future. In addition, as the Company expands the
scope of its content and services, it will compete directly with a greater
number of Web sites and other media companies. Because the operations and
strategic plans of existing and future competitors are undergoing rapid change,
it is extremely difficult for the Company to anticipate which companies are
likely to offer competitive services in the future.

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The Company competes for traditional media advertising sales with national
radio and television networks, as well as local radio and television stations.
Local radio and television content providers and national radio and television
networks may have larger and more established sales organizations than the
Company. These companies may have greater name recognition and more established
relationships with advertisers and advertising agencies than the Company. Such
competitors may be able to undertake more extensive marketing campaigns, obtain
a more attractive inventory of ad spots, adopt more aggressive pricing policies
and devote substantially more resources to selling advertising inventory. The
Company's traditional media advertising sales efforts depend on the Company's
ability to obtain an inventory of ad spots across the top radio and television
markets. If the Company is unable to obtain such inventory, it could have a
material adverse effect on the Company's business, results of operations and
financial condition.

GOVERNMENTAL REGULATION

Although there are currently few laws and regulations directly applicable
to the Internet, it is likely that new laws and regulations will be adopted in
the United States and elsewhere covering issues such as music licensing,
broadcast license fees, copyrights, privacy, pricing, sales taxes and
characteristics and quality of Internet services. It is possible that
governments will enact legislation that may be applicable to the Company in
areas such as content, network security, encryption and the use of key escrow,
data and privacy protection, electronic authentication or "digital" signatures,
illegal and harmful content, access charges and retransmission activities.
Moreover, the applicability to the Internet of existing laws governing issues
such as property ownership, content, taxation, defamation and personal privacy
is uncertain. The majority of such laws were adopted before the widespread use
and commercialization of the Internet and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Any such
export or import restrictions, new legislation or regulation or governmental
enforcement of existing regulations may limit the growth of the Internet,
increase the Company's cost of doing business or increase the Company's legal
exposure, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

By distributing content over the Internet, the Company faces potential
liability for claims based on the nature and content of the materials that it
distributes, including claims for defamation, negligence or copyright, patent or
trademark infringement, which claims have been brought, and sometimes
successfully litigated, against Internet companies. While the CDA generally
states that entities like the Company, which provide interactive computer
services, shall not be treated as the publisher or speaker with respect to third
party content they distribute, the scope of the CDA's definition and limitations
on liability have not been widely tested in court. Accordingly, the Company may
be subject to such claims. To protect itself from such claims, the Company
maintains media liability insurance as well as general liability insurance.
Additionally, in the Company's agreements with content providers, such content
providers generally represent that they have the rights to distribute and
transmit their programming on the Internet and, in most cases, indemnify the
Company for liability based on a breach of such representations and warranties.
The indemnification arrangements and the Company's media and general liability
insurance may not cover all potential claims of

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this type or may not be adequate to indemnify the Company for any liability that
may be imposed. Any liability not covered by indemnification or insurance or in
excess of indemnification or insurance coverage could have a material adverse
effect on the Company's business, results of operations and financial condition.
See "Risk Factors--Governmental Regulation and Legal Uncertainty."

INTELLECTUAL PROPERTY

The Company's success depends in part on its ability to protect its
intellectual property. To protect its proprietary rights, the Company relies
generally on copyright, trademark and trade secret laws, confidentiality
agreements with employees and third parties, and license agreements with
consultants, vendors and customers, although the Company has not signed such
agreements in every case. Despite such protections, a third party could, without
authorization, copy or otherwise obtain and use the Company's content. There can
be no assurance that the Company's agreements with employees, consultants and
others who participate in development activities will not be breached, that the
Company will have adequate remedies for any breach, or that the Company's trade
secrets will not otherwise become known or independently developed by
competitors.

The Company pursues the registration of certain of its trademarks and
service marks in the U.S. and in certain other countries, although it has not
secured registration of all its marks. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the U.S., and effective copyright, trademark and trade secret
protection may not be available in such jurisdictions. In general, there can be
no assurance that the Company's efforts to protect its intellectual property
rights through copyright, trademark and trade secret laws will be effective to
prevent misappropriation of its content, and the Company's failure or inability
to protect its proprietary rights could materially adversely affect the
Company's business, financial condition and results of operations. See "Risk
Factors--Intellectual Property."

LEGAL PROCEEDINGS

From time to time the Company has been, and expects to continue to be,
subject to legal proceedings and claims in the ordinary course of its business,
including claims of alleged infringement of third-party trademarks and other
intellectual property rights by the Company and its licensees. Such claims, even
if not meritorious, could result in the expenditure of significant financial and
managerial resources. The Company is not aware of any legal proceedings or
claims that it believes will have, individually or in the aggregate, a material
adverse effect on its business, financial condition or results of operations.

EMPLOYEES

As of June 15, 1998, the Company had 191 full-time employees. None of the
Company's employees is subject to a collective bargaining agreement and the
Company believes that its relations with its employees are good.

FACILITIES

The Company's executive offices are located in Dallas, Texas in a 28,000
square foot facility that the Company leases at a current monthly rent of
$3,920. The lease agreement terminates on February 1, 2002. The Company has an
option to extend the lease agreement for three additional five-year terms. The
Company also leases an office in New York, New York at a current monthly rent of
$3,083. This lease expires January 31, 2001. The Company also leases an office
in San Francisco, California at a current monthly rent of $1,155. This lease
expires September 30, 1998. The Company also leases an office in Houston, Texas
at a current monthly rent of $450. This lease expires June 30, 1999. The Company
anticipates that it will require additional space within the next 12 months and
that suitable additional space will be available on commercially reasonable
terms, although there can be no assurance in this regard. The Company does not
own any real estate.

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MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The following table sets forth certain information regarding the executive
officers, directors and key employees of the Company as of March 31, 1998.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Executive Officers and Directors
Todd R. Wagner.................... 37 Chief Executive Officer, Secretary and Vice Chairman
of the Board
Mark Cuban........................ 39 President and Chairman of the Board
Jack A. Riggs..................... 39 Chief Financial Officer, Treasurer and Director
Kevin W. Parke.................... 39 Vice President--Operations
Joseph W. Autem(1)(2)............. 39 Director
Randall A. Battat................. 38 Director
Steven D. Leeke(1)(2)............. 36 Director
Key Employees
Henry G. Heflich.................. 47 Vice President--Technology
Tina M. Williamson................ 47 Vice President--Marketing
Stan M. Woodward.................. 36 Vice President--Business Services
</TABLE>

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

(1) Member of Compensation Committee

(2) Member of Audit Committee

TODD R. WAGNER co-founded the Company in May 1995 and has served as Chief
Executive Officer, Secretary and Vice Chairman of the Board since its inception.
From 1989 to 1994, Mr. Wagner worked at the law firm of Hopkins & Sutter, where
he was a partner from 1992 to 1994. Mr. Wagner became a certified public
accountant in April 1988. Mr. Wagner holds a B.S. in Accounting from Indiana
University and a J.D. from The University of Virginia School of Law.

MARK CUBAN co-founded the Company in May 1995 and has served as President
and Chairman of the Board of the Company since its inception. From 1991 to the
present, Mr. Cuban has served as President of Radical Computing, Inc., a
Dallas-based venture capital and investment company specializing in technology
companies. In 1983, Mr. Cuban founded Microsolutions, Inc., a systems
integration company that was sold to CompuServe Corporation in 1990. Mr. Cuban
holds a B.S. in Business from Indiana University.

JACK A. RIGGS has served as Chief Financial Officer and Treasurer of the
Company since August 1997 and as a Director since December 1997. From June 1996
to August 1997, Mr. Riggs served as Corporate Controller of Kitty Hawk, Inc., a
publicly traded international airfreight carrier. From 1994 to 1996 Mr. Riggs
served as Corporate Controller of DHN Enterprises, Inc., a privately held
wholesale distributor. Prior to that, Mr. Riggs served as Regional Controller of
INACOM Corp., a computer reseller. Prior to joining INACOM, Mr. Riggs was with
Coopers & Lybrand L.L.P. Mr. Riggs became a certified public accountant in 1990
and holds a B.S. in Accounting from Louisiana Tech University.

KEVIN W. PARKE has served as Vice President--Operations of the Company
since May 1997 and as the Director--Operations since March 1996. From 1993 to
1996, Mr. Parke served as Vice President and General Counsel of Merritt
Marketing Group, a national integrated marketing company, where he directed the
production, finance, legal and accounting departments. From 1991 to 1993, Mr.
Parke was a partner at the law firm of Hopkins & Sutter. Mr. Parke holds a B.A.
in Economics from Vanderbilt University and a J.D. from Southern Methodist
University School of Law.

JOSEPH W. AUTEM has served as a Director of the Company since September
1996. Mr. Autem has been a partner of Vision Technology Partners, a private
investment company, since March 1997. From July 1996 to December 1996, Mr. Autem
served as Chief Financial Officer of the Company. From 1992 to 1996,

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Mr. Autem served as Vice President of Finance, Secretary, Treasurer and Chief
Financial Officer of OpenConnect Systems, Inc., a software company. Mr. Autem
became a certified public accountant in 1987 and holds a B.S. in Accounting from
Pittsburg State University.

RANDALL A. BATTAT has served as a Director of the Company since February
1998. Mr. Battat has been the Senior Vice President and General Manager for the
Information Systems Group of Motorola since February 1997. From February 1994 to
February 1997, Mr. Battat served as Corporate Vice President and General Manager
of the Wireless Data Group of Motorola. Mr. Battat joined Apple Computer, Inc.
in 1981, and held a number of positions including, most recently, Vice President
of the Macintosh Desktop and Powerbook Division. Mr. Battat holds a B.S. in
Electrical Engineering from Stanford University.

STEVEN D. LEEKE has served as a Director of the Company since October 1996.
Mr. Leeke is the Director and General Manager of Internet Content and Service
Businesses for the Messaging Information and Media Sector of Motorola, a
position he has held since September 1996. From March 1995 to September 1996,
Mr. Leeke was the Director of Strategy for Motorola New Enterprises. Prior to
joining Motorola, Mr. Leeke served in various capacities at Texas Instruments.
Mr. Leeke holds an A.B. in Physics and Math from Dartmouth College and an M.S.
and Ph.D. in Electrical Engineering from Stanford University.

HENRY G. HEFLICH has served as Vice President--Technology for the Company
since March 1998. From January 1996 to March 1998, Mr. Heflich co-founded and
served as Chief System Architect for Genuity, Inc., a national ISP. From January
1981 to December 1995, Mr. Heflich served as President and Director of
Engineering for MicroNet Research. Mr. Heflich holds a B.S. in Electrical
Engineering from the Florida Institute of Technology, an M.S. in Electrical
Engineering from Southern Methodist University and an M.B.A. from the University
of Dallas.

TINA M. WILLIAMSON has served as Vice President--Marketing for the Company
since April 1998 and as the Director--Marketing since May 1997. From October
1996 to February 1997, Ms. Williamson served as Vice President, Director of
Marketing for Deja News, Inc., an Internet search engine company, and from July
1995 to October 1996 was President and owner of TMW Group, an interactive media
and marketing consulting firm. Ms. Williamson was also Senior Vice President and
Associate Media Director at GSD&M Advertising. Ms. Williamson holds a B.S. in
Advertising from the University of Texas at Austin.

STAN M. WOODWARD has served as Vice President--Business Services for the
Company since April 1998 and served as Director--Business Services for the
Company since November 1997. From December 1993 to November 1997, Mr. Woodward
served as Director of Sales for the South Central Region for Ascend
Communications, Inc. He has also held sales and sales management positions with
AMP Communication Systems, National Semiconductor Corporation and a number of
start-up companies specializing in fiber-optic data transport. He holds a B.S.
in Electrical Engineering from Oklahoma State University.

Executive officers of the Company are appointed by the Board of Directors.
The Company's current directors will be eligible for re-election at the
Company's annual stockholder meeting in 1999 at which time the Board will be
divided into three classes. The initial term of the Class I directors will
expire at the Company's annual stockholders meeting in 2000, the initial term of
the Class II directors will expire at the Company's annual stockholder meeting
in 2001 and the initial term of the Class III directors will expire at the
Company's annual stockholder meeting in 2002. Thereafter, the term of each class
of directors will be three years. All directors hold office until the annual
stockholder meeting at which their respective class is subject to re-election
and until their successors are duly elected and qualified, or until their
earlier resignation or removal.

BOARD COMMITTEES

Compensation Committee. The Compensation Committee of the Board of
Directors reviews and makes recommendations to the Board regarding the Company's
compensation policies and all forms of compensation to be provided to executive
officers and directors of the Company, including, among other things, annual
salaries and bonuses, and stock option and other incentive compensation
arrangements. In addition, the Compensation Committee reviews bonus and stock
compensation arrangements for all other employees of the

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Company. As part of the foregoing, the Compensation Committee administers the
Company's Stock Option Plans. The current members of the Compensation Committee
are Messrs. Autem and Leeke.

Audit Committee. The Audit Committee of the Board of Directors reviews and
monitors the corporate financial reporting and the internal and external audits
of the Company, including, among other matters, the Company's control functions,
the results and scope of the annual audit and other services provided by the
Company's independent accountants, and the Company's compliance with legal
matters that have a significant impact on the Company's financial report. In
addition, the Audit Committee consults with the Company's management and
independent accountants prior to the presentation of financial statements to
stockholders and, as appropriate, initiates inquiries into aspects of the
Company's financial affairs. The Audit Committee also has the responsibility to
consider and recommend the appointment of, and to review fee arrangements with,
the Company's independent accountants. The current members of the Audit
Committee are Messrs. Autem and Leeke.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

For the year ended December 31, 1997, the Company's Stock Option Plan
Committee was comprised of Mr. Wagner, the Chief Executive Officer of the
Company, and Mark Cuban, the President of the Company. The Company's
Compensation Committee is currently comprised of Messrs. Autem and Leeke, both
of whom are Directors of the Company. No interlocking relationship exists
between any member of the Board of Directors or the Compensation Committee and
any member of the board of directors or compensation committee of any other
company, and no such interlocking relationship has existed in the past.

DIRECTOR COMPENSATION

Non-Employee Directors Stock Option Plan. Directors who are not employees
of the Company are entitled to receive stock options pursuant to the Company's
1996 Non-Employee Directors Stock Option Plan (the "Directors' Plan"). All
options granted under the Directors' Plan expire 10 years from the date of the
option grant. The exercise price for options granted under the Directors' Plan
is the fair market value of a share of Common Stock on the date of grant. No
more than 150,000 shares of Common Stock may be issued upon exercise of options
granted under the Directors' Plan, subject to adjustment for stock splits, stock
dividends, reverse stock splits and other transactions affecting the number of
outstanding shares of Common Stock. Options may be granted under the Directors'
Plan until April 15, 2006.

The Directors' Plan provides for the automatic grant of an option to
purchase 15,000 shares of Common Stock to each of the Company's non-employee
directors upon their initial election to the Board. Each non-employee director
re-elected to the Board of Directors at a subsequent annual stockholders'
meeting is granted an additional option to purchase 2,400 shares of Common Stock
immediately following such annual stockholders' meeting.

Assuming that the non-employee director optionee has remained eligible
under the Directors' Plan for the entire period, 50% of the shares subject to
his or her initial option becomes exercisable upon the earlier of (i) the first
anniversary of the date of the option grant or (ii) immediately prior to the
first annual stockholders' meeting following the date of the option grant. The
remaining 50% of the shares subject to the option vest and become exercisable
upon the earlier of (i) the second anniversary of the date of the option grant
or (ii) immediately prior to the second annual stockholders' meeting following
the date of the option grant. Assuming that such optionee has remained eligible
under the Directors' Plan for the entire period, each additional option will
become exercisable upon the earlier of (i) the first anniversary of the date of
each such grant or (ii) immediately prior to the first annual stockholders'
meeting following the date of each such grant.

In the event of a sale of substantially all of the Company's assets, the
liquidation or dissolution of the Company, or certain changes in control of the
Company or its Board of Directors, options granted under the Directors' Plan
will become immediately exercisable prior to the occurrence of such event
without regard to vesting requirements and will then terminate if not exercised
prior to the occurrence thereof.

50
<PAGE> 55

As of March 31, 1998, options to purchase 7,500 shares of Common Stock were
outstanding under the Directors' Plan.

Other Director Compensation. The Company has agreed to pay each
non-employee director $1,000 for each Board of Directors meeting attended, $500
for each meeting of a Committee of the Board of Directors attended and $200 for
each unanimous consent executed in lieu of a Board of Directors meeting. The
Company reimburses directors for all reasonable and documented expenses incurred
as a director. Directors who are also employees of the Company, including
Messrs. Wagner, Cuban and Riggs, are not compensated for their services as
directors.

EXECUTIVE COMPENSATION

The following table sets forth, for the year ended December 31, 1997, all
compensation of the Chief Executive Officer and the other executive officers of
the Company who received compensation in excess of $100,000 in such year
(collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------
NAME AND PRINCIPAL POSITION SALARY
--------------------------- ------------
<S> <C>
Todd R. Wagner.............................................. $120,000
Chief Executive Officer
Mark Cuban.................................................. 120,000
President and Chairman of the Board
</TABLE>

The following table sets forth certain information concerning the grant of
stock options to each of the Named Executive Officers. None of such Named
Executive Officers exercised any options during the year ended December 31,
1997.

AGGREGATED OPTION EXERCISES IN 1997 AND 1997 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
HELD AT DECEMBER 31, 1997(1) AT DECEMBER 31, 1997(2)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Todd R. Wagner........................... 47,160 188,640 $439,060 $1,756,238
Mark Cuban............................... 57,600 230,400 536,256 2,145,024
</TABLE>

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

(1) Options shown were granted under the Company's 1996 Stock Option Plan. These
options become exercisable with respect to 20% of the shares covered by the
option on the first anniversary of the date of grant and with respect to an
additional 20% of these shares each year thereafter. Upon certain changes in
control of the Company, all unvested options will automatically vest. See
"--Stock Option Plans" for a description of the material terms of these
options.

(2) Based on an assumed initial public offering price of $12.00 per share and
net of the option exercise price.

EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL CONSIDERATIONS

The Company has entered into employment agreements with Messrs. Wagner and
Cuban for a term commencing on June 15, 1998, and ending on December 31, 2001,
subject to automatic successive one-year extensions in the absence of a notice
of termination by either the Company or the employee. Each agreement provides
for an annual base salary of $150,000 for 1998, plus a bonus equal to 1.5% of
the pre-tax income of the Company, as determined by the Company's outside
accountants in accordance with generally accepted accounting principles, in
excess of certain scheduled net income thresholds. Each of the agreements has
regularly scheduled increases in such salaries through the year 2001. Under the
terms of the agreements, upon

51
<PAGE> 56

consummation of this offering, (i) Messrs. Wagner and Cuban shall each be paid a
bonus of $50,000 and (ii) the current base salaries of Messrs. Wagner and Cuban
shall each increase to $225,000.

The employment agreements provide that at any time within six months
following a Change of Control of the Company (as defined in the employment
agreements), Messrs. Wagner and Cuban can terminate their agreements. Following
such termination, the terminating employee is entitled to payment of Deferred
Compensation (as defined in the employment agreements) equal to the sum of (a)
the greater of (i) the remaining base salary payable to the employee through the
date on which the employment agreement would have expired by its terms or (ii)
150% of the employee's total compensation during the two years prior to such
termination, and (b) all additional benefits owing to the terminating employee
under the agreement for the period of time which is the longer of (x) the period
through the date on which the employment agreement would have expired by its
terms or (y) one year.

Messrs. Wagner and Cuban have been granted options to purchase 235,800 and
288,000 shares of Common Stock, respectively, pursuant to the Company's stock
option plans, which plans provide for acceleration of vesting of such options so
that such options shall immediately become fully exercisable in the event of
certain changes of control.

EMPLOYEE BENEFIT PLANS

The 1996 Stock Option Plan. In April 1996, the Board of Directors adopted,
and the stockholders of the Company approved, the Company's 1996 Stock Option
Plan (the "1996 Plan"), pursuant to which officers, employees and consultants
(excluding non-employee directors) are eligible to receive options to purchase
shares of Common Stock. At the time of adoption, no more than 1,440,000 shares
of Common Stock could be issued as a result of the exercise of options granted
under the 1996 Plan. Generally, with certain exceptions, no eligible person
could receive options to purchase more than 240,000 shares of Common Stock
during any calendar year. In August 1997, the Board of Directors elected not to
grant any further options under the 1996 Plan. At such time, there were options
to purchase 1,257,546 shares of Common Stock outstanding. As of March 31, 1998,
there were options to purchase 1,199,812 shares of Common Stock outstanding
under the 1996 Plan.

The 1998 Stock Option Plan. In August 1997 and April 1998, the Board of
Directors adopted and amended, respectively, and in June 1998 the stockholders
approved, the Company's 1998 Stock Option Plan (the "1998 Plan"), pursuant to
which directors (other than non-employee directors), officers, employees,
consultants and advisors are eligible to receive options to purchase shares of
Common Stock. Subject to adjustment for stock splits, stock dividends, reverse
stock splits and other transactions affecting the number of outstanding shares
of Common Stock effected without the receipt of consideration by the Company, no
more than 2,800,000 shares of Common Stock may be issued as a result of the
exercise of options granted under the 1998 Plan, and no eligible person may be
granted options to purchase more than 250,000 shares of Common Stock during any
calendar year. Options may be granted under the 1998 Plan until August 19, 2007.
As of March 31, 1998, there were options to purchase 797,040 shares of Common
Stock outstanding under the 1998 Plan.

Certain Provisions Applicable to the 1996 Stock Option Plan and the 1998
Stock Option Plan. The 1996 Plan and the 1998 Plan (the 1996 Plan and the 1998
Plan may herein be referred to collectively as the "Stock Option Plans") are
being administered by the Compensation Committee. Under the terms of the Stock
Option Plans, as long as the Company has any class of securities registered
pursuant to Section 12 of the Exchange Act, the Committee must be composed of at
least two members of the Board of Directors of the Company, each of whom is
required to be "disinterested" within the meaning of Rule 16b-3 under the
Exchange Act. In April 1998, the Board of Directors dissolved its Stock Option
Plan Committee and authorized the Compensation Committee (consisting of Messrs.
Leeke and Autem) to administer the Stock Option Plans. Messrs. Leeke and Autem
meet the requirements of Rule 16b-3. The Compensation Committee has the
authority to interpret the Stock Option Plans; to determine the terms and
conditions of options granted under the Stock Option Plans; to prescribe, amend
and rescind the rules and regulations of the

52
<PAGE> 57

Stock Options Plans; and to make all other determinations necessary or advisable
for the administration of the Stock Option Plans.

Options granted under the Stock Option Plans may be incentive stock
options, which are intended to qualify for favorable federal income tax
treatment under the provisions of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") ("ISOs"), or non-qualified stock options, which do
not so qualify ("NSOs"; ISOs and NSOs may be referred to herein collectively as
"Options"). The Compensation Committee selects the eligible persons to whom
Options will be granted and determines the dates, amounts, exercise prices (in
no event less than the fair market value of a share of Common Stock on the date
of grant), vesting periods and other relevant terms of the Options, including
whether the Options will be ISOs or NSOs. Options are generally not transferable
during the life of the optionee.

Options vest and become exercisable as determined by the Compensation
Committee, although Options granted under the 1996 Plan may vest no earlier than
one year from the date of grant. Options may be exercised at any time after they
vest and before their expiration date as determined by the Compensation
Committee, provided, however, that no Option may be exercised more than 10 years
after its date of grant (five years after grant in the case of certain ISOs).
Options, whether or not vested, will generally terminate (i) immediately upon
termination of the optionee's employment with the Company for just cause; (ii)
12 months after death, permanent disability or normal retirement (unless the
Option expires earlier by its terms) under the 1996 Plan and six months
thereafter under the 1998 Plan; and (iii) 90 days after termination of
employment (180 days in the case of non-qualified Options granted thereunder)
for any other reason under the 1996 Plan and 30 days with respect to the 1998
Plan (unless the Option expires earlier by its terms), although the Compensation
Committee, in its discretion, may accelerate vesting and may extend the exercise
period of any Options. The aggregate fair market value (determined at the time
of the option grant) of the shares of Common Stock represented by ISOs that
become exercisable in any calendar year may not exceed $100,000. Options in
excess of this limit are treated as NSOs.

If the Company consummates any reorganization, merger or consolidation,
each outstanding Option will, upon exercise, entitle the optionee to receive the
same consideration received by holders of shares of Common Stock in such
reorganization or merger or consolidation, with appropriate exercise price
adjustments. In the case of certain changes of control of the Company, any
Options so specified at any time by the Compensation Committee or the Board in
its discretion shall vest and become exercisable. Under the 1996 Plan, in the
case of certain changes in control involving the liquidation of the Company, the
disposition of substantially all of the Company's assets, and certain
reorganizations, mergers or consolidations of the Company, all outstanding
Options will automatically vest and become exercisable if, and to the extent
that such Options are not, in connection with the change of control, to be
cashed-out at full value, continued by the Company as the surviving corporation,
assumed by the successor corporation or parent thereof or replaced with
comparable options or other compensation programs. Under the 1998 Plan, in the
event of a "Change of Control" (as defined therein), all outstanding Options
will automatically vest and become exercisable.

As of March 31, 1998, there were options to purchase 2,004,352 shares of
Common Stock outstanding in the aggregate under the Stock Option Plans.

401(k) Plan. The Company sponsors a savings and investment plan (the
"401(k) Plan") intended to be qualified under Section 401 of the Code.
Participating employees may make pre-tax contributions, subject to limitations
under the Code, of a percentage of their total compensation. Employees become
eligible to participate in the plan after being employed by the Company for six
months. The Company, in its sole discretion, may make matching contributions for
the benefit of all participants with at least one year of service who make
pre-tax contributions. The Board of Directors has not yet determined the
matching contribution, if any, that will be made for the 1998 plan year.

Employee Stock Purchase Plan. In May 1998, the Board of Directors adopted,
and in June 1998 the stockholders approved, the Company's 1998 Employee Stock
Purchase Plan (the "Stock Purchase Plan").

53
<PAGE> 58

Subject to meeting federal and state securities law requirements and such
stockholder approval, the Stock Purchase Plan will become effective at the
consummation of this offering, or as soon as practicable thereafter.

The purpose of the Stock Purchase Plan is to maintain competitive equity
compensation programs and to provide employees of the Company with an
opportunity and incentive to acquire a proprietary interest in the Company
through the purchase of Common Stock, thereby more closely aligning the
interests of the Company's employees and shareholders. The Company has reserved
a total of 250,000 shares of Common Stock for issuance and sale under the Stock
Purchase Plan. The Stock Purchase Plan will be administered by the Compensation
Committee, members of which are not eligible to participate in the Stock
Purchase Plan. The Board, however, may from time to time in its discretion
exercise any responsibilities or authority allocated to the Compensation
Committee under the Stock Purchase Plan.

All employees of the Company who have been employees for at least six
months are eligible to participate in the Stock Purchase Plan, other than
employees whose customary employment is less than 20 hours per week or is not
for more than five months in a calendar year, or employees who are ineligible to
participate due to federal tax restrictions. There are certain restrictions on
the number of shares that a participant may purchase, including the requirement
that the fair market value of shares that may be purchased by any employee
during any calendar year may not exceed $25,000. The offering dates will be
August 15 and February 15 of each Stock Purchase Plan year, and each such
offering date will commence a new offering period, provided that the initial
offering period shall commence as soon as practicable following consummation of
this offering. The Company may alter the duration of any offering period if the
change is announced at least 15 days before the relevant offering date. Shares
purchased under the Stock Purchase Plan will be held in separate accounts for
each participant.

Eligible employees may enroll in any offering period by delivering to the
Company a subscription agreement at least five days before the first day of such
offering period. In the subscription agreement, the employee will specify a
whole number percentage from 1% to 10% of his or her annual base compensation
(including any cash bonus) to be deducted from such employee's paycheck during
the offering period. The amounts so deducted and contributed are applied to the
purchase of shares of Common Stock at 85% of the lesser fair market value of
such shares on (i) the date of purchase or (ii) the offering date.

Participants may increase or decrease their payroll deductions at any time
(subject to such limits as the Compensation Committee may impose) during an
offering period by filing with the Company a new subscription agreement
authorizing such a change in the payroll deduction rate. Participants may
withdraw from an offering period by giving written notice to the Company at
least five days before the end of such offering period. If a participant
withdraws from the Stock Purchase Plan, any contributions that have not been
used to purchase shares shall be refunded. A participant who has withdrawn may
not participate in the Stock Purchase Plan again until the next offering period.

In the event of retirement or cessation of employment for any reason, any
contributions that have not yet been used to purchase shares will be refunded to
the participant, or to the participant's designated beneficiary in the case of
death, and a certificate will be issued for the full shares in the participating
account.

The Compensation Committee may, at any time and for any reason, terminate
or amend the Stock Purchase Plan, subject to stockholder approval in certain
circumstances. Unless sooner terminated by the Committee, the Stock Purchase
Plan will continue in effect for a term of 10 years.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

The Company's Restated Certificate of Incorporation contains certain
provisions permitted under the DGCL relating to the liability of directors. The
Restated Certificate of Incorporation provides that, to the fullest extent
permitted under the DGCL, no director of the Company will be liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director.

54
<PAGE> 59

The Bylaws provide that (i) the Company is required to indemnify the
directors, officers and employees of the Company against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement arising out of
any action taken by such officer or director in good faith and in a manner
reasonably believed by such officer or director to be in, or not opposed to, the
best interests of the Company, (ii) the Company is required to advance expenses
(including attorneys' fees) to its officers and directors in defending any
civil, criminal, investigative action, suit or proceeding or appeal therefrom
and (iii) the rights conferred in the Bylaws are not exclusive.

The Company has entered into indemnification agreements with each of its
current directors and executive officers to give such directors and executive
officers additional contractual assurances regarding the scope of the
indemnification set forth in the Company's Restated Certificate of Incorporation
and the Company's Restated Bylaws and to provide additional procedural
protections. At present, there is no pending litigation or proceeding involving
a director, officer or employee of the Company regarding which indemnification
is sought, nor is the Company aware of any threatened litigation that may result
in claims for indemnification.

55
<PAGE> 60

CERTAIN TRANSACTIONS

The Company sold 2,640,000 shares, 920,040 shares, 990,000 shares and
59,700 shares of Common Stock to Mr. Cuban in May 1995, December 1995, March
1996 and August 1996, respectively.

The Company sold 2,640,000 shares, 600 shares and 7,500 shares of Common
Stock to Mr. Wagner in May 1995, December 1995, and August 1996, respectively.

The Company sold 120,000 and 1,560 shares of Common Stock to Martin Woodall
in May 1995 and August 1996, respectively.

The Company entered into a Bill of Conveyance and Agreement to Assume
Liabilities effective July 1995 with Cameron Broadcasting Systems, Inc.
("Cameron Broadcasting") pursuant to which (i) Cameron Broadcasting transferred
certain intangible assets and rights to the Company, (ii) the Company assumed
certain liabilities (relating solely to the assets and rights acquired) and
(iii) the Company issued 600,000 shares of Common Stock to Cameron Broadcasting.
Cameron Broadcasting has appointed Mr. Wagner as proxy to vote these 600,000
shares pursuant to a Proxy dated as of July 1995. The Company sold 33,540
additional shares of Common Stock to Cameron Broadcasting in August 1996. The
Company repurchased 120,000 shares of Company Common Stock from Cameron
Broadcasting in June 1996.

Cameron Broadcasting and Messrs. Cuban and Wagner entered into a Buy-Sell
Agreement effective July 1995 (as amended in August 1996, the "Buy-Sell
Agreement") pursuant to which each party was given the right to buy a pro rata
portion of shares that any other party offered for sale and, in certain
situations, the right or obligation to co-sell shares sold by another party. The
Buy-Sell Agreement terminates upon an initial public offering of any security of
the Company.

The Company issued 735,720 shares, 9,840 shares, 5,220 shares, 21,120
shares and 1,592,356 shares of Common Stock to Motorola in September 1996,
January 1997, March 1997, April 1997 and December 1997, respectively. The
Company and Motorola entered into a Negotiation Rights Agreement in September
1996 pursuant to which the Company agreed (i) to offer Motorola a non-exclusive
license to any technology which it licenses to other parties on a non-exclusive
basis on the same or better terms, (ii) to give Motorola 30 days notice of the
Company's intention to grant a license to any technology to other parties on an
exclusive basis and (iii) to give Motorola a right of first negotiation to any
license of certain wireless distribution technology. The Company, Motorola, and
Messrs. Cuban and Wagner entered into a Stockholders Agreement (the "September
Stockholders Agreement") in September 1996, as amended in December 1996,
pursuant to which Messrs. Cuban and Wagner agreed (i) to vote their shares to
ensure that two designees of Motorola are elected to the Company's Board of
Directors (See "Description of Capital Stock--Stockholder Agreements") and (ii)
to give Motorola certain tag-along rights with respect to certain sales of
shares by Messrs. Cuban and Wagner after the date of the offering.

Steven Leeke and Randall Battat, two of the Company's directors, were
designees of Motorola pursuant to the September Stockholders Agreement. The
September Stockholders Agreement will terminate upon the earlier to occur of (i)
the third anniversary of the Company's offering and (ii) the date on which
Motorola no longer holds at least 50% of the 735,720 shares purchased by
Motorola in September 1996.

On December 16, 1997, the Company and Motorola entered into a Joint
Promotion and Advertising Sales Agreement pursuant to which the Company has
agreed to assist Motorola in monitoring and developing an end-user interface for
Internet delivery of audio content (the "audioSENSE Player"). In order for
Motorola to develop the audioSENSE Player, the Company has agreed to allow the
audioSENSE Player to reside on the Company's Web site as an interface for
accessing certain content on the Company's Web sites. Motorola is also a
customer of the Company, to whom the Company provides business services. These
relationships with Motorola have generated revenues for the Company of $10,000
and $84,000 for the twelve months ending December 31, 1997 and the three months
ending March 31, 1998, respectively. See "Business--Strategic Relationships--Key
Internet Companies."

The Company issued 294,300 shares and 530,786 shares of Common Stock to
Intel in February 1997 and December 1997, respectively. The Company sold a stock
purchase warrant to Intel in February 1997, as

56
<PAGE> 61

amended in December 1997, (the "Intel Warrant") pursuant to which Intel was
granted the right to purchase an additional 147,120 shares of Common Stock at an
exercise price of $6.80 per share. The terms of the warrant provide that Intel's
right to acquire 58,860 shares of Common Stock vested immediately upon the
granting of the warrant, and that Intel's right to acquire the remaining 88,260
shares of Common Stock will, if the Company and Intel have not entered into a
subsequent agreement prior to June 30, 1998, have expired prior to the
effectiveness of this Prospectus. The Company does not anticipate that it will
enter into such agreement. Intel is also a customer of the Company, to whom the
Company provides business services, which services generated revenues for the
Company of approximately $500,000 and $84,000 for the twelve months ending
December 31, 1997 and the three months ending March 31, 1998, respectively.

The Company, Messrs. Cuban and Wagner, Motorola, Intel and certain other
shareholders of the Company are parties to a stockholders agreement (the
"December Stockholders Agreement") which was originally entered into in December
1996 and amended in February 1997 and December 1997 pursuant to which Messrs.
Cuban and Wagner granted Motorola, Intel and certain other shareholders a
tag-along right with respect to certain sales of shares by Messrs. Cuban and
Wagner after the date of this offering. See "Description of Capital
Stock--Stockholder Agreements." The December Stockholders Agreement will
terminate upon the third anniversary of the Company's Initial Public Offering.

The Company, Motorola, Intel and certain other shareholders of the Company
are party to a Registration Rights Agreement, which was originally entered into
in September 1996 and amended in November 1996, December 1996, February 1997,
and December 1997 (the "Registration Rights Agreement"), pursuant to which
Motorola, Intel and certain other shareholders have rights (i) to request that
the Company effect a registration of the sale of shares held by them and (ii) to
request that the sale of shares held by them be included in registrations
conducted by the Company. See "Description of Capital Stock--Registration Rights
Agreement."

The Company has entered into employment agreements with Messrs. Cuban and
Wagner. See "Management--Employment Agreements and Change in Control
Considerations."

The Company has issued options to certain of its Directors and Officers.
The Company has entered into Indemnification Agreements with its directors and
executive officers. See "Management--Indemnification of Directors and Executive
Officers and Limitation of Liability."

Mr. Cuban has agreed to act as guarantor of the following June 1997 Company
lease obligations with Green Tree Vender Services Corporation: (i) lease of
voicemail system with monthly payments of $1,128 for a term of three years; (ii)
lease of office furniture with monthly payments of $4,333 for a term of three
years; and (iii) lease of Nortel Meridian system with monthly payments of $3,938
for a term of three years.

57
<PAGE> 62

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain ownership information with respect
to the beneficial ownership of the Company's Common Stock as of March 31, 1998
(except as otherwise noted), and as adjusted to reflect the sale of shares of
Common Stock hereby, by (i) each person who is known by the Company to own
beneficially more than 5% of the Common Stock, (ii) each director of the
Company, (iii) each of the Named Executive Officers, and (iv) all directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
NUMBER OF BENEFICIALLY OWNED(1)
SHARES -----------------------
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING(2)
------------------------ ------------ -------- -----------
<S> <C> <C> <C>
Mark Cuban(3)............................................... 4,724,940 32.6% 27.8%
Todd R. Wagner(4)........................................... 2,742,420 18.9 16.2
Motorola, Inc.(5)........................................... 2,364,256 16.4 14.0
Intel Corporation(6)........................................ 883,946 6.1 5.2
Joseph W. Autem............................................. 19,620 * *
Steven Leeke(7)............................................. 7,500 * *
Kevin Parke(8).............................................. 6,000 * *
All directors and executive officers as a group (9
persons)(9)............................................... 7,500,480 51.4 43.8
</TABLE>

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

* Less than one percent of the Company's Common Stock.

(1) Unless otherwise indicated, and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares shown as beneficially owned by
it. A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from March 31, 1998 upon the exercise
of options and warrants. Each beneficial owner's percentage ownership is
determined by assuming that options that are held by such person (but not
those held by any other person) and that are exercisable within 60 days from
March 31, 1998 have been exercised.

(2) Assumes that the Underwriter's overallotment option is not exercised.

(3) Includes an aggregate of 115,200 shares of Common Stock issuable pursuant to
options that are currently exercisable or are exercisable within 60 days of
March 31, 1998. Mr. Cuban is required to vote his shares to ensure
representation of Motorola on the Board of Directors. See "Description of
Capital Stock--Stockholder Agreements."

(4) Includes an aggregate of 94,320 shares of Common Stock issuable pursuant to
options that are currently exercisable or are exercisable within 60 days of
March 31, 1998. Mr. Wagner has granted the Underwriters an Option,
exercisable within 30 days hereof, relating to the Offering, to purchase up
to 187,500 shares of Common Stock at the price offered to the public less
underwriting discounts and commissions for the purpose of covering
overallotments, if any. If the Underwriters exercise such options in full,
Mr. Wagner will beneficially own 2,554,920 shares or 14.9% of the Common
Stock after the offering. Mr. Wagner holds voting rights with respect to an
additional 600,000 shares of Common Stock, which shares are owned by Cameron
and are subject to a proxy in favor of Mr. Wagner. See "Certain
Transactions." Mr. Wagner is required to vote his shares to ensure
representation of Motorola on the Board of Directors. See "Description of
Capital Stock--Stockholder Agreements."

(5) The address of Motorola, Inc. is 1303 E. Algonquin Road, Schaumburg,
Illinois 60196. Messrs. Wagner and Cuban are each required to vote their
shares to ensure representation of Motorola on the Board of Directors. See
"Description of Capital Stock--Stockholder Agreements." Messrs. Battat and
Leeke disclaim beneficial ownership of any shares of Common Stock
beneficially owned by Motorola.

(6) Includes an aggregate of 58,860 shares of Common Stock issuable pursuant to
warrants that are currently exercisable or are exercisable within 60 days of
March 31, 1998. The address of Intel Corporation is 2200 Mission College
Boulevard, Santa Clara, California 95052.

(7) Includes an aggregate of 7,500 shares of Common Stock issuable pursuant to
options that are currently exercisable or are exercisable within 60 days of
March 31, 1998. Pursuant to an agreement between Mr. Leeke and Motorola
dated March 27, 1998. Mr. Leeke can exercise his options at the sole
direction of, and for the benefit of, Motorola.

(8) Includes an aggregate of 6,000 shares of Common Stock issuable pursuant to
options that are currently exercisable or are exercisable within 60 days of
March 31, 1998.

(9) Includes an aggregate of 223,020 shares of Common Stock issuable pursuant to
options that are currently exercisable or are exercisable within 60 days of
March 31, 1998.

58
<PAGE> 63

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company is authorized by its Restated Certificate of Incorporation to
issue 60,000,000 shares of Common Stock, par value $0.01 per share, of which
14,385,071 were outstanding and held of record by 35 stockholders on June 15,
1998; and 5,000,000 shares of Preferred Stock, par value $0.01 per share, of
which no shares are outstanding (collectively, the "Capital Stock").

The Company may not subdivide or combine any shares of its Common Stock, or
pay any dividend or retire any share or make any other distribution on any share
of its Common Stock, or accord any other payment, benefit or preference to any
share of its Common Stock, except by extending such subdivision, combination,
distribution, payment, benefit or preference equally to all shares of Common
Stock.

The Common Stock does not entitle holders to any preemptive rights upon the
issuance of other securities of the Company.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by stockholders and are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally available therefore
and to share pro rata in any distribution to holders of Capital Stock. Holders
of Common Stock do not have the power to act by written consent. Actions
required or permitted to be taken by the stockholders of the Company may be
taken only at a duly called annual or special meeting of the stockholders. In
the event of a liquidation, dissolution, or winding-up of the Company, holders
of Common Stock will be entitled to share pro rata in the distribution to
holders of Capital Stock of all remaining assets of the Company after the
payment of all debts, liabilities, and obligations of the Company and the
preference distributions, if any, to holders of the Company's Preferred Stock.

Options entitling the holders thereof to purchase a total of 2,004,352
shares of Common Stock were outstanding under the Company's 1996 and 1998 Stock
Option Plans and the Company's Directors' Plan as of March 31, 1998.

PREFERRED STOCK

Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors has the authority to issue up to 5,000,000 shares of Preferred
Stock in one or more series with such designations, rights and preferences as
may be determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
that may adversely affect the voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, the Preferred Stock could be
utilized, under certain circumstances, to discourage, delay or prevent an
acquisition or change of control of the Company. The Company does not currently
intend to issue any shares of its Preferred Stock.

OPTIONS

As of March 31, 1998, the Company had granted options, net of forfeitures
to purchase up to 2,004,352 shares of Common Stock, of which 290,919 shares were
then currently exercisable, at exercise prices that generally range from $1.07
to $10.43, pursuant to the provisions of the Company's Stock Option Plans and
Directors' Plan. See "Management--Non-Employee Directors Compensation" and
"--Stock Option Plans." Previous offerings under the Plans have been exempt from
registration, and shares issued in connection therewith are subject to resale
restrictions. The Company intends to file a Registration Statement on Form S-8
registering shares to be issued in connection with current and future option
grants. See "Shares Eligible for Future Sale."

59
<PAGE> 64

WARRANTS

As of the effective date of this Prospectus, the Company has outstanding
warrants entitling the holders thereof to purchase a total of 218,096 shares of
Common Stock of the Company with exercise prices of either $6.80 or $9.42 per
share. Warrants to purchase an additional 104,220 shares of Common Stock will
expire upon the consummation of this offering.

DIVIDENDS

The Company has never paid any cash dividends on its Capital Stock. For the
foreseeable future, the Company intends to retain all of its future earnings to
finance its operations and does not anticipate paying cash dividends.

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of the Company's outstanding voting
stock) from engaging in a "business combination" (as defined in Section 203)
with the Company for three years following the date that person became an
interested stockholder unless: (i) before that person became an interested
stockholder, the Board approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (ii) upon completion of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the Company outstanding at
the time the transaction commenced (excluding stock held by directors who are
also officers of the Company and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer) or (iii) on or
following the date on which that person became an interested stockholder, the
business combination is approved by the Company's Board and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least
66 2/3% of the outstanding voting stock of the Company not owned by the
interested stockholder.

Under Section 203, these restrictions do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions involving the Company
and a person who was not an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the Company's directors, if that extraordinary transaction is approved or not
opposed by a majority of the directors (but not less than one) who were
directors before any person became an interested stockholder in the previous
three years or who were recommended for election or elected to succeed such
directors by a majority of such directors then in office.

Under Section 162 of the DGCL, the Board of Directors of the Company can,
without stockholder approval, issue authorized but unissued shares of Capital
Stock, which may have the effect of delaying, deferring or preventing a change
of control of the Company. Except as contemplated hereby, the Company has no
plan or arrangement for the issuance of any shares of Capital Stock other than
in the ordinary course pursuant to the Plans.

CERTAIN CHARTER AND BYLAW PROVISIONS

The Company's Restated Certificate of Incorporation provides that following
the consummation of an initial public offering of the Common Stock, no action
may be taken by written consent in lieu of a meeting of the stockholders.

The Company's Restated Certificate of Incorporation provides that at the
first annual meeting following the consummation of an initial public offering of
shares of Common Stock, the Board of Directors will be divided into three
classes, and the directors will thereafter have staggered three-year terms.
Directors may be removed from office only for cause, and only upon the
affirmative vote of stockholders of the Company, voting as a single class, of
not less than 67% of the total outstanding shares entitled to vote in the
election of directors. The Restated Certificate of Incorporation further
provides that the provisions thereof pertaining to the Board

60
<PAGE> 65

of Directors may be repealed or amended only in accordance with the DGCL and by
the affirmative vote of the stockholders of the Company, voting as a single
class, of not less than 67% of the total outstanding shares entitled to vote in
the election of directors.

The Company's Bylaws provide that nominations for directors by stockholders
and stockholder proposals to be presented at annual meetings of stockholders
generally must be submitted to the Company not less than 120 calendar days in
advance of the anniversary date of the Company's proxy statement sent to
stockholders in connection with the previous year's annual meeting of
stockholders.

REGISTRATION RIGHTS AGREEMENT

On February 24, 1997, the Company entered into that certain First Amended
and Restated Registration Rights Agreement (the "Registration Rights Agreement")
among Motorola, Premiere Radio Networks, Intel, Capitol and HMTF AudioNet
Investors (collectively, the "Holders"). Yahoo! was made a Holder under the
terms of the Registration Rights Agreement pursuant to the Addendum to First
Amended and Restated Registration Rights Agreement dated as of December 30,
1997. Under the terms of the Registration Rights Agreement, Holders owning a
majority of the shares subject to the agreement have the right to demand that
the Company register shares held by them. The rights of the Holders to demand
registration are subject to certain conditions and limitations regarding timing
of such demands (including a six month restriction following an initial public
offering), the number of demands, and other matters. In addition, if the Company
proposes to register any of its securities under the Securities Act (other than
in connection with an initial public offering), either for its own account or
for the account of other security holders, the Holders are entitled to notice of
such registration and are entitled to include their shares of Common Stock in
the registration ("Piggyback Registration"). The Piggyback Registration rights
of the Holders are subject to certain conditions and limitations, among them the
right of the underwriters of a registered offering to limit the number of shares
of Common Stock included in such registration. The Company has agreed to bear
all expenses incurred in connection with all registrations, except to the extent
that the Holders of the registration rights, and not the Company, initiate the
request that a registration be withdrawn prior to its effectiveness. Pursuant to
the Registration Rights Agreement, the Company has agreed, to the extent
permitted by law, to grant certain indemnification rights for claims arising
under the Securities Act in connection with material misstatements, omissions or
violations by the Company in a registration statement effecting a registration
under the Registration Rights Agreement. In addition, each Holder has agreed to
indemnify the Company, to the extent permitted by law, for claims which arise
out of any violation that occurs in reliance upon written information furnished
to the Company by such Holder expressly for use in connection with such
registration.

STOCKHOLDER AGREEMENTS

On September 4, 1996 Motorola, Todd R. Wagner and Mark Cuban entered into a
stockholders agreement (as amended, the "September Stockholders Agreement")
pursuant to which Messrs. Wagner and Cuban have agreed to vote all shares of
Common Stock owned by them in a manner that ensures that (i) at all times two
Motorola designees serve as members of the Board of Directors of the Company,
subject to removal only under limited circumstances described in the September
Stockholders Agreement, and (ii) at all times that the Board of Directors is
segregated into classes, at least one such designee is a member of the class of
directors with the longest initial term.

In the event that Mr. Cuban or Mr. Wagner proposes to sell, transfer or
otherwise dispose of shares of Common Stock representing 10% or more of the
Company's outstanding shares of Common Stock, certain shareholders, including
Intel and Motorola, have the right to co-sell a pro-rata number of shares of
Common Stock, subject to a limited number of exempt transfers.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.

61
<PAGE> 66

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices from time to time.
Furthermore, since no shares owned prior to this offering will be available for
sale shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after these restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.

Upon completion of this offering, the Company will have outstanding an
aggregate of 16,885,071 shares of Common Stock, assuming no exercise of any
warrants or options and no exercise of the Underwriters' over-allotment option.
Of these shares, all of the shares sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act,
unless such shares are purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act (the "Affiliates"). The remaining
14,385,071 shares of Common Stock held by existing stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act
("Restricted Shares"). Restricted Shares may be sold in the public market only
if registered or if they qualify for an exemption from registration under Rule
144 or 701 promulgated under the Securities Act, which rules are summarized
below. All officers, directors, stockholders and option holders of the Company
have agreed not to offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly (or enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of),
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for shares of Common Stock, for a period of 180 days after the date
of this Prospectus, without the prior written consent of Morgan Stanley & Co.
Incorporated. Morgan Stanley & Co. Incorporated may in its sole discretion
choose to release a certain number of these shares from such restrictions prior
to the expiration of such 180 day period. Morgan Stanley & Co. Incorporated
currently has no plans to release any portion of the securities subject to
lock-up agreements. As a result of such contractual restrictions and the
provisions of Rule 144 and 701, the Restricted Shares will be available for sale
in the public market as follows: (i) no shares will be eligible for immediate
sale on the date of this Prospectus; (ii) 13,977,905 shares will be eligible for
sale upon expiration of the contract restriction, 180 days after the date of
this Prospectus, subject in the case of all but 3,260,940 shares to the volume
limitations and other conditions of Rule 144 described below; and (iii) the
remaining 407,166 shares will become eligible for sale in March 1999, all of
which will be subject to the volume limitations and other conditions of Rule
144.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the number of shares of Common Stock then outstanding
(which will equal approximately 168,850 shares immediately after this offering);
or (ii) the average weekly trading volume of the Common Stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of an notice
on Form 144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an Affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years (including the holding period of any
prior owner except an Affiliate), is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144; therefore, unless otherwise restricted, shares
will quality as "144(k) shares" on the date of this Prospectus and may be sold
immediately upon the completion of this offering. Subject to certain limitations
on the aggregate offering price of a transaction and other conditions,
employees, directors, officers, consultants or advisors may rely on Rule 701
with respect to the resale of securities originally purchased from the Company
prior to the date the issuer becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),

62
<PAGE> 67

pursuant to written compensatory benefit plans or written contracts relating to
the compensation of such persons. In addition, the Securities and Exchange
Commission has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Exchange Act, along with the shares acquired upon exercise of such options
(including exercises after the date of this Prospectus). Securities issued in
reliance on Rule 701 are restricted securities and, subject to the contractual
restrictions described above, beginning 90 days after the date of this
Prospectus, may be sold by persons other than Affiliates subject only to the
manner of sale provisions of Rule 144, and by Affiliates under Rule 144 without
compliance with its holding period requirements.

Upon completion of this offering, the holders of approximately 4,751,727
shares of Common Stock currently outstanding or issuable upon exercise of
warrants, or their transferees, will be entitled to certain rights with respect
to the registration of such shares under the Securities Act. See "Description of
Capital Stock--Registration Rights." Registration of such shares under the
Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act (except for share purchases by affiliates)
immediately upon the effectiveness of such registration.

The Company intends to file registration statements under the Securities
Act covering a total of 4,149,812 shares of Common Stock subject to options
outstanding or reserved for future issuance under the 1996 Plan, the 1998 Plan
and the Directors' Plan and 250,000 shares of Common Stock reserved for issuance
under the Stock Purchase Plan. See "Management--Employee Benefit Plans." Such
registration statements are expected to be filed and become effective as soon as
practicable after the effective date of this offering. Accordingly, shares
registered under such registration statements will, subject to Rule 144 volume
limitations applicable to Affiliates, be available for sale in the open market,
beginning 180 days after the date of the Prospectus, unless such shares are
subject to vesting restrictions with the Company.

63
<PAGE> 68

UNDERWRITERS

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below (the "Underwriters"), for whom Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and Hambrecht & Quist LLC
are acting as Representatives (the "Representatives"), have severally agreed to
purchase, and the Company has agreed to sell to them, severally, the respective
number of shares of Common Stock set forth opposite their respective names
below:

<TABLE>
<CAPTION>
NUMBER
OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Hambrecht & Quist LLC.......................................

---------
Total............................................. 2,500,000
=========
</TABLE>

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

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

The Company and the Selling Stockholder have granted to the Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to purchase up
to an aggregate of 375,000 additional shares of Common Stock at the initial
public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The Underwriters may exercise such option to purchase
solely for the purpose of covering over-allotments, if any, made in connection
with the offering of the shares of Common Stock offered hereby. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares of Common Stock as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock set forth next to the names of all Underwriters in the preceding
table.

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

Each of the Company and the directors, executive officers, other
stockholders and option holders of the Company has agreed that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not during the period ending 180 days after the date of
this Prospectus (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer, lend or dispose of, directly
or indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the

64
<PAGE> 69

economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise, except under
certain limited circumstances. The restrictions described in this paragraph do
not apply to (a) the sale of shares of Common Stock to the Underwriters, (b) the
issuance by the Company of shares of Common Stock upon exercise of an option or
a warrant or the conversion of a security outstanding on the date of this
Prospectus of which the Underwriters have been advised in writing or (c)
transactions by any person other than the Company relating to shares of Common
Stock or other securities acquired in open market transactions after the
completion of the offering of the Shares.

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

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

PRICING OF THE OFFERING

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

65
<PAGE> 70

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, New York, New York. Sean P. Griffiths, a
partner of Gibson, Dunn & Crutcher LLP, currently owns 20,220 shares of Common
Stock of the Company. Certain legal matters will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.

EXPERTS

The financial statements of the Company for the period from inception (May
19, 1995) to December 31, 1995 and each of the two years in the period ended
December 31, 1997, included in this Prospectus have been so included in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act, with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is
hereby made to such Registration Statement and the exhibits and schedules
thereto. A copy of the Registration Statement may be inspected by anyone without
charge at the Commission's principal office in Washington, D.C., at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048, and Citicorp Center 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and through the SEC's Web site at http://www.sec.gov. Copies of
all or any part of the Registration Statement may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W. Washington, D.C.
20549, upon payment of certain fees prescribed by the Commission.

66
<PAGE> 71

broadcast.com inc.

INDEX TO FINANCIAL STATEMENTS

THE FINANCIAL STATEMENTS REFERRED TO BELOW ARE AS OF DECEMBER 31, 1996 AND 1997
AND MARCH 31, 1998 (UNAUDITED) AND FOR THE INCEPTION PERIOD ENDED DECEMBER 31,
1995,
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity (Deficit)................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 72

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
broadcast.com inc.

In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of broadcast.com inc.
at December 31, 1996 and 1997 and the results of its operations and its cash
flows for the period from inception (May 19, 1995) to December 31, 1995 and the
years ended December 31, 1996 and 1997 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Dallas, Texas
February 1, 1998

F-2
<PAGE> 73

broadcast.com inc.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1996 1997 1998
ASSETS ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.......................... $4,580,286 $21,337,116 $22,400,176
Accounts receivable, net of allowance of $34,826,
$76,240 and $141,679, respectively.............. 406,802 1,976,765 2,448,561
Prepaid expenses................................... 65,760 1,032,198 1,382,182
Other.............................................. 17,912 11,311 52,986
---------- ----------- -----------
Total current assets....................... 5,070,760 24,357,390 26,283,905
Property and equipment, net.......................... 1,186,182 2,812,971 3,289,255
Prepaid expenses..................................... 1,715,000 935,720 369,834
Intangible assets, net............................... 182,414 126,733 191,480
---------- ----------- -----------
Total assets............................... $8,154,356 $28,232,814 $30,134,474
========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable................................... $ 91,545 $ 362,214 $ 674,333
Accrued liabilities................................ 472,926 677,662 1,154,149
---------- ----------- -----------
Total current liabilities.................. 546,471 1,039,876 1,828,482
---------- ----------- -----------
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized, $.01
par value, no shares issued and outstanding..... -- -- --
Common stock, 60,000,000 shares authorized, $.01
par value, 11,134,140, 13,976,285 and 14,383,451
shares issued and outstanding, respectively..... 57,341 85,763 89,835
Additional paid-in capital......................... 10,807,309 36,838,152 40,669,584
Accumulated deficit................................ (3,256,765) (9,730,977) (12,453,427)
---------- ----------- -----------
Total stockholders' equity................. 7,607,885 27,192,938 28,305,992
---------- ----------- -----------
Total liabilities and stockholders'
equity................................... $8,154,356 $28,232,814 $30,134,474
========== =========== ===========
</TABLE>

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

F-3
<PAGE> 74

broadcast.com inc.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION
(MAY 19, 1995) YEAR ENDED THREE MONTHS ENDED
TO DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------- -------------------------
1995 1996 1997 1997 1998
-------------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Business services............ $ -- $ 535,201 $ 2,820,449 $ 446,711 $ 1,126,515
Web advertising.............. -- 1,090,629 2,955,259 531,306 1,322,911
Traditional media
advertising............... -- -- 942,090 90,751 516,707
Other........................ -- 130,270 138,235 18,189 209,811
---------- ----------- ----------- ----------- -----------
Total revenues....... -- 1,756,100 6,856,033 1,086,957 3,175,944
Cost of revenues (excluding
depreciation and
amortization)................ -- 1,301,253 2,949,641 469,422 1,224,957
---------- ----------- ----------- ----------- -----------
-- 454,847 3,906,392 617,535 1,950,987
---------- ----------- ----------- ----------- -----------
Operating expenses:
Operating and development.... -- 1,506,449 4,659,249 649,565 2,247,141
Sales and marketing.......... 21,413 717,547 3,389,069 519,182 1,670,727
General and administrative... 216,609 751,785 1,416,276 396,832 588,179
Depreciation and
amortization.............. 29,896 544,003 1,129,120 176,463 442,456
---------- ----------- ----------- ----------- -----------
Total operating
expenses........... 267,918 3,519,784 10,593,714 1,742,042 4,948,503
---------- ----------- ----------- ----------- -----------
Net operating loss... (267,918) (3,064,937) (6,687,322) (1,124,507) (2,997,516)
Interest and other income...... -- 76,090 213,110 61,010 275,066
---------- ----------- ----------- ----------- -----------
Net loss............. $(267,918) $(2,988,847) $(6,474,212) $(1,063,497) $(2,722,450)
========== =========== =========== =========== ===========
Basic and diluted net loss per
share........................ $ (0.04) $ (0.31) $ (0.55) $ (0.09) $ (0.19)
========== =========== =========== =========== ===========
Shares used in the net loss per
share calculations........... 6,020,432 9,563,771 11,679,777 11,427,591 14,075,604
========== =========== =========== =========== ===========
</TABLE>

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

F-4
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broadcast.com inc.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE INCEPTION PERIOD ENDED DECEMBER 31, 1995, THE YEARS ENDED DECEMBER 31,
1996 AND 1997
AND THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
-------------------- PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
---------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Issuance of Common Stock to founders
in May 1995......................... 5,400,000 $ -- $ 1,000 $ -- $ 1,000
Issuance of Common Stock; purchase of
transmission and digital programming
rights from Cameron Broadcasting,
Inc. ............................... 600,000 6,000 44,000 -- 50,000
Issuance of Common Stock; payment for
services............................ 30,180 302 2,198 -- 2,500
Net loss incurred during development
stage............................... -- -- -- (267,918) (267,918)
---------- ------- ----------- ------------ -----------
BALANCES, DECEMBER 31, 1995........... 6,030,180 6,302 47,198 (267,918) (214,418)
Issuance of Common Stock.............. 5,103,960 51,039 10,760,111 -- 10,811,150
Net loss.............................. -- -- -- (2,988,847) (2,988,847)
---------- ------- ----------- ------------ -----------
BALANCES, DECEMBER 31, 1996........... 11,134,140 57,341 10,807,309 (3,256,765) 7,607,885
Issuance of Common Stock.............. 2,842,145 28,422 25,310,843 -- 25,339,265
Issuance of warrants.................. -- -- 720,000 -- 720,000
Net loss.............................. -- -- -- (6,474,212) (6,474,212)
---------- ------- ----------- ------------ -----------
BALANCES, DECEMBER 31, 1997........... 13,976,285 85,763 36,838,152 (9,730,977) 27,192,938
Issuance of Common Stock.............. 407,166 4,072 3,831,432 -- 3,835,504
Net loss.............................. -- -- -- (2,722,450) (2,722,450)
---------- ------- ----------- ------------ -----------
BALANCES, MARCH 31, 1998
(UNAUDITED)......................... 14,383,451 $89,835 $40,669,584 $(12,453,427) $28,305,992
========== ======= =========== ============ ===========
</TABLE>

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

F-5
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broadcast.com inc.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION
(MAY 19, 1995) YEAR ENDED THREE MONTHS ENDED
TO DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------- -------------------------
1995 1996 1997 1997 1998
-------------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................... $(267,918) $(2,988,847) $(6,474,212) $(1,063,497) $(2,722,450)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation......................................... 22,936 488,037 1,060,340 162,461 427,203
Amortization......................................... 6,960 55,966 68,780 14,002 15,253
Issuance of Common Stock for services................ 2,500 -- -- -- --
Provision for doubtful accounts...................... -- 84,006 86,240 9,720 88,500
Changes in operating assets and liabilities:
Accounts receivable................................ -- (490,808) (1,656,203) (294,570) (560,296)
Prepaid expenses................................... (87,168) (1,693,592) (200,257) 13,500 215,902
Other assets....................................... (11,663) (6,559) 6,601 (372) (41,675)
Accounts payable and accrued liabilities........... 304,644 241,827 493,405 (39,936) 788,606
-------- ---------- ---------- ---------- ----------
Net cash used in operating activities............ (29,709) (4,309,970) (6,615,306) (1,198,692) (1,788,957)
-------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchases of intangible assets......................... -- -- -- -- (80,000)
Purchases of property and equipment.................... (414,227) (1,282,928) (2,687,129) (688,824) (903,487)
-------- ---------- ---------- ---------- ----------
Net cash used in investing activities............ (414,227) (1,282,928) (2,687,129) (688,824) (983,487)
-------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds from Common Stock issuances................... 1,000 10,045,790 25,339,265 3,542,940 3,835,504
Proceeds from sale of warrants......................... -- -- 720,000 120,000 --
Proceeds from stock subscription deposits.............. 570,330 -- -- -- --
Proceeds from (repayment of) stockholder loan.......... 14,980 (14,980) -- -- --
Purchase of treasury stock............................. -- (160,000) -- -- --
Proceeds from sale of treasury stock................... -- 160,000 -- -- --
-------- ---------- ---------- ---------- ----------
Net cash provided by financing activities........ 586,310 10,030,810 26,059,265 3,662,940 3,835,504
-------- ---------- ---------- ---------- ----------
Net increase in cash and cash equivalents................ 142,374 4,437,912 16,756,830 1,755,424 1,063,060
Cash and cash equivalents at beginning of period......... -- 142,374 4,580,286 4,580,286 21,337,116
-------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period............... $ 142,374 $ 4,580,286 $21,337,116 $ 6,335,710 $22,400,176
======== ========== ========== ========== ==========
</TABLE>

(See disclosure of noncash transactions in Notes 2 and 7)

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

F-6
<PAGE> 77

broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

Cameron Audio Networks, Inc. ("Cameron") was incorporated and filed its
Articles of Incorporation (the "Articles") with the Secretary of State of Texas
on May 19, 1995. The Articles authorized the issuance of one million shares of
no par Common Stock. In December 1995, Cameron filed the Articles of Amendment
to the Articles to increase the number of authorized no par shares of Common
Stock to ten million. On May 15, 1996, Cameron purchased the rights to the name
AudioNet and subsequently filed a Certificate of Incorporation to form AudioNet,
Inc. ("AudioNet"), a new entity, in the state of Delaware, on September 19,
1996. On November 1, 1996, Cameron and AudioNet filed a Certificate of Merger,
effectively a stock-for-stock merger, whereby Cameron merged with and into
AudioNet, with AudioNet continuing as the surviving entity. Each share of common
stock of Cameron was converted to one share of Common Stock of AudioNet, and
Cameron ceased to exist at the date of such merger. Effective as of the merger
date, the number of shares authorized increased from 10,000,000 shares of Common
Stock, no par value, to 5,000,000 shares of Preferred Stock, $0.01 par value,
and 45,000,000 shares of Common Stock, $0.01 par value. The financial statements
have been retroactively restated to reflect this reincorporation, except for the
original issuance of founders' shares (see Note 7). In April 1997, the Company
declared a sixty-for-one stock split to be effected in the form of a stock
dividend to stockholders of record on April 28, 1997. Concurrent with the stock
split, the number of authorized common shares was increased from 10,000,000 to
45,000,000. As stated in Note 2, the financial statements have been adjusted
retroactively for the sixty-for-one stock split. Effective May 1998, the Company
changed its name to broadcast.com inc. ("broadcast.com" or the "Company").
(Unaudited -- see Note 10). Additionally, in June 1998, the Company filed
Restated Certificate of Incorporation which increases the number of authorized
shares of Common Stock to 60,000,000. (Unaudited -- see Note 10).

The Company aggregates content and is a broadcaster of streaming media
programming on the Web with the network infrastructure and expertise to deliver
or "stream" live and on-demand audio and video content on the Internet. The
Company offers a comprehensive selection of live and on-demand audio and video
programming on the Internet, including sports, talk and music radio, television,
business events, full-length music CDs, news, commentary and full-length
audio-books. The Company broadcasts on the Internet 24 hours a day seven days a
week, and its programming includes radio stations, television stations and cable
networks and game broadcasts and other programming for college and professional
sports teams. The Company licenses such programming from content providers, in
most cases under exclusive, multi-year agreements. The Company's Business
Services Group also provides Internet and intranet broadcasting services to
businesses and other organizations. These business services include turnkey
production of press conferences, earnings conference calls, stockholder
meetings, product introductions, training sessions, distance learning
telecourses and media events.

2. SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

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

REVENUES

The Company generates revenues through business services, Web advertising
and traditional media advertising.

F-7
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broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Business Services. In 1996 and 1997, the Company derived 31% and 41%,
respectively, of revenues from business services. Business services revenues are
derived by providing Internet or intranet broadcasting services to businesses
and other organizations. Business services revenues are recognized in the month
in which the service is performed, provided that no significant Company
obligations remain and collection of the resulting receivable is probable.

Web Advertising. In 1996 and 1997, the Company derived 62% and 43%,
respectively, of its revenues from the sale of Web advertisements. Web
advertising revenues are derived from the sale of gateway ads with guaranteed
click-thrus ads, channel and event sponsorships and multimedia and traditional
banner ads. Bartered Web advertising revenues are derived from transactions in
which the Company trades advertising on its Web sites in exchange for
advertisements on the Web sites of other companies. Bartered Web advertising
revenues are recognized at the fair market value of consideration received or
provided, whichever is lower. In cases where there is not substantial objective
evidence of fair market value, no revenue is recognized. All bartered Web
advertising revenues are offset by an equal amount of bartered Web advertising
expense in cost of revenues. Bartered Web advertising revenues, which were
$638,000 in 1996 and $1,018,000 in 1997, represented 59% and 34% of Web
advertising revenues, or 36% and 15% of total revenues in 1996 and 1997,
respectively. Web advertising revenues are recognized in the period in which the
advertisement is displayed on one of the Company's Web pages, except for
sponsorship sales which are recognized ratably over the term of the sponsorship,
provided that no significant Company obligations remain and collection of the
resulting receivable is probable. The duration of the Company's advertising
commitments has generally ranged from one week to one year.

Traditional Media Advertising. In 1997, the Company derived 14% of its
revenues from traditional media advertising. Traditional media advertising
revenues are derived from the sale of ad spots received from radio and
television stations in exchange for the Company broadcasting their programming
over the Internet and the sale of prepaid advertising. Traditional media
advertising revenues are recognized in the month in which the advertisement is
run.

Other. Other revenues consist of electronic commerce sales as well as
certain programming and promotional services performed by the Company and are
recognized in the month the service is provided or the product is shipped.

In 1996, two customers of the Company each accounted for 10% of revenues,
one of which is currently a stockholder. In 1997, no customer accounted for more
than 10% of revenues.

COST OF REVENUES (EXCLUDING DEPRECIATION AND AMORTIZATION)

Cost of revenues (excluding depreciation and amortization) consist
primarily of expenses from the sale of prepaid advertising credits, bartered Web
advertising expenses, event production costs, direct personnel expenses
associated with event production and performance license fees.

OPERATING AND DEVELOPMENT EXPENSES

Operating and development expenses consist primarily of data communications
expenses, personnel expenses associated with broadcasting, content and software
license fees, operating supplies and overhead.

SALES AND MARKETING EXPENSES

Sales and marketing expenses consist primarily of personnel expenses
associated with the sale of the Company's business services and advertising,
marketing of the Company's Web sites, graphic design costs and overhead.

F-8
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broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist primarily of administrative
personnel expenses, professional fees, expenditures for applicable facilities
costs and overhead.

CASH EQUIVALENTS

The Company considers investments with original maturities dates of 90 days
or less to be cash equivalents. The carrying values of these investments are
approximately equal to their fair market values at the end of the year.

ADVERTISING EXPENSES

Advertising expenses are either charged to operations when incurred or
purchased in advance and capitalized for future use or sale and expensed as the
advertising credits are used or sold. The cost of advertising used by the
Company is charged to operations while the cost of advertising sold to customers
is included in cost of revenues.

PREPAID EXPENSES

In December 1997, the Company entered into an agreement with Yahoo! Inc.
("Yahoo!"), an existing stockholder, to integrate their services and conduct
certain joint marketing activities. Amounts paid under this agreement for
prepaid advertising credits are capitalized and expensed as the advertising
credits are utilized. Amounts paid under this agreement for the use,
reproduction and display of the broadcast.com brand, page views received from
Yahoo! for banner advertising, sponsorships and promotions for the Company are
capitalized and expensed ratably over the term of the agreement, which
terminates on January 31, 1999.

In conjunction with a stock transaction with Premiere Radio Networks, Inc.
("Premiere"), the Company entered into an agreement in November 1996 to pay
Premiere $2,000,000 in exchange for an equal value of advertising credits. The
Company is required to utilize a minimum of $250,000 in each twelve-month period
over a maximum of four years. The asset has been and will continue to be
expensed in the period the advertising credits are utilized (see Advertising
expenses). In 1996 and 1997, the Company utilized approximately $285,000 and
$780,000, respectively, in advertising credits.

Prepaid advertising credits that will be utilized within the next twelve
months are classified as current assets.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and is depreciated over its
estimated useful life, ranging from one to five years. The Company provides for
depreciation of assets using the straight-line method for financial reporting
purposes and accelerated methods for income tax purposes. Prior to 1996,
capitalized software costs were being amortized over three years. However, in
1996, the Company changed the estimated life of all capitalized software costs
to one year. The effect of this change was to increase the net loss during 1996
by approximately $240,000, or $0.03 per share. Leasehold improvements are
amortized over the life of the lease using the straight-line method.
Expenditures for maintenance and repairs are charged to operations in the period
they are incurred.

Long-lived assets held and used by the Company, or to be disposed of, are
reviewed for impairment whenever events or changes in circumstances indicate
that the net book value of the asset may not be recoverable. An impairment loss
is recognized if the sum of the expected future cash flows (undiscounted and
before interest) from the use of the asset is less than the net book value of
the asset. The amount of the impairment loss will generally be measured as the
difference between net book value of the assets and the

F-9
<PAGE> 80
broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

estimated fair value of the related assets. Based on its most recent analysis,
the Company believes that no impairment of long-lived assets existed at December
31, 1997.

INTANGIBLE ASSETS

Intangible assets consist of certain transmission and digital programming
distribution rights acquired in May 1995 from Cameron Broadcasting Systems,
Inc., and an agreement to purchase a license from University Sports America,
Inc. ("University Sports") (see Note 7). The transmission agreements acquired
from Cameron Broadcasting Systems, Inc. ("Cameron Broadcasting") are stated at
an historical cost of $50,000, less accumulated amortization of approximately
$24,000 and $40,000 at December 31, 1996 and 1997, respectively, and are being
amortized on a straight-line basis over a three-year period.

In January 1996, the Company entered into an agreement to purchase a
license from University Sports in exchange for 390,060 shares of Common Stock.
The license provides the Company with the right to broadcast several college and
university sports programs over the Internet. The license is stated at an
historical cost of $195,030, less accumulated amortization of approximately
$39,000 and $78,000 at December 31, 1996 and 1997, respectively, and is being
amortized on a straight-line basis over a five-year period.

FINANCIAL INSTRUMENTS

As of December 31, 1996 and 1997, the fair values of the Company's accounts
receivable and accounts payable and accrued liabilities approximate the related
carrying values.

ACCRUED LIABILITIES

At December 31, 1996, accrued liabilities included approximately $145,000
in software license fees, approximately $61,000 in expense reimbursements to
employees, approximately $56,000 in legal fees, approximately $51,000 for
computer hardware costs, and approximately $13,000 for leasehold improvements.

At December 31, 1997, accrued liabilities included approximately $368,000
in software license fees, approximately $82,000 in deferred revenue, and
approximately $55,000 in advertising expenses.

At March 31, 1998, accrued liabilities included approximately $497,000 in
content license fees, approximately $417,000 in software license fees, and
approximately $92,000 in deferred revenue.

INCOME TAXES

The Company presents income taxes pursuant to Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("FAS 109"). FAS 109
uses an asset and liability approach to account for income taxes, wherein
deferred taxes are provided for book and tax basis differences for assets and
liabilities. In the event differences between the financial reporting basis and
the tax basis of the Company's assets and liabilities result in deferred tax
assets, an evaluation of the probability of being able to realize the future
benefits indicated by such assets is required. A valuation allowance is provided
for a portion or all of the deferred tax assets when there is sufficient
uncertainty regarding the Company's ability to recognize the benefits of the
assets in future years.

ACCOUNTING FOR STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("FAS 123"), encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has elected to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. Accordingly, compensation cost for

F-10
<PAGE> 81
broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

stock options issued to employees is measured as the excess, if any, of the fair
market value of the Company's Common Stock at the date of grant over the amount
the employee must pay to acquire the stock. Pro forma disclosure of net loss
based on the provisions of FAS 123 is discussed in Note 6.

STOCK SPLIT

A sixty-for-one split of the Company's Common Stock was effected in the
form of a stock dividend in April 1997. All references in the financial
statements to shares, share prices, per share amounts and stock plans have been
adjusted retroactively for the sixty-for-one stock split(see Note 1).

UNAUDITED QUARTERLY FINANCIAL DATA

The quarterly financial information presented herein should be read in
conjunction with the Company's annual financial statements for the year ended
December 31, 1997. The unaudited interim financial statements reflect all
adjustments (all of which are of a normal recurring nature) which are, in the
opinion of management, necessary for a fair presentation of the results of the
interim periods. The results for the interim periods are not necessarily
indicative of the results to be expected for the year.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("FAS 130"), was issued. FAS 130 establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. Reclassification of financial statements for earlier
periods provided for comparative purposes is required upon adoption. FAS 130 is
effective for fiscal years beginning after December 15, 1997. The Company
adopted FAS 130 for the year ending December 31, 1998. The Company had no
comprehensive income items to report for the three months ended March 31, 1998.

In June 1997, Statement of Financial Accounting Standards No. 131,
Disclosure About Segments of an Enterprise and Related Information ("FAS 131"),
was issued. FAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires those enterprises report selected information about
operating segments in interim financial reports issued to stockholders. FAS 131
is effective for financial statements for periods beginning after December 15,
1997. The Company will adopt the reporting requirements of FAS 131 in its
financial statements for the year ending December 31, 1998.

F-11
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broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Computer hardware........................................... $1,031,198 $2,794,395
Computer software........................................... 492,894 575,582
Furniture and equipment..................................... 66,645 222,175
Leasehold improvements...................................... 106,418 792,132
---------- ----------
1,697,155 4,384,284
Accumulated depreciation.................................... (510,973) (1,571,313)
---------- ----------
$1,186,182 $2,812,971
========== ==========
</TABLE>

Computer software represents software purchased from outside vendors for
internal use and is being amortized over one year.

4. COMMITMENTS AND CONTINGENCIES

A summary of future minimum lease payments under operating leases for
buildings and equipment as of December 31, 1997 is as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31,
-------------------------------
<S> <C>
1998.............................................. $159,806
1999.............................................. 159,806
2000.............................................. 84,629
2001.............................................. 47,040
2002.............................................. 3,920
--------
Total............................................. $455,201
========
</TABLE>

During 1995, the President and co-founder of the Company provided office
space to the Company for no cost. The fair market value of the office space
provided was immaterial for the period from Inception (May 19, 1995) to December
31, 1995. Rental expense of approximately $25,000 and $178,000 was incurred
during 1996 and 1997, respectively.

Pursuant to an agreement with Capitol Radio Network, Inc. ("Capitol"), the
Company is obligated to purchase a minimum of $75,000 of advertising spots from
Capitol each year during the term of the agreement which began in February 1997
and which expires on December 31, 2000 (see Note 7).

In December 1997, the Company entered into an agreement with Yahoo! to
integrate their services and conduct certain joint marketing activities. In
December 1997, the Company paid Yahoo! $1,000,000, representing a prepaid
advertising credit (see Note 2). The Company agreed to pay Yahoo! an additional
$1,500,000 in 1998, pursuant to which Yahoo! agreed to promote broadcast.com
programming on its Web site. As of March 31, 1998, the Company had paid Yahoo!
$750,000 of such amount. The agreement terminates on January 31, 1999.

In December 1997, the Company entered into a line of credit, which provides
for borrowings of up to $2,500,000 for working capital needs and equipment
purchases. The Company's right to make borrowings under the line of credit can
be terminated by the lender upon the occurrence of a default by the Company,
including an uncured failure to pay principal or interest due under the
facility, certain breaches of the representations and warranties made by the
Company in connection with the establishment of the line of credit, and certain
insolvency events of the Company. The Company is obligated to pay monthly
interest on

F-12
<PAGE> 83
broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

amounts outstanding under the line of credit, but no commitment fee is payable
by the Company in respect of unaccessed funding capacity. As of March 31, 1998,
the Company had not made any borrowings against this line of credit.

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

5. INCOME TAXES

As of December 31, 1997, the Company has available net operating loss
carryforwards totaling approximately $10,269,000 which expire beginning in 2011.
Utilization of net operating loss carryforwards may be limited by ownership
changes which may have occurred or could occur in the future.

Deferred taxes are provided for those items reported in different periods
for income tax and financial reporting purposes. The net deferred tax asset has
been fully reserved because of uncertainty regarding the Company's ability to
recognize the benefit of the asset in future years. The tax effects of temporary
differences that give rise to significant portions of the deferred tax assets
are presented below:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 1,088,606 $ 3,796,343
Intangible amortization................................. 20,984 35,231
Depreciation............................................ 88,352 127,201
Contribution carryover.................................. 370 370
Accrual to cash adjustment.............................. 3,793 --
----------- -----------
Gross deferred tax assets............................... 1,202,105 3,959,145
Deferred tax liabilities:
Accrual to cash adjustment.............................. -- 367,680
----------- -----------
Net deferred tax assets................................... 1,202,105 3,591,465
Valuation allowance....................................... (1,202,105) (3,591,465)
----------- -----------
Deferred tax balance...................................... $ -- $ --
=========== ===========
</TABLE>

The provision for income taxes is different than the amount computed using
the applicable statutory federal income tax rate with the difference for each
year summarized below:

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Federal tax benefit at statutory rate....................... (34)% (34)% (34)%
State taxes, net of federal benefit......................... (4) (4) (3)
Adjustment due to increase in valuation allowance........... 38 38 37
--- --- ---
Provision for income taxes.................................. --% --% --%
=== === ===
</TABLE>

F-13
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broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

6. STOCK-BASED COMPENSATION

The Company's 1996 Stock Option Plan for employees and consultants was
approved by the Board of Directors and stockholders of the Company in April 1996
and authorizes the grant of up to 1,440,000 shares of the Company's Common Stock
in the form of incentive stock options ("ISOs") and nonqualified stock options
("NSOs"). The plan is administered by the Stock Option Committee of the Board of
Directors (the "Committee"). Options typically expire 10 years from the date of
grant, and under Committee policy become exercisable in installments of 20% per
year commencing one year from the date of grant, or over such other vesting
period determined by the Committee. Shares granted come from the Company's
authorized but unissued or reacquired Common Stock.

The Company's 1998 Stock Option Plan for employees and consultants was
approved by the Board of Directors in August 1997 and approved by the
stockholders of the Company in June 1998 (unaudited -- see Note 10), and
authorizes the grant of up to 2,800,000 shares of the Company's Common Stock in
the form of ISOs and NSOs. The plan is administered by the Compensation
Committee of the Board of Directors (the "Compensation Committee"). Options
typically expire 10 years from the date of grant, and become exercisable in
installments of 20% per year commencing one year from the date of grant, or over
such other vesting period determined by the Compensation Committee. Shares
granted come from the Company's authorized but unissued or reacquired Common
Stock.

Under the 1996 and 1998 Stock Option Plans, the Company has issued options
to purchase a total, net of forfeitures, of 1,894,013 shares of Common Stock and
has 991,102 options available for issuance as of December 31, 1997. Effective
August 19, 1997, the Company discontinued the 1996 Stock Option Plan.

The Company's 1996 Stock Option Plan for Non-Employee Directors, which was
approved by the Board of Directors and the stockholders in April 1996,
authorizes the grant of up to 150,000 shares of the Company's Common Stock in
the form of ISOs and NSOs. The plan is administered by the Committee. Options
typically expire 10 years from the date of grant, and under Committee policy
become exercisable in installments of 20% per year commencing one year from the
date of grant, or over such other vesting period determined by the Committee.
Shares granted come from the Company's authorized but unissued or reacquired
Common Stock. During 1996, the Company granted to a non-employee director an
option to purchase 15,000 shares of Common Stock at an exercise price of $1.07
per share, which option was still outstanding at December 31, 1997.

There were no stock options granted prior to 1996. If compensation cost for
the Company's stock option plans been determined based on the fair value at the
grant date for awards issued in 1996 and 1997 consistent with the provisions of
FAS 123, then the Company's net loss would have been increased to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Net loss--as reported....................................... $2,988,847 $6,474,212
Net loss--pro forma......................................... 3,050,003 6,747,793
Basic and diluted net loss per share--as reported........... (0.31) (0.55)
Basic and diluted net loss per share--pro forma............. (0.32) (0.58)
</TABLE>

F-14
<PAGE> 85
broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The weighted average fair value at date of grant for options granted during
1996 and 1997 was $0.46 and $1.10 per option, respectively. The fair value of
each option grant was estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions used:

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Dividend yield.............................................. -- --
Expected volatility......................................... -- --
Risk-free rate of return.................................... 6.2% 5.9%
Expected life............................................... 3.0 years 3.0 years
Expected forfeiture rate.................................... -- 15.0%
</TABLE>

The following table summarizes activity under the Company's stock option
plans during the years ended December 31, 1996 and 1997:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE PRICE
--------- ------------- --------
<S> <C> <C> <C>
Outstanding at December 31, 1995................ -- $ -- $ --
Granted....................................... 715,594 1.07 - 13.47 3.10
--------- ------------- -----
Outstanding at December 31, 1996................ 715,594 1.07 - 13.47 3.10
Granted....................................... 1,284,459 6.80 - 10.73 6.82
Forfeited..................................... (91,040) 2.69 - 6.80 5.86
--------- ------------- -----
Outstanding at December 31, 1997................ 1,909,013 1.07 - 10.73 5.42
========= ============= =====
Options exercisable at December 31, 1997........ 199,287 $1.07 - 10.73 $4.68
</TABLE>

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

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER REMAINING NUMBER
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
- --------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
$ 1.07........................................... 15,000 8.4 years 7,500
2.69........................................... 646,200 4.6 years 129,240
3.33........................................... 6,000 8.8 years 1,200
6.80........................................... 1,205,466 9.5 years 25,000
10.73........................................... 36,347 9.0 years 36,347
</TABLE>

In addition to the option activity described above, in September 1996, the
Company issued a warrant to purchase 15,960 shares of Common Stock at an
exercise price of $6.80 per share. In February and December 1997, the Company
issued 147,120 and 159,236 warrants, respectively, for the purchase of Common
Stock to two participants in private placement offerings at exercise prices of
$6.80 and $9.42, respectively (see Note 7).

7. STOCKHOLDERS' EQUITY

In May 1995, founders of the Company were issued a total of 5,400,000
shares of Common Stock for $1,000.

In May 1995, the Company issued 600,000 shares valued at $50,000 in
consideration for a purchase agreement in which the Company acquired certain
assets and intangible rights and assumed the obligations and duties under
certain transmission agreements.

In August 1995, the Company issued 30,180 shares of Common Stock in order
to satisfy a $2,500 liability for legal fees.

Between January and March 1996, the Company issued a total of 3,280,560
shares of Common Stock to new and existing stockholders of the Company for $0.50
per share or $1,640,280.

F-15
<PAGE> 86
broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

In June 1996, the Company issued 499,080 shares of Common Stock to new and
existing stockholders for $536,012 or approximately $1.07 per share.

In July 1996, the Company repurchased 120,000 shares of Common Stock from
Cameron for $1.33 per share or $160,000 and subsequently resold these shares to
new and existing stockholders for $1.33 per share.

Between September 1996 and May 1997, the Company issued a total of
1,870,680 shares of Common Stock to new and existing stockholders, including
Motorola and Intel, for approximately $6.80 per share or $12,712,830. In
connection with Motorola's investment in September 1996, the two largest
stockholders agreed to vote their shares so as to elect a nominee of Motorola to
the Board of Directors. In February 1997, the Company issued a warrant to Intel
for $120,000 representing the right to acquire 147,120 shares of the Company's
Common Stock at a price of $6.80 per share, or $1,000,416. Under the terms of
the warrant, the right to acquire 58,860 shares is exercisable immediately and
expires on February 23, 2004. However, the right to acquire the remaining 88,260
shares of the Company's Common Stock at $6.80 per share will have expired prior
to the effectiveness of the Prospectus if the Company and Intel have not entered
into a subsequent agreement prior to June 30, 1998. The Company does not
anticipate that it will enter into such an agreement. In addition, an
underwriting fee related to certain of these transactions totalling
approximately $365,000 was recorded as a reduction in additional paid-in
capital.

In December 1997, the Company issued 2,295,785 shares of Common Stock for
$21,626,294 or $9.42 per share to new and existing stockholders, including
Motorola, Intel and Yahoo! In connection with these transactions, the two
largest stockholders agreed to vote their shares so as to elect a second nominee
of Motorola to the Board of Directors and the Company issued a warrant to Yahoo!
for approximately $600,000 representing the right to purchase 159,236 shares of
the Company's Common Stock at a strike price of $9.42 per share or $1,500,000.
The warrant is exercisable immediately and expires on December 30, 2000.

In March 1998, the Company issued 407,166 shares of Common Stock to new and
existing stockholders for $3,835,504 or $9.42 per share.

The Company has granted to certain owners of Common Stock preemptive rights
that expire immediately prior to consummation of an initial public offering.

8. NET LOSS PER SHARE

Basic net loss per share has been computed in accordance with FAS 128 using
the weighted average number of common shares outstanding. The provisions and
disclosure requirements for FAS 128 were required to be adopted for interim and
annual periods ending after December 15, 1997, with restatement of EPS for all
prior periods.

Diluted net loss per share gives effect to all dilutive potential common
shares that were outstanding during the period. The Company had a net loss for
all periods presented herein; therefore, none of the options and warrants
outstanding during each of the periods presented, as discussed in Note 6, were
included in the computations of diluted earnings per share because they were
antidilutive. See Note 6 for a list of options and warrants outstanding at
December 31, 1997 that were excluded from the diluted EPS computation because

F-16
<PAGE> 87
broadcast.com inc.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

they were antidilutive. Options and warrants outstanding at March 31, 1998 which
were not included in the computation of diluted EPS because they were
antidilutive were as follows:

<TABLE>
<CAPTION>
EXERCISE
PRICE NUMBER OF EXPIRATION
PER SHARE OPTIONS/WARRANTS DATE
- --------- ---------------- ----------
<S> <C> <C> <C>
$ 1.07............................. 7,500 2006
2.69............................. 626,760 2006
3.33............................. 6,000 2006
6.80............................. 1,380,521 2004-2007
9.42............................. 268,490 2000-2008
10.43............................. 37,397 2008
</TABLE>

9. RELATED PARTY TRANSACTIONS

During 1995, certain computer equipment and office space, owned by a
corporation wholly-owned by the Company's President, were provided to the
Company at no cost. Also in 1995, certain travel and other expenses were
incurred by the President for the direct benefit of the Company. The cost of
these assets, rent and travel expenses were immaterial to the financial
statements as a whole and were not included in the 1995 financial statements.
Additionally, the Company's President has agreed to act as guarantor of certain
current equipment loan obligations of the Company.

The Company and Motorola, a stockholder of the Company, entered into a
Negotiation Rights Agreement in September 1996 pursuant to which the Company
agreed to offer Motorola a non-exclusive license to certain of its technologies
as well as certain rights of notice and first negotiation with Motorola
regarding licenses that the Company proposes to grant to other parties. In
connection with this agreement, the Company, Motorola, and Messrs. Cuban and
Wagner entered into a stockholders agreement pursuant to which Motorola was
granted representation rights on the Company's Board of Directors and certain
tag-along rights with respect to certain sales of shares by Messrs. Cuban and
Wagner after the date of the Offering. Motorola is also a customer of the
Company, to which the Company provides business services. These relationships
with Motorola have generated revenues for the Company of $10,000 and $84,000 for
the twelve months ending December 31, 1997 and the three months ending March 31,
1998, respectively.

10. SUBSEQUENT EVENT (UNAUDITED)

Effective May 1998, the Company's name was changed from AudioNet, Inc. to
broadcast.com inc. Additionally, in June 1998, the Company filed Restated
Certificate of Incorporation increasing the number of authorized shares of
Common Stock to 60,000,000. Further, the stockholders of the Company approved
the Company's 1998 Stock Plan in June 1998, authorizing the issuance of up to
2,800,000 shares of the Company's Common Stock.

F-17
<PAGE> 88

(THIS PAGE INTENTIONALLY LEFT BLANK)

<PAGE> 89

[broadcast.com LOGO]
<PAGE> 90

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The Registrant estimates that expenses in connection with the offering
described in this registration statement will be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 10,325
NASD filing fee............................................. 4,000
Printing expenses........................................... 200,000
Accounting fees and expenses................................ 175,000
Legal fees and expenses..................................... 430,000
Nasdaq National Market listing fee.......................... 90,000
Blue Sky fees and expenses.................................. 10,000
Transfer agent's fees and expenses.......................... 15,000
Miscellaneous............................................... 65,675
----------
Total............................................. $1,000,000
==========
</TABLE>

All amounts except the Securities and Exchange Commission registration fee
and the NASD filing fee are estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145(a) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no cause to believe his or her conduct was unlawful.

Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if he or she acted under similar standards,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.

Section 145 of DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsection (a) and (b) or in the defense of any
claim, issue or matter therein, such officer or director shall be indemnified
against expenses actually and reasonably incurred by him or her in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and that the corporation may purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
such officer or director and incurred by him or her in any such

II-1
<PAGE> 91

capacity or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such
liabilities under Section 145.

As permitted by Section 102(b)(7) of the DGCL, the Company's Restated
Certificate of Incorporation, as amended, provides that a director shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director. However, such provision does not eliminate or
limit the liability of a director for acts or omissions not in good faith or for
breaching his or her duty of loyalty, engaging in intentional misconduct or
knowingly violating a law, paying a dividend or approving a stock repurchase
which was illegal, or obtaining an improper personal benefit. A provision of
this type has no effect on the availability of equitable remedies, such as
injunction or rescission, for breach of fiduciary duty.

The Company's Bylaws require the Company to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer or employee of the Company, or
that being such a director, officer or employee he is or was serving at the
request of the Company as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.

In addition, the Company's Bylaws require the Company to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the Company, or that being such a
director, officer or employee he is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Company
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

Any indemnification (unless ordered by a court) made by the Company may be
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct as set forth
above. Such determination must be made (i) by the Board by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders.

To the extent that a director, officer, employee or agent of the Company
has been successful on the merits or otherwise in defense of any covered action,
suit or proceeding, or in defense of any covered claim, issue or matter therein,
he will be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

II-2
<PAGE> 92

Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the Company in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
in the specific case upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Company as authorized in
the Bylaws. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board deems appropriate.

The Company maintains policies of directors' and officers' liability
insurance.

The Company and the Underwriters will enter into an agreement that the
Company anticipates will provide for indemnification by the Underwriters of the
Company, its directors and officers, and by the Company of the Underwriters, in
each case for certain liabilities, including liabilities arising under the Act
and affords certain rights of contribution with respect thereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant has not issued or sold securities within the past three
years pursuant to offerings that were not registered under the Securities Act,
except as follows:

<TABLE>
<CAPTION>
NUMBER OF
ACQUIROR DATE SHARES PRICE PER SHARE
-------- ---- --------- ---------------
<S> <C> <C> <C>
Mark Cuban............................. May 1995 2,640,000 Founding Contribution
Todd R. Wagner......................... May 1995 2,640,000 Founding Contribution
Martin Woodall......................... May 1995 120,000 Founding Contribution
Cameron Broadcasting................... May 1995 600,000 Contract Rights(1)
Steven R. Block........................ July 1995 20,100 Payment of Legal Fees(2)
Ray A. Balestri........................ July 1995 10,080 Payment of Legal Fees(3)
Mark Cuban............................. December 1995 920,040 $0.50
Ray A. Balestri........................ December 1995 34,980 $0.50
Rex Farrior............................ December 1995 120,000 $0.50
John Lemak............................. December 1995 60,000 $0.50
Rawleigh H. Ralls IV................... December 1995 60,000 $0.50
Mark Landry............................ December 1995 34,980 $0.50
Sean P. Griffiths...................... December 1995 19,980 $0.50
Mark E. Jennings....................... December 1995 60,000 $0.50
Mark A. Nouss.......................... December 1995 40,020 $0.50
Steven H. Stodghill.................... December 1995 30,000 $0.50
Todd R. Wagner......................... December 1995 600 $0.50
University Sports...................... January 1996 390,060 Contract Rights(4)
Stanley Woodward....................... March 1996 60,000 $0.50
Andrew G. Matthes...................... March 1996 60,000 $0.50
Ray A. Balestri........................ March 1996 9,900 $0.50
Mark Cuban............................. March 1996 990,000 $0.50
Richard Pollock........................ March 1996 100,020 $0.50
Stuart W. Cartner...................... March 1996 160,020 $0.50
Bruce W. Berg.......................... March 1996 79,980 $0.50
Goldstein Ventures..................... March 1996 19,980 $0.50
Mark Landry............................ March 1996 10,020 $0.50
Matthew Dolan.......................... March 1996 19,980 $0.50
Big Bend Investments, L.P. ............ April 1996 465,540 $1.07
Cameron Broadcasting................... April 1996 33,540 $1.07
Martin Woodall......................... August 1996 1,560 $1.33
Steven R. Block........................ August 1996 240 $1.33
Ray A. Balestri........................ August 1996 720 $1.33
</TABLE>

II-3
<PAGE> 93

<TABLE>
<CAPTION>
NUMBER OF
ACQUIROR DATE SHARES PRICE PER SHARE
-------- ---- --------- ---------------
<S> <C> <C> <C>
Mark Cuban............................. August 1996 59,700 $1.33
Rex Farrior............................ August 1996 1,560 $1.33
John Lemak............................. August 1996 780 $1.33
Rawleigh H. Ralls IV................... August 1996 780 $1.33
Mark Landry............................ August 1996 600 $1.33
Sean P. Griffiths...................... August 1996 240 $1.33
Mark E. Jennings....................... August 1996 780 $1.33
Mark A. Nouss.......................... August 1996 540 $1.33
Steven H. Stodghill.................... August 1996 420 $1.33
Todd R. Wagner......................... August 1996 7,500 $1.33
University Sports...................... August 1996 5,100 $1.33
Stanley Woodward....................... August 1996 780 $1.33
Andrew G. Matthes...................... August 1996 780 $1.33
Richard Pollock........................ August 1996 1,320 $1.33
Stuart W. Cartner...................... August 1996 2,100 $1.33
Bruce W. Berg.......................... August 1996 1,020 $1.33
Goldstein Ventures..................... August 1996 240 $1.33
Big Bend Investments, L.P. ............ August 1996 6,120 $1.33
Joseph W. Autem........................ August 1996 19,620 $1.33
Daniel G. Routman...................... August 1996 7,500 $1.33
Motorola, Inc. ........................ September 1996 735,720 $6.80
Premiere Radio Networks, Inc. ......... November 1996 588,600 $6.80
HMTF Company Investors................. December 1996 138,360 $6.80
Motorola, Inc. ........................ January 1997 9,840 $6.80
Capital Radio Network, Inc. ........... February 1997 73,620 $6.80
Intel Corporation...................... February 1997 294,300 $6.80
Motorola, Inc.......................... March 1997 5,220 $6.80
Motorola, Inc.......................... April 1997 21,120 $6.80
HMTF Company Investors................. May 1997 3,900 $6.80
Intel Corporation...................... December 1997 530,786 $9.42
Motorola, Inc.......................... December 1997 1,592,356 $9.42
HMTF Company Investors................. December 1997 78,025 $9.42
Killian McCabe & Associates............ December 1977 15,000 $9.42
Yahoo! Inc. ........................... December 1997 79,618 $9.42
HMTF Company Investors................. March 1998 382,166 $9.42
Henry G. Helfich, Jr................... March 1998 25,000 $9.42
Mark Powell(5)......................... June 1998 1,320 $6.80
Richard Greenhut(6).................... June 1998 300 $6.80
</TABLE>

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

(1) These 600,000 shares of Common Stock were issued to Cameron Broadcasting as
consideration for the Company's purchase from Cameron Broadcasting of rights
to certain agreements and intangible property owned by Cameron Broadcasting.
The approximate value of such assets at the time of the issuance was
$50,000, based on the sale price of shares of Common Stock issued shortly
after the issuance to Cameron Broadcasting.

(2) The issuance of 20,100 shares of Common Stock to Mr. Block, along with the
contemporaneous issuance of 10,080 shares of Common Stock to Mr. Balestri,
was in satisfaction of legal fees in the amount of $2,500 owing from the
Company to Block & Balestri, P.C.

(3) The issuance of 10,080 shares of Common Stock to Mr. Balestri, along with
the contemporaneous issuance of 20,100 shares of Common Stock to Mr. Block,
was in satisfaction of legal fees in the amount of $2,500 owing from the
Company to Block & Balestri, P.C.

II-4
<PAGE> 94

(4) These 390,060 shares of Common Stock were issued to University Sports as
consideration for University Sports' contribution to the Company of a
perpetual license enabling the Company to provide digital distribution of
athletic events and related programming for certain colleges and
professional sports organizations. The approximate value of the license at
the time of the issuance was $195,030, based on the $0.50 sale price of
shares of Common Stock issued shortly before and after this issuance to
University Sports.

(5) The issuance of 1,320 shares of Common Stock to Mr. Powell was pursuant to
Mr. Powell's exercise of certain vested options which were originally
granted to Mr. Powell in January and February 1997 pursuant to the 1996
Plan. The terms of the options provided an exercise price of $6.80 per
share.

(6) The issuance of 300 shares of Common Stock to Mr. Greenhut was pursuant to
Mr. Greenhut's exercise of certain vested options which were originally
granted to Mr. Greenhut in February 1997 pursuant to the 1996 Plan. The
terms of the options provided an exercise price of $6.80 per share.

In December 1996, the Company issued a warrant to purchase 15,960 shares of
Common Stock at an exercise price of $6.80 per share for services rendered. In
February and December 1997 the Company issued warrants to purchase 147,120 and
159,236 shares of Common Stock, respectively, at exercise prices of $6.80 and
$9.42 per share, respectively, to investors. As of the effectiveness of this
Prospectus, stock options entitling the holders thereof to purchase 2,559,403
shares of the Company's Common Stock at exercise prices generally ranging from
$1.07 to $12.00 per share are outstanding pursuant to grants since May 1996
under the Company's stock option plans. Since May 1996, the Company has issued
no shares of Common Stock to employees, consultants and directors upon exercise
of stock options (except as described above).

The transactions set forth above, other than the purchases by Messrs.
Powell and Greenhut in June 1998 and the grants of options to employees,
consultants and directors of the Company were undertaken in reliance upon the
exemption from registration requirements of the Securities Act afforded by
Section 4(2) thereof and/or Regulation D promulgated thereunder, as sales not
involving a public offering. The June 1998 issuances to Messrs. Powell and
Greenhut and the grants of stock options to employees, consultants and directors
of the Company were undertaken in reliance upon the exemption from registration
requirements of the Securities Act afforded by rule 701 promulgated under the
Securities Act, as sales by an issuer to employees, directors, officers,
consultants or advisors pursuant to written compensatory benefit plans or
written contracts relating to the compensation of such persons. The recipients
of securities in each such transaction represented their intention to acquire
the securities for investment only and not with a view to, or for sale in
connection with, any distribution thereof, and appropriate legends were affixed
to share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with the Company, to
information about the Company.

II-5
<PAGE> 95

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 -- Underwriting Agreement
3.1 -- Restated Certificate of Incorporation of the Company, as
amended (filed June 19, 1996)
3.1.1 -- Restated Certificate of Incorporation (filed June 23,
1998)
3.2** -- Amended and Restated Bylaws of the Company
3.2.1 -- Amendment to Amended and Restated Bylaws of the Company
4.1 -- Form of Common Stock Certificate
5.1 -- Opinion of Gibson, Dunn & Crutcher LLP
10.1.1 -- Employment Agreement, dated as of June 15, 1998, between
the Company and Todd R. Wagner.
10.1.2 -- Employment Agreement, dated as of June 15, 1998, between
the Company and Mark Cuban.
10.2.1** -- Stock Purchase Agreement, dated as of September 4, 1996,
between the Company and Motorola, Inc.
10.2.2** -- Stock Purchase Agreement, dated as of November 15, 1996,
between the Company and Premiere Radio Networks, Inc.
10.3** -- First Amended and Restated Registration Rights Agreement,
dated as of February 24, 1997 among the Company,
Motorola, Inc., Premiere Radio Networks, Inc., Capitol
Radio Network, Inc., Intel Corporation and HMTF AudioNet
Investors, as amended by the Addendum to First Amended
and Restated Registration Rights Agreement dated as of
December 30, 1997, among the Company, Yahoo! Inc.,
Motorola, Inc. and Intel Corporation.
10.4** -- Stockholders Agreement, dated as of September 4, 1996,
among the Company, Motorola, Inc., Todd R. Wagner and
Mark Cuban, as amended by Amendment No. 1 on December 30,
1996 and Amendment No. 2 on December 19, 1997.
10.5** -- December Stockholders Agreement, dated as of December 31,
1996, among the Company, Todd R. Wagner, Mark Cuban, HMTF
AudioNet Investors, Motorola, Inc., Premiere Radio
Networks, Inc., as amended by an Addendum to December
Stockholders Agreement dated February 24, 1997, between
Intel Corporation, the Company, Todd R. Wagner and Mark
Cuban, and as further amended by an Addendum to December
Stockholders Agreement dated December 30, 1997, between
Yahoo! Inc., the Company, Todd R. Wagner and Mark Cuban.
10.6+** -- Network Radio Sales Representation Agreement dated as of
November 15, 1996, between the Company and Premiere Radio
Networks, Inc.
10.7** -- The Company's 1998 Employee Stock Purchase Plan.
10.8** -- The Company's 1996 Stock Option Plan.
10.9 -- The Company's 1998 Stock Option Plan, as amended.
10.10** -- Form of the Company's Stock Option Agreement under the
1998 Stock Option Plan.
10.11** -- The Company's 1996 Non-Employee Directors Stock Option
Plan.
10.12+** -- RealNetworks License Agreement, dated as of January 1,
1998, between the Company and RealNetworks, Inc.
</TABLE>

II-6
<PAGE> 96

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.13+** -- NetShow License Agreement, dated as of January 1, 1998,
between the Company and Microsoft Corporation.
10.14** -- Form of Directors and Officers Indemnification Agreement.
10.15** -- Lease Agreement, dated as of December 2, 1996, between
the Company and George W. Lollis and Daisy Lollis.
10.16** -- Master Lease of Personal Property No. 3769, dated April
15, 1998, between the Company and Charter Financial, Inc.
10.17** -- The Security and Loan Agreement (Accounts Receivable),
dated December 15, 1997, between the Company and Imperial
Bank.
10.18** -- Imperial Bank Note, dated December 15, 1997, between the
Company and Imperial Bank.
21.1 -- Subsidiary of the Company
23.1 -- Consent of Price Waterhouse LLP
23.2 -- Consent of Gibson, Dunn & Crutcher LLP (contained in
Exhibit 5.1)
24.1** -- Power of Attorney
27.1** -- Financial Data Schedule
</TABLE>

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

+ Information contained in such agreement has been omitted subject to a
confidential treatment request, marked with asterisks and filed separately
with the Commission.

** Previously filed.

b) Financial Statement Schedule

Schedule II -- Valuation and Qualifying Accounts

All other Schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission have been omitted because they are not required under the
related instructions, are not applicable or the information has been
provided in the Financial Statements or the Notes thereto.

ITEM 17. UNDERTAKINGS

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

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses

II-7
<PAGE> 97

incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(l) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-8
<PAGE> 98

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

PERIOD FROM INCEPTION (MAY 19, 1995) TO DECEMBER 31, 1995
AND THE YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT --------------------------------------
BEGINNING CHARGED TO CHARGED TO BALANCE AT
DESCRIPTION OF PERIOD COSTS AND EXPENSES OTHER ACCOUNTS(A) DEDUCTIONS END OF PERIOD
----------- ---------- ------------------ ----------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1995:
Provision for doubtful
accounts -- accounts
receivables......... $ -- $ -- $ -- $ -- $ --
Tax valuation
reserve............. -- 101,429 -- -- 101,429
---------- ---------- -------- -------- ----------
Total.......... $ -- $ 101,429 $ -- $ -- $ 101,429
========== ========== ======== ======== ==========
1996:
Provision for doubtful
accounts -- accounts
receivables......... $ -- $ 84,006 $(49,180) $ -- $ 34,826
Tax valuation
reserve............. 101,429 1,100,676 -- -- 1,202,105
---------- ---------- -------- -------- ----------
Total.......... $ 101,429 $1,184,682 $(49,180) $ -- $1,236,931
========== ========== ======== ======== ==========
1997:
Provision for doubtful
accounts -- accounts
receivables......... $ 34,826 $ 86,240 $(44,826) $ -- $ 76,240
Tax valuation
reserve............. 1,202,105 2,389,360 -- -- 3,591,465
---------- ---------- -------- -------- ----------
Total.......... $1,236,931 $2,475,600 $(44,826) $ -- $3,667,705
========== ========== ======== ======== ==========
</TABLE>

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

(a) Such amounts relate to the utilization of the valuation and qualifying
accounts to specific items for which they were established in the accounts
receivables and tax valuation reserve accounts.

II-9
<PAGE> 99

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on June 24, 1998.

broadcast.com inc.

By: /s/ TODD R. WAGNER
----------------------------------
Name: Todd R. Wagner
Title: Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 has been signed by the following persons in the capacity indicated on June
24, 1998.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ TODD R. WAGNER Chief Executive Officer (Principal Executive
- ----------------------------------------------------- Officer)
Todd R. Wagner

* Chairman of the Board and President
- -----------------------------------------------------
Mark Cuban

* Director
- -----------------------------------------------------
Steven D. Leeke

* Director
- -----------------------------------------------------
Randall Battat

* Director
- -----------------------------------------------------
Joseph Autem

/s/ JACK A. RIGGS Chief Financial Officer (Principal Financial
- ----------------------------------------------------- and Accounting Officer) and Director
Jack A. Riggs

*By: /s/ TODD R. WAGNER
------------------------------------------------
Todd R. Wagner
Attorney-in-fact
</TABLE>

II-10
<PAGE> 100

INDEX TO EXHIBITS

<PAGE> 101

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

+ Information contained in such agreement has been omitted subject to a
confidential treatment request, marked with asterisks and filed separately
with the Commission.

** Previously filed.

<PAGE> 1

_______________ SHARES

BROADCAST.COM INC.

COMMON STOCK, $0.01 PAR VALUE

UNDERWRITING AGREEMENT

__________, 1998
<PAGE> 2

_____________, 1998

Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Hambrecht & Quist LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

Dear Sirs and Mesdames:

broadcast.com, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several Underwriters named in Schedule II
hereto (the "UNDERWRITERS"), an aggregate of _______________ shares of the
Common Stock, $0.01 par value of the Company (the "FIRM SHARES").

The Company and a certain stockholder of the Company (the
"Selling Stockholder") named in Schedule I hereto severally also propose to
issue and sell to the several Underwriters not more than an additional
______________ shares of its Common Stock, $0.01 par value, (the "ADDITIONAL
SHARES"), of which ______ shares are to be issued and sold by the Company and
____ shares are to be sold by the Selling Stockholder, if and to the extent
that you, as Managers of the offering, shall have determined to exercise, on
behalf of the Underwriters, the right to purchase such shares of common stock
granted to the Underwriters in Section 3 hereof. The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "SHARES".
The shares of Common Stock, $0.01 par value, of the Company to be outstanding
after giving effect to the sales contemplated hereby are hereinafter referred
to as the "COMMON STOCK". The Company and the Selling Stockholder are
hereinafter sometimes collectively referred to as the "SELLERS".

The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement, including a prospectus,
relating to the Shares. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS".
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the

1
<PAGE> 3
Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference
herein to the term "REGISTRATION STATEMENT" shall be deemed to include such
Rule 462 Registration Statement.

As part of the offering contemplated by this Agreement, Morgan
Stanley & Co. Incorporated ("MORGAN STANLEY") has agreed to reserve out of the
Shares set forth opposite its name on Schedule II to this Agreement, up to
___________ shares, for sale to the Company's employees, officers, and
directors and other parties associated with the Company (collectively,
"PARTICIPANTS"), as set forth in the Prospectus under the heading
"Underwriting" (the "DIRECTED SHARE PROGRAM"). The Shares to be sold by Morgan
Stanley pursuant to the Directed Share Program (the "DIRECTED SHARES") will be
sold by Morgan Stanley pursuant to this Agreement at the public offering price.
Any Directed Shares not orally confirmed for purchase by any Participants by
the end of the business day on which this Agreement is executed will be offered
to the public by Morgan Stanley as set forth in the Prospectus.

1. Representations and Warranties of the Company. The
Company represents and warrants to and agrees with each of the Underwriters
that:

(a) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration Statement
is in effect, and to the Company's knowledge no proceedings for such
purpose are pending before or threatened by the Commission.

(b) (i) The Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) the
Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iii) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements
or omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein.

(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.

2
<PAGE> 4
(d) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole;
all of the issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims.

(e) This Agreement has been duly authorized, executed and
delivered by the Company.

(f) The authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the
Prospectus.

(g) The shares of Common Stock (including the Shares to be
sold by the Selling Stockholder) outstanding prior to the issuance of
the Shares to be sold by the Company have been duly authorized and are
validly issued, fully paid and non-assessable; except as described in
the Prospectus, and except for preemptive rights which will terminate
by their terms on or before the Closing Date, the Company does not have
any outstanding options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible
securities or obligations; and all outstanding shares of capital stock
and options and other rights to acquire capital stock have been issued
in compliance with the registration and qualification provisions of all
applicable securities laws and were not issued in violation of any
preemptive rights, rights of first refusal or other similar rights, or
the Company has obtained a waiver of such a violation.

(h) The Shares to be sold by the Company have been duly
authorized and, when issued and delivered against payment therefore in
accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights.

(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law (other than
federal, state or international securities laws or rules and
regulations promulgated thereunder, or the rules and regulations of the
National Association of Securities Dealers, Inc. (the "NASD")) or the
certificate of incorporation or by-laws of the Company or any agreement
or other instrument binding upon the Company or any of its subsidiaries
that is material to the Company and its subsidiaries, taken as a whole,
or any

3
<PAGE> 5
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement.

(j) There has not occurred any material adverse change, or
any development which could reasonably be expected to result in
material adverse change, in the condition, financial or otherwise, or
in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).

(k) There are no legal or governmental proceedings pending
or to the Company's knowledge threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not
so described or any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.

(l) The Company has all necessary consents,
authorizations, approvals, orders, certificates and permits of and
from, and has made all declarations and filings with, all foreign,
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to
own, lease, license and use its properties and assets and to conduct
its business in the manner described in the Prospectus, except to the
extent that the failure to obtain or file would not, singly or in the
aggregate, have a material adverse effect on the Company.

(m) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder,
except that the Preliminary Prospectus filed as part of the
Registration Statement as initially filed omitted certain pricing and
proceeds information.

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

(o) The Company and its subsidiaries (i) are in material
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all material permits,

4
<PAGE> 6
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in material compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

(p) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.

(q) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(i) the Company has not incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in
the ordinary course of business; (ii) the Company has not purchased any
of its outstanding capital stock, nor declared, paid or otherwise made
any dividend or distribution of any kind on its capital stock other
than ordinary and customary dividends; and (iii) there has not been any
material change in the capital stock, short-term debt or long-term debt
of the Company, except in each case as described in the Prospectus.

(r) The Company does not own any real property or a
non-leasehold interest in real property. All personal property owned
by the Company that is material to the business of the Company is owned
by the Company free and clear of any security interest, lien,
encumbrance, claim, defect or adverse interest of any nature except
such as are described in the Prospectus or such as do not have a
material adverse effect on the Company and its subsidiaries taken as a
whole; and any real property and buildings held under lease by the
Company are held by it under valid, subsisting and enforceable leases
with such exceptions as do not have a material adverse effect on the
Company and its subsidiaries taken as a whole, in each case except as
described in the Prospectus.

(s) Except as disclosed in the Prospectus, (i) the Company
owns or possesses, or can acquire on reasonable terms, adequate
licenses or other rights to use all patents, patent rights, inventions,
trade secrets, copyrights, trademarks, service marks, trade names,
technology and know-how employed by it in connection with its business
as described in the Prospectus; (ii) the Company is not obligated to
pay a royalty, grant a license, or provide other consideration to any
third party in connection with its patents, copyrights, trademarks,
service marks, trade names, or technology; (iii) the Company has not
received any notice of infringement or conflict with (and the Company
does not know of any infringement or conflict with) asserted rights of
others with respect to any patents, patent rights, inventions,

5
<PAGE> 7
trade secrets, copyrights, trademarks, service marks, trade names,
technology or know-how which would result in any material adverse
effect upon the Company and its subsidiaries taken as a whole; and (iv)
the discoveries, inventions, products or processes of the Company
referred to in the Prospectus do not, to the knowledge of the Company,
infringe or conflict with any right or patent of any third party, or
any discovery, invention, product or process which is the subject of a
patent application filed by any third party known to the Company and
its subsidiaries taken as a whole, which would have a material adverse
effect on the Company.

(t) No material labor dispute with the employees of the
Company exists, except as described in the Prospectus, or, to the
knowledge of the Company, is imminent; other than those that would not
have a material adverse effect on the Company and its subsidiaries
taken as a whole.

(u) The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they
are engaged; the Company has not been refused any insurance coverage
sought or applied for; and the Company does not believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not have
a material adverse effect on the Company and its subsidiaries taken as
a whole, except as described in the Prospectus.

(v) The Company possesses all material certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct its business, and
the Company has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the Company, except as described the Prospectus.

(w) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or
specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(3) access to assets is permitted only in accordance with management's
general or specific authorization; and (4) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.

(x) The Nasdaq Stock Market, Inc. has approved the Common
Stock for listing on the Nasdaq National Market, subject only to
official notice of issuance.

6
<PAGE> 8
(y) The Company has delivered to the Underwriters or their
counsel a complete and accurate list of all holders of Common Stock or
options, warrants or rights to buy Common Stock (collectively "Company
Securities"). The Company has delivered to the Underwriters or their
counsel an originally executed "Lock-Up Agreement" signed by each such
holder of a Company Security in the form of Exhibit A (with exceptions
to such form as approved by Underwriters' counsel in each instance).
To the Company's knowledge, each person who signed a Lock-Up Agreement
was authorized to do so and signing the Lock-Up Agreement did not
conflict with or violate the security holder's constitutive documents
or any agreement binding on the security holder or the security.

(z) The Company (i) has notified each stockholder who is
party to the Registration Rights Agreement dated February 24, 1997, as
amended (the "REGISTRATION RIGHTS AGREEMENT"), that pursuant to the
terms of the Registration Rights Agreement, none of the shares of the
Company's capital stock held by such stockholder may be sold or
otherwise transferred or disposed of for a period of 180 days after the
date of the initial public offering of the Shares and (ii) has imposed
a stop-transfer instruction with the Company's transfer agent in order
to enforce the foregoing lock-up provision imposed pursuant to the
Registration Rights Agreement. There are no other contracts,
agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement. There is no legal or beneficial owner of any securities of
the Company who has any rights, not effectively satisfied or waived, to
require registration of any shares of capital stock of the Company in
connection with the filing of the Registration Statement.

(aa) The Company has not offered, or caused the
Underwriters to offer, Shares to any person pursuant to the Directed
Share Program with the specific intent to unlawfully influence (i) a
customer or supplier of the Company to alter the customer's or
supplier's level or type of business with the Company, or (ii) a trade
journalist or publication to write or publish favorable information
about the Company or its products.

(bb) The Company has complied with all provisions of
Section 517.075, Florida Statutes relating to doing business with the
Government of Cuba or with any person or affiliate located in Cuba.

2. Representations and Warranties of the Selling
Stockholder. The Selling Stockholder represents and warrants to and agrees
with each of the Underwriters that:

(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholder.

7
<PAGE> 9
(b) The execution and delivery by the Selling Shareholder
of, and the performance by the Selling Shareholder of its obligations
under, this Agreement, will not contravene any provision of applicable
law (other than federal, state or international securities laws or
rules and regulations promulgated thereunder, or the rules and
regulations of the NASD, or any agreement or other instrument binding
upon the Selling Stockholder or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Selling
Stockholder, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
issuance and sale of the Additional Shares by the Selling Stockholder
to the Underwriters pursuant to the terms of this Agreement.

(c) The Selling Stockholder has, and on the Closing Date
will have, valid title to the Additional Shares to be sold by the
Selling Stockholder and the legal right and power, and all
authorization and approval required by law, to enter into this
Agreement, the Custody Agreement and the Power of Attorney and to sell,
transfer and deliver the Additional Shares to be sold by the Selling
Stockholder.

(d) Delivery of the Shares to be sold by the Selling
Stockholder pursuant to this Agreement will pass title to such Shares
free and clear of any security interests, claims, liens, equities and
other encumbrances created or suffered by the Selling Stockholder
except restrictions imposed by applicable securities laws.

(e) All information furnished in writing by or on behalf
of such Selling Stockholder relating to his status as a Selling
Stockholder for use in the Registration Statement does not, and on the
Closing Date will not, contain any untrue statement of a material fact
or omit to state any material fact necessary to make such information
not misleading, and all information furnished in writing by or on
behalf of such Selling Stockholder relating to his status as a Selling
Stockholder expressly for use in the Prospectus does not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make such information not misleading in the light of the
circumstances under which they were made.

3. Agreements to Sell and Purchase. The Company hereby
agrees to sell to the several Underwriters, and each Underwriter, upon the
basis of the representations and warranties herein contained, but subject to
the conditions hereinafter stated, agrees, severally and not jointly, to
purchase from the Company the respective numbers of Firm Shares set forth in
Schedule II hereto opposite its name at $______ a share (the "PURCHASE PRICE").

On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, each Seller,
severally and not jointly, agrees to sell to the Underwriters the Additional
Shares, and the Underwriters shall have a one-time right to purchase, severally
and not jointly, up to _______________ Additional Shares at the Purchase Price,
of which

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<PAGE> 10
_______ shares are to be issued and sold by the Company and ______ shares are
to be sold by the Selling Stockholder. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company and the Selling
Stockholder in writing not later than 30 days after the date of this Agreement,
which notice shall specify the number of Additional Shares to be purchased by
the Underwriters and the date on which such shares are to be purchased. Such
date may be the same as the Closing Date (as defined below) but not earlier
than the Closing Date nor later than ten business days after the date of such
notice. Additional Shares may be purchased as provided in Section 5 hereof
solely for the purpose of covering over-allotments made in connection with the
offering of the Firm Shares. If any Additional Shares are to be purchased,
each Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments to eliminate fractional shares
as you may determine) that bears the same proportion to the total number of
Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule II hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.

Each Seller hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of the Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder, (B) the
issuance by the Company of shares of Common Stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date
hereof, (C) transactions by any person other than the Company relating to
shares of Common Stock or other securities acquired in open market transactions
after the completion of the offering of the Shares, (D) the issuance by the
Company of shares of Common Stock under the employee stock purchase plan
described in the Prospectus, or (E) the grant of the Company of options to
purchase Common Stock under the stock option plan described in the Prospectus.

4. Terms of Public Offering. The Sellers are advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Sellers
are further advised by you that the Shares are to be offered to the public
initially at $_____________ a share (the "PUBLIC OFFERING PRICE") and to
certain dealers selected by you at a price that represents a concession not in
excess of $______ a share under the Public Offering Price, and that any
Underwriter may allow, and such dealers may reallow, a concession, not in
excess of $_____ a share, to any Underwriter or to certain other dealers.

5. Payment and Delivery. Payment for the Firm Shares
shall be made to the Company in Federal or other funds immediately available in
New York City against delivery of such

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<PAGE> 11
Firm Shares for the respective accounts of the several Underwriters at 10:00
a.m., New York City time, on ____________, 1998, or at such other time on the
same or such other date, not later than _________, 1998, as shall be designated
in writing by you. The time and date of such payment are hereinafter referred
to as the "CLOSING DATE".

Payment for any Additional Shares shall be made to each Seller
in Federal or other funds immediately available in New York City against
delivery of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 3 or at such other time on the same or on such
other date, in any event not later than _______, 1998, as shall be designated
in writing by you. The time and date of such payment are hereinafter referred
to as the "OPTION CLOSING DATE".

Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the Underwriters duly
paid, against payment of the Purchase Price therefor.

6. Conditions to the Underwriters' Obligations. The
obligations of the Company to sell the Shares to the Underwriters and the
several obligations of the Underwriters to purchase and pay for the Shares on
the Closing Date are subject to the condition that the Registration Statement
shall have become effective not later than 2:00 p.m. (New York City time) on
the date hereof.

The several obligations of the Underwriters are subject to the
following further conditions:

(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date:

(i) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of
this Agreement) that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated
in the Prospectus.

(b) The Underwriters shall have received on the Closing
Date a certificate, dated the Closing Date and signed by an executive
officer of the Company, to the effect that there has not have occurred
any change, or any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company

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<PAGE> 12
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) to the effect that the
representations and warranties of the Company contained in this
Agreement are true and correct in all material respects as of the
Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.

The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.

(c) The Underwriters shall have received on the Closing
Date an opinion of Gibson Dunn & Crutcher LLP, outside counsel for the
Company, dated the Closing Date, to the effect that:

(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the State of Delaware, has the corporate power and
corporate authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified
to transact business and is in good standing in the States of
_______________, _______________, _______________ and
_______________;

(ii) [AudioNet, Inc.] has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the State of Delaware, has the corporate power and
corporate authority to own its property and to conduct its
business as presently conducted;

(iii) the authorized capital stock of the Company
conforms in all material aspects as to legal matters to the
description thereof contained in the Prospectus;

(iv) the shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized are
validly issued and non-assessable and to such counsel's
knowledge are fully paid; except as described in the
Prospectus, and except for preemptive rights which by their
terms will terminate on or before the Closing Date such
counsel is not aware that any person has outstanding any
options to purchase, or any preemptive rights or other rights
to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or
sell, shares of the Company's capital stock or any such
options, rights, convertible securities or obligations; and
all outstanding shares of capital stock of the Company and
options and other rights to acquire capital stock issued since
September 1, 1996 have been issued in compliance with the
registration and qualification provisions of all applicable
securities laws and such capital stock were not issued in
violation of any preemptive rights contained in the Company's
Certificate of Incorporation or Bylaws, or to such counsel's
knowledge any rights of first refusal or other similar rights
excluding any violation for which the Company has obtained a
waiver.

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<PAGE> 13
(v) all of the issued shares of capital stock of each
subsidiary of the Company have been duly authorized and
validly issued, are non-assessable, to such counsel's
knowledge are fully paid and are owned directly by the
Company, free and clear of all liens, encumbrances, equities
or claims;

(vi) the Shares to be sold by the Company have been
duly authorized and, when issued and delivered in accordance
with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights
pursuant to the Company's Certificate of Incorporation or
Bylaws or to such counsel's knowledge, any other agreement or
instrument binding on the Company;

(vii) this Agreement has been duly authorized,
executed and delivered by the Company;

(viii) the execution and delivery by the Company of,
this Agreement and the performance by the Company of its
obligations under, this Agreement will not contravene any
provision of applicable law or the or Bylaws of the Company
or, to such counsel's knowledge, any agreement or other
instrument binding upon the Company or any of its subsidiaries
that is material to the Company and its subsidiaries, taken as
a whole, or, to such counsel's knowledge, any judgment, order
or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for issuance
and sale of the Shares by the Company to the Underwriters
pursuant to the terms of this Agreement;

(ix) the statements (A) in the Prospectus under the
captions "Risk Factors--Government Regulation and Legal
Uncertainty," "Risk Factors--Intellectual Property, " "Risk
Factors--Shares Eligible for Future Sale,"
"Business--Governmental Regulation," "Business--Intellectual
Property," "Management--Director Compensation,"
"Management--Employee Benefit Plans,"
"Management--Indemnification of Directors and Executive
Officers and Limitation of Liability," "Certain Transactions,"
"Description of Capital Stock," "Shares Eligible for Future
Sale," and "Underwriters" and (B) in the Registration
Statement in Items 14 and 15, in each case insofar as such
statements constitute summaries of the legal matters,
documents or proceedings referred to therein, have been
reviewed by such counsel and are accurate in all material
respects;

12
<PAGE> 14
(x) to such counsel's knowledge, such counsel does
not know of any legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is
a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations,
contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not
described or filed as required;

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

(xii) to such counsel's knowledge there is no legal
or beneficial owner of any securities of the Company who has
any rights, not effectively satisfied or waived, to require
registration of any shares of capital stock of the Company in
connection with the filing of the Registration Statement;

(xiii) to the best of such counsel's knowledge: (A)
based solely on oral advice of the Staff of the Commission the
Registration Statement has become effective under the
Securities Act, (B) no stop order proceedings with respect
thereto have been instituted or are pending or threatened
under the Securities Act and nothing has come to such
counsel's attention to lead it to believe that such
proceedings are contemplated; and (C) any required filing of
the Prospectus and any supplement thereto pursuant to Rule
424(b) under the Securities Act has been made in the manner
and within the time period required by such Rule 424(b); and

(xiv) based on a letter from the Nasdaq Stock Market,
the Shares to be sold under this Agreement to the Underwriters
are duly authorized for quotation on the Nasdaq National
Market.

(xv) in addition, such counsel shall state that they
have participated in conferences with officers and other
representatives of the Company representatives of the
independent auditors of the Company and the Underwriters
representatives and counsel at which the contents of the
Registration Statement and Prospectus and related matters were
discussed, and shall state that because the purpose of such
counsel's professional engagement was not to establish or
confirm factual matters and because the scope of their
examination of the affairs of the Company did not permit them
to verify the accuracy, completeness or fairness of the
statements set forth in the Registration Statement or
Prospectus, such counsel are not passing upon and do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or Prospectus except to the extent set forth

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<PAGE> 15
below. On the basis of the foregoing and except for the
financial statements and schedules and the other financial and
statistical data included therein, as to which such counsel
shall express no opinion or belief, such counsel shall state
that: (A) the Registration Statement at the time it became
effective, and the Prospectus as of the date thereof and as of
the date of such opinion, appeared on their face to be
appropriately responsive in all material respects to the
relevant requirements of the Securities Act and the applicable
rules and regulations of the Commission promulgated
thereunder, (B) no facts have come to such counsel's attention
that lead them to believe that (1) the Registration Statement
at the time it became effective contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or (2) the Prospectus as of
its date or as of the date of such opinion contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were not misleading.

In rendering the opinion referred to in this Section
6(c), such counsel may rely upon certificates of officers of the
Company as to matters of fact and upon certificates of public
officials. Such opinion shall expressly be limited to the federal laws
of the United States, the laws of the State of New York and the General
Corporation Law of the State of Delaware.

(d) The Underwriters shall have received on the Option
Closing Date an opinion of Gibson Dunn & Crutcher LLP, counsel for the
Selling Stockholder, dated the Closing Date, to the effect that:

(i) this Agreement has been duly authorized, executed
and delivered by the Selling Stockholder;

(ii) the execution and delivery of this Agreement by
the Selling Stockholder and the sale of the Additional Shares
to be sold by the Selling Stockholder to the Underwriters will
not contravene any provision of applicable law (other than
federal, state or international securities laws or rules and
regulations promulgated thereunder, or the rules and
regulations of the NASD), or, to such counsel's knowledge, any
agreement or other instrument binding upon the Selling
Stockholder or, to the best of such counsel's knowledge, any
judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Selling Stockholder, and no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the sale
of the Additional Shares by the Selling Stockholder to the
Underwriters pursuant to the terms of this Agreement;

(iii) the Selling Stockholder has the legal power,,
and all authorization and approval required by law, to enter
into this Agreement and the Custody Agreement

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<PAGE> 16
and Power of Attorney of the Selling Stockholder and to sell,
transfer and deliver the Additional Shares to be sold by the
Selling Stockholder (other than with respect to federal
securities laws or rules and regulations promulgated
thereunder;

(iv) upon delivery of certificates issued to the
Underwriters for the Additional Shares being sold by the
Selling Stockholder in registered form and payment thereof,
each Underwriter who takes such delivery and makes such
payment in good faith and without notice of any adverse claim,
will acquire all the rights of the Selling Stockholder in such
Additional Shares free of any adverse claim, lien in favor of
the Company and restriction on transfer imposed by the
Company; and

(v) in addition, such counsel shall state that they
have participated in conferences with officers and other
representatives of the Company, representatives of the
independent auditors of the Company and the Underwriters'
representatives and counsel at which the contents of the
Registration Statement and Prospectus and related matters were
discussed, and shall state that because the purpose of such
counsel's professional engagement was not to establish or
confirm factual matters and because the scope of their
examination of the affairs of the Company did not permit them
to verify the accuracy, completeness or fairness of the
statements set forth in the Registration Statement or
Prospectus, such counsel are not passing upon and do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement except to the extent set forth below. On the basis
of the foregoing, and except for the financial statements and
schedules and the other financial and statistical data
included therein, as to which such counsel shall express no
opinion or belief, such counsel shall state that: (A) the
Registration Statement at the time it became effective, and
the Prospectus as of the date thereof and as of the date of
such opinion, appeared on their face to be appropriately
responsive in all material respects to the relevant
requirements of the Securities Act and the applicable rules
and regulations of the Commission promulgated thereunder, (B)
no facts have come to such counsel's attention that lead them
to believe that (1) the Registration Statement at the time it
became effective contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading or (2) the Prospectus as of its date or as of the
date of such opinion contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading.

In rendering the opinion referred to in this Section
6(d), such counsel may rely upon certificates of officers of the
Company as to matters of fact and upon certificates of public
officials. Such opinion shall expressly be limited to the federal laws
of the United States, the laws of the State of New York and the General
Corporation Law of the State of Delaware.

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<PAGE> 17
(e) The Underwriters shall have received on the Closing
Date an opinion of Ray Balestri, counsel to the Company, dated the
Closing Date, covering the matters referred to in Sections 6(c)(iv)
(without limitations based on time) and 6(c)(x).

(f) The Underwriters shall have received on the Closing
Date an opinion of Wilson Sonsini Goodrich & Rosati, counsel for the
Underwriters, dated the Closing Date, covering the matters referred to
in Sections 6(c)(vi), 6(c)(vii), 6(c)(ix) (but only as to the
statements in the Prospectus under "Description of Capital Stock" and
"Underwriters") and 6(c)(xiii) above.

The opinions of Gibson Dunn & Crutcher LLP described in
Sections 6(c) and 6(d) above (and any opinions of counsel for the Selling
Stockholder referred to in the immediately preceding paragraph) shall be
rendered to the Underwriters at the request of the Company or the Selling
Stockholder, as the case may be, and shall so state therein.

(g) The Underwriters shall have received, on each of the
date hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Price Waterhouse LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.

(h) The "Lock-Up" Agreements, each substantially in the
form of Exhibit A hereto, between you and certain stockholders,
optionholders, warrantholders, officers and directors of the Company
relating to sales and certain other dispositions of shares of Common
Stock or certain other securities, delivered to you on or before the
date hereof, shall be in full force and effect on the Closing Date.

The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to you on the Option
Closing Date of such documents as you may reasonably request with respect to
the good standing of the Company, the due authorization and issuance of the
Additional Shares and other matters related to the issuance of the Additional
Shares.

7. Covenants of the Company. In further consideration of
the agreements of the Underwriters herein contained, the Company covenants with
each Underwriter as follows:

(a) To furnish to you, without charge, four signed copies
of the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 5:00 p.m. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in Section 7(c)

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<PAGE> 18
below, as many copies of the Prospectus and any supplements and
amendments thereto or to the Registration Statement as you may
reasonably request.

(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.

(c) If, during such period after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances under which they were made when the
Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to
the Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances under which they were made when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.

(d) To endeavor to qualify the Shares for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request; provided, however, than in no event shall the
Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would
subject it to general service or process in any jurisdiction where it
is not now so subject.

(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering
the twelve-month period ending September 30, 1999 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.

(f) In connection with the Directed Share Program, the
Company will ensure that the Directed Shares will be restricted to the
extent required by the National Association of Securities Dealers, Inc.
(the "NASD") NASD or the NASD rules from sale, transfer, assignment,
pledge or hypothecation for a period of three months following the date
of the effectiveness of the Registration Statement. Morgan Stanley
will notify the Company as to which Participants will need to be so
restricted. The Company will direct the transfer agent to place stop
transfer restrictions upon such securities for such period of time.

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<PAGE> 19
(g) To pay all fees and disbursements of counsel incurred
by the Underwriters in connection with the Directed Share Program and
stamp duties, similar taxes or duties or other taxes, if any, incurred
by the Underwriters in connection with the Directed Share Program.

(h) To (i) enforce the terms of each Lock-up Agreement,
(ii) issue stop-transfer instructions to the transfer agent for the
Common Stock with respect to any transaction or contemplated
transaction that would constitute a breach of or default under the
applicable Lock-up Agreement and (iii) upon written request of Morgan
Stanley to release from the Lock-up Agreements those shares of Common
Stock held by those holders set forth in such request. In addition,
except with the prior written consent of Morgan Stanley, the Company
agrees (i) not to amend or terminate, or waive any right under, any
Lock-up Agreement, or take any other action that would directly or
indirectly have the same effect as an amendment or termination, or
waiver of any right under, any Lock-up Agreement, that would permit any
holder of shares of Common Stock, or securities convertible into or
exercisable or exchangeable for Common Stock, to sell, make any short
sale of, grant any option for the purchase of, or otherwise transfer or
dispose of, any of such shares of Common Stock or other securities
prior to the expiration of 180 days after the date of the Prospectus in
violation of the terms of such Lock-Up Agreement, and (ii) not to
consent to any sale, short sale, grant of an option for the purchase
of, or other disposition or transfer of shares of Common Stock, or
securities convertible into or exercisable or exchangeable for Common
Stock, subject to a Lock-up Agreement.

(i) the Company agrees that, without the prior written
consent of Morgan Stanley, it will not release any stockholder or
option holder from the market standoff provision imposed by the Company
pursuant to the terms of the Registration Rights Agreement or other
agreement earlier than 180 days after the date of the initial public
offering of the Shares.

8. Expenses. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Sellers agree to pay or cause to be paid all of their respective expenses
incident to the performance of their obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel,
the Company's accountants and counsel for the Selling Stockholder of the
Company in connection with the registration and delivery of the Shares under
the Securities Act and all other fees or expenses of the Company in connection
with the preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of printing or producing any
Blue Sky or Legal Investment memorandum in connection with the offer and sale
of the Shares under state securities laws and all expenses in connection with
the qualification of the Shares for offer and sale under state securities laws
as provided in Section 7(d) hereof, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or Legal

18
<PAGE> 20
Investment memorandum, (iv) all filing fees and the reasonable fees and
disbursements of counsel to the Underwriters incurred in connection with the
review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all fees and expenses in
connection with the preparation and filing of the registration statement on
Form 8-A relating to the Common Stock and all costs and expenses incident to
listing the Shares on the Nasdaq National Market, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depository, (viii) the costs and expenses of the
Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any
such consultants, and the cost of any aircraft chartered in connection with the
road show, and (ix) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided in
this Section, Section 9 entitled "Indemnity and Contribution", and the last
paragraph of Section 11 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock transfer
taxes payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.

The provisions of this Section shall not supersede or
otherwise affect any agreement that the Sellers may otherwise have for the
allocation of such expenses among themselves.

9. Indemnity and Contribution.

(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus or any
preliminary prospectus, in light of the circumstances under which they were
made) not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein; and provided further that the foregoing indemnity with respect
to any preliminary prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any such liability, purchase Shares, or any
person controlling such Underwriter, if a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any

19
<PAGE> 21
amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law to have been so delivered
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such losses, claims, damages or liabilities, unless
such failure is the result of noncompliance by the Company with Section 7(a)
hereof.

(b) The Selling Stockholder agrees to indemnify and hold
harmless each Underwriter and each person, if any who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, or is under common control with, or is controlled by, any
Underwriter, and the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus or any preliminary prospectus, in light
of the circumstances under which they were made) not misleading, but only with
reference to information relating to such Selling Stockholder furnished in
writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto, except insofar as such losses, claims,
damages, or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein; and provided further that the foregoing indemnify
with respect to any preliminary prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any such losses, claims, damages
or liabilities purchased Shares, or any person controlling such Underwriter, if
a copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law to have
been so delivered at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities, unless such failure is the result of noncompliance by the Company
with Section 7(a) hereof. The liability of the Selling Stockholder under this
Agreement shall be limited to an amount equal to the net proceeds received by
the Selling Stockholder from the offering of Additional Shares sold by such
Selling Stockholder, except with respect to (i) any breaches of the
representations and warranties set forth in paragraphs (a), (b), (c), (d), (e)
and (f) of Section 2 hereof, (ii) intentional misrepresentation or (iii) fraud.

(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Selling Stockholder, the directors
of the Company, the officers of the Company who sign the Registration Statement
and each person, if any, who controls the Company or

20
<PAGE> 22
any Selling Stockholder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus or any
preliminary prospectus, in light of the circumstances under which they were
made) not misleading, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus,
the Prospectus or any amendments or supplements thereto.

(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 9, such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed in writing to the retention of such counsel,
(ii) the indemnifying party shall have failed to assume the defense and employ
counsel; or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to a conflict of interest on the part of counsel employed by
the indemnifying party to represent the indemnified party (in which case the
indemnifying party will not have the right to assume the joint defense of such
action on behalf of the indemnified person, but shall have the right to select
separate counsel for the indemnified person). It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for (i) the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Underwriters and all
persons, if any, who control any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, (ii) the
fees and expenses of more than one separate firm (in addition to any local
counsel) for the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either such Section and (iii) the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Selling Stockholder,
and that all such fees and expenses shall be reimbursed as they are incurred.
In the case of any such separate firm for the Underwriters and such control
persons of any Underwriters, such firm shall be designated in writing by Morgan
Stanley. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Selling Stockholder. The indemnifying

21
<PAGE> 23
party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.

(e) To the extent the indemnification provided for in this
Section 9 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (i) in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on the
other hand from the offering of the Shares or (ii) if the allocation provided
by clause 9(e)(i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause 9(e)(i) above but also the relative fault of the indemnifying party or
parties on the one hand and of the indemnified party or parties on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Sellers on the one hand
and the Underwriters on the other hand in connection with the offering of the
Shares shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Shares (before deducting expenses) received
by each Seller and the total underwriting discounts and commissions received by
the Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Shares. The
relative fault of the Sellers on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Sellers or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Underwriters' respective obligations to contribute pursuant to
this Section 9 are several in proportion to the respective number of Shares
they have purchased hereunder, and not joint.

(f) The Sellers and the Underwriters agree that it would
not be just or equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the

22
<PAGE> 24
Underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in Section 9(e). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and the Selling
Stockholder shall not be required to contribute any amount in excess of the net
proceeds received by the Selling Stockholder form the offering of Additional
Shares sold by the Selling Stockholder, except with respect to (i) any breach
of the representations and warranties in Section 2, (ii) intentional
misrepresentation or (iii) fraud. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 9 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.

(g) The indemnity and contribution provisions contained in
this Section 9 and the representations, warranties and other statements of the
Company and the Selling Stockholder contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any termination of
this Agreement, (ii) any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter, the Selling Stockholder, or the
Company, its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Shares.

10. Termination. This Agreement shall be subject to
termination by notice given by you to the Company, if (a) after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses 10(a)(i) through 10(a)(iv),
such event, singly or together with any other such event, makes it, in your
judgment, impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.

11. Effectiveness; Defaulting Underwriters. This
Agreement shall become effective upon the execution and delivery hereof by the
parties hereto.

23
<PAGE> 25
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of the Shares to be purchased on such date,
the other Underwriters shall be obligated severally in the proportions that the
number of Firm Shares set forth opposite their respective names in Schedule II
bears to the aggregate number of Firm Shares set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 11 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you, the Company and the Selling Stockholders for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders. In any
such case either you or the relevant Sellers shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus
or in any other documents or arrangements may be effected. If, on the Option
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased, the non- defaulting Underwriters shall have
the option to (i) terminate their obligation hereunder to purchase Additional
Shares or (ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase in the
absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.

If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of any Seller to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason any Seller shall be unable to perform its obligations under
this Agreement, the Sellers will reimburse the Underwriters or such
Underwriters as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Underwriters in connection with
this Agreement or the offering contemplated hereunder.

12. Counterparts. This Agreement may be signed in two or
more counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.

24
<PAGE> 26
13. Applicable Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York.

14. Headings. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed a part of this Agreement.

25
<PAGE> 27
Very truly yours,

broadcast.com inc.

By:
-------------------------------
Name:
Title:

Selling Stockholder

----------------------------------
Todd R. Wagner

Accepted as of the date hereof

Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Hambrecht & Quist LLC

Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule II hereto.

By: Morgan Stanley & Co. Incorporated

By:
----------------------------
Name:
Title:

26
<PAGE> 28

SCHEDULE I

<TABLE>
<CAPTION>
NUMBER OF
ADDITIONAL SHARES
SELLING STOCKHOLDER TO BE SOLD
------------------- -----------------
<S> <C>
Todd R. Wagner . . . . . . . . . . . . . . .

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

Total . . . . . . . . . . .
==============
</TABLE>
<PAGE> 29

SCHEDULE II

<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated . . . . . . . . . . . . . . .

Donaldson, Lufkin & Jenrette Securities Corporation . . . . . .
Hambrecht & Quist LLC . . . . . . . . . . . . . . . . . . . . .

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

Total . . . . . . . . . . .
==============
</TABLE>
<PAGE> 30

EXHIBIT A

[FORM OF LOCK-UP LETTER]

____________, 1998

Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
Hambrecht & Quist LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036

Dear Sirs and Mesdames:

The undersigned understands that Morgan Stanley & Co.
Incorporated ("MORGAN STANLEY") proposes to enter into an Underwriting
Agreement (the "UNDERWRITING AGREEMENT") with broadcast.com, a Delaware
corporation (the "COMPANY"), providing for the public offering (the "PUBLIC
OFFERING") by the several Underwriters, including Morgan Stanley (the
"UNDERWRITERS"), of shares (the "SHARES") of the Common Stock, $0.01 par value
of the Company (the "COMMON STOCK").

To induce the Underwriters that may participate in the Public
Offering to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the final
prospectus relating to the Public Offering (the "PROSPECTUS"), (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (a) the sale of any Shares to the
<PAGE> 31

Underwriters pursuant to the Underwriting Agreement or (b) transactions
relating to shares of Common Stock acquired in the Public Offering or in open
market transactions after the completion of the Public Offering. In addition,
the undersigned agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.

Whether or not the Public Offering actually occurs depends on
a number of factors, including market conditions. Any Public Offering will
only be made pursuant to an Underwriting Agreement, the terms of which are
subject to negotiation between the Company and the Underwriters.

Very truly yours,

-----------------------------
(Name)

-----------------------------
(Address)

<PAGE> 1
EXHIBIT 3.1

CERTIFICATE OF AMENDMENT

TO THE

RESTATED CERTIFICATE OF INCORPORATION

AUDIONET, INC.

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

AudioNet, Inc., (the "Corporation"), a corporation duly organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"),

DOES HEREBY CERTIFY:

FIRST, that the Board of Directors of the Corporation duly adopted
resolutions setting forth a proposed amendment to the Restated Certificate of
Incorporation of the Corporation and declaring such amendment to be advisable.
The resolution setting forth the proposed amendment was as follows:

RESOLVED, that the Restated Certificate of Incorporation of
the Corporation be amended by changing Article I, so that, as amended
in its entirety, such Article shall be and read as follows:

"The name of the corporation (hereinafter called the
"Corporation") is broadcast.com inc."

SECOND, that thereafter, pursuant to a resolution of the Board of
Directors of the Corporation, the proposed amendment was submitted to the
stockholders of the Corporation for their approval, and the stockholders
entitled to vote thereon approved the proposed amendment by a written consent
in accordance with Section 228 of the DGCL.

THIRD, that the amendment was duly adopted in accordance with the
provisions of Sections 242 of the DGCL.

FOURTH, that the amendment did not have the effect of reducing the
capital of the Corporation.

IN WITNESS WHEREOF, as the officer duly authorized to execute this
Certificate of Amendment, I have set my hand hereto this 11th day of May, 1998.

/s/ TODD WAGNER
--------------------------------------
Todd R. Wagner, Chief Executive Officer
<PAGE> 2

RESTATED CERTIFICATE OF INCORPORATION

AUDIONET, INC.

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

ARTICLE I

NAME OF CORPORATION

The name of the corporation (hereinafter referred to as the
"Corporation") is AudioNet, Inc.

ARTICLE II

REGISTERED OFFICE

The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is 9 East
Lookerman Street, in the City of Dover, County of Kent, and the name of the
registered agent of the Corporation in the State of Delaware at such address is
National Registered Agents, Inc.

ARTICLE III

PURPOSE

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.

ARTICLE IV

AUTHORIZED CAPITAL STOCK

<PAGE> 3
(b) The shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors is hereby vested with authority
to fix by resolution or resolutions the designations and the powers,
preferences, and relative, participating, optional, or other special rights,
and qualifications, limitations, or restrictions thereof, including, without
limitation, the dividend rate, conversion or exchange rights, redemption price,
and liquidation preference, of any series of shares of Preferred Stock, and to
fix the number of shares constituting any such series, and to increase or
decrease the number of shares of any such series (but not below the number of
shares thereof then outstanding). In case the number of shares of any such
series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution or
resolutions originally fixing the number of shares of such series.

ARTICLE V

BOARD POWER REGARDING BYLAWS

In the furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend, and rescind the Bylaws of the Corporation.

ARTICLE VI

ELECTION OF DIRECTORS

Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.

ARTICLE VII

SETTLEMENTS WITH CREDITORS

Whenever a compromise or arrangement is proposed between the
Corporation and its creditors, or any class of them, and/or between the
Corporation and its stockholders, or any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof, or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code, or on the application of trustees
in dissolution or of any receiver or receivers appointed for the Corporation
under the provisions of Section 279 of Title 8 of the Delaware Code, order a
meeting of the creditors or class of creditors and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or

-2-

<PAGE> 4
arrangement, said compromise or arrangement and said reorganization shall, if
sanctioned by the court to which said application has been made, be binding on
all the creditors or class of creditors and/or on all the stockholders or class
of stockholders of the Corporation, as the case may be, and also on the
Corporation.

ARTICLE VIII

BOARD OF DIRECTORS

(a) The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in, the Bylaws. The phrase "whole Board" and the
phrase "authorized number of directors" shall be deemed to have the same
meaning, to wit, the total number of directors which the Corporation would have
if there were no vacancies.

(b) Effective at the first annual meeting held following the
consummation of the initial public offering of the Corporation's Common Stock
pursuant to a registration statement declared effective under the Securities
Act of 1933, as amended (the "Post-Public Offering Annual Meeting"), the Board
shall be divided into three classes: Class I, Class II, and Class III. Such
classes shall be as nearly equal in number of directors as possible. Each
director shall serve for a term ending at the third annual stockholders meeting
following the annual meeting at which such director was elected; provided,
however, that the directors first elected to Class I shall serve for a term
ending at the first annual meeting held after the Post-Public Offering Annual
Meeting; the directors first elected to Class II shall serve for a term ending
at the second annual meeting held after the Post-Public Offering Annual
Meeting; and the directors first elected to Class III shall serve for a term
ending at the third annual meeting held after the Post-Public Offering Annual
Meeting.

(c) At each annual election held after the Post-Public Offering
Annual Meeting, the directors chosen to succeed those whose terms then expire
shall be identified as being of the same class as the directors they succeed,
unless, by reason of any intervening changes in the authorized number of
directors, the Board of Directors shall designate one or more directorships
whose term then expires as directorships of another class in order more nearly
to achieve equality in the number of directors among the classes. When the
Board of Directors fills a vacancy resulting from the death, resignation, or
removal of a director, the director chosen to fill that vacancy shall be of the
same class as the director he succeeds, unless, by reason of any previous
changes in the authorized number of directors, the Board of Directors shall
designate the vacant directorship as a directorship of another class in order
more nearly to achieve equality in the number of directors among the classes.

(d) Notwithstanding the rule that the three classes shall be as
nearly equal in umber of directors as possible, in the event of any change in
the authorized number of directors, each director then continuing to serve as
such will nevertheless continue as a director of the class of which he is a
member, until the expiration of his current term or his earlier death,
resignation, or removal. If any

-3-

<PAGE> 5
newly created directorship or vacancy on the Board of Directors, consistent
with the rule that the three classes shall be as nearly equal in number of
directors as possible, may be allocated to one or more classes, the Board of
Directors shall allocate it to that of the available class whose term of office
is due to expire at the earliest date following such allocation.

(e) During any period when the holders of Preferred Stock or any
one or more series thereof, voting as a class, shall be entitled to elect a
specified number of directors by reason of dividend arrearages or other
contingencies giving them the right to do so, then and during such time as such
right continues (i) the then otherwise authorized number of directors shall be
increased by such specified number of directors, and the holders of the
Preferred Stock or such series thereof, voting as a class, shall be entitled to
elect the additional directors as provided for, pursuant to the provisions of
such Preferred Stock or series; (ii) the additional directors shall be members
of those respective classes of directors in which vacancies are created as a
result of such increase in the authorized number of directors; and (iii) each
such additional director shall serve until the annual meeting at which the term
of office of his class shall expire and until his successor shall be elected
and shall qualify, or until his right to hold such office terminates pursuant
to the provisions of such Preferred Stock or series, whichever occurs earlier.
Whenever the holders of such Preferred Stock or series thereof are divested of
such rights to elect a specified number of directors, voting as a class,
pursuant to the provisions of such Preferred Stock or series, the terms of
office of all directors elected by the holders of such Preferred Stock or
series, voting as a class pursuant to such provisions, or elected to fill any
vacancies resulting from the death, resignation, or removal of directors so
elected by the holders of such Preferred Stock or series, shall forthwith
terminate and the authorized number of directors shall be reduced accordingly.

(f) Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time, but only (i) for cause, and
(ii) by the affirmative vote of the holders, voting together as a single class,
of not less than 67% of the total outstanding voting power of the securities
of the Corporation which are then entitled to vote in the election of directors
of the Corporation.

(g) Notwithstanding anything to the contrary in this Restated
Certificate of Incorporation, the provisions set forth in this Article VIII may
not be repealed, amended, or otherwise modified, directly or indirectly, in any
respect (whether by amendment of this Restated Certificate of Incorporation or
the Bylaws of the Corporation or otherwise); provided, however, that the
foregoing Article may be repealed or amended in any respect if such repeal or
amendment is approved by such vote as may be required under applicable law and
in addition thereto by the affirmative vote of the holders, voting together as
a single class, of not less than 67% of the total outstanding voting power of
the securities of the Corporation which are then entitled to vote in the
election of directors of the Corporation.

-4-
<PAGE> 6

ARTICLE IX

LIMITATION OF DIRECTOR LIABILITY

To the fullest extent permitted by the Delaware General Corporation
Law, as the same may be amended or supplemented, a director of the Corporation
shall not be liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. If the Delaware General Corporation
Law is amended after the date of the filing of this Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended from time to time. No
repeal or modification of this Article IX by the stockholders shall adversely
affect any right or protection of a director of the Corporation existing by
virtue of this Article IX at the time of such repeal or modification.

ARTICLE XI

CORPORATE POWER

The Corporation reserves the right to amend, alter, change, or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.

ARTICLE XII

ELIMINATION OF RIGHT TO ACT BY CONSENT

Immediately effective following the consummation of the initial public
offering of the Corporation's Common Stock pursuant to a registration statement
declared effective under the Securities Act of 1933, as amended, no action
required to be taken or which may be taken at any annual or special meeting of
the stockholders of the Corporation may be taken without a meeting, and the
power of stockholders to consent in writing, without a meeting, to the taking
of any action is specifically denied.

-5-

<PAGE> 1
EXHIBIT 3.1.1

RESTATED CERTIFICATE OF INCORPORATION

BROADCAST.COM INC.

______________________________________________________________

ARTICLE I

NAME OF CORPORATION

The name of the corporation (hereinafter referred to as the
"Corporation") is "broadcast.com inc."

ARTICLE II

REGISTERED OFFICE

ARTICLE III

PURPOSE

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.

ARTICLE IV

AUTHORIZED CAPITAL STOCK

(a) The Corporation shall be authorized to issue two classes of
shares of stock to be designated, respectively, "Common Stock" and "Preferred
Stock"; the total number of shares that the Corporation shall have the
authority to issue is 65,000,000; the total number of shares of Common Stock
shall be 60,000,000, and each such share shall have a par value of $0.01; and
the total number of shares of Preferred Stock shall be 5,000,000, and each such
share shall have a par value of $0.01.
<PAGE> 2
(b) The shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors is hereby vested with authority
to fix by resolution or resolutions the designations and the powers,
preferences, and relative, participating, optional, or other special rights,
and qualifications, limitations, or restrictions thereof, including, without
limitation, the dividend rate, conversion or exchange rights, redemption price,
and liquidation preference, of any series of shares of Preferred Stock, and to
fix the number of shares constituting any such series, and to increase or
decrease the number of shares of any such series (but not below the number of
shares thereof then outstanding). In case the number of shares of any such
series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution or
resolutions originally fixing the number of shares of such series.

ARTICLE V

BOARD POWER REGARDING BYLAWS

In the furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend, and rescind the Bylaws of the Corporation.

ARTICLE VI

ELECTION OF DIRECTORS

Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.

ARTICLE VII

SETTLEMENTS WITH CREDITORS

-2-
<PAGE> 3
compromise or arrangement, said compromise or arrangement and said
reorganization shall, if sanctioned by the court to which said application has
been made, be binding on all the creditors or class of creditors and/or on all
the stockholders or class of stockholders of the Corporation, as the case may
be, and also on the Corporation.

ARTICLE VIII

BOARD OF DIRECTORS

(d) Notwithstanding the rule that the three classes shall be as
nearly equal in number of directors as possible, in the event of any change in
the authorized number of directors, each director then continuing to serve as
such will nevertheless continue as a director of the class of which he is a
member, until the expiration of his current term or his earlier death,
resignation, or removal. If any

-3-
<PAGE> 4
newly created directorship or vacancy on the Board of Directors, consistent
with the rule that the three classes shall be as nearly equal in number of
directors as possible, may be allocated to one or more classes, the Board of
Directors shall allocate it to that of the available class whose term of office
is due to expire at the earliest date following such allocation.

(f) Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time, but only (i) for cause; and
(ii) by the affirmative vote of the holders, voting together as a single class,
of not less than 67% of the total outstanding voting power of the securities of
the Corporation which are then entitled to vote in the election of directors of
the Corporation.

-4-
<PAGE> 5
ARTICLE IX

LIMITATION OF DIRECTOR LIABILITY

To the fullest extent permitted by the Delaware General Corporation
Law, as the same may be amended or supplemented, a director of the Corporation
shall not be liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. If the Delaware General
Corporation Law is amended after the date of the filing of this Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended from time to time. No
repeal or modification of this Article IX by the stockholders shall adversely
affect any right or protection of a director of the Corporation existing by
virtue of this Article IX at the time of such repeal or modification.

ARTICLE XI

CORPORATE POWER

ARTICLE XII

ELIMINATION OF RIGHT TO ACT BY CONSENT

-5-

<PAGE> 1
EXHIBIT 3.2.1

FIRST AMENDMENT TO AMENDED AND RESTATED BYLAWS
OF AUDIONET, INC.

2.10 Nomination of Directors. Nominations of candidates for election as
directors at any annual meeting of stockholders may be made by the Board of
Directors or by any stockholder entitled to vote at such annual meeting. Only
persons nominated in accordance with the procedures set forth in this Section
2.10 shall be eligible for election as directors at an annual meeting.

Nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section 2.10. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Corporation not less than 120 calendar days
in advance of the date of the Corporation's proxy statement sent to stockholders
in connection with the previous year's annual meeting of stockholders, except
that if no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement, such notice
shall be received by the Corporation in a reasonable time before the
solicitation is made. Such stockholder's notice shall set forth, (i) as to the
candidate that the stockholder proposes to nominate for election as a director,
(a) the name, age, business address, and residence address of such person; (b)
the principal occupation or employment of such person; (c) the class and number
of shares of the Corporation's stock that are beneficially owned by such person
on the date of such stockholder notice; and (d) any other information relating
to such person that would be required to be disclosed pursuant to Regulations
13D and 13G promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), in connection with the acquisition of shares, and pursuant
to Regulation 14A promulgated under the Exchange Act, in connection with the
solicitation of proxies with respect to nominees for election as directors,
regardless of whether such person is subject to the provisions of such
regulations; and (ii) as to the stockholder giving the notice, (a) the name and
address, as they appear on the Corporation's books, of such stockholder and any
other stockholders known by such stockholder to be supporting such nominee; and
(b) the class and number of shares of the Corporation's stock that are
beneficially owned by such stockholder on the date of such stockholder notice
and beneficially owned by any other stockholders known by such stockholder to be
supporting such nominee on the date of such stockholder notice.

No person shall be elected as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 2.10.
Ballots bearing the names of all the persons who have been nominated for
election as directors at an annual meeting in accordance with the procedures set
forth in this Section 2.10 shall be provided for use at the annual meeting.

The Board of Directors may reject any nomination by a stockholder not
timely made or not in accordance wit the requirements of this Section 2.10. If
the Board of Directors determines that the information provided in a
stockholders' notice does not satisfy the information requirements of this
Section 2.10 in any material respect, the Secretary of the Corporation shall
promptly notify such stockholder of the deficiency of the notice. The
stockholder shall have an opportunity to cure the deficiency by providing
additional information to the Secretary within five days from the date such
deficiency notice is given to the stockholder. If the deficiency is not cured
within such period, or if the Board of Directors reasonably determines that the
additional information provided by the

<PAGE> 2

stockholder, together with the information previously provided by the
stockholder, does not satisfy the requirements of this Section 2.10 in any
material respect, then the Board of Directors may reject such stockholder's
nomination. The Secretary of the Corporation shall notify a stockholder in
writing whether his nomination has been made in accordance with the time and
information requirements of this Section 2.10. Notwithstanding the procedures
set forth in this Section 2.10, if the Board of Directors does not make a
determination as to the validity of an nomination by a stockholder, the
presiding officer of the meeting to which the nomination relates shall
determine and declare at such meeting whether a nomination was made in
accordance with the terms of this Section 2.10. If the presiding officer
determines that a nomination was not made in accordance with the terms of this
Section 2.10, he shall so declare at the annual meeting, and the defective
nomination shall be disregarded.

2.11. New Business. At an annual meeting of stockholders, only such new
business shall be conducted, and only such proposal with respect to such new
business shall be acted upon, as shall have been brought before such meeting by
or at the direction of the Board of Directors, or by any stockholder of the
Corporation who complies with the notice procedures set forth in this Section
2.11. For new business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than 120 calendar days in advance of the date of the
Corporation's proxy statement sent to stockholders in connection with the
previous year's annual meeting of stockholders, except that if no annual meeting
was held in the previous year or the date of the annual meeting has been changed
by more than 30 calendar days from the date contemplated at the time of the
previous year's proxy statement, such notice shall be received by the
Corporation in a reasonable time before the solicitation is made. A
stockholder's notice to the Secretary shall set forth, as to each matter of
business the stockholder proposes to bring before the meeting, (i) a brief
description of the matter desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (ii) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business and any other stockholders known by such stockholder to be supporting
such proposal; (iii) the class and number of shares of the Corporation's stock
that are beneficially owned by the stockholder on the date of such stockholder
notice and by any other stockholders known by such stockholder notice; and (iv)
any financial interest of the stockholder in such proposal.

The Board of Directors may reject any stockholder proposal not timely
made or not in accordance with the requirements of this Section 2.11. If the
Board of Directors determines that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2.11 in any
material respect, the Secretary of the Corporation shall promptly notify such
stockholder of the deficiency in the notice. The stockholder shall have an
opportunity to cure the deficiency by providing additional information to the
Secretary within five days from the date such deficiency notice is given to the
stockholder. If the deficiency is not cured within such period, or if the Board
of Directors reasonably determines that the additional information provided by
the stockholder, together with information previously provided, does not satisfy
the requirements of this Section 2.11 in any material respect, then the Board of
Directors may reject such stockholder's proposal. The Secretary of the
Corporation shall notify a stockholder in writing whether his proposal

<PAGE> 3

has been made in accordance with the time and information requirements of this
Section 2.11. Notwithstanding the procedures set forth in this Section 2.11, if
the Board of Directors does not make a determination as to the validity of any
stockholder proposal, the presiding officer of the meeting to which such
proposal relates shall determine and declare at that meeting whether the
stockholder proposal was made in accordance with the terms of this Section
2.11. If the presiding officer determines that a stockholder proposal was not
made in accordance with the terms of this Section 2.11, he shall so declare at
the meeting, and any such proposal shall not be acted upon at that meeting.

This provision shall not prevent the consideration and approval or
disapproval at the meeting of reports of officers, directors, and committees, of
the Board of Directors, but in connection with such reports, no new business
shall be acted upon at such annual meeting unless stated, filed, and received as
herein provided.

<PAGE> 1
EXHIBIT 4.1

COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE COMMON STOCK

NUMBER SHARES
[BROADCAST.COM LOGO]
C
BROADCAST.COM INC.

THIS CERTIFICATE IS TRANSFERABLE IN CUSIP 111310 10 8
NEW YORK, NY OR RIDGEFIELD PARK, NJ SEE REVERSE FOR
CERTAIN LEGENDS

This Certifies that

is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES, OF THE COMMON STOCK $.01 PAR VALUE EACH, OF

broadcast.com inc. (hereinafter called the "Corporation") transferable on the books of the Corporation by the holder hereof, in
person or by duly authorized attorney, upon surrender of this Certificate properly endorsed or accompanied by a proper assignment.
This Certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Certificate
of Incorporation and Bylaws of the Corporation and all amendments thereof, to all of which the holder by the acceptance hereof
consents. This Certificate is not valid until countersigned and registered by the Transfer Agent and the Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

Dated:

/s/ Mark Cuban /s/ Todd Wagner

President and Chief Executive Officer,
Chairman of the Board Secretary and Vice Chairman of the Board

[SEAL]

COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR

AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 2
broadcast.com inc.

There is on file at the offices of the Secretary of State of the State of
Delaware a full statement of the powers, designations, preferences, and
relative participating, optional, and other special rights, qualifications,
limitations, and restrictions of each class of stock of the Corporation
contained in the Certificate of Incorporation of the Corporation. The
Corporation will furnish a copy of such statement to any stockholder without
charge upon written request to the Corporation at its principal corporate
offices, or at its registered office on file with the Secretary of State of the
State of Delaware.

The Board of Directors of the Corporation may require the owner of a lost
or destroyed stock certificate, or his legal representative, to give the
Corporation a bond to indemnify it and its transfer agent and registrar against
any claim that may be made against them on account of the alleged loss or
destruction of any such certificate.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

UNIF GIFT MIN ACT -- Custodian
TEN COM -- as tenants in common -------- -----------
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act
tenants in common --------------------------
(State)

Additional abbreviations may also be used though not in the above list.

For value received,___________________________________ hereby sell, assign
and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.

Dated,_______________________

X __________________________________
NOTICE: (SIGNATURE)
THE SIGNATURE(S) TO
THIS ASSIGNMENT MUST
CORRESPOND WITH THE
NAME(S) AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR WITHOUT
ALTERATION OR ENLARGE- X __________________________________
MENT OR ANY CHANGE (SIGNATURE)
WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
------------------------------------
SIGNATURE(S) GUARANTEED BY:
</TABLE>

<PAGE> 1
EXHIBIT 5.1

[LETTERHEAD OF GIBSON, DUNN & CRUTCHER LLP]

June 24, 1998

(212) 351-3872 18530-00003

broadcast.com inc.
2914 Taylor Street
Dallas, TX 75226

Re: broadcast.com inc. Registration Statement on Form S-1
(File No. 333-52877)

Ladies and Gentlemen:

At your request, we have examined the Registration Statement on Form
S-1 (File No. 333-52877) (the "Registration Statement") of broadcast.com inc., a
Delaware corporation (the "Company"), filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), in connection with the public offering (i) by the
Company of (a) up to 2,500,000 newly issued shares (the "Firm Shares") of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"), and (b)
up to 187,500 newly issued shares (the "Company Over-allotment Shares") of
Common Stock pursuant to an option granted by the Company to the Underwriters
solely to cover over-allotments, if any, and (ii) by a stockholder of the
Company (the "Selling Stockholder") of up to 187,500 shares (the "Selling
Stockholder Over-allotment Shares") of Common Stock pursuant to an option
granted by the Selling Stockholder to the Underwriters solely to cover
over-allotments, if any.

We have examined the original, or photostatic or certified copy, of
such records of the Company, certificates of officers of the Company and of
public officials and such other documents as we have deemed relevant and
necessary as the basis for the opinion set forth below. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.

<PAGE> 2
broadcast.com inc
June 24, 1998
Page 2

Based upon the foregoing examination and in reliance thereon, and
subject to the assumptions stated and in reliance on statements of fact
contained in the documents that we have examined, and subject to the receipt
from the Commission of an order declaring the Registration Statement effective
under the Securities Act and compliance with applicable state securities laws,
we are of the opinion that:

1. The Firm Shares, when issued, sold and delivered against payment
therefor as described in the Registration Statement, will be
validly issued, fully paid and non-assessable.

2. If and to the extent the over-allotment option is exercised, the
Company Over-allotment Shares when issued, sold and delivered
against payment therefor as described in the Registration
Statement, will be validly issued, fully paid and non-assessable.

3. If and to the extent the over-allotment option is exercised, the
Selling Stockholder Over-allotment Shares are validly issued,
fully paid and non-assessable.

We render no opinion herein as to matters involving the laws of any
jurisdiction other than the laws of the United States of America and the General
Corporation Law of the State of Delaware. In rendering this opinion, we assume
no obligation to revise or supplement this opinion should current laws, or the
interpretations thereof, be changed.

We consent to the filing of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Registration Statement and the Prospectus which
forms a part thereof. In giving these consents, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act or the Rules and Regulations of the Commission.

Very truly yours,

/s/ Gibson, Dunn & Crutcher LLP

<PAGE> 1
EXHIBIT 10.1.1

EMPLOYMENT AGREEMENT

AGREEMENT, dated as of June 15, 1998, by and between broadcast.com
inc., a Delaware corporation, having an office address at 2914 Elm Street,
Dallas, Texas 75226 ("broadcast.com" or the "Company") and the individual named
in Schedule 1 hereto, residing at the address listed in Schedule 1 (hereinafter
referred to as the "Executive").

W I T N E S S E T H:

WHEREAS, the Company desires to hire and retain the Executive as an
Executive to perform certain services for the Company.

NOW, THEREFORE, in consideration of the mutual covenants contained
herein and on the attached Schedule, and for other good and valuable
consideration the receipt of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:

1. Employment of Executive.

(a) The Company hereby employs the Executive in the
capacity and for the position set forth on Schedule 1 attached hereto.
Executive hereby accepts such employment with the Company upon the terms and
conditions hereinafter set forth. Executive further agrees to serve as a
member of the Board of Directors of the Company (the "Board") during the term
of this Agreement.

(b) The duties of the Executive shall include the duties
and services described in Schedule 1, which duties and services shall at all
times be subject to the direction, approval and control of the Board and shall
include such other duties, as may be assigned by the Board commensurate with
the responsibilities normally associated with Executive's position.

2. Services to be Rendered.

(a) Executive shall perform such duties as are usually
performed by an Executive with the position set forth in Schedule 1 of a
business similar in size and scope as the Company and such other reasonable
additional duties as may be prescribed from time to time by the Company which
are reasonable and consistent with the Company's operations, taking into
account Executive's expertise and job responsibilities. During the term of
this Agreement, Executive agrees to devote his full time and attention to the
business and affairs of the Company to the extent necessary to discharge the
responsibilities assigned to Executive and to use reasonable efforts to perform
faithfully and efficiently such responsibilities. The Executive will use
Executive's best efforts to promote the interests of the Company.

(b) During this Agreement, it shall not be a violation of
this Agreement for Executive to (i) serve on corporate, civic or charitable
boards or committees; (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions; or (iii) manage personal
<PAGE> 2
investments or companies in which personal investments are made so long as such
activities do not significantly interfere with the performance of Executive's
responsibilities with the Company and which companies are not in direct
competition with the Company. Any income incurred by Executive outside the
scope of his employment and permitted pursuant to the provisions hereof, shall
inure to the benefit of Executive, and the Company shall not claim any
entitlement thereto; provided, however, that any income derived by Executive
related to the business of the Company, including, without limitation,
compensation for serving on boards of directors of companies in which the
Company has a significant investment, shall be paid over to the Company as and
when received.

(c) During the term of this Agreement, the Company shall
furnish, at Executive's principal place of employment, an office, furnishings,
secretary and such other facilities commensurate and suitable to his position
and adequate for the performance of his duties hereunder.

3. Term.

(a) Term of Employment. The term of this Agreement (the
"Term") shall commence effective as of the date hereof (the "Commencement
Date"), and shall continue until December 31, 2001, unless (i) extended by the
mutual agreement of the Company and the Executive or (ii) extended or
terminated as hereinafter provided.

(b) Termination of Employment by the Company for Cause.
The Company may terminate Executive's employment if such termination is for
"Cause" (as defined herein) and Cause is not cured by Executive within any
available cure period provided below. Such notice must set forth in reasonable
detail the facts underlying the claim of Cause. For the purposes of this
Agreement, "Cause" shall be defined as any of the following, which act or
omission is in bad faith by Executive without a reasonable belief that such act
or omission would benefit the Company:

(i) a default or breach by Executive of
any of the provisions of this Agreement materially detrimental to the
Company which is not cured within 15 days following written notice
thereof;

(ii) actions by Executive constituting
fraud, embezzlement or dishonesty which result in a conviction of a
criminal offense not yet overturned on appeal;

(iii) actions by Executive in
intentionally furnishing materially false, misleading, or omissive
information to the Company's Board of Directors that is materially
detrimental to the Company;

(iv) actions constituting a breach of the
Sections 7 or 8 of this Agreement which is materially detrimental to
the Company;

2
<PAGE> 3
(v) acts or omissions which constitute
willful failure to follow reasonable and lawful directives of the
Company's Board of Directors, which are consistent with Executive's
job responsibilities and performance which is not cured within 15
days following written notice thereof.

Upon termination for Cause, Executive shall immediately cease to have any power
of his position, but shall nevertheless be given a reasonable opportunity to
access his office with the Company for the purpose of retrieving his personal
goods and files. If any conviction pursuant to Section 3(b) above is
overturned on appeal, Executive will be deemed to have been terminated without
Cause as of the effective date of his earlier termination.

(c) Termination Without Cause. The Company has the right
to terminate this Agreement without Cause upon written notice, subject to
payment by the Company of the Deferred Compensation described in Section 4(c)
herein. In such event, Executive shall cease to have any power of his office
as of the effective date of the termination specified in such written notice.

(d) Termination by Executive. Executive may terminate
this Agreement upon 30 days' written notice after the occurrence of a material
default of this Agreement by the Company, which default is not cured within the
30- day notice period. Such notice shall set forth in reasonable detail the
acts underlying the default. If Executive terminates this Agreement under this
Section 3(d), Executive shall be entitled to the Deferred Compensation as
described in Section 4(c) herein.

(e) Termination by Executive Upon Change of Control.
Executive may terminate this Agreement upon 30 days' written notice at any time
within 6 months following the occurrence of a "Change of Control", but only
prior to Executive's receiving a notice of termination by the Company for
Cause. Upon such termination Executive shall be entitled to the Deferred
Compensation described in Section 4(c) herein. Change of Control is defined for
the purposes of this Agreement as any of the following acts:

(i) The acquisition by any person,
entity or "group" within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
other than a person, entity or "group" that includes either Executive
or Mark Cuban, of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of (A) prior to the
consummation of a Qualified Public Offering, more than 50% of the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board of Directors
or (B) after the consummation of a Qualified Public Offering, more
than 25% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the Board of
Directors ; or

(ii) If the individuals who serve on the
Board of Directors as of the Commencement Date (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, any person who becomes a director
subsequent to the Commencement Date, whose election or nomination for

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election was approved by a vote of at least a majority of the
directors then constituting the Incumbent Board, shall for purposes of
this Agreement be considered a member of the Incumbent Board; or

(iii) Approval by the Company's equity
holders of (A) a merger, reorganization or consolidation whereby the
Company's equity holders immediately prior to such approval do not,
immediately after consummation of such reorganization, merger or
consolidation own more than 50% of the combined voting power of the
surviving entity's then outstanding voting securities entitled to vote
generally in the election of directors; or (B) liquidation or
dissolution of the Company; or (C) the sale of all or substantially
all of the assets of the Company.

(f) Termination by Executive for Good Reason. Executive
may terminate this Agreement upon 30 days' written notice if (i) Executive's
duties are materially diminished or altered in a manner contrary to Section 1
and 2 of this Agreement, (ii) Executive's title is altered in a material and
adverse manner, (iii) Executive's reporting relationship is materially and
adversely modified, (iv) Executive's Base Salary, as provided hereunder, is
diminished, (v) the methodology for calculating Executive's Bonus Compensation,
as provided hereunder, is adversely (from the Executive's point of view)
altered or (vi) the Company shall relocate its executive offices more than 40
miles from their current location (collectively "Good Reason"). Upon such
termination Executive shall be entitled to the Deferred Compensation described
in Section 4(c) herein.

(g) Termination by Executive Without Good Reason.
Executive may terminate this Agreement without Good Reason upon 30 days'
written notice. Upon the termination date specified in such written notice
(which date shall be not more than 30 days following the date of such notice)
Executive shall cease to have any power of his office.

(h) Automatic Extension. This Agreement shall be
automatically extended for successive one-year periods at the end of the
initial term and each extended term thereafter, unless either party provides
written notice of termination to the other party at least three months prior to
the expiration of the initial or such extended term, respectively. In the
event the Company terminates this Agreement or fails to renew this Agreement or
does not permit the automatic extension to occur at the end of any term hereof,
Executive shall be entitled to receive his Deferred Compensation under Section
4(c) hereof.

4. Compensation.

(a) Base Salary.

(i) Prior to the consummation of a Qualified
Public Offering (as defined below), the Executive shall receive a base
salary as set forth on Part I of Schedule 4(a) attached hereto.
Immediately following the consummation of a Qualified Public Offering,
the Executive shall receive a base salary as set forth on Part II of
Schedule 4(a). Such increase in base salary shall be effective as of
the date on which the Qualified Public Offering is consummated.

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(ii) Each January, commencing with January
1999, the Board of Directors of the Company shall review Executive's
performance and the Board of Directors may in its sole discretion
elect to increase the salary then paid to Executive above the amount
set forth on Schedule 4(a)(i), however, there shall be absolutely no
obligation to do so.

(iii) For the purposes of this Agreement,
Qualified Public Offering shall mean the effectiveness of a
registration statement under the Securities Act of 1933, as amended,
covering any of the issued and outstanding shares of capital stock of
the Company (the "Stock"), and the completion of a sale of such Stock
thereunder, if, as a result of such sale, (A) the Company becomes a
reporting company under Section 12(b) or 12(g) of the Exchange Act,
(B) such Stock is traded on the New York Stock Exchange or the
American Stock Exchange or quoted on the Nasdaq National Market and
(C) the Company raises gross proceeds of not less than $20 million at
a pre-money valuation of the Company of not less than $120 million.

(b) Bonus Compensation.

(i) The Executive shall receive as "Bonus
Compensation" each year, the amount calculated in accordance with
Schedule 4(b) attached hereto.

(ii) If at anytime hereafter, the Company
shall adopt a bonus program, an option program or any other form of
equity participation for senior executive officers of the Company, the
Executive shall be eligible to participate in such bonus program,
option program or other form of equity participation in a manner and
capacity commensurate with his position and duties.

(i) When Due. Executive (or his estate
as the case may be) shall be entitled to the Deferred Compensation as
calculated below, the initial installment of which is to be paid
within 30 days after the event giving rise to the payout (except as
provided below) in the event that Executive's employment is terminated
for any of the following reasons herein: (A) death of Executive; (B)
termination by the Company without cause pursuant to Section 3(c); (C)
termination by Executive upon default by the Company pursuant to
Section 3(d); (D) termination by Executive after a Change of Control
pursuant to Section 3(e); (E) termination by the Executive pursuant to
Section 3(f); (F) termination by the Company pursuant to Section 3(h);
or (G) termination by the Company pursuant to Section 7(a).

(ii) Amount. The Deferred Compensation
shall be the amount ("Base Deferred Compensation") which is calculated
as the greater of (A) the Base Salary payments Executive would have
received had his employment continued for the remaining term of this
Agreement (including yearly increases calculated at the maximum
increase for the prior two years); or (B) an amount equal to 150% of
the higher annual compensation earned by Executive in the past two
years (including both Base Salary and

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<PAGE> 6
Bonus Compensation). In addition to the Base Deferred Compensation,
Executive shall be entitled to the following (which, together with the
Base Deferred Compensation and the Bonus Deferred Compensation (as
defined below) shall be collectively called the "Deferred
Compensation") all of the benefits and personal perquisites otherwise
provided in this Agreement (including automobile expenses) during that
period of time which is the greater of (X) the remaining term of this
Agreement, or (Y) one year (the "Deferral Period") and an amount equal
to the pro rata portion of the Bonus Compensation for the year in
which executive's employment is terminated determined on the basis of
the number of days elapsed in such year prior to such termination (the
"Bonus Deferred Compensation"). The Deferred Compensation herein
shall be deemed liquidated damages resulting from the Company's
termination of this Agreement and shall be Executive's sole and
exclusive remedy for any such termination. Deferred Compensation
shall not be diminished or offset by reason of any earnings by
Executive subsequent to the date of termination.

(d) Payment of Deferred Compensation. Except as provided
below, the Deferred Compensation shall be paid in monthly installments over the
12 months following the event giving rise to a Deferred Compensation. If such
termination is a result of the death of Executive, the initial Deferred
Compensation shall be made within 15 days after the personal representative of
Executive's estate notifies the Company that Letters of Administration have
been filed in the probate proceeding. The Company shall have the option at all
times during the term of this Agreement to maintain key man life insurance on
Executive's life to cover the cost of any Deferred Compensation due to
Executive. If such key man life insurance is maintained, and the Deferred
Compensation is due as a result of Executive's death, the Deferred Compensation
shall be paid 100% in cash upon Executive's death. The Bonus Deferred
Compensation shall be paid in a single lump sum within 90 days of the end of
the year in which Executive's employment is terminated.

5. Benefits.

(a) Executive shall be entitled to a minimum of 4 weeks
paid vacation during each 12-month period during the term of this Agreement.
In addition, Executive shall be entitled to paid time off for the same holidays
as other employees of the Company as established by the Board.

(b) Following the consummation of a Qualified Public
Offering, the Company shall provide Executive with the full and exclusive use
of a high-quality automobile; provided, however, that the Company shall not pay
more than $500 per month to provide such automobile to Executive. The Company
shall also pay all maintenance, insurance and gasoline expenses incidental to
such automobile. Executive shall have the right to receive a new automobile
every three years. In addition to the new automobile, Executive may purchase
the old automobile or assume the lease payments at the end of each three-year
period or in the event of termination for any reason. The purchase price shall
be the lower of the wholesale blue book value or the auction black book value.

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(c) Executive shall be entitled to participate (in a
manner and capacity commensurate with his position and duties), subject to
eligibility and other terms generally established by the Board, in any employee
benefit plan (including but not limited to life insurance plans, stock option
plans, group hospitalization, health, dental care (which health insurance shall
also cover Executive's dependents), profit sharing and pension, bonus and other
benefit plans), as may be adopted or amended by the Company from time to time.

(d) Following the consummation of a Qualified Public
Offering, the Company shall pay the premium on a "whole life" insurance policy
on the life of Executive in the initial face amount of three times Base Salary
during the term hereof. Executive shall have the right to designate the
beneficiaries of such policies. The Company shall pay timely all premiums on
such life insurance, and on demand provide Executive due proof of such payment.
The insurance companies issuing such policies shall be authorized to give
Executive, upon his request, any information regarding the status of any such
policy. Any dividend declared upon such policy shall be applied to the premium.

(e) Following the consummation of a Qualified Public
Offering, the Company shall pay all initial membership fees and monthly dues on
behalf of Executive for Executive's membership in one business luncheon club,
and one airline club; provided that the aggregate initial membership fees and
the annual membership fees of such clubs in the aggregate do not exceed $1,000
and $500, respectively. Executive shall pay all expenses for such club use
that is not otherwise reimbursable as a Company business expense.

(f) The Company will reimburse Executive for the cost of
reasonable tax and financial preparation and planning, including services that
may be requested by Executive from time to time pertaining to this Agreement.

(g) Executive shall receive any such additional benefits
that any other executive officer may receive during the term of this Agreement
at the reasonable discretion of the Board.

6. Expenses.

The Company shall reimburse the Executive against appropriate
vouchers or other receipts for business expenses reasonably incurred by
Executive in the performance of Executive's duties pursuant to the terms
hereof. Executive is authorized to incur reasonable traveling and other
expenses in connection with the Company's business and in performance of his
duties under this Agreement. When engaging in business related air travel, the
executive shall fly coach on all domestic flights and shall fly business class
on all international flights. In addition, upon the submission of appropriate
vouchers or other receipts the Company shall reimburse Executive for tolls and
reasonable business car phone charges. Executive shall submit vouchers or
other receipts once per calendar month and shall be reimbursed by Company
within 30 days of submission.

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7. Disability.

(a) In the event of the death of the Executive during the
Term, the Executive's employment hereunder shall automatically terminate. In
the event that Executive shall become mentally or physically Disabled (as
hereinafter defined) so as to be unable to fully perform his duties herein,
Executive shall continue to receive his monthly salary for each of the first
nine months or any part thereof of any continuous Disability, less any amounts
received by him under any disability insurance paid for by the Company. If
upon the expiration of nine months of continuous Disability, Executive remains
incapacitated (hereinafter, "Permanent Disability"), the Company shall have the
right to immediately terminate this Agreement. Such "Permanent Disability"
shall be established by a written certification submitted by a medical doctor
agreed to by the Executive and the Company. In the absence of agreement, the
Company and the Executive shall each nominate a qualified medical doctor and
these two doctors shall select a third qualified medical doctor, which third
doctor shall make the determination as to total disability. After the
termination of these time periods, Executive will receive disability insurance
proceeds for the term of such disability.

(b) The Company shall reimburse Executive for the
premiums of all insurance policies covering the long and short-term disability
of Executive not to exceed $10,000 per annum (as adjusted for increases in the
Consumer Price Index) during the term hereof.

(c) Disability for the purposes of this Agreement shall
mean that the Executive is judged disabled pursuant to the Company's long term
disability policy.

8. Non-Competition, Non-Solicitation, and Non-Disparagement

During the Term and for a period of two years thereafter, except if
the Company breaches its obligations to pay the Deferred Compensation pursuant
to Section 4(c) hereof:

(a) Executive shall not, directly or indirectly, enter
into or participate (whether as owner, partner, shareholder, officer, director,
salesman, consultant, employee, principal or in any other relationship or
capacity) in any business operating or providing services in the United States
within any State in which the Company or its affiliates are operating or
providing services as of the date of termination which is, or owns, manages or
performs the following business activities and services: aggregating,
broadcasting or distributing audio or video programming over the Internet or
intranets, including without limitation as principal or on behalf of others and
the development or operation of any network to accomplish same (a "Competing
Entity").

(b) Company and Executive understand and agree that the
scope and duration of the covenants contained in this Section 8 are reasonable
both in time and geographical area and are fairly necessary to protect the
Company's legitimate business interests. Such covenants shall survive the
termination of Executive's employment except as otherwise provided herein. The
parties further agree that such covenants shall be regarded as divisible and
shall be operative as to time and geographical area to the extent that they may
be made so and, if any part of such covenants is declared invalid or
unenforceable, the validity and enforceability of the remainder shall not be
affected. Executive hereby warrants to Company that Executive's compliance
with

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<PAGE> 9
each of the restrictive covenants set forth in this Agreement will not, upon
the termination, of Executive's employment with the Company for any reason
whatsoever, cause Executive to be unable to earn a living that is suitable and
acceptable to Executive.

(c) Executive understands and agrees that, due to the
highly competitive nature of the Company's industry, the breach of any
covenants set out in this Section 8 will cause irreparable injury to the
Company for which it will have no adequate remedy at law. Therefore, the
Company shall be entitled, in addition to such other remedies as it may have
hereunder, to a temporary restraining order and to preliminary and permanent
injunctive relief in state or federal court for any breach or threatened breach
of Section 8. Nothing herein, however, shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from Executive,

(d) Executive shall not, without the prior written
consent of the Company, directly or indirectly, (i) solicit, request, cause or
induce any person who is at the time, or 12 months prior thereto had been, an
employee of or a consultant of the Company to leave the employ of or terminate
such person's relationship with the Company or (ii) employ, hire, engage or be
associated with, or endeavor to entice away from the Company any such person,
or any customer of the Company or its affiliates or (iii) attempt to limit or
interfere with any business agreement or relationship existing between the
Company and/or its affiliates with a third party.

(e) Executive shall not disparage the business reputation
of the Company (or its management team) or take any actions that are harmful to
the Company's goodwill with its customers, content providers, bandwidth or
other network infrastructure providers, vendors, employees, the media or the
public. Executive recognizes that such actions would cause irreparable harm
for which there is no adequate remedy at law and that the Company may seek in
state or federal court, and is entitled to a temporary restraining order and to
preliminary and permanent injunctive relief in state or federal court to stop
any such conduct or statements for any breach or threatened breach of this
Section 8(e) during the term of this Agreement and for a period of two years
thereafter.

(f) Company spends considerable amounts of time, money
and effort in developing and maintaining good will in its industry. Executive
agrees the covenants contained within this Section 8: (i) are reasonable and
necessary in all respects to protect the goodwill, trade secrets, confidential
information, and business interests of Company; (ii) are not oppressive to
Executive; and (iii) do not impose any greater restraint on Executive than is
reasonably necessary to protect the goodwill, trade secrets, confidential
information and legitimate business interests of Company.

(g) Executive acknowledges and agrees that promises made
by the Company in this Agreement such as (i) the establishment of a term of
employment (rather than employment at will) and (ii) the commitment to provide
severance compensation in the event of the termination of Executive's
employment for reasons other than Cause (subject to certain requirements on the
part of Executive), constitute one form of consideration for Executive's
agreement to and compliance with the restrictive covenants in this Agreement.
Executive

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<PAGE> 10
acknowledges and agrees that Company's agreement to provide Executive with
access to Company's confidential and proprietary information is a separate form
of consideration supporting the restrictive covenants in this Agreement.
Executive acknowledges and agrees that the Company's agreement to permit the
use of the Company's goodwill with the Company's customers, investors and
content providers is a separate form of consideration supporting the
restrictive covenants in this Agreement. Executive acknowledges and agrees
that the Company's commitment to providing Executive with unique skill
development and training is a separate form of consideration supporting the
restrictive covenants in this Agreement.

9. Non-Disclosure of Confidential Information.

(a) The Executive acknowledges that as a result of
Executive's employment by the Company, the Executive, both during and after the
Term, will obtain secret and confidential information concerning the business
of the Company and its affiliates, including, without limitation, financial
information, trade secrets, information concerning the operations, sales,
personnel, suppliers, customers, costs, profits and pricing policies, "know
how" and certain business methodologies (the "Confidential Information").

(b) During the Term and thereafter, the Executive shall
exercise all due and diligent precautions to protect the integrity of the
customer lists, mailing lists and sources thereof, statistical data and
compilations, agreements, contracts, manuals, memoranda, notes, records,
reports or other documents and any and all other materials embodying any
Confidential Information (the "Confidential Materials") and, upon the Company's
request in writing, Executive shall immediately return to the Company all such
Confidential Materials (and copies thereof) then in Executive's possession or
control.

(c) Executive shall not at any time, either during the
Term of this Agreement or thereafter, divulge to any person or entity any
Confidential Information or deliver or permit any person or entity to obtain
any Confidential Materials except (i) when required in the course of performing
Executive's duties hereunder, (ii) with the Company's express written consent,
(iii) where required to be disclosed by court order, subpoena or other
government process or (iv) the Executive shall have no responsibility for the
divulgence of any information which is in the public domain. If the Executive
shall be required to make disclosure pursuant to the provisions of clause (iii)
of the preceding sentence, the Executive promptly, but in no event more than 48
hours after learning of such subpoena, court order or other governmental
process, shall notify, by personal delivery or by electronic means, confirmed
by mail, the Company and, at the Company's expense, Executive shall (x) take
all reasonably necessary steps required by the Company to defend against the
enforcement of such subpoena, court order or other government process and (y)
permit the Company to intervene and participate with counsel of its choice in
any proceeding relating to the enforcement thereof.

(d) Upon termination of Executive's employment with the
Company, the Executive shall promptly deliver to the Company all Confidential
Materials relating to the Company and its affiliates, which Executive may then
possess or have under Executive's control; provided, however, that Executive
shall be entitled to retain copies of such documents reasonably

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<PAGE> 11
necessary to document Executive's financial relationship (both past and future)
with the Company.

(e) The Executive acknowledges that (i) any breach of the
provisions of these Sections 8 and 9 may cause substantial and irreparable harm
to the Company for which the Company would have no adequate remedy at law and
(ii) the provisions of this Agreement are reasonable and necessary for the
protection of the business of the Company and its affiliates.

10. Remedies.

(a) If Executive commits a breach, or threatens to commit
a breach, of any of the provisions of Sections 8 or 9, the Company shall have
the right and remedy:

(i) to have the provisions of this
Agreement specifically enforced by any court having equity
jurisdiction or through arbitration as provided herein; and

(ii) to require Executive to account for
and to pay over the Company all damages suffered by the Company
(including consequential and incidental damages) as the result of any
transactions constituting a breach of any of the provisions of
Sections 8 and 9, and Executive hereby agrees to account for and pay
over such damages to the Company;

(b) The Executive acknowledges that the services being
rendered hereunder to the Company are of a special, unique and extraordinary
character and that any such breach or threatened breach may cause substantial
and irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company. In any equitable proceeding to enforce the
provisions hereof, the Company shall not have to prove irreparable harm.
(However, in a suit for damages Company shall be required to prove the amount
of damages actually sustained.)

(c) Each of the rights and remedies enumerated in Section
10 (a) shall be independent of the other, and shall be severally enforceable,
and such rights and remedies shall be in addition to, and not in lieu of any
other rights and remedies available to the Company under law or equity.

(d) If any provision of Section 8 or 9 is held to be
unenforceable because of the scope, duration or area of its applicability, the
court making such determination shall have the power to modify such scope,
duration, or area, or all of them, and such provision or provisions shall then
be enforceable in such modified form.

(e) The Company and Executive agree that any dispute or
controversy arising between any of the parties to this Agreement, or any person
or entity in privity therewith, out of the transactions effected and
relationships created in connection herewith, including any dispute or
controversy involving the formation, terms or construction of this Agreement,
regardless of kind or character, will be resolved through binding arbitration
held in Dallas County, Texas. The

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only disputes not subject to mandatory, binding arbitration are requests for
injunctive relief. With respect to the arbitration of any dispute or
controversy, each party understands that:

(i) arbitration is final and binding on
the parties;

(ii) each party is waiving its right to
seek certain remedies in court, including to right to a jury trial;

(iii) discovery in arbitration is
different and more limited than discovery in litigation; and

(iv) an arbitrator's award need not
include factual findings or legal reasoning, and any party's right to
appeal or to seek modification of a ruling by the arbitrator is
strictly limited.

Each party to this Agreement will submit any dispute or controversy to
arbitration before the American Arbitration Association ("AAA") within five
days after receiving a written request to do so from the other party. If any
party fails to submit a dispute or controversy to arbitration as requested,
then the requesting party may commence the arbitration proceeding. The Federal
Arbitration Act will govern the proceeding and all issues raised by this
Agreement to be arbitrated. Each party to this Agreement will be bound by the
determination of any arbitrator or arbitration panel empaneled by the AAA to
adjudicate the dispute. Judgment on any arbitration award may be entered in
any court of competent jurisdiction.

Any party to this Agreement may bring an action including a summary or
expedited proceeding, to counsel arbitration of any such dispute or controversy
in a court of competent jurisdiction and, further, may seek provision or
ancillary remedies, including temporary or injunctive relief in connection with
such dispute or controversy in a court of competent jurisdiction, provided that
the dispute or controversy is ultimately resolved through binding arbitration
conducted in accordance with the terms and conditions of Section 10(e). If any
party institutes legal proceedings in an effort to resist arbitration and is
unsuccessful in doing so, the prevailing party is entitled to recover, from the
losing party, its legal fees and out-of-pocket expenses incurred in connection
with the defense of such legal proceedings.

11. Indemnification.

(a) To the full extent allowed by law, the Company shall
hold harmless and indemnify the Executive, his executors, administrators or
assigns, against any and all judgments, penalties (including excise and similar
taxes), fines, settlements and reasonable expenses (including attorneys' fees)
actually incurred by the Executive (net of any related insurance proceeds or
other amounts received by the Executive or paid by or on behalf of the Company
on the Executive's behalf in compensation of such judgments, penalties, fines,
settlements or expenses) in connection with any threatened, actual or completed
action, suit or proceeding, whether civil, criminal, arbitral, administrative
or investigative, or any appeal in such action, suit or proceeding, to which
the Executive was, is or is threatened to be made a named defendant or
respondent (a "Proceeding"), because such person is or was a director or
officer of the Company,

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or is or was serving at the request of the Company as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
(an "Affiliate Executive") of another corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise (each, a
"Company Affiliate"). Upon authorization of indemnification of the Executive
by the Board of Directors in accordance with the applicable provisions of the
Delaware General Corporation Law (the "DGCL"), the Executive shall be presumed
to be entitled to such indemnification under this Agreement upon submission of
a Claim (as hereinafter defined). Thereafter, the Company shall have the
burden of proof to overcome the presumption that the Executive is so entitled.
Such presumption shall only be overcome by a judgment or other final
adjudication, after all appeals and all time for appeals have expired ("Final
Determination"), adverse to the Executive establishing that such
indemnification is not permitted hereunder or by law. An actual determination
by the Company (including its Board of Directors, legal counsel, or its
stockholders) that the Executive has not met the applicable standard of conduct
for indemnification shall not be a defense to the action or create a
presumption that the Executive has not met the applicable standard of conduct.
The purchase, establishment or maintenance of any Indemnification Arrangement
shall not in any way diminish, restrict, limit or affect the rights and
obligations of the Company or of the Executive under this Agreement except as
expressly provided herein, and the execution and delivery of this Agreement by
the Company and the Executive shall not in any way diminish, restrict, limit or
affect the Executive's right to indemnification from the Company or any other
party or parties under any other indemnification arrangement, the Certificate
of Incorporation or Bylaws of the Company, or the DGCL.

(b) Subject only to the provisions of this Section 11(b),
as long as the Executive shall continue to serve as a director and/or officer
of the Company (or shall continue at the request of the Company to serve as an
Affiliate Executive) and, thereafter, as long as the Executive shall be subject
to any possible Proceeding by reason of the fact that the Executive was or is a
director and/or officer of the Company (or served in any of said other
capacities), the Company shall, unless no such policies are available in any
market, purchase and maintain in effect for the benefit of the Executive one or
more valid, binding and enforceable policies (the "Insurance Policies") of
directors' and officers' liability insurance ("D&O Insurance") providing
adequate liability coverage for the Executive's acts as a director and/or
officer of the Company or as an Affiliate Executive. The Company shall
promptly notify the Executive of any lapse, amendment or failure to renew said
policy or policies or any provision thereof relating to the extent or nature of
coverage provided thereunder. In the event the Company does not purchase and
maintain in effect said policy or policies of D&O Insurance pursuant to the
provisions of this Section 11(b), the Company shall, to the full extent
permitted by law, in addition to and not in limitation of the other rights
granted the Executive under this Agreement, hold harmless and indemnify the
Executive to the full extent of coverage which would otherwise have been
provided for the benefit of the Executive pursuant to the Insurance Policies.

(c) The Executive shall have the right to receive from
the Company on demand, or at his option to have the Company pay promptly on his
behalf, in advance of a Final Determination of a Proceeding all expenses
payable by the Company pursuant to the terms of this Agreement as corresponding
amounts are expended or incurred by the Executive in

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connection with such Proceeding or otherwise expended or incurred by the
Executive (such amounts so expended or incurred being referred to as "Advanced
Amounts"). In making any claim for payment by the Company of any expenses,
including any Advanced Amount, pursuant to this Agreement, the Executive shall
submit to the Company a written request for payment (a "Claim"), which includes
a schedule setting forth in reasonable detail the dollar amount expended (or
incurred or expected to be expended or incurred). Each item on such schedule
shall be supported by the bill, agreement or other documentation relating
thereto, a copy of which shall be appended to the schedule as an exhibit.

Where the Executive is requesting Advanced Amounts, the
Executive must also provide (i) written affirmation of such Executive's good
faith belief that he has met the standard of conduct required by law for
indemnification, and (ii) a written undertaking to repay such Advanced Amounts
if a Final Determination is made that the Executive is not entitled to
indemnification hereunder.

(d) The Company shall not be liable under this Agreement
to make any payment in connection with any claim made against the Executive for
an accounting of profits made from the purchase or sale by the Executive of
securities of the Company within the meaning of Section 16(b) of the Exchange
Act or similar provisions of any state statutory law or common law.

(e) All agreements and obligations of the Company
contained herein shall continue during the period the Executive is a director
and/or officer of the Company (or is serving at the request of the Company as
an Affiliate Executive) and shall continue thereafter so long as the Executive
shall be subject to any possible Proceeding by reason of the fact that the
Executive was a director or officer of the Company or was serving as such an
Affiliate Executive.

(f) Promptly after receipt by the Executive of notice of
the commencement of any Proceeding, the Executive shall, if a claim in respect
thereof is to be made against the Company under this Agreement, notify the
Company of the commencement thereof, but failure to so notify the Company will
not relieve the Company from any liability which it may have to the Executive.
With respect to any such Proceeding:

(i) The Company shall be entitled to
participate therein at its own expense;

(ii) Except with prior written consent of
the Executive, the Company shall not be entitled to assume the defense
of any Proceeding; and

(iii) The Company shall not settle any
Proceeding in any manner which would impose any penalty or limitation
on the Executive without the Executive's prior written consent.

14
<PAGE> 15
The Executive shall not settle any Proceeding with respect to
which the Executive has received indemnified amounts or Advanced Amounts
without the Company's prior written consent, nor will the Executive
unreasonably withhold consent to any proposed settlement.

12. Notice.

Any notice required hereunder shall (a) be delivered by hand
or (b) sent by registered or certified mail addressed to the other party hereto
at its address set forth above for Company and on Item 1 of the Schedule for
Executive or at such other address as notice thereof shall have been given in
accordance with the provisions of this Section 12. Any such notice shall
become effective (i) if mailed, on the date indicated on the receipt or if not
accepted, the date indicated that delivery was attempted, and (ii) in the case
of delivery by hand, upon delivery or attempted delivery as shown on the
records of the deliveries.

13. Agreement: Amendment.

This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto and represents
their entire understanding and agreement with respect to the subject matter
hereof. This Agreement can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement which is executed by both parties to this
Agreement. Any waiver of any breach of this Agreement shall not be construed
to be a continuing waiver or consent to any subsequent breach by any party
hereto.

14. Severability.

In the event of the invalidity or unenforceability of any one
or more provisions of this Agreement, such illegality or unenforceability shall
not affect the validity or enforceability of the other provisions hereof and
such other provisions shall be deemed to remain in full force and effect.

15. Assignment: Binding Effect.

This Agreement is not assignable by Executive or the Company
without the prior written consent of the other party. This Agreement shall be
binding upon and shall inure to the benefit of the Executive and the Company
and their successors and assigns. It is agreed that in the event of the
termination under this Agreement for any reason, except as expressly provided
in this Agreement, all salary and benefits shall cease as of the date of
termination provided that all accrued salary, bonus and expenses shall be paid
to Executive or Executive's successors, assigns, estate or legal representative
as the case may be.

16. Section Headings.

The Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

15
<PAGE> 16
17. Governing Law; Venue.

This Agreement shall be construed and governed in accordance
with the laws of the State of Texas. The parties hereto agree that any actions
or proceedings instituted to enforce rights hereunder shall be initiated in
Dallas County, Texas.

18. Execution in Counterparts.

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

19. Section 280G Protection.

The Company shall make a cash payment to the Executive at the
time set forth below equal to the amount of excise taxes (i.e., the "excise tax
gross payments") which Executive would be required to pay pursuant to Section
4999 of the Internal Revenue Code of 1986, as amended ("Code"), as a result of
any payments (or any other transfer or deemed transfer of property including
any acceleration of stock options or similar instruments) made by or on behalf
of the Company or any successor thereto resulting in an "excess parachute
payment" within the meaning of Section 280G(b) of the Code. In addition to the
foregoing, the cash payment due to the Executive under this Section 19 shall be
increased by the aggregate of the amount of federal, state and local income and
excise taxes for which the Executive will be liable on account of the cash
payments to be made under this Section 19, such that the Executive will receive
the excise tax gross-up payment net of all income and excise taxes. The
computation of this payment shall be determined, at the expense of the Company,
by an independent accounting, actuarial or consulting firm selected by the
Company. Payment of the cash amount set forth above shall be made at such time
as the Company shall determine, in its sole discretion, but in no event later
than the date five business days before the due date, without regard to any
extension, for filing the Executive's federal income tax return for the
calendar year which includes the date as of which the aforementioned "excess
parachute payments" are determined. In the event that the Executive is
ultimately assessed with excise taxes under Section 4999 of the Code as a
result of payments made by the Company or any successor thereto which exceed
the amount of excise taxes used in computing the Executive's payment under this
Section 19, the Company or its successor shall indemnify the Executive for such
additional excise taxes plus any additional excise taxes, income taxes,
interest and penalties resulting from the additional excise taxes and the
indemnity hereunder.

16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day and year first above written.

"Company"

broadcast.com inc.

By: /s/ JACK RIGGS
-------------------------------------
Name: Jack Riggs
Title: CFO

"Executive"

/s/ TODD R. WAGNER
-----------------------------------------
Name: Todd R. Wagner

17
<PAGE> 18
SCHEDULE 1

EMPLOYMENT CONTRACT

1. Executive Todd R. Wagner

2. Position (i) Chief Executive Officer

(ii) Vice Chairman of the Board of Directors

3. Duties Management, operations and administration as appropriate
for the Chief Executive Officer and Vice Chairman of the
Board of Directors of the Company as further described
in the Bylaws of the Company.

<PAGE> 19

SCHEDULE 4(a)(i)

PART I

BASE SALARY-PRE QUALIFIED PUBLIC OFFERING

<TABLE>
<CAPTION>
Year Base Salary
---- -----------
<S> <C>
1998 $150,000
1999 $175,000
1999 $200,000
2001 $200,000

</TABLE>

PART II

BASE SALARY-POST QUALIFIED PUBLIC OFFERING

<TABLE>
<CAPTION>
Year Base Salary
---- -----------
<S> <C>
1998 $225,000
1999 $250,000
2000 $275,000
2001 $275,000
</TABLE>

<PAGE> 20
SCHEDULE 4(b)

BONUS

Executive shall be paid a bonus in each of the following years during
the term of this Agreement in an amount equal to 1.5% of the Company's
consolidated pre-tax income as determined in accordance with generally accepted
accounting principles by the Company's independent auditors in excess of:

<TABLE>
<CAPTION>
Threshold
Year Pre-tax Income
---- --------------
<S> <C>
1998 $1,500,000
1999 $1,750,000
2000 $2,000,000
2001 $2,000,000
</TABLE>

In addition, upon completion of a Qualified Public Offering, Executive
shall be paid a one time bonus of $50,000.

<PAGE> 1
EXHIBIT 10.1.2

EMPLOYMENT AGREEMENT

W I T N E S S E T H:

WHEREAS, the Company desires to hire and retain the Executive as an
Executive to perform certain services for the Company.

1. Employment of Executive.

2. Services to be Rendered.

3. Term.

(i) a default or breach by Executive of
any of the provisions of this Agreement materially detrimental to the
Company which is not cured within 15 days following written notice
thereof;

(ii) actions by Executive constituting
fraud, embezzlement or dishonesty which result in a conviction of a
criminal offense not yet overturned on appeal;

(iii) actions by Executive in
intentionally furnishing materially false, misleading, or omissive
information to the Company's Board of Directors that is materially
detrimental to the Company;

(iv) actions constituting a breach of the
Sections 7 or 8 of this Agreement which is materially detrimental to
the Company;

(d) Termination by Executive. Executive may terminate
this Agreement upon 30 days' written notice after the occurrence of a material
default of this Agreement by the Company, which default is not cured within the
30-day notice period. Such notice shall set forth in reasonable detail the
acts underlying the default. If Executive terminates this Agreement under this
Section 3(d), Executive shall be entitled to the Deferred Compensation as
described in Section 4(c) herein.

(i) The acquisition by any person, entity
or "group" within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
other than a person, entity or "group" that includes either Executive
or Todd R. Wagner, of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of (A) prior to the
consummation of a Qualified Public Offering, more than 50% of the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board of Directors
or (B) after the consummation of a Qualified Public Offering, more
than 25% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the Board of
Directors; or

4. Compensation.

(a) Base Salary.

(b) Bonus Compensation.

(i) The Executive shall receive as "Bonus
Compensation" each year, the amount calculated in accordance with
Schedule 4(b) attached hereto.

5. Benefits.

(g) Executive shall receive any such additional benefits
that any other executive officer may receive during the term of this Agreement
at the reasonable discretion of the Board.

6. Expenses.

7
<PAGE> 8
7. Disability.

(c) Disability for the purposes of this Agreement shall
mean that the Executive is judged disabled pursuant to the Company's long term
disability policy.

8. Non-Competition, Non-Solicitation, and Non-Disparagement

During the Term and for a period of two years thereafter, except if
the Company breaches its obligations to pay the Deferred Compensation pursuant
to Section 4(c) hereof:

9. Non-Disclosure of Confidential Information.

10
<PAGE> 11
necessary to document Executive's financial relationship (both past and future)
with the Company.

10. Remedies.

(a) If Executive commits a breach, or threatens to commit
a breach, of any of the provisions of Sections 8 or 9, the Company shall have
the right and remedy:

(i) to have the provisions of this
Agreement specifically enforced by any court having equity
jurisdiction or through arbitration as provided herein; and

(i) arbitration is final and binding on
the parties;

(ii) each party is waiving its right to
seek certain remedies in court, including to right to a jury trial;

(iii) discovery in arbitration is
different and more limited than discovery in litigation; and

(iv) an arbitrator's award need not
include factual findings or legal reasoning, and any party's right to
appeal or to seek modification of a ruling by the arbitrator is
strictly limited.

11. Indemnification.

(i) The Company shall be entitled to
participate therein at its own expense;

(ii) Except with prior written consent of
the Executive, the Company shall not be entitled to assume the defense
of any Proceeding; and

(iii) The Company shall not settle any
Proceeding in any manner which would impose any penalty or limitation
on the Executive without the Executive's prior written consent.

12. Notice.

13. Agreement: Amendment.

14. Severability.

15. Assignment: Binding Effect.

16. Section Headings.

The Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

15
<PAGE> 16
17. Governing Law; Venue.

18. Execution in Counterparts.

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

19. Section 280G Protection.

The Company shall make a cash payment to the Executive at the time set
forth below equal to the amount of excise taxes (i.e., the "excise tax gross
payments") which Executive would be required to pay pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended ("Code"), as a result of any
payments (or any other transfer or deemed transfer of property including any
acceleration of stock options or similar instruments) made by or on behalf of
the Company or any successor thereto resulting in an "excess parachute payment"
within the meaning of Section 280G(b) of the Code. In addition to the
foregoing, the cash payment due to the Executive under this Section 19 shall be
increased by the aggregate of the amount of federal, state and local income and
excise taxes for which the Executive will be liable on account of the cash
payments to be made under this Section 19, such that the Executive will receive
the excise tax gross-up payment net of all income and excise taxes. The
computation of this payment shall be determined, at the expense of the Company,
by an independent accounting, actuarial or consulting firm selected by the
Company. Payment of the cash amount set forth above shall be made at such time
as the Company shall determine, in its sole discretion, but in no event later
than the date five business days before the due date, without regard to any
extension, for filing the Executive's federal income tax return for the
calendar year which includes the date as of which the aforementioned "excess
parachute payments" are determined. In the event that the Executive is
ultimately assessed with excise taxes under Section 4999 of the Code as a
result of payments made by the Company or any successor thereto which exceed
the amount of excise taxes used in computing the Executive's payment under this
Section 19, the Company or its successor shall indemnify the Executive for such
additional excise taxes plus any additional excise taxes, income taxes,
interest and penalties resulting from the additional excise taxes and the
indemnity hereunder.

16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.

"Company"

broadcast.com inc.

By: /s/ JACK RIGGS
------------------------------
Name: Jack Riggs
Title: CFO

"Executive"

/s/ MARK CUBAN
----------------------------------
Name: Mark Cuban

17
<PAGE> 18

SCHEDULE 1
EMPLOYMENT CONTRACT

1. Executive Mark Cuban

2. Position (i) President

(ii) Chairman of the Board of
Directors

3. Duties Management, operations and
administration as appropriate for
the President and Chairman of the
Board of Directors of the Company as
further described in the Bylaws of
the Company.
<PAGE> 19

SCHEDULE 4(a)(i)

PART I

BASE SALARY-PRE QUALIFIED PUBLIC OFFERING

Year Base Salary
---- -----------

1998 $150,000
1999 $175,000
1999 $200,000
2001 $200,000

PART II

BASE SALARY-POST QUALIFIED PUBLIC OFFERING

Year Base Salary
---- -----------

1998 $225,000
1999 $250,000
2000 $275,000
2001 $275,000
<PAGE> 20

SCHEDULE 4(b)

BONUS

Threshold
Year Pre-tax Income
---- --------------

1998 $1,500,000
1999 $1,750,000
2000 $2,000,000
2001 $2,000,000

In addition, upon completion of a Qualified Public Offering, Executive
shall be paid a one time bonus of $50,000.

<PAGE> 1
EXHIBIT 10.9

AUDIONET, INC.

1998 STOCK OPTION PLAN

AUGUST 19, 1997
<PAGE> 2
TABLE OF CONTENTS

ARTICLE I PURPOSE OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II EFFECTIVE DATE AND TERM OF PLAN . . . . . . . . . . . . . . . . 1

2.1 Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Effect on Stock Options . . . . . . . . . . . . . . . . . . . . . 1
2.3 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE III SHARES SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . 1

3.1 Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.2 Source of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.3 Availability of Unused Shares . . . . . . . . . . . . . . . . . . 2
3.4 Adjustment Provisions . . . . . . . . . . . . . . . . . . . . . . 2
3.5 Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE IV ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . . . . . . 3

4.1 Administering Body . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Authority of Administering Body . . . . . . . . . . . . . . . . . 3
4.3 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.5 Other Compensation Plans . . . . . . . . . . . . . . . . . . . . . 5
4.6 Plan Binding on Successors . . . . . . . . . . . . . . . . . . . . 5
4.7 References to Successor Statutes, Regulations and Rules . . . . . 5
4.8 Issuances for Compensation Purposes Only . . . . . . . . . . . . . 5
4.9 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . 5
4.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE V GENERAL AWARD PROVISIONS . . . . . . . . . . . . . . . . . . . . 6

5.1 Participation in the Plan . . . . . . . . . . . . . . . . . . . . 6
5.2 Stock Option Documents . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Exercise of Stock Options . . . . . . . . . . . . . . . . . . . . 6
5.4 Payment for Stock Options . . . . . . . . . . . . . . . . . . . . 7
5.5 No Employment Rights . . . . . . . . . . . . . . . . . . . . . . . 7
5.6 Restrictions Under Applicable Laws and Regulations . . . . . . . . 8
5.7 Additional Conditions . . . . . . . . . . . . . . . . . . . . . . 9
5.8 No Privileges of Stock Ownership . . . . . . . . . . . . . . . . . 9
5.9 Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10 Information to Recipients . . . . . . . . . . . . . . . . . . . . 10
</TABLE>

i
<PAGE> 3
<TABLE>
<S> <C>
5.11 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . 10
5.12 Legends on Stock Options and Stock Certificates . . . . . . . . . 10
5.13 Effect of Termination of Employment on Stock Options . . . . . . 11
5.14 Limits on Stock Options to Certain Eligible Persons . . . . . . . 12

ARTICLE VI STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 12

6.1 Nature of Stock Options . . . . . . . . . . . . . . . . . . . . . 12
6.2 Option Exercise Price . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Option Period and Vesting . . . . . . . . . . . . . . . . . . . . 12
6.4 Special Provisions Regarding Incentive Stock Options . . . . . . . 13

ARTICLE VII REORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . . . 13

7.1 Corporate Transactions Not Involving a Change in Control . . . . . 13
7.2 Corporate Transactions Involving a Change in Control . . . . . . . 13

ARTICLE VIII DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>

ii
<PAGE> 4
AUDIONET, INC.
1998 STOCK OPTION PLAN

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

ARTICLE I
PURPOSE OF PLAN

The Company has adopted this Plan to promote the interests of the
Company and its stockholders by using investment interests in the Company to
attract, retain and motivate its management and other persons, to encourage and
reward their contributions to the performance of the Company and to align their
interests with the interests of the Company's stockholders. Capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in
Article VIII.

ARTICLE II
EFFECTIVE DATE AND TERM OF PLAN

2.1 TERM OF PLAN. This Plan became effective as of the Effective
Date and shall continue in effect until the Expiration Date, at which time this
Plan shall automatically terminate.

2.2 EFFECT ON STOCK OPTIONS. Stock Options may be granted during
the Plan Term, but no Stock Options may be granted after the Plan Term.
Notwithstanding the foregoing, each Stock Option properly granted under this
Plan during the Plan Term shall remain in effect after termination of this Plan
until such Stock Option has been exercised, terminated or expired in accordance
with its terms and the terms of this Plan.

2.3 STOCKHOLDER APPROVAL. This Plan shall be approved by the
Company's stockholders within 12 months after the Effective Date. The
effectiveness of any Stock Options granted prior to such stockholder approval
shall be subject to such stockholder approval.

ARTICLE III
SHARES SUBJECT TO PLAN

3.1 NUMBER OF SHARES. The maximum number of shares of Common
Stock that may be issued pursuant to Stock Options granted under this Plan
shall be 2,800,000, subject to adjustment as set forth in Section 3.4.

3.2 SOURCE OF SHARES. The Common Stock to be issued under this
Plan will be made available, at the discretion of the Board, either from
authorized but unissued shares of Common Stock or from previously issued shares
of Common Stock reacquired by the Company, including without limitation shares
purchased on the open market.
<PAGE> 5
3.3 AVAILABILITY OF UNUSED SHARES. Shares of Common Stock subject
to unexercised portions of any Stock Option granted under this Plan that
expire, terminate or are canceled, and shares of Common Stock issued pursuant
to Stock Options under this Plan that are reacquired by the Company pursuant to
the terms of the Stock Options under which such shares were issued, will again
become available for the grant of further Stock Options under this Plan.

3.4 ADJUSTMENT PROVISIONS.

(a) If (i) the outstanding shares of Common Stock of the
Company are increased, decreased or exchanged for a different number or kind of
shares or other securities, or if additional shares or new or different shares
or other securities are distributed in respect of such shares of Common Stock
(or any stock or securities received with respect to such Common Stock),
through merger, consolidation, sale or exchange of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, spin-off or other
distribution with respect to such shares of Common Stock (or any stock or
securities received with respect to such Common Stock), or (ii) the value of
the outstanding shares of Common Stock of the Company is reduced by reason of
an extraordinary cash dividend, an appropriate and proportionate adjustment may
be made in (1) the maximum number and kind of shares subject to this Plan as
provided in Section 3.1, (2) the number and kind of shares or other securities
subject to then outstanding Stock Options and/or (3) the price for each share
or other unit of any other securities subject to then outstanding Stock
Options.

(b) No fractional interests will be issued under this
Plan resulting from any adjustments.

(c) To the extent any adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Administering
Body, whose determination in that respect shall be final, binding and
conclusive.

(d) The grant of Stock Options pursuant to this Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or any part of its business or assets.

(e) No adjustment to the terms of an Incentive Stock
Option shall be made unless such adjustment either (i) would not cause such
Option to lose its status as an Incentive Stock Option or (ii) is agreed to in
writing by the Administering Body and the Recipient.

3.5 RESERVATION OF SHARES. The Company will at all times reserve
and keep available such number of shares of Common Stock as shall equal at
least the number of shares of Common Stock subject to then outstanding Stock
Options issuable in shares of Common Stock under this Plan.

2
<PAGE> 6
ARTICLE IV
ADMINISTRATION OF PLAN

4.1 ADMINISTERING BODY.

(a) Subject to the provisions of Section 4.1(b)(ii), this
Plan shall be administered by the Board or by the Stock Option Plan Committee
of the Board appointed pursuant to Section 4.1(b).

(b) (i) The Board in its sole discretion may from
time to time appoint a Stock Option Plan Committee of not less than two Board
members to administer this Plan and, subject to applicable law, to exercise all
of the powers, authority and discretion of the Board under this Plan. The
Board may from time to time increase or decrease (but not below two) the number
of members of the Stock Option Plan Committee, remove from membership on the
Stock Option Plan Committee all or any portion of its members, and/or appoint
such person or persons as it desires to fill any vacancy existing on the Stock
Option Plan Committee, whether caused by removal, resignation or otherwise.
The Board may disband the Stock Option Plan Committee at any time and revest in
the Board the administration of this Plan.

(ii) Notwithstanding the foregoing provisions of
this Section 4.1(b) to the contrary, upon becoming and so long as the Company
remains an Exchange Act Registered Company, (1) the Board shall appoint the
Stock Option Plan Committee, (2) this Plan shall be administered by the Stock
Option Plan Committee and (3) each member of the Stock Option Plan Committee
shall be a Non-employee Director, and, in addition, if Stock Options are to be
made to persons subject to Section 162(m) of the IRC and such Stock Options are
intended to constitute Performance-Based Compensation, then each member of the
Stock Option Plan Committee shall, in addition to being a Non-employee
Director, be an Outside Director.

(iii) The Stock Option Plan Committee shall report
to the Board the names of Eligible Persons granted Stock Options, the number of
shares of Common Stock covered by each Stock Option and the terms and
conditions of each such Stock Option.

4.2 AUTHORITY OF ADMINISTERING BODY.

(a) Subject to the express provisions of this Plan, the
Administering Body shall have the power to interpret and construe this Plan and
any Stock Option Documents or other documents defining the rights and
obligations of the Company and Optionees hereunder and thereunder, to determine
all questions arising hereunder and thereunder, to adopt and amend such rules
and regulations for the administration hereof and thereof as it may deem
desirable, and otherwise to carry out the terms of this Plan and such Stock
Option Documents and other documents. The interpretation and construction by
the Administering Body of any provisions of this Plan or of any Stock Option
shall be conclusive and binding. Any action taken by, or inaction of, the
Administering Body relating to this Plan or any Stock Options shall be within
the absolute discretion of the Administering Body and shall be conclusive and
binding upon all persons. Subject only to compliance with the express
provisions hereof, the Administering Body may act in its absolute discretion in
matters related to this Plan and any and all Stock Options.

3
<PAGE> 7
(b) Subject to the express provisions of this Plan, the
Administering Body may from time to time in its discretion select the Eligible
Persons to whom, and the time or times at which, Stock Options shall be
granted, the nature of each Stock Option, the number of shares of Common Stock
that make up or underlie each Stock Option, the period for the exercise of each
Stock Option, and such other terms and conditions applicable to each individual
Stock Option as the Administering Body shall determine. The Administering Body
may grant at any time new Stock Options to an Eligible Person who has
previously received Stock Options whether such prior Stock Options are still
outstanding, have previously been exercised as a whole or in part, or are
canceled in connection with the issuance of new Stock Options. The
Administering Body may grant Stock Options singly, in combination or in tandem
with other Stock Options, as it determines in its discretion. Any and all
terms and conditions of the Stock Options, including exercise price, may be
established by the Administering Body without regard to existing Stock Options.

(c) Any action of the Administering Body with respect to
the administration of this Plan shall be taken pursuant to a majority vote of
the authorized number of members of the Administering Body or by the unanimous
written consent of its members; provided, however, that (i) if the
Administering Body is the Stock Option Plan Committee and consists of two
members, then actions of the Administering Body must be unanimous and (ii) if
the Administering Body is the Board, actions taken at a meeting of the Board
shall be valid if approved by directors constituting a majority of the required
quorum for such meeting.

4.3 NO LIABILITY. No member of the Board or the Stock Option Plan
Committee or any designee thereof will be liable for any action or inaction
with respect to this Plan or any Stock Option or any transaction arising under
this Plan or any Stock Option, except in circumstances constituting bad faith
of such member.

4.4 AMENDMENTS.

(a) The Administering Body may, insofar as permitted by
applicable law, rule or regulation, from time to time suspend or discontinue
this Plan or revise or amend it in any respect whatsoever, and this Plan as so
revised or amended will govern all Stock Options hereunder, including those
granted before such revision or amendment; provided, however, that no such
revision or amendment shall alter, impair or diminish any rights or obligations
under any Stock Option previously granted under this Plan, without the written
consent of the Optionee. Without limiting the generality of the foregoing, the
Administering Body is authorized to amend this Plan to comply with or take
advantage of amendments to applicable laws, rules or regulations, including
amendments to the Securities Act, Exchange Act or the IRC or any rules or
regulations promulgated thereunder. No stockholder approval of any amendment
or revision shall be required unless (i) such approval is required by
applicable law, rule or regulation or (ii) an amendment or revision to this
Plan would materially increase the number of shares subject to this Plan (as
adjusted under Section 3.4), materially modify the requirements as to
eligibility for participation in this Plan, extend the final date upon which
Stock Options may be granted under this Plan, or otherwise materially increase
the benefits accruing to Recipients in a manner not specifically contemplated
herein, or affect this Plan's compliance with Rule 16b-3 or applicable

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<PAGE> 8
provisions of or regulations under the IRC, and stockholder approval of the
amendment or revision is required to comply with Rule 16b-3 or applicable
provisions of or rules under the IRC.

(b) The Administering Body may, with the written consent
of an Optionee, make such modifications in the terms and conditions of a Stock
Option as it deems advisable. Without limiting the generality of the
foregoing, the Administering Body may, in its discretion with the written
consent of Optionee, at any time and from time to time after the grant of any
Stock Option accelerate or extend the vesting or exercise period of any Stock
Option as a whole or in part, and adjust or reduce the exercise price of Stock
Options held by such Optionee by cancellation of such Stock Options and
granting of Stock Options at lower or exercise prices or by modification,
extension or renewal of such Stock Options. In the case of Incentive Stock
Options, Recipients acknowledge that extensions of the exercise period may
result in the loss of the favorable tax treatment afforded incentive stock
options under Section 422 of the IRC.

(c) Except as otherwise provided in this Plan or in the
applicable Stock Option Document, no amendment, revision, suspension or
termination of this Plan will, without the written consent of the Optionee,
alter, terminate, impair or adversely affect any right or obligation under any
Stock Option previously granted under this Plan.

4.5 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation plans in effect
for the Company, and this Plan shall not preclude the Company from establishing
any other forms of incentive or other compensation for employees, directors,
advisors or consultants of the Company, whether or not approved by
stockholders.

4.6 PLAN BINDING ON SUCCESSORS. This Plan shall be binding upon
the successors and assigns of the Company.

4.7 REFERENCES TO SUCCESSOR STATUTES, REGULATIONS AND RULES. Any
reference in this Plan to a particular statute, regulation or rule shall also
refer to any successor provision of such statute, regulation or rule.

4.8 ISSUANCES FOR COMPENSATION PURPOSES ONLY. This Plan
constitutes an "employee benefit plan" as defined in Rule 405 promulgated under
the Securities Act. Stock Options to eligible employees or directors shall be
granted for any lawful consideration, including compensation for services
rendered, promissory notes or otherwise. Stock Options to consultants and
advisors shall be granted only in exchange for bona fide services rendered by
such consultants or advisors and such services must not be in connection with
the offer and sale of securities in a capital-raising transaction.

4.9 INVALID PROVISIONS. In the event that any provision of this
Plan is found to be invalid or otherwise unenforceable under any applicable
law, such invalidity or unenforceability shall not be construed as rendering
any other provisions contained herein invalid or unenforceable, and all such
other provisions shall be given full force and effect to the same extent as
though the invalid and unenforceable provision were not contained herein.

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<PAGE> 9
4.10 GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of Delaware,
without giving effect to the principles of the conflicts of laws thereof.

ARTICLE V
GENERAL AWARD PROVISIONS

5.1 PARTICIPATION IN THE PLAN.

(a) A person shall be eligible to receive grants of Stock
Options under this Plan if, at the time of the grant of the Stock Option, such
person is an Eligible Person.

(b) Incentive Stock Options may be granted only to
Eligible Persons meeting the employment requirements of Section 422 of the IRC.

(c) Notwithstanding anything to the contrary herein, the
Administering Body may, in order to fulfill the purposes of this Plan, modify
grants of Stock Options to Recipients who are foreign nationals or employed
outside of the United States to recognize differences in applicable law, tax
policy or local custom.

5.2 STOCK OPTION DOCUMENTS.

(a) Each Stock Option granted under this Plan shall be
evidenced by an agreement duly executed on behalf of the Company and by the
Recipient or, in the Stock Option Plan Committee's discretion, a confirming
memorandum issued by the Company to the Recipient, setting forth such terms and
conditions applicable to the Stock Option as the Stock Option Plan Committee
may in its discretion determine. Stock Option Documents may but need not be
identical and shall comply with and be subject to the terms and conditions of
this Plan, a copy of which shall be provided to each Recipient and incorporated
by reference into each Stock Option Document. Any Stock Option Document may
contain such other terms, provisions and conditions not inconsistent with this
Plan as may be determined by the Stock Option Plan Committee.

(b) In case of any conflict between this Plan and any
Stock Option Document, this Plan shall control.

5.3 EXERCISE OF STOCK OPTIONS. No Stock Option shall be
exercisable except in respect of whole shares, and fractional share interests
shall be disregarded. Not less than 100 shares of Common Stock (or such other
amount as is set forth in the applicable Stock Option Documents) may be
purchased at one time and Stock Options must be exercised in multiples of 100
unless the number purchased is the total number at the time available for
purchase under the terms of the Stock Option. A Stock Option shall be deemed
to be exercised when the Secretary or other designated official of the Company
receives written notice of such exercise from the Optionee, together with
payment of the exercise price made in accordance with Section 5.4 and any
amounts required under Section 5.11. Notwithstanding any other provision of
this Plan, the Administering Body may impose, by rule and/or in Stock Option
Documents, such conditions

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<PAGE> 10
upon the exercise of Stock Options (including without limitation conditions
limiting the time of exercise to specified periods) as may be required to
satisfy applicable regulatory requirements, including without limitation Rule
16b-3 and Rule 10b-5 under the Exchange Act, and any amounts required under
Section 5.12 or other applicable section of or regulation under the IRC.

5.4 PAYMENT FOR STOCK OPTIONS.

(a) The exercise price or other payment for a Stock
Option shall be payable upon the exercise of a Stock Option pursuant to a Stock
Option granted hereunder by delivery of legal tender of the United States or
payment of such other consideration as the Administering Body may from time to
time deem acceptable in any particular instance.

(b) The Company may assist any person to whom Stock
Options are granted hereunder (including without limitation any officer or
director of the Company) in the payment of the exercise price or other amounts
payable in connection with the receipt or exercise of that Stock Option, by
lending such amounts to such person on such terms and at such rates of interest
and upon such security (if any) as shall be approved by the Administering Body.

(c) In the discretion of the Administering Body, Stock
Options may be exercised by capital stock of the Company delivered in transfer
to the Company by or on behalf of the person exercising the Stock Option and
duly endorsed in blank or accompanied by stock powers duly endorsed in blank,
with signatures guaranteed in accordance with the Exchange Act if required by
the Administering Body, or retained by the Company from the stock otherwise
issuable upon exercise or surrender of vested and/or exercisable Stock Options
previously granted to the Recipient and being exercised (if applicable) (in
either case valued at Fair Market Value as of the exercise date); or such other
consideration as the Administering Body may from time to time in the exercise
of its discretion deem acceptable in any particular instance; provided,
however, that the Administering Body may, in the exercise of its discretion,
(i) allow exercise of Stock Options in a broker-assisted or similar transaction
in which the exercise price is not received by the Company until promptly after
exercise, and/or (ii) allow the Company to loan the exercise price to the
Optionee, if the exercise will be followed by a prompt sale of some or all of
the underlying shares and a portion of the sale proceeds is dedicated to full
payment of the exercise price and amounts required pursuant to Section 5.11.

5.5 NO EMPLOYMENT RIGHTS. Nothing contained in this Plan (or in
Stock Option Documents or in any other documents related to this Plan or to
Stock Options granted hereunder) shall confer upon any Eligible Person or
Recipient any right to continue in the employ of the Company or any Affiliated
Entity or constitute any contract or agreement of employment or engagement, or
interfere in any way with the right of the Company or any Affiliated Entity to
reduce such person's compensation or other benefits or to terminate the
employment or engagement of such Eligible Person or Recipient, with or without
cause. Except as expressly provided in this Plan or in any statement
evidencing the grant of Stock Options pursuant to this Plan, the Company shall
have the right to deal with each Recipient in the same manner as if this Plan
and any such statement evidencing the grant of Stock Options pursuant to this
Plan did not exist, including without limitation with respect to all matters
related to the hiring, discharge,

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<PAGE> 11
compensation and conditions of the employment or engagement of the Recipient.
Any questions as to whether and when there has been a termination of a
Recipient's employment or engagement, the reason (if any) for such termination,
and/or the consequences thereof under the terms of this Plan or any statement
evidencing the grant of Stock Options pursuant to this Plan shall be determined
by the Administering Body and the Administering Body's determination thereof
shall be final and binding.

5.6 RESTRICTIONS UNDER APPLICABLE LAWS AND REGULATIONS.

(a) All Stock Options granted under this Plan shall be
subject to the requirement that, if at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of the shares
subject to Stock Options granted under this Plan upon any securities exchange
or under any federal, state or foreign law, or the consent or approval of any
government regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Stock Options or the issuance, if any, or
purchase of shares in connection therewith, such Stock Options may not be
exercised as a whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company. During the term of this Plan,
the Company will use its reasonable efforts to seek to obtain from the
appropriate regulatory agencies any requisite qualifications, consents,
approvals or authorizations in order to issue and sell such number of shares of
its Common Stock as shall be sufficient to satisfy the requirements of this
Plan. The inability of the Company to obtain from any such regulatory agency
having jurisdiction thereof the qualifications, consents, approvals or
authorizations deemed by the Company to be necessary for the lawful issuance
and sale of any shares of its Common Stock hereunder shall relieve the Company
of any liability in respect of the nonissuance or sale of such stock as to
which such requisite authorization shall not have been obtained.

(b) The Company shall be under no obligation to register
or qualify the issuance of Stock Options or underlying shares under the
Securities Act or applicable state securities laws. Unless the issuance of
Stock Options and underlying shares have been registered under the Securities
Act and qualified or registered under applicable state securities laws, the
Company shall be under no obligation to issue any Stock Options or underlying
shares of Common Stock covered by any Stock Options unless the Stock Options
and underlying shares may be issued pursuant to applicable exemptions from such
registration or qualification requirements. In connection with any such exempt
issuance, the Administering Body may require the Optionee to provide a written
representation and undertaking to the Company, satisfactory in form and scope
to the Company and upon which the Company may reasonably rely, that such
Optionee is acquiring such Stock Options and underlying shares for such
Optionee's own account as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares of stock, and that such
person will make no transfer of the same except in compliance with any rules
and regulations in force at the time of such transfer under the Securities Act
and other applicable law, and that if shares of stock are issued without such
registration, a legend to this effect (together with any other legends deemed
appropriate by the Administering Body) may be endorsed upon the securities so
issued. The Company may also order its transfer agent to stop transfers of
such shares. The Administering Body may also

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<PAGE> 12
require the Optionee to provide the Company such information and other
documents as the Administering Body may request in order to satisfy the
Administering Body as to the investment sophistication and experience of the
Optionee and as to any other conditions for compliance with any such exemptions
from registration or qualification.

5.7 ADDITIONAL CONDITIONS. Any Stock Option may also be subject
to such other provisions (whether or not applicable to any other Stock Option
or Optionee) as the Administering Body determines appropriate including without
limitation provisions to assist the Optionee in financing the purchase of
Common Stock through the exercise of Stock Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of
Common Stock acquired under any form of benefit, provisions giving the Company
the right to repurchase shares of Common Stock acquired under any form of
benefit in the event the Optionee elects to dispose of such shares, and
provisions to comply with federal and state securities laws and federal and
state income tax withholding requirements.

5.8 NO PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise set
forth herein, an Optionee shall have no rights as a stockholder with respect to
any shares issuable or issued in connection with the Stock Option until the
date of the receipt by the Company of all amounts payable in connection with
exercise of the Stock Option and performance by the Optionee of all obligations
thereunder. Status as an Eligible Person shall not be construed as a
commitment that any Stock Option will be granted under this Plan to an Eligible
Person or to Eligible Persons generally. No person shall have any right, title
or interest in any fund or in any specific asset (including shares of capital
stock) of the Company by reason of any Stock Option granted hereunder. Neither
this Plan (or any documents related hereto) nor any action taken pursuant
hereto shall be construed to create a trust of any kind or a fiduciary
relationship between the Company and any person. To the extent that any person
acquires a right to receive Stock Options hereunder, such right shall be no
greater than the right of any unsecured general creditor of the Company.

5.9 NONASSIGNABILITY. No Stock Option granted under this
Plan shall be assignable or transferable except (a) by will or by the laws of
descent and distribution, or (b) subject to the final sentence of this Section
5.9, upon dissolution of marriage pursuant to a qualified domestic relations
order or, in the discretion of the Administering Body and under circumstances
that would not adversely affect the interests of the Company, pursuant to a
nominal transfer that does not result in a change in beneficial ownership;
provided, however, that the Administering Body may in the applicable Stock
Option Document evidencing Stock Options granted hereunder or at any time
thereafter provide that Stock Options granted hereunder may be transferred
without consideration by the Recipient, subject to such rules as the
Administering Body may adopt to preserve the purposes of the Plan, to one or
more Permitted Transferees; provided further, that the Recipient gives the
Administering Body advance written notice describing the terms and conditions
of the proposed transfer and the Administering Body notifies the Recipient in
writing that such transfer would comply with the requirements of the Plan and
any applicable Stock Option Document. The terms of any Stock Option
transferred to Permitted Transferees in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee, except that (a)
Permitted Transferees shall not be entitled to transfer any Stock Options,
other

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<PAGE> 13
than by will or the laws of descent and distribution; and (b) Permitted
Transferees shall not be entitled to exercise any transferred Stock Options
unless there shall be in effect a registration statement on an appropriate form
covering the shares of Common Stock to be acquired pursuant to the exercise of
such Stock Option if the Administering Body determines that such a registration
statement is necessary or appropriate. During the lifetime of an Optionee,
Stock Options shall be exercisable only by the Optionee or such person's
guardian or legal representative.

Notwithstanding the foregoing, (a) no Stock Option owned by an
Optionee subject to Section 16 of the Exchange Act may be assigned or
transferred in any manner inconsistent with Rule 16b-3, and (b) Incentive Stock
Options (or other Stock Options subject to transfer restrictions under the IRC)
may not be assigned or transferred in violation of Section 422(b)(5) of the IRC
(or any comparable or successor provision) or the regulations thereunder, and
nothing herein is intended to allow such assignment or transfer.

5.10 INFORMATION TO OPTIONEES.

(a) The Administering Body in its sole discretion shall
determine what, if any, financial and other information shall be provided to
Optionees and when such financial and other information shall be provided after
giving consideration to applicable federal and state laws, rules and
regulations, including without limitation applicable federal and state
securities laws, rules and regulations.

(b) The furnishing of financial and other information
that is confidential to the Company shall be subject to the Optionee's
agreement that the Optionee shall maintain the confidentiality of such
financial and other information, shall not disclose such information to third
parties, and shall not use the information for any purpose other than
evaluating an investment in the Company's securities under this Plan. The
Administering Body may impose other restrictions on the access to and use of
such confidential information and may require an Optionee to acknowledge the
Optionee's obligations under this Section 5.10(b) (which acknowledgment shall
not be a condition to the Optionee's obligations under this Section 5.10(b)).

5.11 WITHHOLDING TAXES. Whenever the granting, vesting or exercise
of any Stock Option granted under this Plan, or the transfer of any shares
issued upon exercise of any Stock Option, gives rise to tax or tax withholding
liabilities or obligations, the Administering Body shall have the right to
require the Optionee to remit to the Company an amount sufficient to satisfy
any federal, state and local withholding tax requirements prior to issuance of
such shares. The Administering Body may, in the exercise of its discretion,
allow satisfaction of tax withholding requirements by accepting delivery of
stock of the Company or by withholding a portion of the stock otherwise
issuable in connection with Stock Options.

5.12 LEGENDS ON STOCK OPTIONS AND STOCK CERTIFICATES. Each Stock
Option Document and each certificate representing shares acquired upon or
exercise of Stock Options shall be endorsed with all legends, if any, required
by applicable federal and state securities and other laws to be placed on the
Stock Option Document and/or the certificate. The determination

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<PAGE> 14
of which legends, if any, shall be placed upon Stock Option Documents or the
certificates shall be made by the Administering Body in its sole discretion and
such decision shall be final and binding.

5.13 EFFECT OF TERMINATION OF EMPLOYMENT ON STOCK OPTIONS.

(a) TERMINATION FOR JUST CAUSE. Subject to
Section 5.13(c), and except as otherwise provided in a written agreement
between the Company and the Optionee which may be entered into at any time
before or after termination of employment of the Recipient, in the event of a
Just Cause Dismissal of a Recipient, all of the Optionee's unexercised Stock
Options, whether or not vested, shall expire and become unexercisable as of the
date of such Just Cause Dismissal.

(b) TERMINATION OTHER THAN FOR JUST CAUSE
DISMISSAL. Subject to Section 5.13(c) and except as otherwise provided in a
written agreement between the Company and the Optionee, which may be entered
into at any time before or after termination of employment, in the event of a
Recipient's termination of employment for:

(i) any reason other than for Just Cause
Dismissal, death, Permanent Disability or normal retirement,
the Optionee's Stock Options, whether or not vested, shall
expire and become unexercisable as of the earlier of (A) the
date such Stock Options would expire in accordance with their
terms had the Recipient remained employed and (B) 30 days
after the date of employment termination.

(ii) death, Permanent Disability or
normal retirement, the Optionee's unexercised Stock Options
shall, whether or not vested, expire and become unexercisable
as of the earlier of (A) the date such Stock Options would
expire in accordance with their terms had the Recipient
remained employed and (B) six months after the date of
employment termination.

(c) ALTERATION OF VESTING AND EXERCISE PERIODS.
Notwithstanding anything to the contrary in Section 5.13(a) or Section 5.13(b),
the Administering Body may in its discretion designate shorter or longer
periods to exercise Stock Options following a Recipient's termination of
employment; provided, however, that any shorter periods determined by the
Administering Body shall be effective only if provided for in the instrument
that evidences the grant to the Optionee of such Stock Options or if such
shorter period is agreed to in writing by the Optionee. Notwithstanding
anything to the contrary herein, Stock Options shall be exercisable by a an
Optionee following such Optionee's termination of employment only to the extent
that installments thereof had become exercisable on or prior to the date of
such termination; and provided, further, that the Administering Body may, in
its discretion, elect to accelerate the vesting of all or any portion of any
Stock Options that had not become exercisable on or prior to the date of such
termination.

(d) LEAVE OF ABSENCE. In the case of any
employee on an approved leave of absence, the Administering Body may make such
provision respecting continuance of Stock Options as the Administering Body in
its discretion deems appropriate, except that in no event shall a Stock Option
be exercisable after the date such Stock Option would expire in accordance with
its terms had the Recipient remained continuously employed.

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<PAGE> 15
5.14 LIMITS ON STOCK OPTIONS TO ELIGIBLE PERSONS. Notwithstanding
any other provision of this Plan, in order for the compensation attributable to
Stock Options hereunder to qualify as Performance-Based Compensation, no one
Eligible Person shall be granted any Stock Options with respect to more than
250,000 shares of Common Stock in any one calendar year. The limitation set
forth in this Section 5.14 shall be subject to adjustment as provided in
Section 3.4 or under Article VII, but only to the extent such adjustment would
not affect the status of compensation attributable to Stock Options hereunder
as Performance-Based Compensation.

ARTICLE VI
STOCK OPTIONS

6.1 NATURE OF STOCK OPTIONS. Stock Options may be Incentive Stock
Options or Non-qualified Stock Options.

6.2 OPTION EXERCISE PRICE. The exercise price for each Stock
Option shall be determined by the Administering Body as of the date such Stock
Option is granted. The exercise price shall be no less than the Fair Market
Value of the Common Stock subject to the Option. The Administering Body may,
with the consent of the Optionee and subject to compliance with statutory or
administrative requirements applicable to Incentive Stock Options, amend the
terms of any Stock Option to provide that the exercise price of the shares
remaining subject to the Stock Option shall be reestablished at a price not
less than 100% of the Fair Market Value of the Common Stock on the effective
date of the amendment. No modification of any other term or provision of any
Stock Option that is amended in accordance with the foregoing shall be
required, although the Administering Body may, in its discretion, make such
further modifications of any such Stock Option as are not inconsistent with
this Plan.

6.3 OPTION PERIOD AND VESTING. Stock Options granted hereunder
shall vest and may be exercised as determined by the Administering Body, except
that exercise of such Stock Options after termination of the Recipient's
employment shall be subject to Section 5.13. Each Stock Option granted
hereunder and all rights or obligations thereunder shall expire on such date as
shall be determined by the Administering Body, but not later than 10 years
after the date the Stock Option is granted and shall be subject to earlier
termination as provided herein or in the Stock Option Document. The
Administering Body may, in its discretion at any time and from time to time
after the grant of a Stock Option, accelerate vesting of such Option as a whole
or in part by increasing the number of shares then purchasable, provided that
the total number of shares subject to such Stock Option may not be increased.
Except as otherwise provided herein, a Stock Option shall become exercisable,
as a whole or in part, on the date or dates specified by the Administering Body
and thereafter shall remain exercisable until the expiration or earlier
termination of the Stock Option.

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<PAGE> 16
6.4 SPECIAL PROVISIONS REGARDING INCENTIVE STOCK OPTIONS.

(a) Notwithstanding anything in this Article VI to the contrary,
the exercise price and vesting period of any Stock Option intended to qualify
as an Incentive Stock Option shall comply with the provisions of Section 422 of
the IRC and the regulations thereunder. As of the Effective Date, such
provisions require, among other matters, that (i) the exercise price must not
be less than the Fair Market Value of the underlying stock as of the date the
Incentive Stock Option is granted, and not less than 110% of the Fair Market
Value as of such date in the case of a grant to a Significant Stockholder; and
(ii) that the Incentive Stock Option not be exercisable after the expiration of
five years from the date of grant in the case of an Incentive Stock Option
granted to a Significant Stockholder.

(b) The aggregate Fair Market Value (determined as of the
respective date or dates of grant) of the Common Stock for which one or more
Options granted to any Recipient under this Plan (or any other option plan of
the Company or any of its subsidiaries or affiliates) may for the first time
become exercisable as Incentive Stock Options under the federal tax laws during
any one calendar year shall not exceed $100,000.

(c) Any Options granted as Incentive Stock Options pursuant to
this Plan that for any reason fail or cease to qualify as such shall be treated
as Non-qualified Stock Options.

ARTICLE VII
REORGANIZATIONS

7.1 CORPORATE TRANSACTIONS NOT INVOLVING A CHANGE IN CONTROL. If
the Company shall consummate any Reorganization not involving a Change in
Control in which holders of shares of Common Stock are entitled to receive in
respect of such shares any securities, cash or other consideration (including
without limitation a different number of shares of Common Stock), each Stock
Option outstanding under this Plan shall thereafter be exercisable, in
accordance with this Plan, only for the kind and amount of securities, cash
and/or other consideration receivable upon such Reorganization by a holder of
the same number of shares of Common Stock as are subject to that Stock Option
immediately prior to such Reorganization, and any adjustments will be made to
the terms of the Stock Option in the sole discretion of the Administering Body
as it may deem appropriate to give effect to the Reorganization.

7.2 CORPORATE TRANSACTIONS INVOLVING A CHANGE IN CONTROL. As of
the effective time and date of any Change in Control, this Plan and any then
outstanding Stock Options (whether or not vested) shall automatically terminate
unless (a) provision is made in writing in connection with such transaction for
the continuance of this Plan and for the assumption of such Stock Options, or
for the substitution for such Stock Options of new awards covering the
securities of a successor entity or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and exercise prices, in
which event this Plan and such outstanding Stock Options shall continue or be
replaced, as the case may be, in the manner and under the terms so provided; or
(b) the Board otherwise shall provide in writing for such adjustments as it
deems appropriate in the terms and conditions of the then-outstanding Stock
Options (whether or not vested), including without limitation (i) accelerating
the vesting of outstanding Stock Options

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<PAGE> 17
and/or (ii) providing for the cancellation of Stock Options and their automatic
conversion into the right to receive the securities, cash or other
consideration that a holder of the shares underlying such Stock Options would
have been entitled to receive upon consummation of such Change in Control had
such shares been issued and outstanding immediately prior to the effective date
and time of the Change in Control (net of the appropriate option exercise
prices). If, pursuant to the foregoing provisions of this Section 7.2, this
Plan and the Stock Options shall terminate by reason of the occurrence of a
Change in Control without provision for any of the actions described in clause
(a) or (b) hereof, then any Optionee holding outstanding Stock Options shall
have the right, at such time immediately prior to the consummation of the
Change in Control as the Board shall designate, to exercise the Optionee's
Stock Options to the full extent not theretofore exercised, including any
installments which have not yet become vested.

ARTICLE VIII
DEFINITIONS

Capitalized terms used in this Plan and not otherwise defined shall
have the meanings set forth below:

"ADMINISTERING BODY" shall mean the Board as long as no Stock Option
Plan Committee has been appointed and is in effect and shall mean the Stock
Option Plan Committee as long as the Stock Option Plan Committee is appointed
and in effect.

"AFFILIATED ENTITY" means any Parent Corporation or Subsidiary
Corporation.

"BOARD" means the Board of Directors of the Company.

"CHANGE IN CONTROL" means the following and shall be deemed to occur
if any of the following events occur:

(a) Any Person becomes after the Effective Date the
beneficial owner (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of thirty percent (30%) or more of either the then
outstanding shares of Common Stock or the combined voting power of the
Company's then outstanding securities entitled to vote generally in
the election of directors; or

(b) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Company (the INCUMBENT
BOARD") cease for any reason to constitute at least a majority of the
Board of Directors of the Company, provided that any individual who
becomes a director after the effective date hereof whose election, or
nomination for election by the Company's stockholders, is approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered to be a member of the Incumbent
Board unless that individual was nominated or elected by any Person
having the power to exercise, through beneficial ownership, voting
agreement and/or proxy, twenty percent (20%) or more of either the
outstanding shares of Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote
generally in the election of directors, in which case that individual
shall not be

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considered to be a member of the Incumbent Board unless such
individual's election or nomination for election by the Company's
stockholders is approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board; or

(c) Consummation by the Company of the sale or other
disposition by the Company of all or substantially all of the Company's
assets or a reorganization or merger or consolidation of the Company
with any other person, entity or corporation, other than

(i) a reorganization or merger or consolidation
that would result in the voting securities of the Company
outstanding immediately prior thereto (or, in the case of a
reorganization or merger or consolidation that is preceded or
accomplished by an acquisition or series of related
acquisitions by any Person, by tender or exchange offer or
otherwise, of voting securities representing five percent (5%)
or more of the combined voting power of all securities of the
Company, immediately prior to such acquisition or the first
acquisition in such series of acquisitions) continuing to
represent, either by remaining outstanding or by being
converted into voting securities of another entity, more than
fifty percent (50%) of the combined voting power of the voting
securities of the Company or such other entity outstanding
immediately after such reorganization or merger or
consolidation (or series of related transactions involving
such a reorganization or merger or consolidation), or

(ii) a reorganization or merger or consolidation
effected to implement a recapitalization or reincorporation of
the Company (or similar transaction) that does not result in a
material change in beneficial ownership of the voting
securities of the Company or its successor; or

(d) Approval by the stockholders of the Company or any
order by a court of competent jurisdiction of a plan of liquidation of
the Company.

Notwithstanding the foregoing, a Change in Control of the type described in
paragraph (b), (c) or (d) shall be deemed to be completed on the date it
occurs, and a Change in Control of the type described in paragraph (a) shall be
deemed to be completed as of the date the entity or group attaining thirty
percent (30%) or greater ownership has elected its representatives to the
Company's Board of Directors and/or caused its nominees to become officers of
the Company with the authority to terminate or alter the terms of employee's
employment.

"COMMISSION" means the Securities and Exchange Commission.

"COMMON STOCK" means the common stock of the Company, par value $0.01
per share, as constituted on the Effective Date of this Plan, and as thereafter
adjusted as a result of any one or more events requiring adjustment of
outstanding Stock Options under Section 3.4 above.

"COMPANY" means AudioNet, Inc., a Delaware corporation.

15
<PAGE> 19
"EFFECTIVE DATE" means August 19, 1997, which is the date this Plan
was adopted by the Board.

"ELIGIBLE PERSON" shall include directors (other than non-employee
directors of the Company), officers, employees, consultants and advisors of the
Company or of any Affiliated Entity.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"EXCHANGE ACT REGISTERED COMPANY" means that the Company has any class
of any equity security registered pursuant to Section 12 of the Exchange Act.

"EXPIRATION DATE" means the tenth anniversary of the Effective Date.

"FAIR MARKET VALUE" of a share of the Company's capital stock as of a
particular date shall be: (a) if the stock is listed on an established stock
exchange or exchanges (including for this purpose, the Nasdaq National Market),
the average of the highest and lowest sale prices of the stock quoted for such
date as reported in the Transactions Index of each such exchange, as published
in The Wall Street Journal and determined by the Administering Body, or, if no
sale price was quoted in any such Index for such date, then as of the next
preceding date on which such a sale price was quoted; or (b) if the stock is
not then listed on an exchange or the Nasdaq National Market, the average of
the closing bid and asked prices per share for the stock in the
over-the-counter market as quoted on The Nasdaq Small Cap Market on such date
(in the case of (a) or (b), subject to adjustment as and if necessary and
appropriate to set an exercise price not less than 100% of the Fair Market
Value of the stock on the date an option is granted); or (c) if the stock is
not then listed on an exchange or quoted in the over-the-counter market, an
amount determined in good faith by the Administering Body; provided, however,
that (i) when appropriate, the Administering Body, in determining Fair Market
Value of capital stock of the Company, may take into account such other factors
as it may deem appropriate under the circumstances and (ii) if the stock is
traded on the Nasdaq Small Cap Market and both sales prices and bid and asked
prices are quoted or available, the Administering Body may elect to determine
Fair Market Value under either clause (i) or (ii) above. Notwithstanding the
foregoing, the Fair Market Value of capital stock for purposes of grants of
Incentive Stock Options shall be determined in compliance with applicable
provisions of the IRC.

"IMMEDIATE FAMILY" means the Recipient's spouse, children or
grandchildren (including adopted and stepchildren and grandchildren).

"INCENTIVE STOCK OPTION" means a Stock Option that qualifies as an
incentive stock option under Section 422 of the IRC, or any successor statute
thereto.

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

16
<PAGE> 20
"JUST CAUSE DISMISSAL" shall mean a termination of a Recipient's
employment for any of the following reasons: (a) the Recipient violates any
reasonable rule or regulation of the Board, the Company's Chief Executive
Officer or the Recipient's superiors that results in damage to the Company or
which, after written notice to do so, the Recipient fails to correct within a
reasonable time; (b) any willful misconduct or gross negligence by the
Recipient in the responsibilities assigned to the Recipient; (c) any willful
failure to perform the Recipient's job as required to meet Company objectives;
(d) any wrongful conduct of a Recipient which has an adverse impact on the
Company or which constitutes a misappropriation of Company assets; (e) the
Recipient's performing services for any other person or entity which competes
with the Company while the Recipient is employed by the Company, without the
written approval of the Chief Executive Officer of the Company; or (f) any
other conduct that the Administering Body determines constitutes Just Cause for
Dismissal; provided, however, that if a Recipient is party to an employment
agreement with the Company providing for just cause dismissal (or some
comparable notion) of Recipient from Recipient's employment with the Company,
"Just Cause Dismissal" for purposes of this Plan shall have the same meaning as
ascribed thereto or to such comparable notion in such employment agreement.

"NON-EMPLOYEE DIRECTOR" means any director of the Company who
qualifies as a "non-employee director" within the meaning of Rule 16b-3.

"NON-QUALIFIED STOCK OPTION" means a Stock Option that is not an
Incentive Stock Option.

"OPTIONEE" means a Recipient or the Recipient's successor in interest.

"OUTSIDE DIRECTOR" means an "outside director" as defined in the
regulations adopted under Section 162(m) of the IRC.

"PARENT CORPORATION" means any Parent Corporation as defined in
Section 424(e) of the IRC.

"PERFORMANCE-BASED COMPENSATION" means performance-based compensation
as described in Section 162(m) of the IRC. If the amount of compensation an
Eligible Person will receive under any Stock Option is not based solely on an
increase in the value of Common Stock after the date of grant or award, the
Stock Option Plan Committee, in order to qualify Stock Options as
performance-based compensation under Section 162(m) of the IRC, can condition
the grant, award, vesting, or exercisability of such Stock Options on the
attainment of a preestablished, objective performance goal. For this purpose,
a preestablished, objective performance goal may include one or more of the
following performance criteria: (a) cash flow; (b) earnings per share
(including earning before interest, taxes, and amortization); (c) return on
equity; (d) total stockholder return; (e) return on capital; (f) return on
assets or net assets; (g) income or net income; (h) operating income or net
operating income; (i) operating margin; (j) return on operating revenue; (k)
attainment of stated goals related to the Company's capitalization, costs,
financial condition or results of operations; and (l) any other similar
performance criteria.

17
<PAGE> 21
"PERSON" means any person, entity or group, within the meaning of
Section 13(d) or 14(d) of the Exchange Act, but excluding (a) the Company and
its subsidiaries, (b) any employee stock ownership or other employee benefit
plan maintained by the Company that is qualified under ERISA and (c) an
underwriter or underwriting syndicate that has acquired the Company's
securities solely in connection with a public offering thereof.

"PERMANENT DISABILITY" shall mean that the Recipient becomes
physically or mentally incapacitated or disabled so that the Recipient is
unable to perform substantially the same services as the Recipient performed
prior to incurring such incapacity or disability (the Company, at its option
and expense, being entitled to retain a physician to confirm the existence of
such incapacity or disability, and the determination of such physician to be
binding upon the Company and the Recipient), and such incapacity or disability
continues for a period of three consecutive months or six months in any
12-month period or such other period(s) as may be determined by the Stock
Option Plan Committee with respect to any Stock Option, provided that for
purposes of determining the period during which an Incentive Stock Option may
be exercised pursuant to Section 5.13(b)(ii) hereof, Permanent Disability shall
mean "permanent and total disability" as defined in Section 22(e) of the IRC.

"PERMITTED TRANSFEREE" means (a) the Recipient's Immediate Family; (b)
a trust solely for the benefit of the Recipient and/or his or her Immediate
Family; or (c) a partnership or limited liability company the partners or
shareholders of which are limited to the Recipient and his or her Immediate
Family.

"PLAN" means this 1997 Stock Option Plan of the Company.

"PLAN TERM" means the period during which this Plan remains in effect
(commencing on the Effective Date and ending on the Expiration Date).

"RECIPIENT" means a person who has received Stock Options under this
Plan.

"REORGANIZATION" means any merger, consolidation or other
reorganization.

"RULE 16b-3" means Rule 16b-3 under the Exchange Act.

"SECURITIES ACT" means the Securities Act of 1933, as amended.

"SIGNIFICANT STOCKHOLDER" is an individual who, at the time a Stock
Option is granted to such individual under this Plan, owns more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company or of any Parent Corporation or Subsidiary Corporation (after
application of the attribution rules set forth in Section 424(d) of the IRC).

"STOCK OPTION" means a right to purchase stock of the Company granted
under Article VI of this Plan to an Eligible Person.

"STOCK OPTION DOCUMENT" means the agreement or confirming memorandum
setting forth the terms and conditions of Stock Options.

18
<PAGE> 22
"STOCK OPTION PLAN COMMITTEE" means the committee appointed by the
Board to administer this Plan pursuant to Section 4.1.

"SUBSIDIARY CORPORATION" means any Subsidiary Corporation as defined
in Section 425(f) of the IRC.

<PAGE> 1
EXHIBIT 21.1

Subsidiary

AudioNet Corporation

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 1, 1998,
relating to the financial statements of broadcast.com, which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the period from May 19, 1995 (inception) to December 31,
1995 and the two years ended December 31, 1997 listed under Item 16 (b) of this
Registration Statement when such schedule is read in conjunction with the
financial statements referred to in our report. The audits referred to in such
report also included this schedule. We also consent to the references to us
under the headings "Experts" and "Selected Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Financial Data."

PRICE WATERHOUSE LLP

Dallas, Texas
June 23, 1998