AMERICAN BUSINESS INFORMATION INC /DE, S-3/A, 1997-10-23

AMERICAN BUSINESS INFORMATION INC /DE
S-3/A, 1997-10-23
DIRECT MAIL ADVERTISING SERVICES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1997

REGISTRATION NO. 333-36669

================================================================================

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

AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

AMERICAN BUSINESS INFORMATION, INC.
(Exact name of registrant as specified in its charter)
---------------------

<TABLE>
<CAPTION>
DELAWARE 47-0751545
<C> <C>
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
</TABLE>

5711 SOUTH 86TH CIRCLE
OMAHA, NEBRASKA 68127
(402) 593-4500
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
---------------------

STEVEN PURCELL
CHIEF FINANCIAL OFFICER AND SECRETARY
5711 SOUTH 86TH CIRCLE, OMAHA, NEBRASKA 68127
(402) 593-4500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------

Copies of all communications should be sent to:

<TABLE>
<C> <C>
FRANCIS S. CURRIE, ESQ. MICHAEL J. SULLIVAN, ESQ.
MARTIN A. WELLINGTON, ESQ. JODIE M. BOURDET, ESQ.
WILSON SONSINI GOODRICH & ROSATI, P.C. TROY F. CHRISTMAS, ESQ.
650 PAGE MILL ROAD COOLEY GODWARD LLP
PALO ALTO, CALIFORNIA 94304-1050 FIVE PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
</TABLE>

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

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

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

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

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

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

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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE> 2

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

SUBJECT TO COMPLETION, DATED OCTOBER 23, 1997

PROSPECTUS

8,500,000 SHARES

[LOGO]

CLASS A COMMON STOCK

Of the 8,500,000 shares of Class A Common Stock offered hereby, 6,480,500
shares are being sold by the Company and 2,019,500 shares are being sold by the
Selling Stockholders. The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholders. The Company's Class A Common Stock
is quoted on the Nasdaq National Market under the symbol ABIIA. On October 22,
1997, the last reported sale price of the Class A Common Stock was $12.75 per
share. See "Price Range of Common Stock" and "Principal and Selling
Stockholders."

The Company's Common Stock consists of Class A Common Stock and Class B
Common Stock. The Class A Common Stock entitles the holder thereof to one vote
per share and a non-cumulative dividend of $0.02 per share per year, when and as
declared by the Company's Board of Directors in preference to any dividend on
the Class B Common Stock. The Class B Common Stock entitles the holder thereof
to ten votes per share. In all other respects, the Class A Common Stock and
Class B Common Stock are identical. See "Description of Capital Stock."

------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 4.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------

<TABLE>
<CAPTION>
=======================================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $ $
=======================================================================================================================
</TABLE>

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $600,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 1,275,000 shares of Class A Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------
The shares of Class A Common Stock are offered by the several Underwriters
subject to prior sale, receipt and acceptance by them and subject to the right
of the Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be made
available for delivery on or about , 1997, at the office of the agent
of Hambrecht & Quist LLC in New York, New York.

HAMBRECHT & QUIST

ABN AMRO CHICAGO CORPORATION

BT ALEX. BROWN

, 1997
<PAGE> 3

Graphic depiction of the Company's assets, products and markets, as
follows:

<TABLE>
<S> <C> <C> <C>
Caption: "Assets" Caption: "Products" Caption: "Markets"
Caption: Business Icons representing products, [Arrow Icons representing
Database captioned: "Business Profile and Pointing markets, captioned:
11 Million Businesses Credit Report," "Sales Lead Right] "Small Businesses"
[Arrow Pointing Right] Cards," "Info Access, and "Medium Sized
1-800-808-INFO," "Mailing Businesses."
Labels," "Prospect Lists,"
"Tapes or PC Diskettes,"
"Non-Stop Sales Leads," "Online
Information," "Directories," and
"www.salesleadsusa.com."
Caption: "Consumer Icons representing products [Arrow Icons representing
Database" captioned, "CD-ROM Products." Pointing markets captioned:
113 Million Households Right] "Small Office/Home
180 Million Office" and
Individuals "Individuals."
[Arrow Pointing Right]
Caption: "Data Captions: "Merge/Purge," "Market [Arrow Icon representing
Processing Services" Research Services" and "Data Pointing markets, captioned:
[Arrow Pointing Right] Warehousing and Analysis." Right] "Large Corporations."
</TABLE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK OR CLASS B COMMON STOCK, INCLUDING BY ENTERING STABILIZING BIDS OR
EFFECTING SYNDICATE COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE CLASS A COMMON STOCK OR CLASS B COMMON STOCK ON THE NASDAQ
STOCK MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."

American Business Information(R), SalesLeadsUSA, PhoneDisc(R),
InfoAccess(R) and certain other product and business names used herein are
trademarks of the Company. This Prospectus also includes trademarks of companies
other than the Company.

<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Except as otherwise noted, all
information in this Prospectus is adjusted to give effect to the
reclassification of the Company's Common Stock as Class B Common Stock, the
authorization of a new class of Common Stock designated Class A Common Stock
(together, the "Reclassification") and the stock dividend of one share of Class
A Common Stock for every share of Class B Common Stock outstanding as of October
3, 1997 (the "Stock Dividend"), and assumes no exercise of the Underwriters'
over-allotment option. See "Description of Capital Stock" and "Underwriting."

THE COMPANY

American Business Information, Inc. (the "Company") is a leading provider
of business and consumer marketing information products and data processing
services. The Company's products and services help its clients generate new
customers more effectively at lower cost. The Company's key assets include a
proprietary database of over 11 million businesses and a consumer database of
over 113 million households and 180 million individuals in the United States and
Canada, which the Company believes are among the most comprehensive and accurate
available. The Company leverages these key assets by selling a broad range of
marketing information products and data processing services through targeted
distribution channels primarily to small and medium size businesses and also to
consumers and larger corporations. The Company's net sales increased at a
compounded annual rate of 22% to $108.3 million in 1996 from $48.5 million in
1992, both through the introduction of new products and distribution channels
and through the strategic acquisition of complementary businesses. For the nine
months ended September 30, 1997, total net sales were $139.5 million.

The Company's business is organized around three principal product lines,
consisting of sales lead generation products, data processing services and
consumer CD-ROM products, which accounted for 68%, 22% and 10% of the Company's
net sales, respectively, in the nine months ended September 30, 1997. The
Company sells a wide range of pre-packaged and customized information products
and data processing services tailored to meet the specific requirements of small
and medium size businesses, consumers and larger corporations. The Company
prices its products and services based on the type, amount and format of the
information provided to create an attractive marketing information solution for
its customers. The Company distributes its products and services through direct
mail, telemarketing, field sales offices, national accounts sales teams, retail
outlets and information resellers.

The Company intends to enhance its competitive position in the business and
consumer information market by continuing to help its clients generate new
customers efficiently and effectively and by successfully implementing its
growth strategy. The Company continues to invest substantial time and resources
to maintain the quality and increase the depth of its databases. The Company
leverages its databases through the introduction of new information products,
new delivery formats and new distribution channels. The Company intends to
increase recurring revenue in a number of ways, including encouraging the repeat
purchase of its information products through the use of annual editions and
monthly updates, licensing its databases to other information providers and
large corporations and selling its data processing services to large
corporations. Using its consumer database, which consists of data licensed from
third parties, the Company intends to utilize the effective strategies and
distribution channels developed for its business information products and data
processing services to serve customers engaged in marketing to consumers.

Since mid-1996, the Company has completed six strategic acquisitions that
increased its presence in the consumer marketing information industry, greatly
increased its ability to provide data processing solutions, added two consumer
CD-ROM product lines and broadened its offerings of business marketing
information. While there are currently no binding commitments with respect to
any particular future acquisitions, the Company frequently evaluates the
strategic opportunities available to it and intends to aggressively pursue
acquisitions of complementary products, technologies or businesses that it
believes fit its business strategy.

The Company was incorporated in Nebraska in 1972, and was reincorporated
into Delaware in 1992. The Company's executive offices are located at 5711 South
86th Circle, Omaha, Nebraska 68127, and its telephone number is (402) 593-4500.
1
<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by the Company................. 6,480,500 shares
Class A Common Stock offered by the Selling Stockholders.... 2,019,500 shares
Common Stock to be outstanding after the Offering
Class A Common Stock...................................... 30,883,832 shares(1)(2)
Class B Common Stock...................................... 24,403,332 shares(1)(3)
----------------------------------
Total............................................. 55,287,164 shares
Use of proceeds............................................. To repay approximately $50.0
million in bank debt and for
general corporate purposes,
including working capital and
potential future acquisitions
Nasdaq National Market symbol for Class A Common Stock...... ABIIA
</TABLE>

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

(1) The Class A Common Stock entitles the holders thereof to one vote per share
on all matters submitted to a vote of the stockholders and a non-cumulative
dividend of $0.02 per year, prior and in preference to the Class B Common
Stock. The Class B Common Stock entitles the holders thereof to ten votes
per share on any matter submitted to a vote of the stockholders. In all
other respects the Class A Common Stock and the Class B Common Stock are
identical. See "Description of Capital Stock."

(2) Based on the number of shares of Common Stock outstanding at September 30,
1997 as adjusted to give effect to the Reclassification and the Stock
Dividend. Excludes 3,193,025 shares of Class A Common Stock reserved for
issuance upon the exercise of outstanding options at a weighted average
exercise price of $8.47 per share, 1,806,975 shares of Class A Common Stock
reserved for future grant under the Company's 1992 Stock Option Plan and
2,000,000 shares of Class A Common Stock reserved for future grant under the
Company's 1997 Class A Common Stock Option Plan.

(3) Based on the number of shares of Common Stock outstanding at September 30,
1997 as adjusted to give effect to the Reclassification and the Stock
Dividend. Excludes 3,193,025 shares of Class B Common Stock reserved for
issuance upon exercise of outstanding options at a weighted average exercise
price of $8.47 per share and 1,806,975 shares of Class B Common Stock
reserved for future grant under the Company's 1992 Stock Option Plan.

2
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................... $ 62,353 $ 90,248
Total assets.............................................. 196,035 223,930
Long-term debt, including current portion................. 82,167 32,167
Stockholders' equity...................................... 76,676 154,571
</TABLE>

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

(1) In 1996, reflects charges for the write-off of acquired in-process research
and development of approximately $10.0 million relating to the acquisition
of Digital Directory Assistance and approximately $11.5 million relating to
the change in estimated useful lives based on management's evaluation of
certain intangibles related to acquisitions prior to 1995. In 1997, reflects
the write-offs of $53.5 million of acquired in-process research and
development and $2.6 million of other restructuring charges related to the
acquisitions of Database America and Pro CD.

(2) During 1995, the Company sold American Business Communications for $3.0
million in the form of a non-recourse promissory note. The aggregate losses
from discontinued operations from this disposition were approximately $3.3
million for 1993 through 1996. In addition, in 1996 the Company recorded a
loss of $1.4 million attributable to the default by the purchaser on the
non-recourse promissory note delivered to the Company in this transaction.

(3) Prior to February 1992, the Company was taxed as an S Corporation.
Accordingly, net income prior to February 1992 contained no provision for
federal and state income taxes. Had net income for 1992 reflected tax
provision at a combined federal and state income tax rate of 36% in 1992,
net income and earnings per share would have approximated $9.2 million and
$0.23, respectively.

(4) Adjusted to reflect the sale by the Company of 6,480,500 shares of Class A
Common Stock at an assumed price of $12.75 per share and the anticipated use
of the net proceeds by the Company. See "Use of Proceeds".

3
<PAGE> 7

RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information contained in
this Prospectus before purchasing the Class A Common Stock offered hereby.

Integration of Recent and Future Acquisitions. Since mid-1996, the Company
has completed six acquisitions, including the August 1996 acquisition of certain
assets and liabilities of Digital Directory Assistance, the November 1996 merger
with County Data Corporation and acquisition of certain assets and liabilities
of Marketing Data Systems, the December 1996 acquisition of certain assets and
liabilities of BJ Hunter, the February 1997 merger with Database America ("DBA")
and the August 1997 acquisition of certain assets and liabilities of Pro CD. The
Company also made a number of other acquisitions in prior periods. The Company's
strategy includes continued growth through acquisitions of complementary
products, technologies or businesses, which, if implemented, will result in the
diversion of management's attention from the day-to-day operations of the
Company's business and may include numerous other risks, including difficulties
in the integration of operations, databases, products and personnel, financial
and accounting issues set forth in "-- Financial and Accounting Issues Relating
to Acquisitions," difficulty in applying the Company's internal controls to
acquired businesses and particular problems, liabilities or contingencies
related to the businesses being acquired. To the extent that efforts to
integrate recent or future acquisitions fail, there will be a material adverse
effect on the Company's business, financial condition and results of operations.
While the Company has not made any binding commitments with respect to any
particular future acquisitions, the Company frequently evaluates the strategic
opportunities available to it and intends to aggressively pursue opportunities
that it believes fit its business strategy. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business -- Strategy."

Financial and Accounting Issues Related to Acquisitions. In connection
with the acquisitions completed since mid-1996, the Company issued approximately
3.7 million shares of Class A Common Stock and 3.7 million shares of Class B
Common Stock, and paid approximately $93.9 million in cash. The issuance of
stock in these or future transactions may be dilutive to existing stockholders
to the extent that earnings of the acquired companies do not offset the
additional number of shares outstanding. In connection with the acquisitions of
DBA and Pro CD, the Company incurred approximately $78.0 million in debt, of
which approximately $50.0 million will be repaid with the proceeds to the
Company of the offering made hereby. In connection with future acquisitions, the
Company may incur substantial amounts of debt. Servicing such debt may result in
decreases in earnings per share, and the inability on the part of the Company to
service such debt would result in a material adverse effect on the Company's
business, financial condition and results of operations. Finally, the Company
expects that future acquisitions will generally be required to be accounted for
using the purchase method. As a result of such accounting treatment, the Company
may be required to take charges to operations or to amortize goodwill in
connection with future acquisitions. As a result of acquisitions completed since
mid-1996, the Company was required to take significant acquisition-related
charges to operations and will be required to amortize goodwill and other
intangibles over periods of 1 to 15 years. The acquisition-related charges and
amortization of goodwill and other intangibles have had and will continue to
have an adverse effect on net income. To the extent that future acquisitions
result in substantial charges to operations, incurrence of debt and amortization
of goodwill and other intangibles, such acquisitions could have an adverse
effect on the Company's net income, earnings per share and overall financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Strategy."

Recent Changes in Senior Management; Constraints on Management
Resources. The Company has experienced rapid growth, particularly as a result
of its recent acquisitions, and believes that as a result the hiring and
retention of senior management will be essential to the Company's ability to
manage growth successfully. In 1996 and the first nine months of 1997, the lack
of senior management resources resulted in a few key individuals taking on
multiple roles and responsibilities in the Company, which in turn placed a
significant strain on the Company's senior management. While the Company
believes it has filled many key management positions in the last several months,
there can be no assurance that the Company will be successful in attracting

4
<PAGE> 8

and retaining senior management personnel in the future. The Company's founder
and Chairman of the Board, Vinod Gupta, expects to remain an active Chairman of
the Board but to reduce his role in the Company's day-to-day management over the
next twelve months due to the Company's employment of additional executive
officers. Mr. Gupta may be offered an appointed position with the Federal
Government. If such an appointment is offered to and accepted by Mr. Gupta, Mr.
Gupta will be required to resign as an employee and director of the Company, but
he will not be required to divest himself of his shares in the Company.

The Company hired Scott Dahnke as its Chief Executive Officer in October
1997, Steven Purcell as its Chief Financial Officer in April 1997, Gregory Back
as its Executive Vice President of Corporate Planning and Business Development,
Joseph Szczepaniak as the President of the Company's Consumer CD-ROM division
and Kevin Hall as Senior Vice President of Special Projects in October 1997 and
Rick Puckett as its Corporate Controller in September 1997. Messrs. Purcell,
Szczepaniak and Puckett had no prior experience with the Company. Messrs.
Dahnke, Back and Hall served as consultants to the Company since May 1997, but
did not have experience with the day-to-day management of the Company. This new
management team does not have experience working together or working with the
Company's other senior management and personnel. Failure of the new management
team to manage growth, work together or work effectively with the Company's
other senior management could result in disruptions in operations or the
departure of key personnel, which in turn could have a material adverse effect
on the Company's business, financial condition or results of operations. See
"Management."

Fluctuations in Operating Results; Failure to Achieve Anticipated
Growth. The Company believes that future operating results will be subject to
quarterly and annual fluctuations, and that long term growth will depend upon
the Company's ability to expand its present business and complete strategic
acquisitions. The Company's net sales on a quarterly basis can be affected by
seasonal characteristics and certain other factors. For example, the Company
experiences higher revenue from its sales leads products in the fall of each
year due to increases in direct marketing by the Company's clients in the fourth
quarter of each year. In addition, the Company typically experiences increases
in revenue in the two months following introduction of new editions of its
consumer CD-ROM products. Revenue from sales lead generation products is
generally lower in the summer due to decreased direct marketing activity of the
Company's customers during that time. The Company's operating expenses are
determined in part based on the Company's expectations of future revenue growth
and are substantially fixed. As a result, unexpected changes in revenue levels
will have a disproportionate effect on net income in any given period. Long term
growth will be adversely affected if the Company fails to broaden its existing
product and service offerings, increase sales of products and services, or
expand into new markets, or fails to complete acquisitions or successfully
integrate acquired operations into its existing operations. To the extent there
are fluctuations in operating results or the Company fails to achieve long-term
internal growth or growth through acquisitions, there could be an adverse affect
on the Company's business, financial condition, results of operations or stock
price. See "Price Range of Common Stock" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Risk of Product Returns. The Company has agreements that allow retailers
certain rights to return the Company's consumer CD-ROM products and consumers
may also seek to return such products to the Company. In the past the Company
has offered customers a money-back guarantee on its products. Accordingly, the
Company is exposed to the risk of product returns from retailers, distributors,
and direct purchasers, particularly in the case of products sold shortly before
introduction of the next year's edition of the same product. At the time of
product sales, the Company establishes reserves based on estimated future
returns of products, taking into account promotional activities, the timing of
new product introductions, seasonal variations in product returns, distributor
and retailer inventories of the Company's products and other factors. The
Company's product returns have historically been high in the fourth fiscal
quarter, immediately prior to and after the introduction of new editions of the
Company's products. Actual product returns could differ from estimates, and
product returns that exceed the Company's reserves could adversely affect the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 2 of Notes to Consolidated Financial Statements.

5
<PAGE> 9

Restatement of Financial Statements. The Company was required to restate
its financial statements twice in 1997. One restatement was required in
connection with the recognition of compensation expense associated with a former
officer of the Company and the other was required in connection with recognition
and amortization of goodwill associated with an acquisition. Because of these
recent restatements of financial statements, any future restatement of the
Company's financial statements, to the extent it is material, could have an
adverse affect on the Company's results of operations and stock price. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Risks Associated with Changes in Technology. Advances in information
technology may result in changing customer preferences for products and product
delivery formats in the business and consumer marketing information industry.
The Company believes it is presently the leading provider of marketing
information on CD-ROM. However, the Company believes that if customers
increasingly look to the Internet, DVD or other new technology for information
resources, the market for business and consumer information on CD-ROM may
contract and prices for CD-ROM products may have to decrease or CD-ROM products
may become obsolete. Failure of the Company to successfully shift its products
to the Internet or DVD or to successfully introduce products that take advantage
of other technological changes may thus have an adverse effect on the Company's
business, results of operations and financial condition. See
"Business -- Products and Services."

Volatility and Uncertainties With Respect to Stock Price. As with other
companies that have experienced rapid growth, the Company has experienced and is
likely to continue to experience substantial volatility in its stock price.
Factors such as announcements by either the Company or its competitors of new
products or services or of changes in product or service pricing policies,
quarterly fluctuations in the Company's operating results, announcements of
technical innovations, announcements relating to strategic relationships or
acquisitions, changes in earnings estimates, opinions or ratings by analysts,
and general market conditions or market conditions within the business and
consumer marketing information industry, among other factors, may have
significant impact on the Company's stock price. Should the Company fail to
introduce, enhance or integrate products or services on the schedules expected,
its stock price could be adversely affected. It is likely that in some future
quarter the Company will fail to achieve anticipated operating results, and this
failure will have a material adverse effect on the Company's stock price. In
addition, the Company's Class A Common Stock and Class B Common Stock have been
trading for a very short time. While the Company expects the Class A Common
Stock and Class B Common Stock prices to remain roughly equal in most market
conditions, the difference in rights of the two classes, coupled with the
general volatility of the Company's stock price described above, could cause the
Class A Common Stock and Class B Common Stock to trade at different prices. In
the event of a tender offer or other unsolicited attempt to acquire the Company,
shares of Class B Common Stock would likely trade at a substantial premium to
shares of Class A Common Stock as a result of the disparity of voting rights.
Future issuances of both Class A Common Stock and Class B Common Stock could
affect the price for either or both classes of Common Stock. For the foregoing
reasons, the price for the Company's Class A Common Stock may be subject to
substantial fluctuation. See "Price Range of Common Stock" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Risk of Discounted Value of Class A Common Stock in Future Acquisitions or
Financings. The Company presently plans to issue primarily Class A Common Stock
in future acquisitions or financings. If the Class A Common Stock trades at a
discount to the Class B Common Stock, then acquisitions or financings involving
the issuance of Class A Common Stock will be economically more dilutive to
existing stockholders than such transactions would be if the Company issued
Class B Common Stock. This dilution, if it occurs, will result in decreased
earnings per share and lower stock prices for both the Class A Common Stock and
the Class B Common Stock. See "Description of Capital Stock."

Competition. The business and consumer marketing information industry is
highly competitive. In particular, the rapid expansion of the Internet creates a
substantial new channel for distributing business information to the market, and
a new avenue for future entrants to the business and consumer marketing
information industry. There is no guarantee that the Company will be successful
in this new market. Many of the Company's principal or potential future
competitors are much larger than the Company and have much larger capital bases
from which to develop and compete with the Company. In business sales lead
generation

6
<PAGE> 10

products, the Company faces competition from Dun's Marketing Services ("DMS"), a
division of Dun & Bradstreet. DMS, which relies upon information compiled from
Dun & Bradstreet's credit database, tends to focus on marketing to large
companies. In business directory publishing, the Company competes primarily with
Regional Bell Operating Companies, Donnelley Marketing and many smaller,
regional directory publishers. In consumer sales lead generation products, the
Company competes with Metromail, Donnelley Marketing, R.L. Polk, Trans Union,
Equifax and Experian, both directly and through reseller networks. In data
processing services, the Company competes with Acxiom, May & Speh, Harte-Hanks
Data Technologies and Direct Marketing Technologies. In consumer products, the
Company competes with certain small producers of CD-ROM products. In addition,
the Company faces competition to the extent similar information is available on
the Internet. See "Business -- Competition."

Risks Associated with Computer Systems and Software Upgrades. Many of the
Company's currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, the
re-engineering of the Company's computer systems and software products to
achieve year 2000 compliance will need to be completed within approximately two
years. System wide computer upgrades and re-engineering can lead to
unanticipated system and software defects that could disrupt the Company's data
compilation, processing and packaging activities. In addition, the Company needs
to replace its accounting systems in order to accommodate recent growth. If the
Company is unsuccessful in upgrading its computer systems and software, or if
successful completion of such upgrades takes longer than anticipated, such
failure or delay would have a material adverse effect on the Company's business,
competitive position, results of operations and financial condition.

Loss of Data Centers. The Company's business depends on computer systems
contained in the Company's data centers located in Omaha, Nebraska, Carter Lake,
Iowa and Montvale, New Jersey. A fire or other disaster affecting any of the
Company's data centers could disable the Company's computer systems. Any
significant damage to any of the data centers could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Computer Operations and Database Protection."

Limited Protection of Intellectual Property and Proprietary Rights. The
Company regards its databases and software as proprietary. The Company's
databases are copyrighted, and the Company depends on trade secret and
non-disclosure safeguards for protection of its software. The Company
distributes its products under agreements that grant customers a license to use
the Company's products in the ordinary course of their businesses and contain
terms and conditions prohibiting the unauthorized reproduction of the Company's
products. In addition, the Company generally enters into confidentiality
agreements with its management and programming staff and limits access to and
distribution of its proprietary information. There can be no assurance that the
foregoing measures will be adequate to protect the Company's intellectual
property. See "Business -- Intellectual and Other Proprietary Rights."

Direct Marketing Regulation and Dependence Upon Mail Carriers. The Company
and many of its customers engage in direct marketing. Certain data and services
provided by the Company are subject to regulation by federal, state and local
authorities. In addition, growing concerns about individual privacy and the
collection, distribution and use of information about individuals have led to
self-regulation of such practices by the direct marketing industry through
guidelines suggested by the Direct Marketing Association (the "DMA") and to
increased federal and state regulation. Compliance with existing federal, state
and local laws and regulations and industry self-regulation has not to date had
a material adverse effect on the Company's business, financial condition or
results of operations. Nonetheless, federal, state and local laws and
regulations designed to protect the public from the misuse of personal
information in the marketplace and adverse publicity or potential litigation
concerning the commercial use of such information may increasingly affect the
operations of the Company, which could result in substantial regulatory
compliance or litigation expense or a loss of revenue. Certain proposed federal
legislation could also create proprietary rights in certain "white pages"
information that is presently in the public domain, which could in turn increase
the cost to the Company of acquiring data or disrupt its ability to do so. The
direct mail industry depends and will continue to depend upon the services of
the United States Postal Service and other private mail carriers. Any
modification

7
<PAGE> 11

by the United States Postal Service of its rate structure, any increase in
public or private postal rates generally or any disruption in the availability
of public or private postal services could have a negative impact on the demand
for business information, direct mail activities and the cost of the Company's
direct mail activities.

Certain Anti-takeover Effects. Upon completion of the offering made hereby
the Company's Chairman of the Board, Vinod Gupta, and his family (the "Gupta
Family") will own voting stock constituting approximately 38.1% of the Company's
total stockholder vote (approximately 37.9% if the over-allotment option is
exercised in full), based on the number of shares outstanding at September 30,
1997. As a result, after the offering the Gupta Family will remain in a position
to control most matters requiring stockholder approval, including the election
of the Company's Board of Directors and the approval of certain merger
proposals. In addition, the Company's charter documents contain certain
provisions that may delay, defer or prevent a takeover of the Company, including
the Company's two-class Common Stock structure, a class of undesignated
Preferred Stock that the Board can issue without stockholder consent, a
classified board of directors with three-year staggered terms, and a
supermajority stockholder vote requirement to amend the Certificate of
Incorporation. The Company is also governed by Section 203 of the General
Corporation Law of the State of Delaware, which imposes a three-year moratorium
on certain business combinations between the Company and an interested
stockholder. Finally, the Company has adopted stockholder rights plans with
respect to its Class A Common Stock and Class B Common Stock, which are
specifically designed to make an unsolicited, non-negotiated takeover attempt
more difficult. See "Description of Capital Stock -- Certain Anti-Takeover
Effects."

8
<PAGE> 12

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 6,480,500 shares of
Class A Common Stock offered by the Company hereby at the assumed public
offering price of $12.75, after deducting the underwriting discount and
estimated offering expenses payable by the Company, are estimated to be
$77,895,056 ($93,338,493 if the Underwriters' over-allotment option is exercised
in full). The Company will not receive any proceeds from the sale of Class A
Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."

The Company intends to use the net proceeds from this offering to repay
debt and for general corporate purposes, including working capital and potential
future acquisitions. The Company plans to repay approximately $50.0 million in
debt with the proceeds of the offering, which debt was incurred since January 1,
1997 primarily in connection with the acquisitions of DBA and Pro CD. The debt
to be repaid matures on February 14, 2000 and accrues interest at the bank's
base rate or LIBOR plus a percentage ranging from 0.375% to 0.625% based on the
Company's funded debt ratio. A portion of the net proceeds may also be used for
investment in or acquisition of complementary products, technologies or
businesses. As of the date of this Prospectus, the Company has no binding
commitments with respect to any specific acquisition but the Company frequently
evaluates the strategic opportunities available to it and intends to
aggressively pursue opportunities that it believes fit its business strategy.
Pending such uses, the net proceeds will be invested in marketable debt and
equity securities.

PRICE RANGE OF COMMON STOCK

The Company's Class A Common Stock is traded on the Nasdaq National Market
under the symbol ABIIA. The following table sets forth for the periods indicated
the high and low sale price for the Company's Common Stock prior to the Stock
Dividend, as adjusted to give effect to the Reclassification and the Stock
Dividend.

<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
----------- ------ ------
<S> <C> <C>
1995 1st Quarter............................................ $ 7.42 $ 5.42
2nd Quarter........................................... 9.92 7.08
3rd Quarter........................................... 10.75 8.58
4th Quarter........................................... 10.63 8.38
1996 1st Quarter............................................ 9.75 7.00
2nd Quarter........................................... 10.00 7.63
3rd Quarter........................................... 9.50 5.25
4th Quarter........................................... 11.50 7.88
1997 1st Quarter............................................ 12.00 9.25
2nd Quarter........................................... 11.94 8.50
3rd Quarter........................................... 15.94 10.50
4th Quarter (through October 9, 1997*)................ 13.38 12.00
</TABLE>

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

* Payment date of the Stock Dividend

Since October 10, 1997, the date that the Class A Common Stock and Class B
Common Stock began trading separately, the highest closing price for the Class A
Common Stock was $12.75, and the lowest closing price for such stock was $11.75.
For the same period, the highest closing price for the Class B Common Stock was
$13.63, and the lowest closing price for such stock was $11.88. The last
reported sale price for the Company's Class A Common Stock is indicated on the
cover of the Prospectus. As of October 10, 1997, there were 96 holders of record
of Class A Common Stock and 96 holders of record of Class B Common Stock.

DIVIDEND POLICY

The Company has not declared or paid any cash dividends on its capital
stock. Pursuant to certain financing arrangements, the Company has agreed not to
pay cash dividends in any four quarter period in excess of the lesser of
$5,000,000 or 25% of net income for such four quarter period. The Company
currently anticipates that it will retain all future earnings for use in its
business and does not anticipate paying any cash dividends in the foreseeable
future.

9
<PAGE> 13

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1997 (i) on an actual basis, (ii) on a pro forma basis to give
effect to the Reclassification and the Stock Dividend and (iii) on such pro
forma basis as adjusted to give effect to the sale by the Company of the
6,480,500 shares of Class A Common Stock offered hereby at an assumed offering
price of $12.75 per share and the application of the estimated proceeds
therefrom. This table should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ------------ -----------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, current portion (1)....................... $ 531 $ 531 $ 531
======== ======== ========
Long-term debt, excluding current portion (1)............. 81,636 81,636 31,636
Stockholders' equity:
Preferred Stock, $.0025 par value per share, 5,000,000
shares authorized; no shares issued or outstanding... -- -- --
Common Stock, $.0025 par value per share, actual:
75,000,000 shares authorized, 48,971,664 shares
issued and 48,806,664 shares outstanding(2); pro
forma and as adjusted: none.......................... 61 -- --
Class A Common Stock (3), actual: none; pro forma:
$.0025 par value per share, 220,000,000 shares
authorized, 24,403,332 shares issued and outstanding;
as adjusted: 30,883,832 shares issued and
outstanding.......................................... -- 61 77
Class B Common Stock (4), actual: none; pro forma and as
adjusted: $.0025 par value per share, 75,000,000
shares authorized, 24,568,332 shares issued and
24,403,332 shares outstanding........................ -- 61 61
Paid-in capital......................................... 68,270 68,209 146,088
Retained earnings....................................... 9,410 9,410 9,410
Treasury stock, at cost, 165,000 shares held............ (2,281) (2,281) (2,281)
Unrealized holding gain, net of tax..................... 1,216 1,216 1,216
-------- -------- --------
Total stockholders' equity........................... 76,676 76,676 154,571
-------- -------- --------
Total capitalization............................ $158,312 $158,312 186,207
======== ======== ========
</TABLE>

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

(1) See Note 7 of Notes to Consolidated Financial Statements for information
regarding long-term debt and capitalized leases.

(2) Excludes 6,386,050 shares reserved as of September 30, 1997 for issuance
upon the exercise of outstanding options at a weighted average exercise
price of $8.47 per share and 3,613,950 shares reserved for future grant or
issuance under the Company's stock option plan at September 30, 1997. See
Note 9 to the Consolidated Financial Statements.

(3) Based on the number of shares of Common Stock outstanding at September 30,
1997, as adjusted to give effect to the Reclassification and the Stock
Dividend. Excludes 3,193,025 shares of Class A Common Stock reserved for
issuance upon the exercise of outstanding options at a weighted average
exercise price of $8.47 per share, 1,806,975 shares reserved for future
grant of issuance under the Company's 1992 Stock Option Plan and 2,000,000
shares of Class A Common Stock reserved for the 1997 Class A Common Stock
Option Plan.

(4) Based on the number of shares of Common Stock outstanding at September 30,
1997, as adjusted to give effect to the Reclassification and the Stock
Dividend. Excludes 3,193,025 shares of Class B Common Stock reserved for
issuance upon exercise of outstanding options at a weighted average exercise
price of $8.47 per share and 1,806,975 shares reserved for future grant of
issuance under the Company's 1992 Stock Option Plan.

10
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data for each of the years in
the five years ended December 31, 1996 has been derived from the Company's
audited Consolidated Financial Statements and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes included
elsewhere in this Prospectus. The selected consolidated financial data for the
nine months ended September 30, 1996 and 1997 has been derived from unaudited
interim financial statements and, in the opinion of management, include all
adjustments that are of a normal recurring nature. The Consolidated Financial
Statements as of December 31, 1995 and 1996, and June 30, 1997, and for each of
the years in the three years ended December 31, 1996 and the six months ended
June 30, 1997, have been audited by Coopers & Lybrand L.L.P. and are included
elsewhere in this Prospectus. The following data has been restated to reflect
the Reclassification and the Stock Dividend.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net sales.............................. $48,517 $55,752 $69,603 $86,766 $108,298 $76,695 $139,511
Costs and expenses:
Database and production costs........ 11,774 13,973 18,153 23,999 29,272 20,673 38,674
Selling, general and
administrative..................... 20,051 23,072 28,249 37,724 45,766 31,674 59,396
Depreciation and amortization........ 2,410 2,651 3,125 3,469 4,855 3,291 24,397
Acquisition-related charges(1)....... -- -- -- -- 21,500 21,500 56,098
------- ------- ------- ------- -------- ------- --------
Total costs and expenses............... 34,235 39,696 49,527 65,192 101,393 77,138 178,565
------- ------- ------- ------- -------- ------- --------
Operating income (loss)................ 14,282 16,056 20,076 21,574 6,905 (443) (39,054)
Other income (expense):
Investment income.................... 607 1,172 1,109 1,322 3,194 1,567 2,513
Interest expense..................... (605) (298) (247) (157) (209) (53) (2,687)
Other................................ 58 -- -- -- (943) (740) --
------- ------- ------- ------- -------- ------- --------
Income (loss) before income taxes and
discontinued operation............... 14,342 16,930 20,938 22,739 8,947 331 (39,228)
Income taxes(2)........................ 4,435 5,941 7,710 8,421 3,400 126 4,299
------- ------- ------- ------- -------- ------- --------
Income (loss) from continuing
operations........................... 9,907 10,989 13,228 14,318 5,547 205 (43,527)
Loss on discontinued operation(3)...... -- (214) (404) (2,317) (355) (355) --
Loss from abandonment of
subsidiary(3)........................ -- -- -- -- (1,373) (1,373) --
------- ------- ------- ------- -------- ------- --------
Net income (loss)(2)................... $ 9,907 $10,775 $12,824 $12,001 $ 3,819 $(1,523) $(43,527)
======= ======= ======= ======= ======== ======= ========
Earnings per share:
Income (loss) from continuing
operations......................... $ 0.25(2) $ 0.27 $ 0.32 $ 0.35 $ 0.13 $ 0.00 $ (0.91)
Loss on discontinued operation and
abandonment of subsidiary.......... -- (0.01) (0.01) (0.06) (0.04) (0.04) --
------- ------- ------- ------- -------- ------- --------
Net income (loss).................... $ 0.25(2) $ 0.26 $ 0.31 $ 0.29 $ 0.09 $ (0.04) $ (0.91)
======= ======= ======= ======= ======== ======= ========
Weighted average shares outstanding.... 40,329 41,315 41,356 41,475 42,065 41,616 47,964
======= ======= ======= ======= ======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.......................... $23,465 $30,765 $35,411 $45,363 $ 45,727 $42,709 $ 62,353
Total assets............................. 47,807 61,027 77,783 91,241 107,877 98,499 196,035
Long-term debt, including current
portion................................ 5,306 4,587 3,821 2,039 1,135 1,026 82,167
Stockholders' equity..................... 39,508 50,665 63,326 76,084 87,605 77,556 76,676
</TABLE>

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

(1) In 1996, represents charges for the write-off of purchased in-process
research and development costs of approximately $10.0 million relating to
the acquisition of Digital Directory Assistance and approximately $11.5
million related to the change in estimated useful lives based on
management's evaluation of certain intangibles related to acquisitions prior
to 1995. In 1997, represents the write-off of $53.5 million of purchased
in-process research and development costs and $2.6 million of other
restructuring costs related to the acquisitions of DBA and Pro CD.

(2) Prior to February 1992, the Company was taxed as an S corporation.
Accordingly, net income prior to February 1992 contained no provision for
federal and state income taxes. Had net income reflected a tax provision at
a combined federal

11
<PAGE> 15

and state income tax rate of 36% in 1992, net income and earnings per share
would have approximated $9.2 million and $0.23, respectively.

(3) During 1995, the Company sold American Business Communications for $3.0
million in the form of a non-recourse promissory note. The aggregate losses
from discontinued operations from this disposition were approximately $3.3
million from 1993 through 1996. In addition, in 1996 the Company recorded a
loss of $1.4 million attributable to the default by the purchaser on the
non-recourse promissory note delivered to the Company in this transaction.

12
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. Except for
the historical information contained herein, the discussion in this Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.

OVERVIEW

The Company is a leading provider of business and consumer marketing
information products and data processing services. The Company's products and
services help its clients generate new customers more effectively at lower cost.
The Company's key assets include a proprietary database of over 11 million
businesses and a consumer database of over 113 million households and 180
million individuals in the United States and Canada, which the Company believes
are among the most comprehensive and accurate available. The Company leverages
these key assets by selling a broad range of marketing information products and
data processing services through targeted distribution channels primarily to
small and medium size businesses and also to consumers and larger corporations.

The Company's business is organized around three principal product lines
consisting of sales lead generation products, data processing services and
consumer CD-ROM products, which accounted for 68%, 22% and 10% of net sales,
respectively, in the nine months ended September 30, 1997. Historically, the
Company's revenue has been derived predominantly through the sale of its sales
lead generation products. The Company began to recognize significant revenue
from its data processing services in 1997 and revenue from its consumer CD-ROM
products increased substantially between 1993 and 1997. Over 75% of the
Company's net sales in 1996 were attributable to customers who had previously
purchased the Company's products. No customer represented greater than 7% of net
sales in the nine months ended September 30, 1997. The Company's net sales
increased at a compounded annual rate of 22% to $108.3 million in 1996 from
$48.5 million in 1992, both through the introduction of new products and new
distribution channels and through the strategic acquisition of complementary
businesses. For the nine months ended September 30, 1997, total net sales were
$139.5 million.

The Company has supplemented its internal growth through strategic
acquisitions. The Company has completed six acquisitions since mid-1996. Through
these acquisitions, the Company has increased its presence in the consumer
marketing information industry, greatly increased its ability to provide data
processing solutions, added two consumer CD-ROM product lines and broadened its
offerings of business marketing information. The following table summarizes
these acquisitions:

<TABLE>
<CAPTION>
ACQUIRED COMPANY KEY ASSET DATE ACQUIRED
---------------- --------- -------------
<S> <C> <C>
Digital Directory Assistance Consumer CD-ROM Products August 1996
County Data Corporation New Businesses Database November 1996
Marketing Data Systems Data Processing Services November 1996
BJ Hunter Canadian Business Database December 1996
DBA Consumer Database and Data Processing Services February 1997
Pro CD Consumer CD-ROM Products August 1997
</TABLE>

The Company incurred acquisition-related charges to operations, consisting
of the write-off of acquired in-process research and development and other
restructuring charges of an aggregate of approximately $10.0 million in 1996 in
connection with the acquisition of Digital Directory Assistance and $56.1
million in the nine months ended September 30, 1997 in connection with the
acquisitions of DBA and Pro CD. In

13
<PAGE> 17

addition, the Company expects to amortize an aggregate of approximately $91.2
million in goodwill and other intangibles over periods of 1 to 15 years in
connection with acquisitions completed since mid-1996. Of this amount, $19.0
million constitutes amortization of purchased databases associated with the DBA
acquisition over 12 months beginning on February 1, 1997 which will result in
$4.8 million and $1.6 million being recognized in the three months ended
December 31, 1997 and March 31, 1998, respectively. The Company's strategy is to
continue growth both internally and through future strategic acquisitions. While
there are currently no binding commitments with respect to any particular future
acquisitions, the Company frequently evaluates the strategic opportunities
available to it and intends to aggressively pursue acquisitions of complementary
products, technologies or businesses that it believes fit its business strategy.
See Notes 2, 3, 6 and 16 of Notes to Consolidated Financial Statements.

The Company's revenue is primarily generated from the sale of its products
and services and the licensing of its data to third parties. Revenue from the
sale of products and services is generally recognized when the product is
delivered or the services are performed. A portion of revenue from data
licensing is recognized at the time the initial set of data is delivered, with
the remaining portion being deferred and recognized over the license term as the
Company provides updated information. Reserves are established for estimated
returns and uncollectible amounts.

The Company's operating expenses are determined in part based on the
Company's expectations of future revenue growth and are substantially fixed in
the short term. As a result, unexpected changes in revenue will have a
disproportionate effect on net income in any given period. The Company's
database and production costs are generally expensed as incurred and relate
principally to maintaining, verifying and updating its database, fulfilling
customer orders and the direct costs associated with the production of CD-ROM
titles. Costs to develop new databases, including the consumer database
currently under development, are capitalized by the Company and amortized upon
the successful completion of the databases over a period not to exceed 12
months. Selling, general and administrative expenses consist principally of
salaries and benefits associated with the Company's sales force as well as costs
associated with its catalogs and other promotional materials.

Database and production costs have increased as a percentage of net sales
as a result of higher costs associated with data processing services and CD-ROM
production. To the extent that data processing and CD-ROM sales constitute a
greater percentage of net sales, the Company expects database and production
costs to increase as a percentage of net sales in the future. In addition, the
Company is building infrastructure for continued growth and increased sales, and
as a result selling, general and administrative expenses have grown as a
percentage of net sales.

The Company has been profitable on an operating basis in each year since
its inception in 1972. The Company incurred a net loss in the nine months ended
September 30, 1997, and expects a net loss in fiscal 1997, due to
acquisition-related write-offs of acquired in-process research and development
and restructuring charges and amortization of goodwill and other intangibles in
connection with the acquisitions of DBA, Pro CD and other businesses. Excluding
these acquisition-related write-offs and amortization, the Company would have
been profitable in the nine months ended September 30, 1997.

During 1995, the Company sold American Business Communications for $3.0
million in the form of a non-recourse promissory note. The aggregate losses from
discontinued operations from this disposition were approximately $3.3 million
from 1993 through 1996. In addition, in 1996 the Company recorded a loss of $1.4
million attributable to the default by the purchaser on the non-recourse
promissory note delivered to the Company in this transaction.

14
<PAGE> 18

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items
from the Company's statement of operations data expressed as a percentage of net
sales:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------
1994 1995 1996 1996 1997
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Net sales................................................. 100% 100% 100% 100% 100%
Costs and expenses:
Database and production costs........................... 26 28 27 27 28
Selling, general and administrative..................... 41 43 42 41 43
Depreciation and amortization........................... 4 4 5 5 17
Acquisition-related charges............................. -- -- 20 28 40
--- --- --- --- ----
Total costs and expenses........................ 71 75 94 101 128
--- --- --- --- ----
Operating income (loss)................................... 29 25 6 (1) (28)
Other income, net......................................... 1 2 2 1 --
--- --- --- --- ----
Income (loss) before income taxes and discontinued
operation............................................... 30 27 8 -- (28)
Income taxes.............................................. 11 10 3 -- 3
--- --- --- --- ----
Income (loss) from continuing operations.................. 19 17 5 -- (31)
Loss on discontinued operation and abandonment of
subsidiary.............................................. 1 3 1 (2) --
--- --- --- --- ----
Net income (loss)......................................... 18% 14% 4% (2)% (31)%
=== === === === ====
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996

Net Sales. Net sales for the nine months ended September 30, 1997 were
$139.5 million, an increase of $62.8 million, or 82%, from $76.7 million in the
comparable period in 1996. Of this increase, approximately $38.3 million were
attributable to the net sales of DBA for the period from February 1, 1997, the
date of acquisition, through September 30, 1997.

Net sales of sales lead generation products for the nine months ended
September 30, 1997 were $94.5 million, a 45% increase from $65.3 million in the
comparable period in 1996. Excluding the effect of acquisitions completed after
September 30, 1996, net sales of sales lead generation products for the nine
months ended September 30, 1997 were $79.0 million, a 21% increase from the
comparable period in 1996. Net sales of sales lead generation products
attributable to acquired companies and included in the nine months ended
September 30, 1997 were approximately $15.5 million, or 16% of net sales. Of
this amount, approximately $10.7 million were attributable to the net sales of
DBA from February 1, 1997 through September 30, 1997. The remaining $4.8 million
were primarily attributable to the net sales of County Data Corporation and BJ
Hunter for the nine months ended September 30, 1997.

Net sales of data processing services for the nine months ended September
30, 1997 were $30.9 million, as compared to $3.1 million in the comparable
period in 1996. This increase is directly attributable to the acquisitions of
DBA and Marketing Data Systems. Of the increase, $27.6 million were attributable
to the net sales of DBA from February 1, 1997 through September 30, 1997 and
$1.5 million were attributable to the net sales of Marketing Data Systems for
the nine months ended September 30, 1997.

Net sales of consumer CD-ROM products for the nine months ended September
30, 1997 were $14.1 million, a 70% increase from $8.3 million in the comparable
period in 1996. This increase was primarily attributable to the acquisitions of
Digital Directory Assistance in September 1996 and Pro CD effective in August
1997.

Database and Production Costs. Database and production costs for the nine
months ended September 30, 1997 were $38.7 million, an 87% increase from $20.7
million in the comparable period in 1996. These costs constituted 28% of net
sales in the nine months ended September 30, 1997 and 27% of net sales in the

15
<PAGE> 19

comparable period in 1996. The increase as a percentage of net sales was the
result of higher database and production costs for data processing services and
CD-ROM production as compared to the costs for maintaining and verifying the
Company's databases.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 1997 were $59.4
million, an 88% increase from $31.7 million in the comparable period in 1996.
These expenses constituted 43% of net sales in the nine months ended September
30, 1997 and 41% as a percentage of net sales in the comparable period in 1996.
This increase as a percentage of net sales was primarily attributable to an
increase in direct marketing activities for all of the Company's products and
services, continued investment in the Company's field sales organization and
promotional marketing of consumer CD-ROM products.

Depreciation and Amortization Expenses. Depreciation and amortization
expenses for the nine months ended September 30, 1997 were $24.4 million, as
compared to $3.3 million in the comparable period in 1996. These expenses
constituted 17% of net sales in the nine months ended September 30, 1997, and 5%
of net sales in comparable period of 1996. Of such increases, $15.8 million
represented amortization of acquired database costs and purchased data
processing costs related to the acquisition of DBA, which are being amortized
over lives of one or two years. The remaining increase reflects additional
depreciation on property and equipment additions and amortization of intangibles
for certain other acquisitions recorded since September 30, 1996.

Acquisition-Related Charges. As part of the acquisition of Digital
Directory Assistance in August 1996, the Company recorded charges of $10.0
million in the nine months ended September 30, 1996 for acquired in-process
research and development costs. Additionally, in September 1996, the Company
recorded a charge of $11.5 million due to the change in estimated useful lives
based on management's evaluation of the remaining lives of certain intangibles
related to acquisitions made prior to 1995. These acquisition-related charges
constituted $21.5 million constituted 28% of net sales for the nine months ended
September 30, 1996.

As part of the acquisition of DBA in February 1997 and Pro CD in August
1997, the Company recorded charges totaling $56.1 million, or 40% of net sales,
in the nine months ended September 30, 1997 for acquired in-process research and
development costs as well as other related integration and organizational
restructuring costs.

Operating Income (Loss). As a result of the factors described above, the
Company had an operating loss of $39.1 million, or 28% of net sales, in the nine
months ended September 30, 1997, as compared to an operating loss of $443,000,
or 1% of net sales, in the comparable period in 1996. Excluding the effect of
the amortization and acquisition related charges described above, the Company
would have had operating income of $32.8 million, or 24% of net sales, in the
nine months ended September 30, 1997, and operating income of $21.1 million, or
27% of net sales, in the nine months ended September 30, 1996.

Other Income (Expense), Net. Other income (expense), net for nine months
ended September 30, 1997 was $(174,000), as compared to $774,000 in the
comparable period in 1996. This decrease was primarily attributable to interest
expense incurred on the Company's credit facility, of which $78.0 was
outstanding at September 30, 1997 (See Note 3). The Company had no outstanding
borrowings under a credit facility at September 30, 1996.

Income Taxes. A provision for income taxes at a combined federal and state
tax rate of 38% was recorded with respect to the nine months ended September 30,
1997.

1996 COMPARED TO 1995

Net Sales. Net sales for 1996 were $108.3 million, a 25% increase from
$86.8 million in 1995. Net sales of sales lead generation products for 1996 were
$89.7 million, an 18% increase from $75.9 million in 1995. Net sales of consumer
CD-ROM products for 1996 were $13.9 million, a 74% increase from $8.0 million in
1995. Net sales of data processing services were $4.6 million, a 64% increase
from $2.8 million in 1995.

Database and Production Costs. Database and production costs for 1996 were
$29.3 million, an increase of 22% from $24.0 million in 1995.

16
<PAGE> 20

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1996 were $45.8 million, an increase of 21% from
$37.7 million in 1995. This increase was primarily attributable to an overall
increase in direct marketing activities for all of the Company's products and
services, continued investment in the Company's field sales organization and
promotional marketing of consumer CD-ROM products, partially offset by a
one-time charge of $3.1 million in 1995 to recognize compensation expense
related to the repurchase of capital stock from a former officer of the Company.

Depreciation and Amortization Expenses. Depreciation and amortization of
goodwill and other intangibles were $4.9 million in 1996, as compared to $3.5
million in 1995, primarily due to the increased amortization related to
acquisitions.

Acquisition-Related Charges. During the third quarter of 1996, the Company
recorded acquisition-related charges to continuing operations of $10.0 million
for acquired in-process research and development associated with the acquisition
of Digital Directory Assistance and $11.5 million associated with a change in
the estimated useful lives of certain intangible assets related to acquisitions
prior to 1995.

Operating Income. As a result of the factors described above, operating
income in 1996 was $6.9 million, as compared to $21.6 million in 1995. Excluding
the acquisition-related charges described above, the Company would have had
operating income of $28.4 million, or 26% of net sales, in 1996.

Other Income, Net. Other income, net for 1996 was $2.0 million, as
compared to $1.2 million in 1995, primarily due to net realized gains of $1.3
million on the sale of marketable securities during 1996 compared to net
realized losses of $339,000 on the sale of marketable securities during 1995.
Interest expense increased slightly due to the addition of capitalized equipment
leases during early 1996. Other expenses consist of a permanent write-down on an
equity investment included in other assets of the consolidated balance sheet and
costs associated with a pooling-of-interests transaction.

1995 COMPARED TO 1994

Net Sales. Net sales for 1995 were $86.8 million, a 25% increase from
$69.6 million in 1994. Net sales of sales lead generation products for 1995 were
$75.9 million, a 16% increase from $65.6 million in 1994. Net sales of consumer
CD-ROM products for 1995 were $8.0 million, as compared to $2.0 million in 1994.

Database and Production Costs. Database and production costs for 1995 were
$24.0 million, a 32% increase from $18.2 million in 1994. The increase in
database and production costs as a percent of net sales was primarily
attributable to increased sales of CD-ROM products which bore a slightly higher
level of costs than the Company's traditional lead generation products.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1995 were $37.7 million, a 34% increase from $28.2
million in 1994. This increase was primarily attributable to an overall increase
in direct marketing activities for all of the Company's products and services,
continued investment in a field sales organization and promotional marketing of
consumer CD-ROM products. This increase also includes a one-time charge of $3.1
million in 1995 to recognize compensation expense related to the repurchase of
capital stock from a former officer of the Company.

Depreciation and Amortization Expenses. Depreciation and amortization
expenses were $3.5 million in 1995, as compared to $3.1 million in 1994,
primarily due to the increased amortization related to acquisitions.

Operating Income. As a result of the factors described above, operating
income in 1995 was $21.6 million, as compared to $20.1 million in 1994.

Other Income, Net. Other income, net for 1995 was $1.2 million, as
compared to $862,000 for 1994. Investment income for 1995 was $1.3 million, as
compared to $1.1 million in 1994, primarily due to an increase in cash and cash
equivalents and investments. Interest expense decreased in 1995 from 1994 due to
lower outstanding debt balances during 1995.

17
<PAGE> 21

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1997, the Company's principal sources of liquidity
included cash and cash equivalents of $10.2 million and marketable securities of
$20.7 million. In February 1997, the Company entered into a $65.0 million credit
facility in connection with the acquisition of DBA. In August 1997, the Company
increased this credit facility to $100.0 million. The primary reason for the
increase was to finance the acquisition of Pro CD. As of the date of this
Prospectus, $78.0 million of this facility had been drawn upon. Approximately
$50.0 million of the Company's debt under this credit facility will be repaid
with the proceeds of the offering made hereby. As of September 30, 1997, the
Company had working capital of $62.4 million.

Net cash provided by operating activities for the nine months ended
September 30, 1997 totaled $17.4 million. The Company spent approximately 4.0
million related to acquisitions of furniture and equipment and $2.4 million
related to building and improvements to its Omaha facility in the nine months
ended September 30, 1997. The Company is building a new facility for the
consumer and business database compilation division in Papillion, Nebraska, with
an estimated cost of $8.0 million, which is anticipated to be completed in
mid-1998.

The Company paid $87.4 million in cash during the nine months ended
September 30, 1997 in connection with the acquisition of certain businesses.
This amount includes $8.1 million, $59.1 million and $18.3 million associated
with the acquisitions of Digital Directory Assistance, DBA and Pro CD,
respectively.

The Company believes that the proceeds from the sale of the Common Stock
offered hereby, together with its existing sources of liquidity and cash
generated from operations, will satisfy the Company's projected working capital
and other cash requirements for at least the next 12 months. To the extent the
Company experiences growth in the future, the Company anticipates that its
operating and investing activities may use cash. Any such future growth and any
acquisitions of other technologies, products or companies may require the
Company to obtain additional equity or debt financing, which may not be
available or may be dilutive.

18
<PAGE> 22

UNAUDITED QUARTERLY RESULTS OF OPERATIONS

The following table sets forth selected financial information for each of
the seven quarters in the period ended September 30, 1997. This information has
been prepared by the Company on the same basis as the Consolidated Financial
Statements included elsewhere in this Prospectus and includes all normal
recurring adjustments necessary to present fairly this information when read in
conjunction with the Company's audited financial statements and the notes
thereto. The operating results for any given quarter are not necessarily
indicative of results for any future period. Earnings per share data and
weighted average shares outstanding have been adjusted for the Reclassification
and the Stock Dividend.

<TABLE>
<CAPTION>
1996 1997
QUARTER ENDED QUARTER ENDED
--------------------------------------- ----------------------------
MARCH JUNE SEPT. DEC. MARCH JUNE SEPT.
31 30 30 31 31 30 30
------- ------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $24,785 $24,325 $ 27,585 $ 31,603 $ 41,948 $47,008 $50,555
Costs and expenses:
Database and production costs........ 6,274 6,654 7,745 8,599 11,415 13,111 14,148
Selling, general and
administrative..................... 10,152 10,113 11,409 14,092 17,986 20,079 21,331
Depreciation and amortization........ 1,164 1,165 962 1,564 6,356 9,056 8,985
Acquisition-related charges.......... -- -- 21,500 -- 51,798 -- 4,300
------- ------- -------- -------- -------- ------- -------
Operating income (loss)................ 7,195 6,393 (14,031) 7,348 (45,607) 4,762 1,791
Other income (expense)................. 399 613 (238) 1,268 42 41 (257)
------- ------- -------- -------- -------- ------- -------
Income (loss) before income taxes and
discontinued operation............... 7,594 7,006 (14,269) 8,616 (45,565) 4,803 1,534
Income taxes........................... 2,885 2,630 (5,389) 3,274 1,631 1,893 775
------- ------- -------- -------- -------- ------- -------
Income (loss) from continuing
operations........................... 4,709 4,376 (8,880) 5,342 (47,196) 2,910 759
Loss on discontinued operation......... -- -- (355) -- -- -- --
Loss from abandonment of subsidiary.... -- -- (1,373) -- -- -- --
------- ------- -------- -------- -------- ------- -------
Net income (loss)...................... $ 4,709 $ 4,376 $(10,608) $ 5,342 $(47,196) $ 2,910 $ 759
======= ======= ======== ======== ======== ======= =======
Net income (loss) per share............ $ 0.11 $ 0.11 $ (0.25) $ 0.12 $ (1.02) $ 0.06 $ 0.02
======= ======= ======== ======== ======== ======= =======
Weighted average shares outstanding.... 41,566 41,602 41,680 43,402 46,412 48,678 48,774
======= ======= ======== ======== ======== ======= =======
Net Sales.............................. 100% 100% 100% 100% 100% 100% 100%
Costs and expenses
Database and production costs........ 25 27 28 27 27 28 28
Selling, general and
administrative..................... 41 42 41 45 43 43 42
Depreciation and amortization........ 5 5 3 5 15 19 18
Acquisition-related charges.......... -- -- 78 -- 123 -- 9
Operating income (loss)................ 29 26 (51) 23 (109) 10 4
Other income (expense)................. 2 3 (1) 4 -- -- (1)
Income (loss) before income taxes and
discontinued operations.............. 31 29 (52) 27 (109) 10 3
Income taxes........................... 12 11 20 10 4 4 2
Loss on discontinued operations and
abandonment of subsidiary............ -- -- (6) -- -- -- --
Net income (loss)...................... 19% 18% 38% 17% (113)% 6% 2%
</TABLE>

19
<PAGE> 23

BUSINESS

THE COMPANY

American Business Information, Inc. (the "Company") is a leading provider
of business and consumer marketing information products and data processing
services. The Company's products and services help its clients generate new
customers more effectively at lower cost. The Company's key assets include a
proprietary database of over 11 million businesses and a consumer database of
over 113 million households and 180 million individuals in the United States and
Canada, which the Company believes are among the most comprehensive and accurate
available. The Company leverages these key assets by selling a broad range of
marketing information products and data processing services through targeted
distribution channels primarily to small and medium size businesses and also to
consumers and larger corporations. The Company's net sales increased at a
compounded annual growth rate of 22% to $108.3 million in 1996 from $48.5
million in 1992, both through the introduction of new products and distribution
channels and through the acquisition of complementary businesses. For the nine
months ended September 30, 1997, total net sales were $139.5 million.

INDUSTRY BACKGROUND

Businesses, sales organizations and sales people have an ongoing need to
acquire new customers. Targeted marketing to businesses and consumers through
direct marketing, telesales and field sales is increasingly used as a
cost-effective means to identify and acquire new customers. As competition for
customers has heightened, marketing costs have increased while technological
advances have made information more accessible and less expensive. As a result,
it has become imperative for businesses to utilize their marketing resources
more efficiently through the targeted use of information products and data
processing services. The growth of business and consumer targeted marketing has
created a substantial and ongoing need for accurate and timely information to
help identify potential customers from the millions of businesses and hundreds
of millions of consumers in the United States and Canada.

The demand for business and consumer data is highly segmented among small
and medium size businesses, large corporations and individual consumers. For
many small and medium size businesses with limited resources business
information and related analytical services have become fundamental marketing
tools. These businesses require accurate and comprehensive information on
specific segments of their customer population. The Company believes that
traditionally these small and medium size businesses have been unable to obtain
this information because they do not have the resources to collect it themselves
and marketing information vendors have not provided them with comprehensive and
affordable solutions. In contrast, larger corporations typically have their own
data and require data processing and management services in addition to the
blending of their in-house customized database with a more extensive data set to
achieve specific marketing requirements. Finally, individual consumers need very
specific reference information on a small number of businesses or consumers that
is easily accessible at low cost through a variety of delivery formats.

The Company believes that the increasing demand for sales and marketing
information products and data processing services has contributed and will
continue to contribute to growth and consolidation in the business and consumer
marketing information industry. The Company believes that economies of scale and
scope are available in the compilation and maintenance of large and in-depth
business and consumer databases that can then be leveraged to meet each segment
of demand in the business and consumer information market. The Company also
believes that the quality of data processing services is directly dependent upon
the scale and scope of the underlying databases. The Company further believes
that to optimize the value of a database, the provider of information products
and data processing services derived from that database must have a broad range
of well established distribution channels.

20
<PAGE> 24

STRATEGY

The Company's objective is to be the leading provider of business and
consumer marketing information products and data processing services in the
United States and Canada by continuing to help its clients generate new
customers efficiently and effectively. The Company focuses on selling its lead
generation products to small and medium size businesses while marketing
reference products to consumers and more complete solutions to larger
corporations. The Company believes that it effectively competes in the business
and consumer marketing information industry by exploiting its competitive
strengths. These strengths include the Company's accurate and comprehensive
databases and its ability to leverage these databases by providing customers
with the specific data they need in a variety of formats through targeted
distribution channels. Key elements of the Company's growth strategy include:

Expand and Enhance the Proprietary Business Database. The Company
continues to invest substantial time and resources to maintain the quality and
increase the depth of its proprietary business database, which it believes
contains the most comprehensive and accurate business marketing information in
the United States and Canada. The Company expands and continually updates its
business database to strengthen its leadership position in business marketing
information products and data processing services. For example, the Company
makes over 16 million telephone calls every year to verify each record in the
business database.

Leverage the Databases. The Company continues to leverage its business
database by introducing new information products and new product delivery
formats to strengthen its competitive advantage in the business marketing
information industry. The Company sells a wide range of pre-packaged and
customized information products tailored to specific customer requirements on a
variety of delivery formats through targeted distribution channels. The Company
distributes its information products and data processing services through direct
mail, telemarketing, field sales offices, national accounts sales teams, retail
outlets and information resellers. The Company intends to respond to changes in
information technology by introducing new product delivery formats, such as
delivery over the Internet and business intranets and on DVD. The Company prices
its information products and services based on the type, amount and format of
the information provided to create an attractive marketing information solution
for its customers.

Increase Recurring Revenue. The Company intends to increase recurring
revenue in a number of ways. The Company encourages repeat purchases of its
information products by offering annual editions of its directories and monthly
subscription updates. The Company generates recurring revenue from royalties by
licensing its databases to other information providers and large corporations
for internal use. In addition, the Company sells its data processing services to
large corporations with ongoing information service requirements, and
subsequently sells its information products to these clients.

Replicate Business Database Strategy for Consumer Database. The Company
intends to utilize the strategies and targeted distribution channels developed
for its business information products and data processing services to serve
clients engaged in marketing to consumers. The Company believes that its
consumer database is among the most accurate and comprehensive in the United
States, and its ability to offer customers both high quality business and
consumer data gives it a competitive advantage over other companies offering
marketing information. The Company's consumer database consists of data licensed
from third parties and the Company is developing a proprietary consumer white
page file.

Enhance Product and Service Offerings Through Strategic Acquisitions. The
Company intends to continue expanding its database and data processing
capabilities not only through expansion of its existing business, but also
through the acquisition of complementary businesses. Since mid-1996, the Company
completed six acquisitions that increased its presence in the consumer marketing
information industry, greatly increased its ability to provide data processing
solutions, added two consumer CD-ROM product lines and broadened its offerings
of business marketing information. The Company believes that there are further
opportunities to add to its product and service offerings and to expand its
distribution channels through strategic acquisitions.

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<PAGE> 25

DATABASES

The Company believes that its databases are among the most comprehensive
and accurate in the United States, and that the maintenance and development of
these databases will be critical elements of the Company's continued success.
The Company continually updates its databases to reflect the formation of new
businesses, entities going out of business, changes relating to existing
businesses, such as new offices, new officers or new lines of business, and
changes of consumer names and addresses. The Company has invested and will
continue to invest significant time and resources in the creation, maintenance
and enhancement of its databases and related applications software.

Business Database. The Company's proprietary business database contains
information on over 11 million businesses in the United States and Canada. The
Company segments the business database into subsets such as growing businesses,
small business owners, big businesses, "work at home" businesses, female
executives and business owners, corporate affiliations, toll-free telephone
numbers and World Wide Web sites. The Company also adds depth to its business
database through the addition of data elements such as news headlines, public
filings, credit information and business owner biographies. The Company compiles
the information in the business database in two stages. First, the Company
inputs from approximately 5,000 sources including yellow page directories, state
directories, chamber of commerce directories, newspapers, business white pages,
telephone directories and other publicly available sources. Each business entry
contains, where available: name of business, contact person, street address,
city, state, area code and telephone number, fax number, SIC code, product
brands sold by businesses, franchises, professional specialties, yellow page
classification, size of yellow page advertisement, year of first appearance in
the yellow pages, zip code, carrier route, county code, population code and
metropolitan statistical area. Second, the Company makes over 16 million
telephone calls each year to the businesses in the database to verify the
information and to obtain or confirm additional information for inclusion in the
database. The Company's proprietary automated and predictive dialing system
optimizes the efficiency of the telephone verification process. Information
obtained through the telephone verification process includes name of the owner
or manager, number of employees, primary business activity and address
verification. The Company regularly evaluates additional or alternative
questions to ask in telephone verification in order to improve the depth and
quality of its database.

The maintenance and development of the Company's business database require
sophisticated computer hardware and software to handle rapid compilation, order
processing, accounting, storage, sorting and quality control. The Company's
computer system allows a work force of over 500 employees to compile, program
and process data simultaneously. More than 20,000 proprietary software programs
operate the data compilation, demographic enhancement and order fulfillment
process. The Company's data entry personnel use on-line proprietary data
compilation software to access the database and update, change or verify each
record at a rate of approximately 1.3 million records per month. A separate
quality control group checks input quality and seeks to ensure that the
information that reaches the Company's database is approximately 99% accurate
from the original source. The Company has also developed proprietary software to
check the database for the accuracy of spelling, abbreviations and telephone
exchanges.

Consumer Database. The Company's consumer database, which primarily
consists of data licensed from third parties, contains information on over 113
million households, 180 million consumers, 60 million homeowners, and 22 million
mail order purchasers. The consumer database includes information in over 70
categories of demographic information including age, income, marital status,
gender, presence of children in households, credit card information, mortgage
data, vehicle information, recent changes of address and lifestyle selections.
The Company obtains information for its consumer database from publicly
available and third party directories, supplemented with information gathered
from warranty data, census data, buyer information, credit data and
self-reported lifestyle information. In addition, the Company updates and
maintains its consumer database using information licensed from the United
States Postal Service's National Change of Address, Delivery Sequence File and
Locatable Address Conversion Systems, allowing the Company to track consumers as
they move. These steps enable the Company to ensure high deliverability rates
for direct mail marketing. The Company is working to complete its own
proprietary consumer white page file, which it expects to complete by the end of
1997. The Company complies with the DMA guidelines with respect to the
collection, distribution and use of information about individuals.

22
<PAGE> 26

"New Business" Database. The Company monitors and compiles information on
newly formed businesses throughout the United States by checking state filings,
business licenses and court documents. The Company verifies and sells the data
to allow clients to contact potential new customers as soon as possible, then
incorporates the information into its core business database.

Medical Databases. The Company maintains and markets a specialized
database on physicians and surgeons, and is creating a similar database on
dentists. The physician and surgeon database contains information on over
575,000 physicians and surgeons nationwide. The database is compiled from third
party sources, and contains information on age, gender, professional school,
specialties, and personal interests.

PRODUCTS AND SERVICES

The Company offers a variety of business and consumer information products
and data processing services to assist its customers with activities such as
identifying and qualifying prospective customers, initiating direct mail
programs, telemarketing, estimating market potential, monitoring the
effectiveness of marketing efforts and surveying competitive markets. The
Company sells its information products through a variety of delivery formats,
including hard copy prospect lists, sales lead cards, mailing labels, diskettes,
CD-ROMs, the Internet, telephone and fax. The Company distributes its
information products and data processing services through direct mail,
telemarketing, field sales offices, national accounts sales teams, retail
outlets and information resellers. More than 75% of the Company's net sales in
1996 were attributable to customers who had previously purchased the Company's
products. The Company's business is organized around three principal product
lines consisting of sales lead generation products, data processing services and
consumer CD-ROM products, which accounted for 68%, 22% and 10% of net sales,
respectively, in the nine months ended September 30, 1997.

Sales Lead Generation Products

Customized Sales Lead Generation Products. The Company's customized sales
lead generation products, which include hard copy prospect lists, sales lead
cards, mailing labels, diskettes and mapping products, are used by customers who
ask the Company to generate specific information for them. The Company markets
its customized sales lead generation products primarily to small and medium size
businesses, who use these materials to efficiently identify and communicate with
potential customers. The Company produces its sales lead generation products
using a combination of customized sorting criteria to meet the customer's
marketing objectives. The Company's telemarketing sales representatives work
with prospective customers to help them specify sorting criteria that will
produce marketing information materials optimized for each customer's business,
and guide them to understanding how this information can be used. For example,
with Sales Leads On A Map, customers can plot their leads on a street map, which
allows them to increase productivity, assign sales territories and measure sales
activity by knowing exactly where prospective customers are clustered. The
Company sells its customized sales lead generation products primarily through
direct mail, telemarketing and its field sales offices. Generally, sales lead
generation products are priced on a per name basis, which varies according to
the number of names supplied, the type of information required and the delivery
format selected.

Non-Stop Sales Leads. Non-Stop Sales Leads is a subscription program that
provides customers with a prospect database and monthly updates including new
leads for the market area, changes to the original database and a list of
companies that have gone out of business. The Company sells Non-Stop Sales Leads
to small, medium and large businesses who use the monthly new prospect updates
to acquire new customers, expand into new markets and replace lost customers.
The Company markets Non-Stop Sales Leads primarily through direct mail,
telemarketing and field sales offices. Customers pay an up-front fee for the
initial database of requested information and additional monthly subscription
fees for the updates.

Business Directories. The Company's printed business directories are
bundled with CD-ROMs and include such titles as State Business Directories,
American Manufacturers Directory, Big Business Directory, Credit Reference
Directory, Entrepreneurs Directory, Physicians & Surgeons Directory and U.S.
Business Directory. In addition, the Company also sells a number of business
directories on CD-ROM only, including titles such as Households USA,
Professionals, and Female Executives and Business Owners. The Company

23
<PAGE> 27

sells these directories to small and large business marketers who use them for
lead generation, telemarketing and reference purposes, and are attracted to the
directories by their affordability, convenience and reference value. The printed
directories are useful for reference, while the CD-ROM products allow users to
sort, search and print marketing information. The Company sells its business
directories primarily through direct mail, telesales and its field sales
offices. Purchasers of business directories pay a one-time fee for the
directories when they initially acquire them, and can purchase annual updates.
For CD-ROM products, an annual license fee enables a customer to access and use
a specified number of names. Proprietary metering technologies for CD-ROM
products require purchasers to pay an additional fee to download additional
names and prevent purchasers from using the product longer than one year after
the installation date.

Telephone Information Service. The Company sells its telephone information
service, InfoAccess, to businesses that request instant company profiles,
business credit profiles and additional detailed information on businesses in
the United States and Canada. Business credit profiles allow a customer to
evaluate a company's credit history, qualify sales leads, learn about vendors,
suppliers or competitors and determine whether a prospective customer is likely
to pay bills on time. The Company prices its telephone information services on a
subscription basis.

Internet/Online Information Service. SalesLeadsUSA (www.SalesLeadsUSA.com)
allows businesses and consumers to define a target market, retrieve a count of
the number of businesses in a particular market or obtain a credit profile on a
particular company, all through the World Wide Web. Customers also use the site
for directory assistance, finding individuals in the white pages or businesses
in the yellow pages. Links to the service are also available on InfoSpace,
Microsoft, Netscape and Big Book and other national online information
providers. SalesLeadsUSA provides customers with immediate access to the
Company's database 24 hours a day, seven days a week. The Company's directory
assistance information over the Internet is free. The Company sells customer
lists and business profiles over the Internet on a per name or per profile
basis.

Information Brokerage Services. The Company currently resells information
on consumers that it purchases from other suppliers. The Company resells this
data to businesses who use the information to target narrow segments of the
population. Purchasers can select consumer lists by age group, income range,
homeowner status, mortgage value, hobbies or interests, or geographical area.
The Company sells brokered information through direct mail, telemarketing, field
sales offices and its national accounts sales teams. The Company prices its
brokered information on a per name basis.

Data Processing Services

The Company's data processing services include "merge-purge" services,
market research services and data warehousing and analysis. Data processing
services are marketed primarily through national accounts sales teams. The
Company prices these services on a contract or per order basis depending upon
the nature of the services provided.

"Merge-Purge." Merge-purge services involve merging data from multiple
sources and purging out duplicative and erroneous data. Merge-purge services
enable clients to more accurately target customers. The Company sells its
merge-purge services primarily to large corporations, many of which use these
services on an ongoing basis, providing a steady stream of revenue.

Market Research Services. The Company offers a variety of market research
services, including customer and market profile analyses, market segmentation
reports, statistical marketing reports, list enhancements to update a customer's
in-house database, computerized name search service, and other analytical tools
and reports. The Company sells these market research services primarily to
medium and large businesses, who use the data to target their direct marketing
efforts on segments of the business or consumer population most likely to
respond positively.

Data Warehousing and Analysis. The information provided by the Company's
data warehousing and analysis allows customers to make more informed business
decisions by identifying the highest potential prospect group, determining
market size, conducting competitive analysis or determining sales goals,

24
<PAGE> 28

marketing plans, budgetary priorities, site locations or territory assignments.
The Company sells data warehousing and analysis services to small, medium and
large businesses.

Consumer CD-ROM Products

The Company's consumer CD-ROM products include titles such as 104 Million
Businesses and Households, Streets USA, American Yellow Pages, 88 Million
Households, 2 Million Fax Number Directory, PhoneDisc Powerfinder, Powerfinder
Pro and Select Phone Deluxe. The Company markets its consumer CD-ROM products to
individual consumers and small office and home office businesses, who use these
products on their personal computers as an affordable way to find addresses and
phone numbers of businesses and consumers anywhere in the country. Customers can
view and select information to print to lists or labels or download the
information. The Company sells consumer CD-ROMs through direct mail and retail
outlets.

SALES AND MARKETING

The Company markets and sells its information products and data processing
services directly through direct mail, telemarketing, field sales offices and
national accounts sales teams and indirectly through distribution channels such
as value-added resellers and retail outlets. The sales and marketing channels
used by the Company vary by product. Sales lead generation products are sold
through direct mail, telesales, field sales offices and national accounts sales
teams. Data processing services are sold primarily through national accounts
sales teams. Consumer CD-ROM products are sold through direct mail,
telemarketing and retail outlets, and the Company licenses its databases to
information resellers and large corporations.

Direct Mail. The Company has traditionally marketed to businesses through
direct mail, in which the Company mails catalogs to prospective customers and
takes orders by mail or by telephone. In 1996 and the first nine months of 1997,
the Company mailed more than 42 million catalogs, letters and other pieces of
mail primarily to small and medium size businesses. The Company sells its full
line of sales lead generation products, including customer lists, mailing
labels, directories, CD-ROM products, maps and credit reference guides, through
direct mail. Direct mail marketing allows the Company to reach a large number of
customers at relatively little cost, and generates a high volume of sales.

Telemarketing. The Company sells its sales lead generation products and
services through "outbound" telephone calls to small and medium size businesses.
Since adopting this strategy in late 1996, the Company estimates it has
initiated more than 350,000 telephone contacts with prospective customers.
Telemarketing allows the Company to contact dormant accounts, occasional
purchasers and repeat customers to create a more consultative relationship
between the client and the Company, and in turn to generate more frequent sales.

Field Sales Offices. The Company's field sales offices sell the Company's
full line of sales lead generation products and services through direct or
telephone contact with small and medium size businesses, establishing
consultative relationships at the local level. The Company believes that through
field sales offices it can establish and maintain direct relationships with
businesses that are otherwise unresponsive to direct mail and telesales
contacts. As of September 30, 1997, the Company had field sales offices in 10
cities, and expects to add offices in two more cities by the end of 1997.

National Accounts. The Company's national accounts sales teams establish
ongoing relationships with larger corporations to sell data processing services
and information products. Data processing services for these clients include
generating mailing lists through merging and purging of databases, producing
customer profiles and market analysis, and managing and warehousing client data.
After selling data processing services to large corporations, the Company seeks
to sell its information products to these clients as well.

Retail Sales. The Company sells its consumer CD-ROM products
"off-the-shelf" to customers through retail sales outlets including computer
software stores, office supply stores, convenience stores, pharmacies and
supermarkets. The Company sells its consumer CD-ROM products principally through
wholesale distributors and also directly to retail outlets.

25
<PAGE> 29

Database Licensing. The Company licenses its databases for distribution to
on-line information providers such as InfoSpace, Microsoft, Netscape and Big
Book and to large corporations for internal use. Licensees pay the Company
royalties for the use of its information products. In addition, some on-line
information services provide a link to the Company's World Wide Web site,
allowing potential customers to purchase additional products or services
directly from the Company.

COMPUTER OPERATIONS AND DATABASE PROTECTION

The Company compiles and maintains business databases on its redundant
computer systems located at its Omaha, Nebraska and Carter Lake, Iowa
facilities. The Company uses its Omaha facility primarily for compiling and
enhancing the business database. The Company uses its Carter Lake facility to
fulfill orders, produce directories and develop new software applications. By
maintaining its data entry operations in one location and its order-filling
capacity at the other, the Company believes it enhances its ability to control
the accuracy and costs of the compilation process.

Each of the data centers is protected by a fire suppression system and an
uninterrupted power supply battery backup system. The Company's data is
regularly backed up and stored off-site. The Company believes its computer
systems are adequate for its present requirements and that its operations can be
readily expanded in support of the Company's growth strategy. The Company is
building a new facility for the business and consumer database compilation
division in Papillion, Nebraska, which is anticipated to be completed in mid-
1998.

The Company maintains its consumer database and analytical data processing
capabilities at its Montvale, New Jersey facilities. The data is regularly
backed up and stored off-site. The Company has contracted with a third party to
load and access its consumer database in the event of loss at the Montvale
facility, and the Company could regenerate its analytical capabilities through
the lease of computer equipment in less than two weeks.

The Company's telecommunications equipment is also redundant. In the event
of a disaster at any of its locations, calls could be redirected to the other
location within 12 hours, thereby minimizing the effect of the disaster.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

The Company regards its databases and software as proprietary. The
Company's databases are copyrighted, and the Company depends on trade secret and
non-disclosure safeguards for protection of its software. The Company
distributes its products under agreements that grant customers a license to use
the Company's products in the ordinary course of their businesses and contain
terms and conditions prohibiting the unauthorized reproduction of the Company's
products. In addition, the Company generally enters into confidentiality
agreements with its management and programming staff and limits access to and
distribution of its proprietary information. While there can be no assurance
that the steps taken by the Company will be adequate to deter misappropriation
of its proprietary rights or independent third party development of
substantially similar products and technology, the Company believes that legal
protection of its database and software is less significant than the knowledge
and experience of the Company's management and personnel, and their ability to
develop, enhance and market existing and new products and services.

COMPETITION

The business environment in which the Company competes is highly
competitive. The Company believes that competition in its industry is based on
the quality and comprehensiveness of the information provided, the ability to
deliver the information in products and formats that the customer needs and, to
a lesser extent, on the pricing of information products and services. The
Company also believes that the ability to provide data processing to support
customer direct selling efforts can provide a key competitive advantage. A
number of small and large competitors are active in specific aspects of the
Company's business. Many such competitors have substantially greater financial,
technical and marketing resources than the Company. In business sales lead
generation products, the Company faces competition from Dun's Marketing Services
("DMS"), a

26
<PAGE> 30

division of Dun & Bradstreet. DMS, which relies upon information compiled from
Dun & Bradstreet's credit database, tends to focus on marketing to large
companies. In business directory publishing, the Company competes primarily with
Regional Bell Operating Companies, Donnelley Marketing, and many smaller,
regional directory publishers. In consumer sales lead generation products, the
Company competes with Metromail, Donnelly Marketing, R.L. Polk, Trans Union,
Equifax and Experian, both directly and through reseller networks. In analytical
data processing services, the Company competes with Acxiom, May & Speh,
Harte-Hanks Data Technologies and Direct Marketing Technologies. In consumer
products, the Company competes with certain small producers of CD-ROM products.
In addition, the Company faces competition to the extent similar marketing
information is available on the Internet.

EMPLOYEES

As of September 30, 1997, the Company employed a total of approximately
1,600 people on a full-time basis. None of the Company's employees is
represented by a labor union or is the subject of a collective bargaining
agreement. The Company has never experienced a work stoppage and believes that
its employee relations are good.

PROPERTIES

The Company's headquarters are located in a 148,000 square foot facility in
Omaha, Nebraska, where the Company performs data compilation, telephone
verification, data development services, and sales and administrative
activities. Order fulfillment and shipping are conducted at the Company's 30,000
square foot Carter Lake, Iowa facility, which is located 15 miles from its
headquarters. The Company owns both of these facilities, as well as adjacent
land for possible future expansion. In addition, the Company leases a 101,000
square foot facility in Montvale, New Jersey, which lease expires in September
1999. The Company also leases sales office space at various locations, the
aggregate rental obligations of which are not significant. The Company is
building a new 130,000 square foot facility for the business and consumer
database compilation division in Papillion, Nebraska, which is anticipated to be
completed in mid-1998.

27
<PAGE> 31

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Vinod Gupta....................... 51 Chairman of the Board
Scott Dahnke...................... 32 Chief Executive Officer and Director
Jon Wellman....................... 45 President, Chief Operating Officer and Director
Steven Purcell.................... 46 Chief Financial Officer and Secretary
Allen Ambrosino................... 54 Executive Vice President and President, Database America
Gregory Back...................... 30 Executive Vice President, Corporate Planning and Business
Development
Monica Messer..................... 34 Executive Vice President and Chief Information Officer
William Chasse.................... 38 Executive Vice President, Sales and Marketing
William Kerrey.................... 49 Senior Vice President, Licenses
Harold Andersen(1)(2)............. 73 Director
Paul Goldner...................... 63 Director
Gautam Gupta...................... 51 Director
George Haddix, Ph.D.(1)........... 58 Director
Jon Hoffmaster(2)................. 49 Director
Elliot Kaplan(1).................. 60 Director
George Kubat(2)................... 52 Director
</TABLE>

- ------------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee

Vinod Gupta is the founder of the Company and has been Chairman of the
Board of the Company since its incorporation in 1972. Mr. Gupta served as Chief
Executive Officer of the Company from the time of its incorporation in 1972
until September 1997. Mr. Gupta holds a B.S. in Engineering from the Indian
Institute of Technology, Kharagpur, India, and an M.S. in Engineering and an
M.B.A. from the University of Nebraska. Mr. Gupta is unrelated to Gautam Gupta.

Scott Dahnke joined the Company as Chief Executive Officer in October 1997.
Prior to that time, Mr. Dahnke was with the consulting firm McKinsey & Company,
Inc., where he worked since August 1991, and had been a Partner since May 1997.
While at McKinsey, Mr. Dahnke served as a consultant to the Company since May
1997. Mr. Dahnke holds a B.S. in Mechanical Engineering from the University of
Notre Dame and an M.B.A. from Harvard Business School.

Jon Wellman has served as President, Chief Operating Officer and a director
of the Company since February 1997. Mr. Wellman joined the Company in August
1995 as Chief Financial Officer and Secretary. Mr. Wellman previously served as
Vice President and Chief Financial Officer at Signal Technology Corporation, a
defense electronics manufacturer, from December 1994 to July 1995, and was a
Partner with Coopers & Lybrand L.L.P., an independent public accounting firm,
from 1989 to November 1994. Mr. Wellman holds a B.S. in Business from the
University of Idaho.

Steven Purcell has served as Chief Financial Officer and Secretary of the
Company since April 1997. Prior to that time, Mr. Purcell served as the Chief
Financial Officer and Treasurer at Micro Warehouse, Inc., a direct mail computer
software and hardware distributor, from November 1991 until November 1996. Mr.
Purcell holds a B.S. in Accounting from the University of New Haven and an
M.B.A. from Radford College. Mr. Purcell is licensed as a Certified Public
Accountant.

Allen Ambrosino has served as Executive Vice President of the Company since
August 1997, and as President of DBA, which the Company acquired in February
1997, since November 1991. Mr. Ambrosino holds a B.S. in Business Administration
from Fairleigh Dickinson University.

Gregory Back joined the Company as Executive Vice President of Corporate
Planning and Business Development in October 1997. Prior to that time, Mr. Back
was with the consulting firm McKinsey & Company, Inc., where he worked from
September 1989 to September 1992 and again from September 1994 to September
1997. While at McKinsey, Mr. Bank served as a consultant to the Company since
May 1997. Mr. Back also worked for Golder, Thoma, Cressey & Rauner, a private
equity firm, from June 1993 to August

28
<PAGE> 32

1993. Mr. Back holds a B.A. in Economics from Yale University and an M.B.A. from
Stanford Business School.

Monica Messer has served as an Executive Vice President and Chief
Information Officer of the Company since February 1997, and served as a Senior
Vice President of the Company from January 1996 to January 1997. Ms. Messer
joined the Company in 1984 and has served as a Vice President of the Company
since 1985. Ms. Messer holds a B.S. in Business Administration from Bellevue
University.

William Chasse has served as Executive Vice President, Sales and Marketing
of the Company since October 1996, as a Senior Vice President from January 1995
to October 1996, and as a Vice President from 1990 to January 1995. Mr. Chasse
joined the Company in 1988. Mr. Chasse holds a B.S. in Business Administration
and an M.B.A. from the University of Nebraska.

William Kerrey has served as Senior Vice President, Licenses since August
1994, and served as a Vice President from 1989 to August 1994. Mr. Kerrey holds
a B.S. in Economics, a B.S. in Spanish and an M.S. in Agronomy from the
University of Nebraska.

Harold Andersen has served as director of the Company since September 1993.
He is the former President, Chief Executive Officer, Chairman and Publisher of
the Omaha World Herald Company, a newspaper publishing company. Mr. Anderson is
currently a Contributing Editor to the Omaha World Herald. Mr. Andersen holds a
B.S. in Liberal Arts from the University of Nebraska.

Paul Goldner has served as a director of and consultant to the Company
since the acquisition of DBA in February 1997. He was a founder of DBA, and
served as its Chairman and Chief Executive Officer from 1973 to February 1997.
Mr. Goldner holds a B.S. in Management Engineering from the Rensselaer
Polytechnic Institute. In connection with its acquisition of DBA, the Company
agreed to nominate Mr. Goldner to be elected to the Board when his current term
expires in 1999.

Gautam Gupta has served as a director of the Company since May 1988. Since
1982, Mr. Gupta has served as the President and Chief Executive Officer of
IDEAssociates, Inc., a manufacturer of data communication equipment for computer
systems. Mr. Gupta holds an M.B.A. from Harvard Business School and an M.S. and
a B.S. degree in Engineering from the Indian Institute of Technology, Kharagpur,
India. Mr. Gupta is unrelated to Vinod Gupta.

George Haddix, Ph.D. has served as a director of the Company since March
1995. Since November 1994, Mr. Haddix has served as President of CSG Holdings,
Inc. and CSG Systems International, Inc., companies engaged in providing
software and information services to the communications industry. Mr. Haddix is
a director of CSG Systems International, Inc. From 1989 until joining CSG in
November 1994, Mr. Haddix was an individual investor. Mr. Haddix holds a B.A.
from the University of Nebraska, an M.A. from Creighton University and a Ph.D.
from Iowa State University, all in Mathematics.

Jon Hoffmaster has served as a director of the Company since 1978, as Vice
Chairman of the Company from September 1993 to December 1995, as Chief Financial
Officer of the Company from July 1992 to July 1995, and as President and Chief
Operating Officer of the Company from September 1991 to September 1993. Mr.
Hoffmaster has served as a consultant to the Company since January 1996. Mr.
Hoffmaster is also a director of Bridges Investment Fund. Mr. Hoffmaster holds a
B.A. in Finance from the University of Nebraska.

Elliot Kaplan has served as director of the Company since May 1988. He is a
name partner and former Chairman of the Executive Board of the law firm of
Robins, Kaplan, Miller & Ciresi L.L.P. and has practiced law continuously with
that firm since 1962. Mr. Kaplan is also a director and officer of Best Buy Co.,
Inc., and a director of The Franklin Corporation. Mr. Kaplan holds a B.A. in
Business Administration and a J.D. from the University of Minnesota.

George Kubat has served as a director of the Company since May 1995. Since
November 1992, Mr. Kubat has served as President and Chief Executive Officer of
Phillips Manufacturing Co., a dry wall equipment and supply business
("Phillips"). Prior to joining Phillips, Mr. Kubat was with Coopers & Lybrand
L.L.P. for over 16 years. Mr. Kubat is also a director of America First
Companies L.L.C. and SITEL Corporation. Mr. Kubat holds a B.S. in Business
Administration from Creighton University and a J.D. from Creighton University.

29
<PAGE> 33

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth the beneficial ownership of Common Stock of
the Company as of September 30, 1997 and as adjusted as of such date to reflect
the sale of the shares offered hereby (assuming no exercise of the Underwriter's
over-allotment option) by (i) all persons known to the Company to be the
beneficial owners of more than 5% of the Company's Class A Common Stock or Class
B Common Stock, (ii) the Company's Chief Executive Officer and the four most
highly compensated executive officers other than the Chief Executive Officer,
(iii) each Selling Stockholder, (iv) each of the Company's directors and (v) all
directors and executive officers as a group. The information on beneficial
ownership in the table and the footnotes below is based upon the Company's
records, Schedule 13D and 13G filings and information supplied to the Company by
the listed person or entity.

The following table has been prepared in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934 and discloses all securities beneficially owned
by the named persons as of September 30, 1997, plus all securities that such
persons have a right to acquire through the exercise of options or other rights
within 60 days after September 30, 1997. Certain individuals in the table below
have the right to acquire additional shares after such 60-day period, as
indicated in the footnotes to the table.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(1)
------------------------------------ CLASS A ------------------------------------
TOTAL SHARES TOTAL
DIRECTORS, OFFICERS, 5% STOCKHOLDERS VOTING OFFERED VOTING
AND SELLING STOCKHOLDERS CLASS A CLASS B PERCENTAGE HEREBY(1) CLASS A CLASS B PERCENTAGE
- ------------------------------------ ---------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Vinod Gupta(2)...................... 9,015,654 9,015,654 36.8% 1,000,000 8,015,654 9,015,654 35.5%
5711 South 86th Circle
Omaha, Nebraska 68127
FMR Corp............................ 2,448,050 2,448,050 10.0% 0 2,448,050 2,448,050 9.8%
82 Devonshire Street
Boston, Massachusetts 02109
Paul Goldner(3)..................... 1,426,316 1,426,316 5.8% 400,000 1,026,316 1,426,316 5.6%
100 Paragon Drive
Montvale, New Jersey 07645
Jon Hoffmaster(4)................... 471,000 471,000 1.9% 100,000 371,000 471,000 1.8%
George Haddix(5).................... 23,500 23,500 * 0 23,500 23,500 *
Harold Andersen(6).................. 17,300 17,300 * 0 17,300 17,300 *
Gautam Gupta(7)..................... 45,535 45,535 * 9,000 36,535 45,535 *
Elliot Kaplan(8).................... 91,840 91,840 * 18,000 73,840 91,840 *
George Kubat(9)..................... 28,300 28,300 * 0 28,300 28,300 *
Scott Dahnke........................ 0 0 * 0 0 0 *
Jon Wellman(10)..................... 82,500 82,500 * 82,500 0 82,500 *
Monica Messer(11)................... 150,934 150,934 * 15,000 135,934 150,934 *
William Chasse(12).................. 68,250 68,250 * 10,000 58,250 68,250 *
William Kerrey(13).................. 19,759 19,759 * 6,000 13,759 19,759 *
All directors and executive officers
as a group (12 persons)(14)....... 11,440,888 11,440,888 46.1% 1,640,500 9,800,388 11,440,888 44.4%
---------- ---------- --- --------- ---------- ---------- ---
</TABLE>

30
<PAGE> 34

<TABLE>
<CAPTION>
OTHER SELLING STOCKHOLDERS
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dr. Crystal Grow.................. 101,500 101,500 * 10,000 91,500 101,500 *
Vinod Gupta Charitable
Foundation...................... 100,000 100,000 * 20,000 80,000 100,000 *
Tom Lingelbach(15) 112,500 112,500 * 20,000 92,500 112,500 *
Bonnie Gupta Trust................ 217,060 217,060 * 10,000 207,060 217,060 *
Bonnie Gupta Charitable Remainder
Trust........................... 78,500 78,500 * 20,000 58,580 78,500 *
Ed Mallin(16)..................... 28,750 28,750 * 10,000 18,750 28,750 *
Claude Schoch(17)................. 585,000 585,000 2.4% 220,000 365,000 585,000 2.3%
Alex Gupta Educational Trust...... 9,690 9,690 * 2,000 7,690 9,690 *
Ben Gupta Educational Trust....... 9,190 9,190 * 2,000 7,190 9,190 *
Jess Gupta Educational Trust...... 9,690 9,690 * 2,000 7,690 9,960 *
Vinod Gupta Irrevocable Trust --
Alex Gupta...................... 115,000 115,000 * 20,000 95,000 115,000 *
Vinod Gupta Irrevocable Trust --
Ben Gupta....................... 115,000 115,000 * 20,000 95,000 115,000 *
Vinod Gupta Irrevocable Trust --
Jess Gupta...................... 115,000 115,000 * 20,000 95,000 115,000 *
McManigal Family Trust -- Alex
Gupta........................... 9,000 9,000 * 1,000 8,000 9,000 *
McManigal Family Trust -- Ben
Gupta........................... 9,000 9,000 * 1,000 8,000 9,000 *
McManigal Family Trust -- Jess
Gupta........................... 9,000 9,000 * 1,000 8,000 9,000 *
As a Group(18).................... 1,623,880 1,623,880 6.6% 379,000 1,244,880 1,623,880 6.3%
Total(19)................ 15,512,818 15,512,818 62.3% 2,019,500 13,493,318 15,512,818 60.1%
========== ========== === ========= ========== ========== ==========
</TABLE>

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

* Represents less than 1% of the outstanding shares of Common Stock.

(1) This table is presented on a pro forma basis to reflect the
Reclassification and the Stock Dividend.

(2) Excludes 345,030 shares of Class A Common Stock and 345,030 shares of Class
B Common Stock held in irrevocable trusts for the benefit of Mr. Gupta's
children for which Mr. Gupta is not trustee and in which he has no
beneficial interest. Includes 120,000 shares of Class A Common Stock and
120,000 shares of Class B Common Stock subject to options exercisable on or
before November 29, 1997.

(3) Excludes 543,717 shares of Class A Common Stock and 543,717 shares of Class
B Common Stock held in irrevocable trusts for the benefit of Mr. Goldner's
children for which Mr. Goldner is not a trustee and in which he has no
beneficial interest. Includes 3,000 shares of Class A Common Stock and
3,000 shares of Class B Common Stock subject to options exercisable on or
before November 29, 1997.

(4) Includes 81,000 shares of Class A Common Stock and 81,000 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(5) Includes 21,000 of Class A Common Stock and 21,000 of Class B Common Stock
subject to options exercisable on or before November 29, 1997.

(6) Includes 3,000 shares of Class A Common Stock and 3,000 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(7) Includes 6,000 shares of Class A Common Stock and 6,000 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(8) Includes 6,000 shares of Class A Common Stock and 6,000 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(9) Includes 21,000 shares of Class A Common Stock and 21,000 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(10) Includes 82,500 shares of Class A Common Stock and 82,500 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.
In addition to the shares of Class A Common

31
<PAGE> 35

Stock offered for the account of Mr. Wellman hereby, Mr. Wellman also
anticipates selling 50,000 shares of Class B Common Stock in the open
market at or about the time of the offering made hereby.

(11) Includes 11,250 shares of Class A Common Stock and 11,250 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(12) Includes 68,250 shares of Class A Common Stock and 68,250 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(13) Includes 9,000 shares of Class A Common Stock and 9,000 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(14) Includes 432,000 shares of Class A Common Stock and 432,000 shares of Class
B Common Stock subject to options exercisable on or before November 29,
1997.

(15) Includes 12,500 shares of Class A Common Stock and 12,500 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.
Mr. Lingelbach is presently an employee of the Company.

(16) Includes 25,750 shares of Class A Common Stock and 25,750 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.
Mr. Mallin is presently an employee of the Company.

(17) Includes 45,000 shares of Class A Common Stock and 45,000 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.
Mr. Schoch is presently an employee of the Company.

(18) Includes 83,250 shares of Class A Common Stock and 83,250 shares of Class B
Common Stock subject to options exercisable on or before November 29, 1997.

(19) Includes 515,250 shares of Class A Common Stock and 515,250 shares of Class
B Common Stock subject to options exercisable on or before November 29,
1997.

32
<PAGE> 36

DESCRIPTION OF CAPITAL STOCK

The Company is offering hereby shares of its Class A Common Stock.

The Company's authorized capital stock consists of 295,000,000 shares of
Common Stock, par value $0.0025 per share, and 5,000,000 shares of Preferred
Stock, par value $0.0025 per share. Of the Common Stock, 220,000,000 shares have
been designated Class A Common Stock and 75,000,000 shares have been designated
Class B Common Stock. Of the Preferred Stock, 35,000 shares have been designated
Series A Preferred Stock, 220,000 shares have been designated Series B Preferred
Stock and 4,745,000 shares remain undesignated.

The following summary of certain features of the Common Stock and Preferred
Stock does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the Company's Certificate of Incorporation, as
amended, and Certificate of Designation, as amended, which are included as
exhibits to the Registration Statement of which this Prospectus is a part, and
by the provisions of applicable law.

COMMON STOCK

Except as set forth below, the Class A Common Stock and Class B Common
Stock are substantially identical. The holders of Common Stock may take action
by written consent in accordance with Delaware law, but do not have the right to
cumulate votes in connection with the election of Directors. In the event of a
liquidation, dissolution or winding up of the Company and subject to any rights
of any Preferred Stock outstanding, the holders of each class of Common Stock
will first receive any declared but unpaid dividends with respect to such class,
and then will be entitled to share ratably in all assets remaining after payment
of the Company's liabilities. A sale of all or substantially all of the
Company's assets or a merger in which the stockholders of the Company
immediately prior to the merger own less than a majority of the voting power of
the surviving entity following the merger, will be deemed to be liquidation,
dissolution or winding up of the Company. The Common Stock has no preemptive,
conversion or other subscription rights and there are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and non-assessable. There are no restrictions on the
transferability of the Common Stock, except for such restrictions as may be
entered into by the holders thereof contractually or may be imposed on the
holders thereof by applicable law.

Voting Rights. Holders of the Class A Common Stock are entitled to one vote
per share on all matters submitted to a vote of the stockholders. Holders of the
Class B Common Stock are entitled to ten votes per share on all matters
submitted to a vote of the stockholders. The votes of holders of Class A Common
Stock and Class B Common Stock will be counted together for all purposes,
including any increase or decrease in the number of authorized shares of Class A
Common Stock or Class B Common Stock, unless the matter to be voted on would
increase or decrease the par value of such class or alter or change the powers,
preferences or special rights of the shares of such class so as to affect it
adversely. As a result of this difference in voting rights, the holders of Class
B Common Stock will effectively maintain voting control of the Company, except
in limited circumstances.

Dividend Rights. Neither the Class A Common Stock nor the Class B Common
Stock has any right to receive dividends unless and until such dividends are
declared by the Board of Directors out of funds legally available therefor.
Subject to any dividend rights of the Preferred Stock, when and if the Board of
Directors declares a dividend on Common Stock payable other than in shares of
capital stock of the Company or in rights to acquire such capital stock, holders
of Class B Common Stock will not be entitled to any such dividend until the
holders of the Class A Common Stock have received a dividend in such year equal
to $0.02 per share. Thereafter, all such dividends declared on Class A Common
Stock and Class B Common Stock shall be paid at an equal per-share rate. The
Company has not paid any cash dividends since its inception and does not
anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain available future earnings to finance the operations
of the business.

33
<PAGE> 37

PREFERRED STOCK

Series A Preferred Stock and Series B Preferred Stock.

No shares of Series A Preferred Stock or Series B Preferred Stock are
currently outstanding. The Series A Preferred Stock and Series B Preferred Stock
were designated by the Board of Directors in connection with the Company's
stockholder rights plans. The Series A Preferred Stock is issuable upon the
exercise of certain currently unexercisable purchase rights, which rights are
attached to and trade with the outstanding shares of Class A Common Stock.
Similarly, the Series B Preferred Stock is issuable upon the exercise of certain
currently unexercisable purchase rights, which rights are attached to and trade
with the outstanding shares of Class B Common Stock. Because of the voting,
dividend and liquidation rights of each series of Preferred Stock described
below, the value of a one-thousandth interest in one share of Series A Preferred
Stock or a one-thousandth interest in one share of Series B Preferred Stock
should approximate the value of one share of Class A Common Stock or Class B
Common Stock, respectively. The Preferred Stock purchase rights, and the
conditions upon which they detach from the Common Stock and become exercisable,
are discussed in detail in "-- Certain Anti-Takeover Effects -- Stockholder
Rights Plans."

Except as set forth below, the Series A Preferred Stock and Series B
Preferred Stock are substantially identical. Upon issuance of Preferred Stock,
the holders thereof, together with the holders of Common Stock, may take action
by written consent in accordance with Delaware law, but will not have the right
to cumulate votes in connection with the election of directors. The Preferred
Stock has no preemptive, conversion or other subscription rights and there are
no redemption or sinking fund provisions applicable to the Preferred Stock.
There are no restrictions on the transferability of the Preferred Stock, except
for such restrictions as may be entered into by the holders thereof
contractually, or may be imposed on the holders thereof by applicable law.

Voting Rights. Holders of the Series A Preferred Stock are entitled to
1,000 votes per share on all matters submitted to a vote of the stockholders.
Holders of the Series B Preferred Stock are entitled to 10,000 votes per share
on all matters submitted to a vote of the stockholders. The votes of holders of
Series A Preferred Stock and Series B Preferred Stock will be counted together
with the votes of the Common Stock for all purposes, unless the matter to be
voted on would increase or decrease the par value of such series or alter or
change the powers, preferences or special rights of the shares of such series so
as to affect it adversely.

Dividend Rights. Each share of Series A Preferred Stock is entitled to a
dividend equal to 1,000 times any dividend declared per share of Class A Common
Stock. Each share of Series B Preferred Stock is entitled to a dividend equal to
1,000 times any dividend declared per share of Class B Common Stock.

Liquidation Rights. In the event of a liquidation, dissolution or winding
up of the Company holders of Series A Preferred Stock are entitled to receive
1,000 times any amount payable to the Class A Common Stock, while holders of
Series B Preferred Stock are entitled to receive 1,000 times any amount payable
to the Class B Common Stock, plus, in each case, any accrued but unpaid
dividends. As is the case for the Common Stock, a sale of all or substantially
all of the Company's assets or a merger in which the stockholders of the Company
immediately prior to the merger own less than a majority of the voting power of
the surviving entity following the merger will be treated as a liquidation,
dissolution or winding up of the Company.

Undesignated Preferred Stock

Pursuant to the Company's Certificate of Incorporation, the Board of
Directors has the authority, without further action by the stockholders, to
issue the remaining 4,745,000 undesignated shares of Preferred Stock in one or
more series and to fix the designations, powers, preferences and privileges, and
relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the Common Stock, the Series A
Preferred Stock or the Series B Preferred Stock. The Board of Directors, without
stockholder approval, can issue Preferred Stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of holders
of Common Stock, the Series A Preferred Stock or the Series B Preferred Stock.
Preferred Stock could thus be issued quickly with terms calculated to delay or
prevent a change in control of the Company or make removal of management

34
<PAGE> 38

more difficult. Additionally, the issuance of Preferred Stock may have the
effect of decreasing the market price of either or both classes of Common Stock.
At present, there are no shares of Preferred Stock outstanding and the Company
has no plans to issue any of the Preferred Stock, except as described above. See
"-- Series A Preferred Stock and Series B Preferred Stock."

REGISTRATION RIGHTS

Certain stockholders of the Company (the "Registration Rights Holders"),
including certain of the Selling Stockholders, have contractual rights with
respect to registration under the Securities Act of up to 3,513,000 shares of
the Company's Class A Common Stock and 3,513,000 shares of the Company's Class B
Common Stock held by them. Specifically, under certain circumstances, the
Company is obligated to file registration statements on Form S-3 at the
Company's expense, and certain of the Registration Rights Holders have
"piggyback" registration rights, which allow them to include their shares in
registered offerings effected by the Company for its own account or for the
account of other security holders. The Selling Stockholders and the Company's
officers and directors have agreed to a lock-up expiring 180 days following
effectiveness of the offering made hereby with respect to the portion of their
respective holdings of Class A Common Stock and Class B Common Stock not being
offered hereby except that Mr. Jon Wellman, the Company's President and Chief
Operating Officer, plans to sell 50,000 shares of Class B Common Stock in the
open market at or about the time of the offering made hereby. The exercise by
the Selling Stockholders of their respective registration rights or other sale
by the Selling Stockholders or officers or directors of the Company of their
respective holdings following the expiration of such 180-day period could have
an adverse impact on the market for shares of the Company's Class A Common Stock
or Class B Common Stock.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is NorWest
Shareowner Services of Minnesota.

CERTAIN ANTI-TAKEOVER EFFECTS

Two Classes of Common Stock. The Company recently reclassified its Common
Stock as Class B Common Stock, with ten votes per share, and authorized the new
Class A Common Stock, with one vote per share, to provide greater flexibility to
issue Common Stock without substantial diminution of the voting power of the
Company's existing stockholders. The Reclassification could also result in
certain anti-takeover effects because the Class B Common Stock effectively
controls all matters subject to stockholder vote, and the Gupta Family controls
approximately 39.4% of the Class B Common Stock, based on the number of shares
of Common Stock outstanding as of September 30, 1997. New issuances of Class A
Common Stock, including the offering made hereby, will not substantially reduce
the voting control of the Gupta Family, the Board and management. As a result,
the Reclassification might reduce the possibility of the stockholders receiving
and accepting hostile takeover bids, which are often made at premiums over
then-current market prices of the target company's stock. The Reclassification
may also render more difficult or discourage mergers, proxy contests, removal of
current management or other changes in control of the Company that may be
desired by substantial holders of the Company's equity securities, particularly
if their holdings are primarily Class A Common Stock.

Stockholder Rights Plans. The Board recently adopted stockholder rights
plans with respect to its Class A Common Stock and Class B Common Stock
(together, the "Rights Plans"). Pursuant to the Rights Plans, the Board declared
dividend distributions of Series A Preferred Stock purchase rights to the
holders of the Class A Common Stock (the "Series A Rights") and Series B
Preferred Stock purchase rights to the holders of the Class B Common Stock (the
"Series B Rights," or together with the Series A Rights, the "Rights"). The
Series A Rights and Series B Rights trade with shares of the Company's Class A
Common Stock and Class B Common Stock, respectively, and have no impact on the
way the Company's shares are traded. The Rights are not exercisable until ten
days after a person or group (other than present holders of more than 15% of the
Company's voting stock, including the Gupta Family) announces acquisition of 15%
or more of the Company's outstanding voting stock or the commencement of a
tender offer which would result in ownership of the person or group of 15% or
more of the outstanding voting stock.

35
<PAGE> 39

Once a person or group (the "Acquiring Person") acquires shares of Class A
Common Stock and/or Class B Common Stock represent 15% or more of the Company's
voting power, including the Class A Common Stock and Class B Common Stock
together (a "Trigger Event"), each Series A Right or Series B Right not owned by
the Acquiring Person will separate and trade separately from the Class A Common
Stock and Class B Common Stock, respectively, and will entitle its holder to
purchase, at such Right's then current exercise price, that number of shares of
Class A Common Stock or Class B Common Stock, respectively, of the Company (or,
in certain circumstances as determined by the Board, cash, other property or
other securities) having a market value at that time of twice such Right's
exercise price. If, after the tenth day following acquisition by such Acquiring
Person of 15% or more of the Company's voting stock, the Company sells more than
50% of its assets or earning power or is acquired in a merger or other business
combination transaction, the Acquiring Person must assume the obligations under
the Rights and the Rights will become exercisable to acquire common stock of the
Acquiring Person at the discounted price. The Rights are redeemable at the
Company's option for $0.001 per Right at any time on or prior to public
announcement that a Person has acquired beneficial ownership of 15% or more of
the Company's voting stock.

The Rights are designed to protect and maximize the value of stockholders'
interests in the Company in the event of an unsolicited takeover attempt through
such methods as a gradual accumulation of shares in excess of 15% of the
outstanding voting power followed by a two-tier tender offer or other tactics
that do not treat all shareholders equally. The Rights Plans are not intended to
prevent a takeover, but instead to protect stockholders from the abusive and
coercive tactics that often occur in takeover attempts. These tactics may
unfairly pressure stockholders, deprive them of the full value of their shares,
or squeeze them out of their investment without giving them any real choice.

Classified Board of Directors. The Company's Certificate of Incorporation
currently provides for three classes of directors, each with three-year terms.
The term of one class of Directors terminates at each annual meeting of
stockholders. As a result, stockholders desiring to replace the incumbent
directors and gain control of the Board would be required to win at least two
annual contests before their nominees constituted a majority of directors.

Super-majority Required to Amend Certificate of Incorporation. The
Company's Certificate of Incorporation provides that the affirmative vote of the
holders of shares representing at least 60% of the votes entitled to be cast by
the outstanding Class A Common Stock and Class B Common Stock, voting together
as a single class, is required to amend provisions of the Certificate of
Incorporation. These provisions of the Certificate of Incorporation could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company.

Section 203 of the Delaware General Corporation Law. Finally, because the
Company has not by a provision in its Certificate of Incorporation elected
otherwise, it is subject to Section 203 of the Delaware General Corporation Law
("Section 203"), which imposes certain restrictions, described below, on
"business combinations" with an "interested stockholder" that could produce
anti-takeover effects in certain circumstances. Section 203 defines a business
combination to include: (i) any merger or consolidation involving the
corporation and the interested stockholder; (ii) any sale, transfer, pledge or
other disposition involving the interested stockholder of 10% or more of the
assets of the corporation; (iii) subject to certain exceptions, any transaction
which results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; (iv) any transaction involving the
corporation which has the effect of increasing the proportionate share of the
stock of any class or series of the corporation beneficially owned by the
interested stockholder; or (v) the receipt by the interested stockholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation. In general, Section 203 defines an
"interested stockholder" as any entity or person beneficially owning 15% or more
of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.

Subject to certain exceptions, Section 203 prohibits a Delaware corporation
from engaging in any business combination with any interested stockholder for a
period of three years following the time that such stockholder became an
interested stockholder, unless (i) prior to such time, the board of directors of
the

36
<PAGE> 40

corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (not counting those shares owned by directors who are also officers
and by employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer), or (iii) at or subsequent to such time,
the business combination is approved by the board of directors and authorized at
an annual or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder.

37
<PAGE> 41

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC,
ABN AMRO Chicago Corporation and BT Alex. Brown Incorporated, have severally
agreed to purchase from the Company and the Selling Stockholders the following
respective number of shares of Class A Common Stock.

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Hambrecht & Quist LLC.......................................
ABN AMRO Chicago Corporation................................
BT Alex. Brown Incorporated.................................

--------
Total............................................. 8,500,000
========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Class A Common Stock offered hereby
if any of such shares are purchased.

The Underwriters propose to offer the shares of Class A Common Stock
directly to the public at the offering price set forth on the cover of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow and such dealers may reallow a
concession not in excess of $ per share to certain other dealers. After
the public offering of the shares, the offering price and other selling terms
may be changed by the Underwriters.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 1,275,000
additional shares of Class A Common Stock at the public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
that the number of shares of Class A Common Stock to be purchased by it shown in
the above table bears to the total number of shares of Class A Common Stock
offered hereby. The Company will be obligated, pursuant to the option, to sell
such shares to the Underwriters to the extent the option is exercised. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of shares of Class A Common Stock offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act and to contribute to payments the Underwriters may be required to
make in respect thereof.

The Selling Stockholders and directors and officers of the Company have
agreed that they will not, without the prior written consent of Hambrecht &
Quist LLC, sell, offer, contract to sell, make any short sale, pledge, 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 any
shares of Class A Common Stock or Class B Common Stock or any securities
convertible into or exchangeable or exercisable for or any rights to purchase or
acquire Class A Common Stock or Class B Common Stock or enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Class A Common Stock or

38
<PAGE> 42

Class B Common Stock owned by them during the 180-day period following the date
of this Prospectus except that Mr. Jon Wellman, the Company's President and
Chief Operating Officer, plans to sell 50,000 shares of Class B Common Stock in
the open market at or about the time of the offering made hereby.

In general, the rules of the Commission will prohibit the Underwriters from
making a market in the Company's Common Stock during the "cooling off" period
immediately preceding the commencement of sales in the offering. The Commission
has, however, adopted exemptions from these rules that permit passive market
making under certain conditions. These rules permit an underwriter to continue
to make a market subject to the conditions, among others, that its bid not
exceed the highest bid by a market maker not connected with the offering and
that its net purchases on any one trading day not exceed prescribed limits.
Pursuant to these exemptions, certain Underwriters, selling group members or
their respective affiliates intend to engage in passive market making in the
Company's Class A Common Stock and Class B Common Stock during the cooling off
period.

Hambrecht & Quist LLC and ABN AMRO Chicago Corporation each make a market
in the Company's Class A Common Stock and Class B Common Stock. Within the last
12 months, Hambrecht & Quist LLC also provided advisory services to the Company
regarding capital structure, acquisition opportunities and financing strategies
for which it was paid customary fees. In addition, ABN AMRO Chicago Corporation
and BT Alex. Brown Incorporated provided advisory services to the Company
regarding actual and potential acquisitions for which they have received or will
receive customary fees.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain legal matters will be
passed upon for the Underwriters by Cooley Godward LLP, Palo Alto and San
Francisco, California.

EXPERTS

The consolidated financial statements of the Company at December 31, 1995
and 1996, and June 30, 1997 and for each of the three years in the period ended
December 31, 1996 and the six months ended June 30, 1997, appearing in this
Prospectus and Registration Statement have been audited by Coopers & Lybrand
L.L.P., independent auditors, as set forth in their reports thereon appearing
elsewhere herein and are included in reliance upon such reports, given upon the
authority of such firm as experts in accounting and auditing.

39
<PAGE> 43

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
following Regional Offices: Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661; and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Company's Class
A Common Stock and Class B Common Stock are quoted for trading on the Nasdaq
National Market and reports, proxy statements and other information concerning
the Company may also be inspected at the offices of the National Association of
Securities Dealers, 1735 K Street, N.W., Washington, D.C. 20006.

Additional information regarding the Company and the shares offered hereby
is contained in the Registration Statement on Form S-3 and the exhibits thereto
filed with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). For further information pertaining to the Company and the
shares, reference is made to the Registration Statement and the exhibits
thereto, which may be inspected without charge at, and copies thereof may be
obtained at prescribed rates from, the office of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549.

The Commission maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov.

INFORMATION INCORPORATED BY REFERENCE

The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, as amended, the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1997, as amended, the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, the Company's Current Report on Form
8-K dated February 28, 1997, as amended, the Company's Current Report on Form
8-K dated August 5, 1997, the Company's Current Report on Form 8-K dated
September 8, 1997, the Company's Current Report on Form 8-K dated October 3,
1997, as amended, the description of the Company's Class A Common Stock
contained in the Company's registration statement on Form 8-A dated October 3,
1997, the description of the Company's Class B Common Stock contained in the
Company's Registration Statement on Form 8-A dated October 19, 1991, as amended,
the description of the Company's Series A Preferred Stock Purchase Rights
contained in the Company's Registration Statement on Form 8-A dated October 3,
1997 and the description of the Company's Series B Preferred Stock Purchase
Rights contained in the Company's registration statement on Form 8-A dated
August 6, 1997, as amended, filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus except as superseded or modified
herein. All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the shares offered
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in any document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge to
each person, including any beneficial owner, to whom this Prospectus is
delivered, upon written or oral request of such person, a copy of any and all of
the documents that have been or may be incorporated by reference herein (other
than exhibits to such documents that are not specifically incorporated by
reference into such documents). Such requests should be directed to the
Company's Secretary at the Company's principal executive offices at 5711 South
86th Circle, Omaha, Nebraska 68127 (telephone (402) 593-4500).

40
<PAGE> 44

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American Business Information, Inc. and Subsidiaries:
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1995, 1996
and June 30, 1997...................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996, and for the Six Month
Periods Ended June 30, 1996 (unaudited) and 1997....... F-4
Consolidated Statements of Stockholders' Equity for the
Periods Ended December 31, 1994, 1995, 1996 and June
30, 1997............................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996, and for the Six Month
Periods Ended June 30, 1996 (unaudited) and 1997....... F-6
Consolidated Balance Sheet as of September 30, 1997
(unaudited)............................................ F-7
Consolidated Statements of Operations for the Nine Months
Ended September 30, 1996 (unaudited) and September 30,
1997 (unaudited)....................................... F-8
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1996 (unaudited) and September 30,
1997 (unaudited)....................................... F-9
Notes to Consolidated Financial Statements................ F-10
Notes to Consolidated Financial Statements at September
30, 1997............................................... F-23
</TABLE>

F-1
<PAGE> 45

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of
American Business Information, Inc.:

We have audited the consolidated balance sheets of American Business
Information, Inc. and subsidiaries as of December 31, 1995 and 1996 and June 30,
1997 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996 and the six months ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of American
Business Information, Inc. and subsidiaries as of December 31, 1995 and 1996,
and June 30, 1997, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996,
and the six months ended June 30, 1997 in conformity with generally accepted
accounting principles.

/s/ COOPERS & LYBRAND L.L.P.
------------------------------------
COOPERS & LYBRAND L.L.P.

Omaha, Nebraska

September 19, 1997, except for the effects of the

stock split described in Note 18, for which the

date is October 3, 1997

F-2
<PAGE> 46

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ --------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.......................... $11,999 $ 7,497 $ 7,863
Marketable securities.............................. 23,350 22,810 22,237
Trade accounts receivable, net of allowances of
$1,824, $2,724, and $4,868, respectively........ 18,552 29,630 42,536
Income taxes receivable............................ 984 1,105 5,172
Prepaid expenses................................... 1,733 3,267 3,345
Deferred income taxes.............................. 129 -- --
Deferred marketing costs........................... 996 1,263 2,329
------- -------- --------
Total current assets....................... 57,743 65,572 83,482
------- -------- --------
Property and equipment, net.......................... 13,885 18,886 23,580
Net assets of business transferred under contractual
arrangement........................................ 2,972 -- --
Intangible assets, net of accumulated amortization... 14,642 17,410 55,808
Deferred income taxes................................ -- 5,388 --
Other assets......................................... 1,999 621 2,758
------- -------- --------
$91,241 $107,877 $165,628
======= ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................. $ 969 $ 708 $ 576
Payable to shareholders............................ -- 7,925 4,746
Accounts payable................................... 4,255 5,520 5,206
Accrued payroll expenses........................... 5,267 2,352 3,425
Accrued expenses................................... 239 711 3,885
Deferred revenue................................... 1,650 2,117 1,445
Deferred income taxes.............................. -- 512 3,488
------- -------- --------
Total current liabilities.................. 12,380 19,845 22,771
------- -------- --------
Long-term debt, net of current portion............... 1,070 427 63,659
Deferred income taxes................................ 1,707 -- 2,500
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0025 par value. Authorized
5,000,000 shares; none issued or outstanding.... -- -- --
Common stock, $.0025 par value. Authorized
75,000,000 shares; 41,553,720 shares issued and
outstanding at December 31, 1995, 44,366,920
shares issued and 48,883,164 shares outstanding
at December 31, 1996, and 49,048,164 shares
issued and 48,718,164 shares outstanding at June
30, 1997........................................ 51 55 61
Paid-in capital.................................... 27,342 37,268 67,458
Retained earnings.................................. 48,937 52,942 8,656
Treasury stock, at cost, 0 shares held at December
31, 1995, and 165,000 shares held at December
31, 1996 and June 30, 1997...................... -- (2,281) (2,281)
Unrealized holding gain (loss), net of tax......... (246) (379) 2,804
------- -------- --------
Total stockholders' equity................. 76,084 87,605 76,698
------- -------- --------
$91,241 $107,877 $165,628
======= ======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE> 47

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

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

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE> 48

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
NET UNREALIZED TOTAL
COMMON PAID-IN RETAINED TREASURY HOLDING STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK GAIN (LOSS) EQUITY
------ ------- -------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993........ $34 $26,519 $ 24,112 $ -- $ -- $ 50,665
Issuance of 13,500 shares of common
stock............................ -- 54 -- -- -- 54
Unrealized holding loss, net of
tax.............................. -- -- -- -- (217) (217)
Net income......................... -- -- 12,824 -- -- 12,824
--- ------- -------- ------- ------ --------
Balances, December 31, 1994........ 34 26,573 36,936 -- (217) 63,326
Issuance of 188,250 shares of
common stock..................... -- 786 -- -- -- 786
Unrealized holding loss, net of
tax.............................. -- -- -- -- (29) (29)
3 for 2 stock split................ 17 (17) -- -- -- --
Net income......................... -- -- 12,001 -- -- 12,001
--- ------- -------- ------- ------ --------
Balances, December 31, 1995........ 51 27,342 48,937 -- (246) 76,084
Issuance of 2,441,950 shares of
common stock..................... 3 9,628 -- -- -- 9,631
Issuance of 1,120,000 shares of
common stock in
pooling-of-interests
transaction...................... 1 86 186 -- -- 273
Tax benefit related to employee
stock options.................... -- 212 -- -- -- 212
Acquisition of treasury stock...... -- -- -- (2,281) -- (2,281)
Unrealized holding loss, net of
tax.............................. -- -- -- -- (133) (133)
Net income......................... -- -- 3,819 -- -- 3,819
--- ------- -------- ------- ------ --------
Balances, December 31, 1996........ 55 37,268 52,942 (2,281) (379) 87,605
Issuance of 4,516,244 shares of
common stock..................... 6 29,858 -- -- -- 29,864
Tax benefit related to employee
stock options.................... -- 332 -- -- -- 332
Unrealized holding gain, net of
tax.............................. -- -- -- -- 3,183 3,183
Net loss........................... -- -- (44,286) -- -- (44,286)
--- ------- -------- ------- ------ --------
Balances, June 30, 1997............ $61 $67,458 $ 8,656 $(2,281) $2,804 $ 76,698
=== ======= ======== ======= ====== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5
<PAGE> 49

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
------------------------------------------ ------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ 12,824 $ 12,001 $ 3,819 $ 9,085 $(44,286)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 3,125 3,469 4,855 2,329 15,412
Deferred income taxes.......................... 574 662 (6,307) 1,538 (1,879)
Impairment of other assets..................... -- 630 740 -- --
Loss on discontinued operation and abandonment
of subsidiary................................ -- 1,833 2,788 -- --
Net realized (gains) losses on sale of
marketable securities and other
investments.................................. -- 339 (1,267) (93) (866)
Acquisition-related charges.................... -- -- 21,500 -- 49,200
Changes in assets and liabilities, net of
effect of acquisitions:
Trade accounts receivable.................... (2,166) (4,108) (7,762) (333) (1,492)
Prepaid expenses............................. 211 (796) (1,117) (810) 631
Deferred marketing costs..................... -- (996) (267) (1,305) (1,066)
Accounts payable............................. 615 2,480 (1,422) (912) (2,022)
Income taxes receivable and payable.......... 573 (1,330) (128) 407 2,442
Accrued expenses............................. 2,330 1,635 (3,111) (3,892) (6,658)
-------- -------- -------- ------- --------
Net cash provided by operating
activities.............................. 18,086 15,819 12,321 6,014 9,416
Cash flows from investing activities:
Proceeds from sales of marketable securities...... 15,248 15,787 18,865 3,230 16,728
Purchases of marketable securities................ (15,316) (24,792) (17,348) (4,755) (10,303)
Purchase of other investments..................... -- -- -- -- (2,000)
Purchases of property and equipment............... (3,580) (3,554) (6,755) (2,787) (5,356)
Acquisitions of businesses, including minority
interest....................................... (8,246) (1,174) (6,484) -- (59,806)
Consumer database costs........................... -- -- (494) (356) (1,340)
Software development costs........................ -- (512) (1,955) (980) (972)
Other............................................. (500) (660) 347 (400) 13
-------- -------- -------- ------- --------
Net cash used in investing activities..... (12,394) (14,905) (13,824) (6,048) (63,036)
Cash flows from financing activities:
Repayment of long-term debt....................... (5,566) (3,192) (1,450) (897) (1,857)
Proceeds from long-term debt...................... 4,800 -- -- -- 63,000
Deferred financing costs.......................... -- -- -- -- (250)
Repayment of note payable to shareholders......... -- -- -- -- (7,925)
Acquisition of treasury stock..................... -- -- (2,281) -- --
Proceeds from exercise of stock options........... 54 786 520 293 686
Tax benefit related to employee stock options..... -- -- 212 -- 332
-------- -------- -------- ------- --------
Net cash provided by (used in) financing
activities.............................. (712) (2,406) (2,999) (604) 53,986
Net increase (decrease) in cash and cash
equivalents....................................... 4,980 (1,492) (4,502) (638) 366
Cash and cash equivalents, beginning................ 8,511 13,491 11,999 11,999 7,497
-------- -------- -------- ------- --------
Cash and cash equivalents, ending................... $ 13,491 $ 11,999 $ 7,497 $11,361 $ 7,863
======== ======== ======== ======= ========
Supplemental cash flow information:
Interest paid..................................... $ 259 $ 165 $ 78 $ 33 $ 1,550
======== ======== ======== ======= ========
Income taxes paid................................. $ 6,328 $ 8,226 $ 8,280 $ 2,894 $ 4,517
======== ======== ======== ======= ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-6
<PAGE> 50

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 10,171
Marketable securities..................................... 20,726
Trade accounts receivable, net of allowances of $7,869.... 48,964
Income taxes receivable................................... 6,916
Prepaid expenses.......................................... 3,665
Deferred marketing costs.................................. 2,566
--------
Total current assets................................. 93,008
Property and equipment, net................................. 23,864
Intangible assets, net of accumulated amortization.......... 76,426
Other assets................................................ 2,737
--------
$196,035
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 531
Payable to shareholders................................... 4,746
Accounts payable.......................................... 10,984
Accrued payroll expense................................... 3,618
Accrued expenses.......................................... 6,832
Deferred revenue.......................................... 2,550
Deferred income taxes..................................... 1,394
--------
Total current liabilities............................ 30,655
Long-term debt, net of current portion...................... 81,636
Deferred income taxes....................................... 3,068
Other liabilities........................................... 4,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0025 par value. Authorized 5,000,000
shares; none issued or outstanding..................... --
Common stock, $.0025 par value. Authorized 75,000,000
shares; 49,136,664 shares issued and 48,806,664 shares
outstanding at September 30, 1997...................... 61
Paid-in capital........................................... 68,270
Retained earnings......................................... 9,410
Treasury stock, at cost, 330,000 shares held.............. (2,281)
Unrealized holding gain, net of tax....................... 1,216
--------
Total stockholders' equity........................... 76,676
--------
$196,035
========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-7
<PAGE> 51

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Net sales................................................... $ 76,695 $139,511
Costs and expenses:
Database and production costs............................. 20,673 38,674
Selling, general and administrative....................... 31,674 59,396
Depreciation and amortization............................. 3,291 24,397
Acquisition-related charges............................... 21,500 56,098
-------- --------
77,138 178,565
-------- --------
Operating (loss)............................................ (443) (39,054)
Other income (expense):
Investment income......................................... 1,567 2,513
Interest expense.......................................... (53) (2,687)
Other..................................................... (740) --
-------- --------
Income (loss) before income taxes and discontinued
operation................................................. 331 (39,228)
Income taxes................................................ 126 4,299
-------- --------
Income (loss) from continuing operations.................... 205 (43,527)
Loss on discontinued operation.............................. (355) --
Loss from abandonment of subsidiary......................... (1,373) --
-------- --------
Net (loss).................................................. $ (1,523) $(43,527)
======== ========
EARNINGS PER SHARE DATA:
Income (loss) from continuing operations.................... $ 0.00 $ (0.91)
======== ========
Loss on discontinued operation and abandonment of
subsidiary................................................ $ (0.04) $ --
======== ========
Net income (loss)........................................... $ (0.04) $ (0.91)
======== ========
Weighted average shares outstanding......................... 41,616 47,964
======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-8
<PAGE> 52

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net (loss).................................................. $ (1,523) $(43,527)
Adjustments to reconcile net (loss) to cash flows from
operating activities:
Depreciation and amortization.......................... 2,505 24,397
Deferred income taxes.................................. (5,790) (2,431)
Net realized (gain) loss on sale of marketable
securities and other.................................. (83) (1,647)
Acquisition-related charges............................ 21,500 53,500
Loss on discontinued operation......................... 1,728 --
Impairment of other assets............................. 740 --
Changes in assets and liabilities, net of effects of
acquisitions:
Trade accounts receivable.............................. (3,813) (6,869)
Prepaid expenses and other assets...................... (987) 1,261
Deferred marketing costs............................... (604) (1,303)
Accounts payable....................................... 987 (985)
Income taxes payable and receivable.................... (335) 698
Accrued expenses and other liabilities................. (3,776) (5,677)
-------- --------
Net cash provided by operating activities............ 10,549 17,417
Cash flows from investing activities:
Proceeds from sales of marketable securities.............. 8,274 18,589
Purchases of marketable securities........................ (8,634) (12,285)
Purchases of property and equipment....................... (4,639) (6,392)
Purchase of other investments............................. -- (2,000)
Acquisition of businesses................................. (4,000) (79,462)
Capitalization of consumer database costs................. -- (2,348)
Capitalization of software development costs.............. (1,345) (2,235)
Other..................................................... 258 (1,101)
-------- --------
Net cash used in investing activities................ (10,086) (87,234)
Cash flows from financing activities:
Repayment of long-term debt............................... (1,013) (2,026)
Proceeds from long-term debt.............................. -- 81,000
Deferred financing costs.................................. -- (388)
Payment of note payable to shareholders................... -- (7,925)
Purchase of treasury stock................................ (2,281) --
Proceeds from exercise of stock options................... 380 1,242
Tax benefit related to employee stock options............. 128 588
-------- --------
Net cash provided by (used in) financing
activities.......................................... (2,786) 72,491
Net increase (decrease) in cash and cash equivalents........ (2,323) 2,674
Cash and cash equivalents, beginning........................ 11,999 7,497
-------- --------
Cash and cash equivalents, ending........................... $ 9,676 $ 10,171
======== ========
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 53 $ 2,247
======== ========
Income taxes paid......................................... $ 5,418 $ 7,389
======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-9
<PAGE> 53

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

American Business Information, Inc. (ABI) and its subsidiaries, (the
Company), provides business and consumer marketing information products and data
processing services throughout the United States and Canada. These products
include customized business lists, business directories and other information
services.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

All information pertaining to the six months ended June 30, 1996 are
unaudited and management believes that all adjustments, which are all of a
normal recurring nature, that are necessary to a fair presentation of the
results of operations and cash flows for the six months ended June 30, 1996 have
been made.

Use of Estimates and Assumptions. 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.

Principles of Consolidation. The consolidated financial statements include
the accounts of ABI and its subsidiaries. Intercompany accounts and transactions
have been eliminated.

Revenue Recognition. The Company recognizes revenue from the sale of
product or license of information at the time of delivery. A portion of the
revenue is deferred and recognized over the license term when the Company is
required to provide updated information. Allowance is made currently for
estimated returns and for estimated uncollectable amounts. Actual experience has
been within management's expectations.

Database Costs. Costs to maintain and enhance the Company's business
database are expensed as incurred. Costs to develop new databases are
capitalized and amortized upon the successful completion of the compilation
project, over a period not to exceed 1 year. The Company is currently
capitalizing costs associated with a compilation project to create a new
consumer database. Costs incurred as of December 31, 1996 and June 30, 1997
related to the database compilation effort totaled approximately $494 thousand
and $1.8 million, respectively, and are included in intangible assets in the
accompanying consolidated balance sheets.

Advertising Costs. Certain direct-response advertising costs are
capitalized and amortized over periods that correspond to the estimated revenue
stream of the individual advertising activity. All other advertising costs are
expensed as the advertising takes place. Total unamortized marketing costs at
December 31, 1995 and 1996, and June 30, 1997, was $1.0 million, $1.3 million,
and $2.3 million, respectively. Total advertising expense for the years ended
December 31, 1994, 1995, and 1996 was $8.6 million, $10.8 million, and $11.0
million, respectively. Total advertising expense for the six month periods ended
June 30, 1996 and 1997, was $5.2 million and $4.5 million, respectively.

Software Capitalization. Until technological feasibility is established,
software development costs are expensed as incurred. After that time, direct
costs are capitalized and amortized using the straight-line method over the
estimated economic life, generally one to four years. Unamortized software costs
included in intangible assets at December 31, 1995 and 1996, and June 30, 1997,
was $431 thousand, $1.4 million, and $1.8 million, respectively. Amortization of
capitalized costs during the years ended December 31, 1995 and 1996 totaled
approximately $81 thousand, and $1.0 million, respectively. Amortization of
capitalized costs during the six month periods ended June 30, 1996 and 1997 was
$237 thousand and $1.3 million, respectively.

Income taxes. The Company recognizes income taxes using the liability
method, under which deferred tax assets and liabilities are determined based on
the difference between financial and tax bases of assets and liabilities using
enacted tax rates.

F-10
<PAGE> 54

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Earnings Per Share. Earnings per share are based on the weighted average
number of common shares outstanding, which have been restated to account for the
stock dividend. See Note 18. Common equivalent shares arise as a result of stock
options and have not been included in the calculation since their dilutive
effect is less than 3%.

Financial Accounting Standards No. 128, Earnings Per Share. (FASB 128) was
issued in February 1997 and is effective for financial statements issued for
fiscal periods ending after December 15, 1997. The standard revises the
calculation and presentation of earnings per share and requires the presentation
of "basic earnings per share" and "diluted earnings per share." Management
believes the amount reported as earnings per share in the accompanying income
statement would approximate basic earnings per share under FASB 128 and that
diluted earnings per share would be less than 3% dilutive.

Invested Cash. Cash equivalents,consisting of highly liquid debt
instruments that are readily convertible to known amounts of cash and when
purchased have an original maturity of three months or less, are carried at cost
which approximates fair value. Marketable securities have been classified as
available-for-sale and are therefore carried at fair value, which are estimated
based on quoted market prices. Net unrealized gains and losses are reported as a
separate component of stockholders' equity. Unrealized and realized gains and
losses are determined by specific identification.

Property and Equipment. Property and equipment (including equipment
acquired under capital leases) are stated at cost and are depreciated or
amortized primarily using straight-line methods over the estimated useful lives
of the assets, as follows:

<TABLE>
<S> <C>
Buildings and improvements.................................. 30 years
Office furniture and equipment.............................. 5 to 7 years
Computer equipment.......................................... 5 years
Capitalized equipment leases................................ 5 years
</TABLE>

Intangibles. Intangible assets are stated at cost and are amortized using
the straight-line method over the estimated useful lives of the assets, as
follows:

<TABLE>
<S> <C>
Goodwill................................................ 8 to 15 years
Distribution networks................................... 2 years
Noncompete agreements................................... Term of agreements
Purchased data processing software...................... 2 years
Acquired database costs................................. 1 year
Software development costs.............................. 1 to 4 years
</TABLE>

In 1996, the Company shortened the lives for goodwill and distribution
networks in recognition of more rapid changes in the businesses acquired to 8
years and 2 years, respectively. Prior to 1996, goodwill and distribution
networks were amortized over 30 and 15 years, respectively.

All of the Company's long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future cash flows is less than the
carrying amount of the asset, a loss is recognized.

Reclassifications. Certain reclassifications were made to the 1994, 1995
and 1996 financial statements to conform to the 1997 presentation.

3. ACQUISITIONS

Effective March 1994, the Company acquired certain assets from Business
Mailers, Inc. (BMI) for total consideration of $5.8 million which was accounted
for under the purchase method of accounting. The Company allocated substantially
all of the purchase price to a distribution network which was amortized over its
estimated useful life.

F-11
<PAGE> 55

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective August 1994, the Company acquired certain assets of Zeller &
Letica (Z&L) and Nationwide Mail Marketing (NMM) for total consideration of $2.4
million which was accounted for under the purchase method of accounting.
Substantially all of the purchase price was allocated to a distribution network
and amortized over its estimated useful life.

Effective August 1996, the Company acquired certain assets and assumed
certain liabilities of Digital Directory Assistance, Inc. (DDA), a publisher of
PhoneDisc CD-ROM products. The total purchase price, subject to adjustment, was
estimated to be approximately $17.1 million of which $4.0 million was paid in
September 1996, $7.9 million in the form of a promissory note issued to the
sellers paid in January 1997, and the remaining amount through the issuance of
1.2 million unregistered shares of the Company's common stock. The acquisition
was accounted for under the purchase method of accounting. In addition to
purchased in-process research and development costs of $10 million (See Note
16), goodwill recorded as part of the purchase was $9.9 million, which is being
amortized over 8 years.

Effective November 1996, the Company acquired the common stock of County
Data Corporation (CDC), a national new business database compiler. Total
consideration for the acquisition was 1.1 million unregistered shares of the
Company's common stock. The acquisition was accounted for under the
pooling-of-interests method of accounting. The accompanying consolidated
financial statements have not been restated to reflect this acquisition, as the
net sales and net income of CDC were not significant for the periods presented.

Effective November 1996, the Company acquired certain assets and assumed
certain liabilities of Marketing Data Systems, Inc. (MDS), a provider of data
warehousing, research and analysis services for target marketing applications to
Fortune 1000 companies. Total consideration for the acquisition was $2.4
million, consisting of $1.0 million in cash and 236,000 unregistered shares of
the Company's common stock. The acquisition has been accounted for under the
purchase method of accounting. Substantially all of the purchase price was
allocated to goodwill which is being amortized over 8 years.

Effective December 1996, the Company acquired all of the Common Stock of
Kadobec Investments, Inc., (operating as B.J. Hunter), which provides lead
generation products in Canada. Total consideration for the acquisition was $3.1
million, consisting of $876 thousand in cash and 300,000 unregistered shares of
the Company's common stock. The acquisition has been accounted for under the
purchase method of accounting. The Company allocated substantially all of the
purchase price to goodwill which is being amortized over 8 years.

Effective February 1, 1997, the Company acquired all issued and outstanding
common stock of DBA Holdings, Inc. and Subsidiaries (operating as Database
America Companies, or DBA), a provider of data processing and analytical
services for marketing applications, and compiler of information on consumers
and businesses in the United States. Total consideration for the acquisition was
approximately $103.5 million, consisting of $60 million in cash, funded using a
revolving credit facility (See Note 7), and approximately 4.6 million
unregistered shares of the Company's common stock. The final payment, due in
October 1997, totalling approximately $4.7 million is included in payable to
shareholders. The acquisition has been accounted for under the purchase method
of accounting. In addition to purchased in-process research and development
costs of $49.2 million (See Note 16), intangibles and goodwill recorded as part
of the purchase included acquired database costs of $19.0 million, purchased
data processing software of $9.4 million, noncompete agreements of $1.7 million
and goodwill of $17.2 million. Goodwill is being amortized over 15 years.

Operating results for each of these acquisitions are included in the
accompanying consolidated statements of operations from the respective
acquisition dates. Assuming the above described companies had been acquired on
January 1, of the year preceding the acquisition, and excluding the write-offs
of in-process

F-12
<PAGE> 56

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

research and development costs, unaudited pro forma consolidated revenues, net
income (loss) and net income (loss) per share would have been as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1996 1996 1997
------------ ------------ ------------ -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales........................ $ 72,749 $101,404 $172,624 $81,273 $93,019
Net income (loss)................ $ 13,316 $ 9,564 $ (3,217) $ 4,023 $14,614
Net income (loss) per share...... $ 0.32 $ 0.22 $ (0.07) $ 0.09 $ 0.30
</TABLE>

The pro forma information provided above does not purport to be indicative
of the results of operations that would actually have resulted if the
acquisitions were made as of those dates or of results which may occur in the
future.

4. MARKETABLE SECURITIES

<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GROSS GAIN GROSS LOSS VALUE
--------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
At December 31, 1995
Municipal bonds.......................... $12,027 $ 68 $ (55) $12,040
U.S. government and agency............... 1,513 46 -- 1,559
Corporate bonds.......................... 7,189 114 (5) 7,298
Common stock............................. 1,148 11 (248) 911
Preferred stock.......................... 1,804 4 (266) 1,542
------- ------ ------- -------
$23,681 $ 243 $ (574) $23,350
======= ====== ======= =======
At December 31, 1996
Municipal bonds.......................... $11,450 $ 35 $ (132) $11,353
U.S. government and agency............... 808 7 (5) 810
Corporate bonds.......................... 5,751 17 (58) 5,710
Common stock............................. 5,365 18 (496) 4,887
Preferred stock.......................... 47 3 -- 50
------- ------ ------- -------
$23,421 $ 80 $ (691) $22,810
======= ====== ======= =======
At June 30, 1997
Municipal bonds.......................... $ 685 $ -- $ -- $ 685
Corporate bonds.......................... 2,665 -- (55) 2,610
Common stock............................. 14,317 5,571 (984) 18,904
Preferred stock.......................... 47 -- (9) 38
------- ------ ------- -------
$17,714 $5,571 $(1,048) $22,237
======= ====== ======= =======
</TABLE>

Scheduled maturities of marketable debt securities at June 30, 1997, are as
follows:

<TABLE>
<CAPTION>
LESS THAN ONE TO FIVE TO MORE THAN
1 YEAR 5 YEARS 10 YEARS 10 YEARS
--------- ------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Municipal bonds............................. $ -- $ 178 $ -- $507
Corporate bonds............................. 1,121 1,489 -- --
------ ------ ------ ----
$1,121 $1,667 $ -- $507
====== ====== ====== ====
</TABLE>

For the year ended December 31, 1995, proceeds from sales of marketable
securities approximated $15.8 million while realized gains totaled $747 thousand
and realized losses totaled $1.1 million. For the year

F-13
<PAGE> 57

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ended December 31, 1996, proceeds approximated $18.9 million while realized
gains totaled $1.6 million and realized losses totaled $343 thousand. For the
six month periods ended June 30, 1996 and 1997, proceeds approximated $3.2
million and $16.7 million, respectively, while realized gains totaled $202
thousand and $925 thousand, respectively, and realized losses totaled $109
thousand and $59 thousand, respectively.

5. PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Land and improvements.............................. $ 1,032 $ 1,220 $ 1,701
Buildings and improvements......................... 7,157 9,084 11,476
Furniture and equipment............................ 15,439 21,597 24,520
Capitalized equipment leases....................... 1,437 1,437 2,014
------- ------- -------
25,065 33,338 39,711
Less accumulated depreciation and amortization:
Owned property................................... 11,036 14,188 15,639
Capitalized equipment leases..................... 144 264 492
------- ------- -------
Property and equipment, net................... $13,885 $18,886 $23,580
======= ======= =======
</TABLE>

The Company is currently constructing an additional facility in Papillion,
Nebraska, near the existing Company headquarter location. The estimated cost of
the project is $8 million and is anticipated to be completed in mid 1998. The
Company anticipates funding the project with cash flows from operations and a
revolving credit facility.

Under the terms of its capital lease agreements, the Company is required to
pay ownership costs, including taxes, licenses and maintenance. The Company also
leases office space under operating leases expiring at various dates through
February, 2005. Certain of these leases contain renewal options. Rent expense
was $603 thousand, $593 thousand, and $952 thousand in the years ended December
31, 1994, 1995 and 1996, respectively, and $374 thousand and $1.1 million for
the six month periods ended June 30, 1996 and 1997, respectively.

6. INTANGIBLE ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Goodwill......................................... $ 6,331 $19,093 $38,000
Distribution networks............................ 11,871 -- --
Noncompete agreements............................ 150 -- 1,725
Purchased data processing software............... -- -- 9,400
Acquired database costs.......................... -- -- 19,000
Consumer database costs.......................... -- 494 1,834
Software development costs....................... 512 1,955 2,503
------- ------- -------
18,864 21,542 72,462
Less accumulated amortization.................... 4,222 4,132 16,654
------- ------- -------
$14,642 $17,410 $55,808
======= ======= =======
</TABLE>

F-14
<PAGE> 58

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. FINANCING ARRANGEMENTS

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Uncollateralized bank revolving line of credit,
provides for maximum borrowings of $75 million
at June 30, 1997. Facility provides for
borrowings with interest at bank's base rate or
LIBOR plus 0.375%-0.625%, based on the
Company's funded debt ratio. The rate in effect
at June 30, 1997 was 6.1875%. Principal is due
February 2000. Interest is payable at the
earliest of the end of each applicable interest
period or quarterly. In August 1997, available
borrowings under the facility was increased to
$100 million................................... $ -- $ -- $60,000
Uncollateralized bank revolving line of credit,
provides for maximum borrowings of $5 million.
Facility provides for borrowings with interest
at bank's LIBOR plus 2.150% The rate in effect
at June 30, 1997 was 7.85%. Principal is due
January 2000. Interest is payable monthly...... -- -- 3,000
Bank note, repaid in March 1996.................. 687 -- --
Bank note assumed in acquisition, repaid in
January 1997................................... -- 225 --
Computer lease obligations (See Note 5).......... 1,352 910 1,235
------ ------ -------
2,039 1,135 64,235
Less current portion............................. 969 708 576
------ ------ -------
Long-term debt................................. $1,070 $ 427 $63,659
====== ====== =======
</TABLE>

Future maturities by calendar year of long-term debt as of June 30, 1997
are as follows:

<TABLE>
<S> <C>
Remainder of 1997.................................. $ 301
1998............................................... $ 613
1999............................................... $ 235
2000............................................... $63,086
</TABLE>

The Company is subject to certain financial covenants on the $75 million
revolving credit facility, including maximum funded debt ratio, minimum interest
coverage ratio, and minimum tangible net worth tests. Additionally, the Company
is required to pay an annual commitment fee on the average unused amount of the
facility, ranging from 0.15%-0.25% based on the Company's funded debt ratio.

F-15
<PAGE> 59

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Following is a schedule of the future minimum lease payments as of June 30,
1997:

<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Remainder of 1997........................................... $ 316 $1,130
1998........................................................ 637 2,046
1999........................................................ 243 1,521
2000........................................................ 87 654
2001........................................................ -- 259
2002........................................................ -- 90
------ ------
Total future minimum lease payments......................... $1,283 $5,700
======
Less amounts representing interest.......................... 48
------
Present value of net minimum lease payments................. $1,235
======
</TABLE>

8. INCOME TAXES

The provision for income taxes on continuing operations consists of the
following:

<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED SIX MONTHS ENDED
------------------------------------------ -------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1996 1996 1997
------------ ------------ ------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current:
Federal.................... $6,559 $7,101 $ 8,782 $3,661 $ 4,923
State...................... 577 658 925 316 480
------ ------ ------- ------ -------
7,136 7,759 9,707 3,977 5,403
------ ------ ------- ------ -------
Deferred:
Federal.................... 443 615 (6,159) 1,416 (1,731)
State...................... 131 47 (148) 122 (148)
------ ------ ------- ------ -------
574 662 (6,307) 1,538 (1,879)
------ ------ ------- ------ -------
$7,710 $8,421 $ 3,400 $5,515 $ 3,524
====== ====== ======= ====== =======
</TABLE>

Loss on discontinued operation and abandonment of subsidiary is presented
net of income tax benefits of $235 thousand in 1994, $1.3 million in 1995 and
$1.1 million in 1996.

F-16
<PAGE> 60

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The effective income tax rate varied from the federal statutory rate as
follows:

<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED SIX MONTHS ENDED
------------------------------------------ -------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1994 1995 1996 1996 1997
------------ ------------ ------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Tax provision computed at
statutory rate of 35%......... $7,328 $7,959 $3,131 $5,110 $(14,267)
State taxes, net................ 418 401 530 285 216
Amortization of nondeductible
intangibles................... -- -- 29 -- 293
In-process research and
development................... -- -- -- -- 17,220
Nondeductible expense,
nontaxable income and other... (36) 61 (290) 120 62
------ ------ ------ ------ --------
$7,710 $8,421 $3,400 $5,515 $ 3,524
====== ====== ====== ====== ========
</TABLE>

The components of the net deferred tax asset (liability) were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30,
1995 1996 1997
------------ ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Marketable securities.......................... $ 85 $ 232 $ --
Intangible assets.............................. -- 5,758 --
Accrued vacation............................... 185 291 301
Accrued expenses............................... 409 369 --
Accounts receivable............................ 389 317 560
Other assets................................... 239 521 --
Other.......................................... 208 -- --
------- ------- -------
1,515 7,488 861
------- ------- -------
Deferred tax liabilities:
Intangible assets.............................. (1,439) -- (1,375)
Marketable securities.......................... -- -- (1,719)
Depreciation................................... (801) (824) (972)
Prepaid expenses and other..................... (853) (1,788) (2,783)
------- ------- -------
(3,093) (2,612) (6,849)
------- ------- -------
Net deferred tax asset (liability)............... $(1,578) $ 4,876 $(5,988)
======= ======= =======
</TABLE>

No valuation allowance has been recorded against net deferred tax assets
since management believes future taxable income will more likely than not be
sufficient to realize such assets.

F-17
<PAGE> 61

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCK INCENTIVES

The Company has a stock option plan under which, as of June 30, 1997, a
total of 5.0 million shares of the Company's Class A Common Stock and 5.0
million shares of the Company's Class B Common Stock have been reserved for
issuance to officers, key employees and non-employee directors.

Options are generally granted at the stock's fair market value on the date
of grant, vest generally over a four or five year period and expire five or six
years, respectively, from date of grant. Options issued to shareholders holding
10% or more of the Company's stock are generally issued at 110% of the stock's
fair market value on the date of grant and vest over periods ranging from five
to six years with early vesting if certain financial goals are met. Certain
options issued to directors at the stock's fair market value vested immediately
and expire five years from grant date. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation". Accordingly, no compensation
cost has been recognized for the stock option plan. Had compensation cost for
the Company's stock option plan been determined based on the fair value at the
grant date for awards issued in or subsequent to 1995 consistent with the
provisions of SFAS No. 123, the Company's net income (loss) and earnings (loss)
per share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1996 1997
------------ ------------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income (loss) -- as reported......... $12,001 $3,819 $9,085 $(44,286)
Net income (loss) -- pro forma........... $11,779 $3,072 $8,560 $(44,909)
Earnings (loss) per share -- as
reported............................... $ 0.29 $ 0.09 $ 0.22 $ (0.93)
Earnings (loss) per share -- pro forma... $ 0.28 $ 0.07 $ 0.21 $ (0.94)
</TABLE>

The above pro forma results are not likely to be representative of the
effects on reported net income for future years since options vest over several
years and additional awards generally are made each year.

The fair value of the weighted average of each year's option grants is
estimated as of the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants in 1995, 1996
and 1997: dividend yield of 0%; expected volatility of 15.52% (1995 and 1996)
and 16.18% (1997); risk free interest rate based on the U.S. Treasury strip
yield at the date of grant; and expected lives of 4.0 or 5.0 years for options
other than those issued to 10% or more shareholders for which the expected lives
were equal to the vesting periods of 5 to 6 years.

During 1995, the Company agreed to repurchase, at fair market value,
583,750 shares of common stock from a former officer of the Company for $3.1
million. The charge of $3.1 million is reflected as selling, general and
administrative expense in the accompanying 1995 consolidated statement of
operations. The actual shares were repurchased and retired in 1996. The
following information has been restated to reflect the stock dividend (see Note
18). Each option to purchase shares of common stock outstanding prior to the
stock

F-18
<PAGE> 62

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

dividend was converted into an option to purchase both, but not either, shares
of Class A Common Stock and Class B Common Stock.

<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE EXERCISE AVERAGE EXERCISE AVERAGE EXERCISE
----------------- ----------------- -----------------
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of period... 1,389,000 $4.14 2,188,500 $4.33 2,913,750 $5.49
Granted........................... 873,000 4.59 996,000 7.69 3,964,000 8.19
Exercised......................... (13,500) 3.97 (188,250) 4.18 (705,950) 4,32
Forfeited/Expired................. (60,000) 4.07 (82,500) 4.22 (968,000) 6.00
--------- ----- --------- ----- --------- -----
Outstanding end of period......... 2,188,500 $4.33 2,913,750 $5.49 5,203,800 $7.58
========= ===== ========= ===== ========= =====
Options exercisable at end of
period.......................... 378,000 $4.11 757,500 $5.49 585,050 $5.53
========= ===== ========= ===== ========= =====
Shares available for options that
may be granted.................. 1,611,500 886,250 2,796,200
========= ========= =========
Weighted-average grant date fair
value of options, granted during
the period -- exercise price
equals stock market price at
grant........................... $1.91 $2.00
===== =====
Weighted-average grant date fair
value of options granted during
the period -- exercise price
exceeds stock market price at
grant........................... $2.10
=====
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1997
----------------- ------------------
WEIGHTED WEIGHTED
AVERAGE EXERCISE AVERAGE EXERCISE
----------------- ------------------
SHARES PRICE SHARES PRICE
--------- ----- --------- ------
<S> <C> <C> <C> <C>
Outstanding beginning of period................... 2,913,705 $5.49 5,203,800 $ 7.58
Granted........................................... 2,250,000 8.40 1,190,000 10.73
Exercised......................................... (651,900) 4.33 (154,750) 4.43
Forfeited/Expired................................. (966,500) 6.01 (58,750) 8.93
--------- ----- --------- ------
Outstanding end of period......................... 3,545,350 $7.41 6,180,300 $ 8.27
========= ===== ========= ======
Options exercisable at end of period.............. 447,650 $5.25 949,300 $ 6.64
========= ===== ========= ======
Shares available for options that may be
granted......................................... 4,454,650 3,819,700
========= =========
Weighted-average grant date fair value of options,
granted during the period -- exercise price
equals stock market price at grant.............. $1.99 $ 3.02
===== ======
Weighted-average grant date fair value of options
granted during the period -- exercise price
exceeds stock market price at grant............. $2.10
=====
</TABLE>

F-19
<PAGE> 63

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
at June 30,1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- -----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
------------------------ ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$3.79 to $4.75................. 469,300 1.8 years $ 4.40 290,800 $4.33
$5.50 to $7.25................. 1,227,000 3.7 years $ 6.61 175,000 $5.89
$7.75 to $9.38................. 3,370,000 4.4 years $ 8.57 483,500 $8.30
$10.37 to $11.38............... 1,114,000 5.3 years $10.82 -- $ --
--------- ------ ------- -----
$3.79 to $11.38................ 6,180,300 $ 8.27 949,300 $6.64
========= ====== ======= =====
</TABLE>

10. SAVINGS PLAN

Employees who meet certain eligibility requirements can participate in the
Company's 401(k) Savings and Investment Plan. Under the plan, the Company may,
at its discretion, match a percentage of the employee contributions. The Company
recorded expenses related to its matching contributions of $71 thousand, $80
thousand and $115 thousand in the years ended December 31, 1994, 1995 and 1996,
respectively, and $55 thousand and $437 thousand for the six month periods ended
June 30, 1996 and 1997, respectively.

11. RELATED PARTY TRANSACTIONS

Included in other assets at December 31, 1995, December 31, 1996, and June
30, 1997, are investments of $1.3 million, $571 thousand, and $486 thousand,
respectively, in two companies that were partially owned by certain members of
the Board of Directors of the Company at the time the investments were made. At
June 30, 1997, the investments include $415 thousand in Trident Capital Partners
CSG Acquisition Fund, L.P. and $71 thousand in IDE Corporation. The Company owns
less than 10% of either company and accounts for these investments on the cost
method.

The Company paid $280 thousand, $148 thousand, and $48 thousand in 1994,
1995 and 1996, respectively, and $24 thousand for each of the six month periods
ended June 30, 1996 and 1997, to Annapurna Corporation for consulting services
and related expenses in connection with acquisition activity conducted by the
Company. Annapurna Corporation is 100% owned by a significant stockholder. The
Company also paid $156 thousand in the year ended December 31, 1996, and $48
thousand and $125 thousand for the six month periods ended June 30, 1996 and
1997, to a Director of the Company for consulting services in connection with
acquisition activity conducted by the Company.

The Company utilizes a law firm of which one member of the Board of
Directors is a partner to the firm. Legal fees paid to the law firm totaled $69
thousand, $115 thousand, and $91 thousand in the years ended December 31, 1994,
1995 and 1996, respectively, and $81 thousand and $47 thousand for the six month
periods ended June 30, 1996 and 1997, respectively.

12. DISCONTINUED OPERATIONS

On June 1, 1995, the Company transferred substantially all of the assets
and liabilities of its wholly-owned subsidiary, American Business
Communications, Inc. ("ABC") to a wholly-owned subsidiary of Baker University.
The Company received $3.0 million in the form of a 7.52% non-recourse promissory
note, due in equal monthly installments through 2005. The note is listed as "net
assets of business transferred under contractual arrangement" on the
accompanying consolidated balance sheet since it is non-recourse to Baker
University. ABC recorded net sales of $6.7 million and $2.9 million during 1994
and 1995, respectively.

F-20
<PAGE> 64

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1996, Baker University defaulted on the note and the Company
abandoned any remaining net assets of the business. As a result, the Company
recorded a loss from abandonment of subsidiary of $1.4 million, net of tax.

13. SUPPLEMENTAL CASH FLOW INFORMATION

The Company made certain acquisitions in 1994, 1996 and 1997 (See Note 3)
and assumed liabilities as follows:

<TABLE>
<CAPTION>
1994 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Fair value of assets................................. $ 9,333 $28,107 $114,280
Cash paid............................................ (8,246) (6,484) (59,806)
Promissory note issued............................... -- (7,925) --
Common stock issued.................................. -- (9,382) (29,178)
------- ------- --------
Liabilities assumed.................................. $ 1,087 $ 4,316 $ 25,296
======= ======= ========
</TABLE>

In conjunction with the transfer of ABC in 1995, approximately $6.8 million
of assets, less liabilities of $1.0 million, were exchanged for a $3.0 million
note receivable. As a result, the Company recognized an impairment of $1.8
million net of a tax benefits, which is included in loss on discontinued
operations.

During 1997, the Company acquired computer equipment totaling $577 thousand
under a capital lease obligation (See Note 5).

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's financial instruments approximates
their estimated fair value at June 30, 1997. The fair value of cash and cash
equivalents was based on the carrying value of such assets. The estimated fair
value of marketable securities were based on quoted market prices. The fair
value of notes receivable and long-term debt, including capital lease
obligations, were estimated based on discounted cash flows using market rates at
the balance sheet date. The use of discounted cash flows can be significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. The derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument.

15. CONTINGENCIES

The Company and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. Management believes
that any resulting liability should not materially affect the Company's
financial position, results of operations, or cash flows.

16. ACQUISITION-RELATED CHARGES

As part of the acquisition of DDA in August 1996 (See Note 3), the Company
recorded acquisition-related charges for purchased in-process research and
development costs totaling $10 million for write-offs in conjunction with the
merger of DDA, which related to projects that had not met technological
feasibility. Additionally in 1996, the Company recorded an acquisition-related
charge totaling $11.5 million due to the change in estimated useful lives based
on management's evaluation of the remaining lives of certain intangibles related
to acquisitions prior to 1995.

As part of the acquisition of DBA in February 1997 (See Note 3), the
Company recorded acquisition-related charges totaling $51.8 million for
write-offs in conjunction with the merger of DBA for purchased in-process
research and development costs which related to projects that had not met
technological feasibility ($49.2 million), as well as other related integration
and organizational restructuring costs ($2.6 million).

F-21
<PAGE> 65

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. SUBSEQUENT EVENT

Effective August 1997, the Company acquired certain assets and assumed
certain liabilities of Pro CD, Inc. (Pro CD). from Acxiom Corporation (Acxiom),
a provider of telephone directory and other business software products on CD-ROM
to consumers. The acquisition will be accounted for as a purchase. Total
consideration for the acquisition was $18 million in cash, funded using a
revolving credit facility (See Note 7). In conjunction with the acquisition of
Pro CD, the Company entered into a Data License Agreement with Acxiom in which
Acxiom will pay to the Company $8 million over a two year period. Additionally,
the Company entered into a Technology License Agreement with Acxiom in which the
Company will pay to Acxiom $8 million over a two year period.

18. STOCK RECLASSIFICATION AND STOCK DIVIDEND AND STOCKHOLDERS RIGHTS PLANS

On October 3, 1997, the Company's Board of Directors and shareholders
approved the reclassification of the existing common stock as Class B Common
Stock and authorized 220,000,000 shares of a new Class A Common Stock. The Board
also declared a stock split, effected in the form of a two-for-one stock
dividend of one share of Class A Common Stock for each share of Class B Common
Stock then outstanding. Accordingly all share and per share information has been
restated to reflect the stock split.

Each share of Class A Common Stock entitles the holder to one vote and a
non-cumulative dividend of $0.02 per year, when and as declared by the Board of
Directors in preference to any dividend on Class B Common Stock. Each share of
Class B Common Stock entitles the holder to ten votes.

On October 3, 1997, shareholders also approved the 1997 Class A Common
Stock Option Plan (the Plan) and reserved 2 million shares of Class A Common
Stock for issuance under the Plan. The exercise price of options issued under
the Plan may not be less than 100% of the fair market value of Class A Common
Stock at issuance, or 110% of fair value for options issued to a 10%
stockholder.

On October 3, 1997, the Company adopted a stockholder rights plan with
respect to its Class A Common Stock and adopted certain changes to the plan it
had adopted on July 21, 1997 with respect to its Class B Common Stock, under
which the Board declared a dividend distribution of one Preferred Stock purchase
rights to holders of each share of Class A Common Stock and Class B Common
Stock. The rights are not exercisable until ten days after a person or group
announces the acquisition of 15% or more of the Company's voting stock or
announces a tender offer for 15% or more of the Company's outstanding common
stock. Each right entitles the holder to purchase common stock at one half the
stock's market value. The rights are redeemable at the Company's option for
$0.001 per Right at any time on or prior to public announcement that a person
has acquired 15% or more of the Company's voting stock. The rights are
automatically attached to and trade with each share of Common Stock.

F-22
<PAGE> 66

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

The accompanying unaudited financial statements have been prepared on the
same basis as the audited consolidated financial statements and, in the opinion
of management, contain all adjustments, consisting of normal recurring
adjustments, necessary to fairly present the financial information included
therein.

The Company suggests that this financial data be read in conjunction with
the audited consolidated financial statements and notes thereto for the year
ended December 31, 1996 included in the Company's 1996 Annual Report to the
Securities and Exchange Commission on Form 10-K, as amended, and its audited
consolidated financial statements and notes thereto for the six months ended
June 30, 1997 included in the Company's Form S-3 filed September 29, 1997 and
any amendments thereto. Results for the interim period presented are not
necessarily indicative of results to be expected for the entire year.

2. ACQUISITIONS AND ACQUISITION RELATED CHARGES

Effective February 1997, the Company acquired all issued and outstanding
common stock of DBA Holdings, Inc. and Subsidiaries (operating as Database
America Companies, or DBA), a provider of data processing and analytical
services for marketing applications, and compiler of information on consumers
and businesses in the United States. Total consideration for the acquisition was
approximately $103.5 million, consisting of $60.0 million in cash, funded using
a revolving credit facility (See Note 3), and approximately 4.6 million
unregistered shares of the Company's common stock. The acquisition has been
accounted for under the purchase method of accounting. As part of this
acquisition, the Company recorded acquisition related charges totaling $51.8
million for write-offs in connection with the merger of DBA for purchased in-
process research and development costs which related to projects that had not
met technological feasibility (total of $49.2 million) as well as other related
integration and organizational restructuring costs (total of $2.6 million).
Intangibles and goodwill recorded as part of the purchase included acquired
database costs of $19.0 million (to be amortized over 1 year), purchased data
processing software of $9.4 million (to be amortized over two years), noncompete
agreements of $1.7 million (to be amortized over 10 years) and goodwill of $17.2
million (to be amortized over 10 years).

Effective August 1997, the Company acquired certain assets and assumed
certain liabilities of Pro CD, Inc. (Pro CD) from Acxiom Corporation (Acxiom), a
provider of telephone directory and other business software products on CD ROM
to consumers. Total consideration for the acquisition was $18.0 million in cash,
funded using a revolving credit facility (See Note 3). The acquisition has been
accounted for under the purchase method of accounting. As part of the
acquisition, the Company recorded acquisition related charges of $4.3 million
for write-offs of purchased in-process research and development costs which
related to projects that had not met technological feasibility. Intangibles and
goodwill recorded as part of the purchase included goodwill of $5.2 million (to
be amortized over 10 years), tradenames and noncompete agreements of $8.9
million (to be amortized over 10 years), and $2.2 million of other intangibles
(to be amortized over 3 years).

3. REVOLVING CREDIT AGREEMENT

In February 1997, the Company entered into a $65.0 million Credit Facility
with First Union Bank of North Carolina. The purpose of this facility was to
finance a portion of the acquisition of Database America Companies (See Note 2).
In addition, the bank syndicate led by First Union Bank of North Carolina
subsequently approved an additional $35.0 million of availability under the
Credit Facility principally to finance the acquisition of Pro CD in August 1997.
At September 30, 1997, total borrowings under this facility were $78.0 million.
Interest expense on the facility, which is currently based on LIBOR plus 0.50%
based on the Company's funded debt ratio, was approximately $2.5 million for the
nine months ended September 30, 1997.

F-23
<PAGE> 67

AMERICAN BUSINESS INFORMATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. SUBSEQUENT STOCK SPLIT

On October 3, 1997, the Board of Directors and shareholders approved a
reclassification of its existing common stock as Class B Common Stock and
authorized 220 million shares of new Class A Common Stock. The Class A Common
Stock entitles the holder thereof to one vote per share and a non-cumulative
dividend of $0.02 per share per year, when and as declared by the Board of
Directors, in preference to any dividend on the Class B Common Stock. The Class
B Common Stock entitles the holder thereof to ten votes per share. In all other
respects, the Class A Common Stock and Class B Common Stock are identical.

Effective October 9, 1997, the Board of Directors declared a stock split,
effected in the form of a two-for-one stock dividend of one share of Class A
Common Stock for each share of Class B Common Stock then outstanding.

All share and per share information presented in these financial statements
have been restated to reflect the split.

F-24
<PAGE> 68

============================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE 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, ANY SELLING
STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 1
Risk Factors............................... 4
Use of Proceeds............................ 9
Price Range of Common Stock................ 9
Dividend Policy............................ 9
Capitalization............................. 10
Selected Consolidated Financial Data....... 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 13
Business................................... 20
Management................................. 28
Principal and Selling Stockholders......... 30
Description of Capital Stock............... 33
Underwriting............................... 38
Legal Matters.............................. 39
Experts.................................... 39
Available Information...................... 40
Information Incorporated by Reference...... 40
Index to Consolidated Financial
Statements............................... F-1
</TABLE>

============================================================

8,500,000 SHARES

[LOGO]

CLASS A COMMON STOCK

-----------------------
PROSPECTUS
-----------------------

HAMBRECHT & QUIST

ABN AMRO CHICAGO CORPORATION

BT ALEX. BROWN

, 1997

============================================================
<PAGE> 69

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses incurred or to be
incurred in connection with the sale and distribution of the securities being
registered, other than underwriting discounts and commissions. All of the
amounts shown are estimates except the Securities and Exchange Commission
registration and NASD filing fees.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 42,000
NASD filing fee............................................. $ 14,308
Nasdaq listing fee.......................................... $ 17,500
Accounting fees and expenses................................ $110,000
Legal fees and expenses..................................... $225,000
Printing and engraving...................................... $150,000
Blue Sky fees and expenses (including counsel fees)......... $ 5,000
Transfer agent, registrar, and custodian fees and
expenses.................................................. $ 15,000
Miscellaneous expenses...................................... $ 21,192
--------
Total..................................................... $600,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Article XIII of
the Company's Certificate of Incorporation (Exhibit 3.1) and Article VIII of the
Company's Bylaws (Exhibit 3.2 hereto) provide for indemnification of the
Company's directors and officers to the maximum extent permitted by the Delaware
General Corporation Law. The Company has also entered into contracts in the form
attached hereto as Exhibit 99.1 with each officer and director, providing for
the indemnification of such persons for losses and claims incurred as a result
of their position as officer or director. Reference is also made to Section 7(b)
of the Underwriting Agreement (Exhibit 1.1 hereto) indemnifying officers and
directors of the Company against certain liabilities.

ITEM 16. EXHIBITS

The following exhibits are filed herewith or incorporated by reference
herein:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.1 -- Form of Underwriting Agreement.
2.1 -- Asset Purchase Agreement between the Company and Digital
Directory Assistance, Inc. is incorporated herein by
reference to exhibits filed with registrant's current
report on Form 8-K dated September 10, 1996.
2.2 -- Agreement and Plan of Reorganization between the Company
and the Shareholders of County Data Corporation is
incorporated herein by reference to exhibits filed with
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1996, filed with the Commission on
March 31, 1997.
2.3 -- Agreement and Plan of Reorganization between the Company
and the Shareholders of 3319971 Canada Inc. is
incorporated herein by reference to exhibits filed with
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1996, filed with the Commission on
March 31, 1997.
</TABLE>

II-1
<PAGE> 70

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
2.4 -- Agreement and Plan of Reorganization between the Company
and the shareholders of Marketing Data Systems, Inc.
2.5 -- Agreement and Plan of Reorganization between the Company
and the Shareholders of DBA Holdings, Inc. is
incorporated herein by reference to exhibits filed with
registrant's current report on Form 8-K dated February
28, 1997.
2.6 -- Agreement and Plan of Reorganization between the Company
and the Shareholders of Pro CD, Inc. is incorporated
herein by reference to exhibits filed with registrant's
current report on Form 8-K dated September 25, 1997.
3.1 -- Certificate of Incorporation, as amended through
September 5, 1996 is incorporated herein by reference to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, filed with the Commission
on March 31, 1997.
3.2 -- Bylaws are incorporated herein by reference to the
Company's Registration Statement on Form S-1 (File No.
33-42887), which became effective February 18, 1992.
3.3 -- Form of Amendment to Certificate of Incorporation filed
with the Delaware Secretary of State on or after October
3, 1997, subject to stockholder approval, filed
previously.
3.4 -- Certificate of Designation of Rights, Preferences, and
Privileges of Series A Participating Preferred Stock is
incorporated herein by reference to the Company's
Registration Statement on Form 8-A (File No. 97-652508),
filed on August 6, 1997.
3.5 -- Form of Amended and Restated Certificate of Designation
of Participating Preferred Stock, filed in Delaware on or
after October 3, 1997, subject to stockholder approval of
Exhibit 3.3 is incorporated herein by reference to the
Company's Registration Statement on Form 8-A, (File No.
97-690893), filed on October 6, 1997.
4.1 -- Rights Plan for Class A Common is incorporated herein by
reference to the Company's Registration Statement on Form
8-A, (File No. 97-690893), filed on October 6, 1997.
4.2 -- Rights Plan for Class B Common is incorporated herein by
reference to the Company's Registration Statement on Form
8-A, (File No. 97-690896), filed on August 6, 1997 and
amended on October 6, 1997.
4.3 -- Specimen of Class A Common Stock Certificate.
5.1 -- Opinion of Wilson Sonsini Goodrich & Rosati, P.C.,
regarding certain legal matters.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Wilson Sonsini Goodrich & Rosati, P.C. (See
Exhibit 5.1 above)
24.1 -- Power of Attorney is contained on the signature pages of
this Registration Statement.
99.1 -- Form of Director and Officer Indemnification Agreement is
incorporated herein by reference to Exhibit 10.15 filed
with the Company's Registration Statement on Form S-1,
(File No. 33-51352), filed on August 28, 1992.
</TABLE>

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

II-2
<PAGE> 71

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (i) and (ii) do not apply
if the information required to be included in a post-effective amendment
thereby is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement 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.

(5) That 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.

(6) That 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-3
<PAGE> 72

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Omaha, State of Nebraska, on the 26th day of
September 1997.

AMERICAN BUSINESS INFORMATION, INC.

By: /s/ JON H. WELLMAN
------------------------------------
Jon H. Wellman
President and Chief Operating
Officer

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Jon H. Wellman and Steven Purcell, jointly and
severally, his true and lawful attorneys-in-fact and agents, each with the power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement on Form S-3, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

II-4
<PAGE> 73

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ VINOD GUPTA* Chairman of the Board and October 22, 1997
- ----------------------------------------------------- Chief Executive Officer
Vinod Gupta (principal executive officer)

/s/ SCOTT DAHNKE Chief Executive Officer October 22, 1997
- ----------------------------------------------------- (principal executive officer)
Scott Dahnke

/s/ JON H. WELLMAN President, Chief Operating October 22, 1997
- ----------------------------------------------------- Officer, and Director
Jon H. Wellman

/s/ STEVEN PURCELL* Chief Financial Officer and October 22, 1997
- ----------------------------------------------------- Secretary (principal financial
Steven Purcell and accounting officer)

/s/ JON D. HOFFMASTER* Director October 22, 1997
- -----------------------------------------------------
Jon D. Hoffmaster

/s/ GAUTAM GUPTA* Director October 22, 1997
- -----------------------------------------------------
Gautam Gupta

/s/ ELLIOT S. KAPLAN* Director October 22, 1997
- -----------------------------------------------------
Elliot S. Kaplan

/s/ HAROLD ANDERSEN* Director October 22, 1997
- -----------------------------------------------------
Harold Andersen

/s/ GEORGE F. HADDIX* Director October 22, 1997
- -----------------------------------------------------
George F. Haddix

/s/ GEORGE J. KUBAT* Director October 22, 1997
- -----------------------------------------------------
George J. Kubat

/s/ PAUL A. GOLDNER* Director October 22, 1997
- -----------------------------------------------------
Paul A. Goldner

*By/s/ JON H. WELLMAN
-------------------------------------------------
Jon H. Wellman
Attorney-in-Fact
</TABLE>

II-5
<PAGE> 74

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE PAGE
------- ------------- ----
<C> <S> <C>

1.1 -- Form of Underwriting Agreement.
2.1 -- Asset Purchase Agreement between the Company and Digital
Directory Assistance, Inc. is incorporated herein by
reference to exhibits filed with registrant's current
report on Form 8-K dated September 10, 1996.
2.2 -- Agreement and Plan of Reorganization between the Company
and the Shareholders of County Data Corporation is
incorporated herein by reference to exhibits filed with
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1996, filed with the Commission on
March 31, 1997.
2.3 -- Agreement and Plan of Reorganization between the Company
and the Shareholders of 3319971 Canada Inc. is
incorporated herein by reference to exhibits filed with
Company's Annual Report on Form 10-K for the Fiscal Year
Ended December 31, 1996, filed with the Commission on
March 31, 1997.
2.4 -- Agreement and Plan of Reorganization between the Company
and the shareholders of Marketing Data Systems, Inc.
2.5 -- Agreement and Plan of Reorganization between the Company
and the Shareholders of DBA Holdings, Inc. is
incorporated herein by reference to exhibits filed with
registrant's current report on Form 8-K dated February
28, 1997.
2.6 -- Agreement and Plan of Reorganization between the Company
and the Shareholders of Pro CD, Inc. is incorporated
herein by reference to exhibits filed with registrant's
current report on Form 8-K dated September 25, 1997.
3.1 -- Certificate of Incorporation, as amended through
September 5, 1996 is incorporated herein by reference to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, filed with the Commission
on March 31, 1997.
3.2 -- Bylaws are incorporated herein by reference to the
Company's Registration Statement on Form S-1 (File No.
33-42887), which became effective February 18, 1992.
3.3 -- Form of Amendment to Certificate of Incorporation filed
with the Delaware Secretary of State on or after October
3, 1997, subject to stockholder approval, filed
previously.
3.4 -- Certificate of Designation of Rights, Preferences, and
Privileges of Series A Participating Preferred Stock is
incorporated herein by reference to the Company's
Registration Statement on Form 8-A (File No. 97-652508),
filed on August 6, 1997.
3.5 -- Form of Amended and Restated Certificate of Designation
of Participating Preferred Stock, filed in Delaware on or
after October 3, 1997, subject to stockholder approval of
Exhibit 3.3 is incorporated herein by reference to the
Company's Registration Statement on Form 8-A, (File No.
97-690893), filed on October 6, 1997.
4.1 -- Rights Plan for Class A Common is incorporated herein by
reference to the Company's Registration Statement on Form
8-A, (File No. 97-690893), filed on October 6, 1997.
4.2 -- Rights Plan for Class B Common is incorporated herein by
reference to the Company's Registration Statement on Form
8-A, (File No. 97-690896), filed on August 6, 1997 and
amended on October 6, 1997.
4.3 -- Specimen of Class A Common Stock Certificate.
5.1 -- Opinion of Wilson Sonsini Goodrich & Rosati, P.C.,
regarding certain legal matters.
</TABLE>

<PAGE> 75

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE PAGE
------- ------------- ----
<C> <S> <C>
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Wilson Sonsini Goodrich & Rosati, P.C. (See
Exhibit 5.1 above)
24.1 -- Power of Attorney is contained on the signature pages of
this Registration Statement.
99.1 -- Form of Director and Officer Indemnification Agreement is
incorporated herein by reference to Exhibit 10.15 filed
with the Company's Registration Statement on Form S-1,
(File No. 33-51352), filed on August 28, 1992.
</TABLE>

<PAGE> 1
Exhibit 1.1

AMERICAN BUSINESS INFORMATION, INC.

__________ SHARES(1)

CLASS A COMMON STOCK

UNDERWRITING AGREEMENT

_____ __, 1997

HAMBRECHT & QUIST LLC
ABN AMRO Chicago Corporation
BT Alex. Brown Incorporated
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104

Ladies and Gentlemen:

American Business Information, Inc., a Delaware corporation (herein
called the Company), proposes to issue and sell __________ shares of its
authorized but unissued Class A Common Stock, $0.0025 par value per share
(herein called the Common Stock), and the stockholders of the Company named in
Schedule II hereto (herein collectively called the Selling Securityholders)
propose to sell an aggregate of __________ shares of Common Stock (said
__________ shares of Common Stock being herein called the Underwritten Stock).
The Company proposes to grant to the Underwriters (as hereinafter defined) an
option to purchase up to __________ additional shares of Common Stock (herein
called the Option Stock and with the Underwritten Stock herein collectively
called the Stock). The Common Stock is more fully described in the
Registration Statement and the Prospectus hereinafter mentioned.

The Company and the Selling Securityholders severally hereby confirm
the agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
and warrant that you have been authorized by each of the other Underwriters to
enter into this Agreement on its behalf and to act for it in the manner herein
provided.

1. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-3 (No. 333-36669), including the related preliminary prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
Securities Act), of the Stock. Copies of such registration statement and of
each amendment thereto, if any, including the related preliminary prospectus
(meeting the requirements of Rule 430A of the rules and regulations of the
Commission) heretofore filed by the Company with the Commission have been
delivered to you.

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

(1) Plus an option to purchase from the Company up to __________
additional shares to cover over-allotments.

<PAGE> 2
The term Registration Statement as used in this agreement shall mean
such registration statement, including all documents incorporated by reference
therein, all exhibits and financial statements, all information omitted
therefrom in reliance upon Rule 430A and contained in the Prospectus referred
to below, in the form in which it became effective, and any registration
statement filed pursuant to Rule 462(b) of the rules and regulations of the
Commission with respect to the Stock (herein called a Rule 462(b) registration
statement), and, in the event of any amendment thereto after the effective date
of such registration statement (herein called the Effective Date), shall also
mean (from and after the effectiveness of such amendment) such registration
statement as so amended (including any Rule 462(b) registration statement).
The term Prospectus as used in this Agreement shall mean the prospectus,
including the documents incorporated by reference therein, relating to the
Stock first filed with the Commission pursuant to Rule 424(b) and Rule 430A (or
if no such filing is required, as included in the Registration Statement) and,
in the event of any supplement or amendment to such prospectus after the
Effective Date, shall also mean (from and after the filing with the Commission
of such supplement or the effectiveness of such amendment) such prospectus as
so supplemented or amended. The term Preliminary Prospectus as used in this
Agreement shall mean each preliminary prospectus, including the documents
incorporated by reference therein, included in such registration statement
prior to the time it becomes effective.

The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS.

(a) Each of the Company and Vinod Gupta and the entities under his
control or for the benefit of him or any member of his family named in Schedule
II hereto (each, a "Principal Securityholder") hereby represents and warrants
as follows:

(i) Each of the Company and its subsidiaries has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation,
has full corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement
and the Prospectus and as being conducted, and is duly qualified as a
foreign corporation and in good standing in all jurisdictions in which
the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where
the failure to be so qualified would not have a material adverse
effect on the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole).
The only subsidiaries of the Company that own assets or conduct
business (the "Principal Subsidiaries") are _________, _________,
________, ________, __________ and ___________.

(ii) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any materially adverse change in the business,
properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, other than as
set forth in the Registration Statement and the Prospectus, and since
such dates, except in the ordinary course of business, neither the
Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement and the
Prospectus.

2.
<PAGE> 3
(iii) The Registration Statement and the Prospectus
comply, and on the Closing Date (as hereinafter defined) and any later
date on which Option Stock is to be purchased, the Prospectus will
comply, in all material respects, with the provisions of the
Securities Act and the Securities Exchange Act of 1934, as amended
(herein called the Exchange Act) and the rules and regulations of the
Commission thereunder; on the Effective Date, the Registration
Statement did not contain any untrue statement of a material fact and
did not omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading;
and, on the Effective Date the Prospectus did not and, on the Closing
Date and any later date on which Option Stock is to be purchased, will
not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations and
warranties in this subparagraph (iii) shall apply to statements in, or
omissions from, the Registration Statement or the Prospectus made in
reliance upon and in conformity with information herein or otherwise
furnished in writing to the Company by or on behalf of the
Underwriters for use in the Registration Statement or the Prospectus.

(iv) The Stock is duly and validly authorized, is
(or, in the case of shares of the Stock to be sold by the Company,
will be, when issued and sold to the Underwriters as provided herein)
duly and validly issued, fully paid and nonassessable and conforms to
the description thereof in the Prospectus. No further approval or
authority of the stockholders or the Board of Directors of the Company
will be required for the transfer and sale of the Stock to be sold by
the Selling Securityholders or the issuance and sale of the Stock as
contemplated herein.

(v) The Stock to be sold by the Selling
Securityholders is listed and duly admitted to trading on the Nasdaq
National Market, and prior to the Closing Date the Stock to be issued
and sold by the Company will be authorized for listing by the Nasdaq
National Market upon official notice of issuance.

(vi) The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus under
"Capitalization"; the shares of the Company's issued and outstanding
Common Stock and Class B Common Stock have been duly authorized,
validly issued, and are fully paid and nonassessable; the Common Stock
and Class B Common Stock conform in all material respects to all
statements relating thereto contained in the Prospectus; except as
described in or contemplated by the Prospectus, there is no
outstanding option, warrant or other right calling for the issuance
of, and no commitment, plan or arrangement to issue, any share of
capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company; and
except as described in the Prospectus, no holder of any securities of
the Company or any other person has the right, contractual or
otherwise, to cause the Company to sell or otherwise issue to them, or
to permit them to underwrite the sale of, any of the Stock or the
right to have any Common Stock or Class B Common Stock or any of the
Stock or the right to have any Common Stock or Class B Common Stock or
other securities of the Company included in the Registration Statement
or the right, as a result of the filing of the Registration Statement,
to require registration under the Securities Act of any shares of
Common Stock or Class B Common Stock or other securities of the
Company.

(vii) The combined financial statements of the
Company, together with related notes and schedules as set forth in the
Registration Statement, present fairly the combined financial position
and the results of operations of the entities purported to be shown
thereby at the indicated dates and for the indicated periods. Such
financial statements have been prepared

3.
<PAGE> 4
in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of results for such
periods have been made. The summary financial and statistical data
included in the Registration Statement present fairly the information
shown therein and have been compiled on a basis consistent with the
financial statements presented therein. None of the Company or any of
its subsidiaries has any material contingent obligations that are not
disclosed in the financial statements or elsewhere in the Prospectus.

(viii) Except as described in the Prospectus, there
is no action or proceeding pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against the Prospectus or any
of its subsidiaries before any court or administrative agency that
might have a material adverse effect on the business properties,
condition (financial or otherwise), prospects or results of operations
of the Company and its subsidiaries taken as a whole.

(ix) Each of the Company and its subsidiaries has
good and marketable title to all of the properties and assets that are
reflected in the financial statements (or described in the Prospectus)
hereinabove described or that are material to the business of the
Company and its subsidiaries, subject to no lien, mortgage, pledge,
charge or encumbrance of any kind except those reflected in such
financial statements (or described in the Prospectus) or that do not
materially affect the business, properties, condition (financial or
otherwise), prospects or results of operations of the Company and its
subsidiaries taken as a whole. The Company and its subsidiaries
occupy their leased properties under valid and enforceable leases
conforming to the descriptions thereof set forth in the Prospectus.

(x) Each of the Company and its subsidiaries has
filed all Federal, State and foreign income tax returns that have been
required to be filed, which returns are true and correct, and has paid
all taxes indicated by said returns and all assessments received by it
to the extent such taxes have become due.

(xi) To the knowledge of the Company and its
subsidiaries, neither the Company nor any of its subsidiaries is in
violation of any law, ordinance, governmental rule or regulation or
court decree to which it may be subject, which violation might have a
material adverse effect on the business, properties, condition
(financial or otherwise), prospects or results of operations of the
Company and its subsidiaries taken as a whole.

(xii) Neither the Company nor any of its
subsidiaries is in default under any lease, contract, indenture,
mortgage, deed of trust or other agreement, instrument or obligation
to which it is a party or by which it is bound or any of its
properties is subject and which default is of material significance in
respect of the business, properties, condition (financial or
otherwise), prospects or results of operations of the Company and its
subsidiaries taken as a whole. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated
do not and will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under or violate, (A)
any lease, contract, indenture, mortgage, deed of trust or other
agreement, instrument or obligation to which the Company or any of its
subsidiaries is a party, or of the certificate of incorporation or
by-laws of the Company or any of its subsidiaries or (B) any of the
terms, conditions or provisions of any material document, agreement or
other instrument to which the Company or any of its subsidiaries is a
party or by which they are bound or (C) any order, rule or regulation
applicable to the Company or any of its subsidiaries of any court or
of any regulatory body or administrative agency or other governmental
body.

4.
<PAGE> 5
(xiii) This Agreement has been duly authorized and
validly executed and delivered by the Company and constitutes the
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that rights
to indemnification hereunder may be limited by Federal or State
securities laws.

(xiv) Each approval, consent, order, authorization,
registration, qualification, designation, declaration or filing by or
with any regulatory, administrative or other governmental agency or
body that is necessary in connection with the execution and delivery
by the Company of this Agreement or the consummation by the Company of
the transactions herein contemplated (except such consents, approvals,
authorizations, registrations or qualifications as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") or
under State securities or Blue Sky laws in connection with the
purchase and distribution of the Stock by the Underwriters) has been
obtained or made and is in full force and effect.

(xv) Each of the Company and its subsidiaries
holds all material licenses, certificates and permits from
governmental authorities that are necessary to the conduct of its
business and is in substantial compliance with the terms, conditions
and requirements of each such license, certificate and permit; each of
the Company and its subsidiaries owns or has rights by license to all
intellectual property rights including, without limitation,
copyrights, trademarks, trademark applications and other similar
rights, necessary for the conduct of its business as described in the
Prospectus; and, except as disclosed in the Prospectus, neither the
Company nor any of its subsidiaries has infringed any intellectual
property rights including, without limitation, copyrights, trade names
or trademarks, which infringement is material to the business,
properties, condition (financial or otherwise), prospects or results
of operations of the Company and its subsidiaries taken as a whole.

(xvi) Coopers & Lybrand LLP, who has certified
certain of the financial statements filed with the Commission as part
of the Registration Statement, is an independent public accountant as
required by the Securities Act and the rules and regulations
promulgated thereunder.

(xvii) Neither the Company nor any of its affiliates
has taken or may take, directly or indirectly, any action designed to
cause or result in, or that constitutes or that might reasonably be
expected to constitute, the stabilization or manipulation of the price
of the shares of Common Stock or the Class B Common Stock to
facilitate the sale or resale of the Stock.

(xviii) Each of the Company and its subsidiaries
maintains insurance of the types and in the amounts reasonably
necessary to operate its business including, but not limited to,
insurance covering real and personal property owned or leased by the
Company and its subsidiaries against theft, damage, destruction, acts
of vandalism, liability and malpractice and all other risks
customarily insured against, all of which insurance is in full force
and effect.

(xix) No collective bargaining agreement exists
with any of the Company's or its subsidiaries' employees and, to the
Company's and its subsidiaries' knowledge, no such agreement is
imminent.

(b) Each of the Selling Securityholders severally and not jointly
represents and warrants as follows:

5.
<PAGE> 6
(i) Such Selling Securityholder has good and
marketable title to all the shares of Stock to be sold by such Selling
Securityholder hereunder, free and clear of all liens, encumbrances,
equities, security interests and claims whatsoever, with full right
and authority to deliver the same hereunder, subject, in the case of
each Selling Securityholder, to the rights of Norwest Bank Minnesota,
N.A., as Custodian (herein called the Custodian), and that upon the
delivery of and payment for such shares of the Stock hereunder, the
several Underwriters will receive good and marketable title thereto,
free and clear of all liens, encumbrances, equities, security
interests and claims whatsoever.

(ii) Certificates in negotiable form for the
shares of the Stock to be sold by such Selling Securityholder have
been placed in custody under a Custody Agreement for delivery under
this Agreement with the Custodian; such Selling Securityholder
specifically agrees that the shares of the Stock represented by the
certificates so held in custody for such Selling Securityholder are
subject to the interests of the several Underwriters and the Company,
that the arrangements made by such Selling Securityholder for such
custody, including the Power of Attorney provided for in such Custody
Agreement, are to that extent irrevocable, and that the obligations of
such Selling Securityholder shall not be terminated by any act of such
Selling Securityholder or by operation of law, whether by the death or
incapacity of such Selling Securityholder (or, in the case of a
Selling Securityholder that is not an individual, the dissolution or
liquidation of such Selling Securityholder) or the occurrence of any
other event; if any such death, incapacity, dissolution, liquidation
or other such event should occur before the delivery of such shares of
the Stock hereunder, certificates for such shares of the Stock shall
be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity,
dissolution, liquidation or other event had not occurred, regardless
of whether the Custodian shall have received notice of such death,
incapacity, dissolution, liquidation or other event.

(iii) Such Selling Securityholder has reviewed the
Registration Statement and Prospectus and, although such Selling
Securityholder has not independently verified the accuracy or
completeness of all the information contained therein, nothing has
come to the attention of such Selling Securityholder that would lead
such Selling Securityholder to believe that on the Effective Date, the
Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date the Prospectus contained and,
on the Closing Date, contains any untrue statement of a material fact
or omitted or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing,
if such Selling Securityholder is not a Principal Securityholder or an
officer or director of the Company (or an entity for the benefit of
such officer or director or any member of such officer's or director's
immediate family), then the foregoing representation will only apply
to information contained in the Prospectus with respect to such
Selling Securityholder.

(iv) All consents, approvals, authorizations and
orders necessary for the execution and delivery by such Selling
Securityholder of this Agreement, the Power of Attorney and the
Custody Agreement and for the sale and delivery of the Stock to be
sold by such Selling Securityholder hereunder have been obtained
(assuming the making of all filings required under Rule 424(b) or Rule
430A and the due qualification of the Stock for public offering by the
Underwriters under state securities laws); such Selling Securityholder
has the right, power and authority to enter into this Agreement, the
Power of Attorney and the Custody Agreement and to sell, assign,
transfer and deliver the Stock to be sold by such Selling
Securityholder hereunder;

6.
<PAGE> 7
this Agreement, the Power of Attorney and the Custody Agreement
constitute valid and binding obligations and agreements of such
Selling Securityholder in accordance with their respective terms.

(v) The performance of this Agreement, the Power
of Attorney and the Custody Agreement and the consummation of the
transactions contemplated herein and therein will not constitute a
default under any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Selling
Securityholder is a party or by which such Selling Securityholder is
bound or, to the knowledge of such Selling Securityholder and assuming
the making of all filings required under Rule 424(b) or Rule 430A and
the due qualification of the Stock for public offering by the
Underwriters under state securities laws, under any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over such Selling Securityholder or the property
of such Selling Securityholder.

(vi) Such Selling Securityholder has not taken and
will not take, directly or indirectly, any action that has
constituted, or that is designed to or might reasonably be expected to
cause or result in, stabilization or manipulation of the price of sale
or resale of the Stock.

3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.

(a) On the basis of the representations and warranties and subject
to the terms and conditions herein set forth, the Company agrees to issue and
sell __________ shares of the Underwritten Stock to the several Underwriters,
each Selling Securityholder agrees to sell to the several Underwriters the
number of shares of the Underwritten Stock set forth in Schedule II opposite
the name of such Selling Securityholder, and each of the Underwriters agrees to
purchase from the Company and the Selling Securityholders the respective
aggregate number of shares of Underwritten Stock set forth opposite its name in
Schedule I. The price at which such shares of Underwritten Stock shall be sold
by the Company and the Selling Securityholders and purchased by the several
Underwriters shall be $___ per share. The obligation of each Underwriter to
the Company and each of the Selling Securityholders shall be to purchase from
the Company and the Selling Securityholders that number of shares of the
Underwritten Stock that represents the same proportion of the total number of
shares of the Underwritten Stock to be sold by each of the Company and the
Selling Securityholders pursuant to this Agreement as the number of shares of
the Underwritten Stock set forth opposite the name of such Underwriter in
Schedule I hereto represents of the total number of shares of the Underwritten
Stock to be purchased by all Underwriters pursuant to this Agreement, as
adjusted by you in such manner as you deem advisable to avoid fractional
shares. In making this Agreement, each Underwriter is contracting severally
and not jointly; except as provided in paragraphs (b) and (c) of this Section
3, the agreement of each Underwriter is to purchase only the respective number
of shares of the Underwritten Stock specified in Schedule I.

(b) If for any reason one or more of the Underwriters shall fail
or refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company or the Selling Securityholders shall
immediately give notice thereof to you, and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by you of such notice to
purchase, or procure one or more other Underwriters to purchase, in such
proportions as may be agreed upon between you and such purchasing Underwriter
or Underwriters and upon the terms herein set forth, all or any part of the
shares of the Stock which such defaulting Underwriter or Underwriters agreed to
purchase. If the non-defaulting Underwriters fail so to make such arrangements
with respect to all such shares and portion, the number of shares of the Stock
which each

7.
<PAGE> 8
non-defaulting Underwriter is otherwise obligated to purchase under this
Agreement shall be automatically increased on a pro rata basis to absorb the
remaining shares and portion which the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting Underwriters
shall not be obligated to purchase the shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate number of such
shares of the Stock exceeds 10% of the total number of shares of the Stock
which all Underwriters agreed to purchase hereunder. If the total number of
shares of the Stock which the defaulting Underwriter or Underwriters agreed to
purchase shall not be purchased or absorbed in accordance with the two
preceding sentences, the Company and the Selling Securityholders shall have the
right, within 24 hours next succeeding the 24-hour period above referred to, to
make arrangements with other underwriters or purchasers satisfactory to you for
purchase of such shares and portion on the terms herein set forth. In any such
case, either you or the Company and the Selling Securityholders shall have the
right to postpone the Closing Date determined as provided in Section 5 hereof
for not more than seven business days after the date originally fixed as the
Closing Date pursuant to said Section 5 in order that any necessary changes in
the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters nor the
Company and the Selling Securityholders shall make arrangements within the
24-hour periods stated above for the purchase of all the shares of the Stock
which the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company or the Selling Securityholders to any
non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company or the Selling Securityholders.
Nothing in this paragraph (b), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.

(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company grants an option to the several Underwriters to purchase, severally and
not jointly, up to __________ shares in the aggregate of the Option Stock from
the Company at the same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-
allotments in the sale of the Underwritten Stock by the Underwriters and may be
exercised in whole or in part at any time (but not more than once) on or before
the thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of shares of
the Option Stock as to which the several Underwriters are exercising the
option. Delivery of certificates for the shares of Option Stock, and payment
therefor, shall be made as provided in Section 5 hereof. The number of shares
of the Option Stock to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Stock to be purchased by
the several Underwriters as such Underwriter is purchasing of the Underwritten
Stock, as adjusted by you in such manner as you deem advisable to avoid
fractional shares.

4. OFFERING BY UNDERWRITERS.

(a) The terms of the public offering by the Underwriters of the
Stock to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.

(b) The information set forth in the last paragraph on the front
cover page and under "Underwriting" in the Registration Statement, any
Preliminary Prospectus and the Prospectus relating to the Stock filed by the
Company (insofar as such information relates to the Underwriters) constitutes
the only information furnished by the Underwriters to the Company for inclusion
in the Registration

8.
<PAGE> 9
Statement, any Preliminary Prospectus, and the Prospectus, and you on behalf of
the respective Underwriters represent and warrant to the Company that the
statements made therein are correct.

5. DELIVERY OF AND PAYMENT FOR THE STOCK.

(a) Delivery of certificates for the shares of the Underwritten
Stock and the Option Stock (if the option granted by Section 3(c) hereof shall
have been exercised not later than 6:00 a.m., San Francisco time, on the date
two business days preceding the Closing Date), and payment therefor, shall be
made at the office of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San
Francisco, California, at 6:00 a.m., San Francisco time, on the fourth business
day after the date of this Agreement, or at such time on such other day, not
later than seven full business days after such fourth business day, as shall be
agreed upon in writing by the Company, the Selling Securityholders and you.
The date and hour of such delivery and payment (which may be postponed as
provided in Section 3(b) hereof) are herein called the Closing Date.

(b) If the option granted by Section 3(c) hereof shall be
exercised after 6:00 a.m., San Francisco time, on the date two business days
preceding the Closing Date, delivery of certificates for the shares of Option
Stock, and payment therefor, shall be made at the office of Wilson, Sonsini,
Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California, at 6:00
a.m., San Francisco time, on the third business day after the exercise of such
option.

(c) Payment for the Stock purchased from the Company shall be made
to the Company or its order, and payment for the Stock purchased from the
Selling Securityholders shall be made to the Custodian, for the account of the
Selling Securityholders, in each case by one or more certified or official bank
check or checks in same day funds (and the Company and the Selling
Securityholders agree not to deposit any such check in the bank on which drawn
until the day following the date of its delivery to the Company or the
Custodian, as the case may be). Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the
Stock to be delivered to you shall be registered in such name or names and
shall be in such denominations as you may request at least one business day
before the Closing Date, in the case of Underwritten Stock, and at least one
business day prior to the purchase thereof, in the case of the Option Stock.
Such certificates will be made available to the Underwriters for inspection,
checking and packaging at the offices of Lewco Securities Corporation, 2
Broadway, New York, New York 10004 on the business day prior to the Closing
Date or, in the case of the Option Stock, by 3:00 p.m., New York time, on the
business day preceding the date of purchase.

It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any
later date on which Option Stock is purchased for the account of such
Underwriter. Any such payment by you shall not relieve such Underwriter from
any of its obligations hereunder.

6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING SECURITYHOLDERS.
Each of the Company and the Selling Securityholders respectively covenants and
agrees as follows:

(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A and (ii) not file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been
advised and furnished with a

9.
<PAGE> 10
copy or to which you shall have reasonably objected in writing or which is not
in compliance with the Securities Act or the rules and regulations of the
Commission.

(b) The Company will promptly notify each Underwriter in the event
of (i) the request by the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, (ii) the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement, (iii) the institution or
notice of intended institution of any action or proceeding for that purpose,
(iv) the receipt by the Company of any notification with respect to the
suspension of the qualification of the Stock for sale in any jurisdiction, or
(v) the receipt by it of notice of the initiation or threatening of any
proceeding for such purpose. The Company and the Selling Securityholders will
make every reasonable effort to prevent the issuance of such a stop order and,
if such an order shall at any time be issued, to obtain the withdrawal thereof
at the earliest possible moment.

(c) The Company will (i) on or before the Closing Date, deliver to
you a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus
as you may reasonably request, and (iii) thereafter from time to time during
the period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.

(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event relating
to or affecting the Company, or of which the Company shall be advised in
writing by you, shall occur as a result of which it is necessary, in the
opinion of counsel for the Company or of counsel for the Underwriters, to
supplement or amend the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser of the Stock, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended
prospectus so that the Prospectus as so supplemented or amended will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading. If, after the initial public offering of the Stock
by the Underwriters and during such period, the Underwriters shall propose to
vary the terms of offering thereof by reason of changes in general market
conditions or otherwise, you will advise the Company in writing of the proposed
variation, and, if in the opinion either of counsel for the Company or of
counsel for the Underwriters such proposed variation requires that the
Prospectus be supplemented or amended, the Company will forthwith prepare and
file with the Commission a supplement to the Prospectus or an amended
prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the
several Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.

10.
<PAGE> 11
(e) Prior to the filing thereof with the Commission, the Company
will submit to you, for your information, a copy of any post-effective
amendment to the Registration Statement and any supplement to the Prospectus or
any amended prospectus proposed to be filed.

(f) The Company will cooperate, when and as requested by you, in
the qualification of the Stock for offer and sale under the securities or blue
sky laws of such jurisdictions as you may designate and, during the period in
which a prospectus is required by law to be delivered by an Underwriter or
dealer, in keeping such qualifications in good standing under said securities
or blue sky laws; provided, however, that the Company shall not be obligated to
file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified. The Company
will, from time to time, prepare and file such statements, reports, and other
documents as are or may be required to continue such qualifications in effect
for so long a period as you may reasonably request for distribution of the
Stock.

(g) During a period of five years commencing with the date hereof,
the Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders
of the Company and of all information, documents and reports filed with the
Commission.

(h) Not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the Effective Date, the
Company will make generally available to its security holders an earnings
statement in accordance with Section 11(a) of the Securities Act and Rule 158
thereunder.

(i) The Company agrees to pay all costs and expenses incident to
the performance of their obligations under this Agreement, including all costs
and expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc. ("NASD") of
the Registration Statement, any Preliminary Prospectus and the Prospectus, (ii)
the furnishing to the Underwriters of copies of any Preliminary Prospectus and
of the several documents required by paragraph (c) of this Section 6 to be so
furnished, (iii) the printing of this Agreement and related documents delivered
to the Underwriters, (iv) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph (d) of
this Section 6, (v) the furnishing to you and the Underwriters of the reports
and information referred to in paragraph (g) of this Section 6 and (vi) the
printing and issuance of stock certificates, including the transfer agent's
fees. The Selling Securityholders will pay any transfer taxes incident to the
transfer to the Underwriters of the shares the Stock being sold by the Selling
Securityholders. Except as provided in Sections 6(j), 7 and 11, the parties
will be responsible for their respective attorneys' fees.

(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements (including
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel
in qualifying the Stock under state securities or blue sky laws and in the
review of the offering by the NASD.

(k) The provisions of paragraphs (i) and (j) of this Section are
intended to relieve the Underwriters from the payment of the expenses and costs
which the Company hereby agrees to pay and shall not affect any agreement which
the Company may make, or may have made, for the sharing of any such expenses
and costs.

(l) The Company and each of the Selling Securityholders hereby
agrees that, without the prior written consent of Hambrecht & Quist LLC on
behalf of the Underwriters, the Company or such

11.
<PAGE> 12
Selling Securityholder, as the case may be, will not, for a period of 180 days
following the commencement of the public offering of the Stock by the
Underwriters, directly or indirectly, (i) sell, offer, contract to sell, make
any short sale, pledge, 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 any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for or any rights to purchase
or acquire Common Stock or (ii) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences or ownership
of 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 the Stock to be
sold to the Underwriters pursuant to this Agreement as described in the
Preliminary Prospectus.

(m) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 and the Interest and Dividend Tax Compliance Act of
1983 with respect to the transactions herein contemplated, each of the Selling
Securityholders agrees to deliver to you prior to or at the Closing Date a
properly completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).

(n) If at any time during the period in which a Prospectus is
required to be delivered by an Underwriter or dealer any rumor, publication or
event relating to or affecting the Company shall occur as a result of which in
your opinion the market price for the Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, consult with you concerning the appropriate response, which may include,
without limitation, the dissemination of a press release or other public
statement, responding to or commenting on such rumor, publication or event.

(o) Until the termination of the offering of the Stock, the
Company will timely file all documents, and any amendments to previously filed
documents, required to be filed by it pursuant to Sections 13, 14 or 15(d) of
the Exchange Act (as hereinafter defined), and will make such documents
available to you at least two days prior to filing such documents.

7. INDEMNIFICATION AND CONTRIBUTION.

(a) Subject to the provisions of paragraph (f) of this Section 7
and the limitations set forth below in clauses (1), (2) and (3) of this
paragraph (a), the Company and the Selling Securityholders jointly and
severally agree to indemnify and hold harmless each Underwriter and each person
(including each partner or officer thereof) who controls any Underwriter within
the meaning of Section 15 of the Securities Act from and against any and all
losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise, and the Company and the
Selling Securityholders jointly and severally agree to reimburse each such
Underwriter and controlling person for any legal or other expenses (including,
except as otherwise hereinafter provided, reasonable fees and disbursements of
counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding which may
be brought against, the respective indemnified parties, in each case arising
out of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (including the Prospectus
as part thereof and any Rule 462(b) registration statement) or any
post-effective amendment thereto (including any Rule 462(b) registration
statement), or the omission or alleged omission to state therein a material
fact required to be stated therein or

12.
<PAGE> 13
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that (1) the indemnity agreements of the Company and the Selling
Securityholders contained in this paragraph (a) shall not apply to any such
losses, claims, damages, liabilities or expenses if such statement or omission
was made in reliance upon and in conformity with information furnished as
herein stated or otherwise furnished in writing to the Company by or on behalf
of any Underwriter for use in any Preliminary Prospectus or the Registration
Statement or the Prospectus or any such amendment thereof or supplement
thereto, (2) the indemnity agreement contained in this paragraph (a) 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,
liabilities or expenses purchased the Stock that is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
(excluding the documents incorporated therein by reference) and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented) unless the failure is the result of noncompliance by the Company
with paragraph (c) of Section 6 hereof, and (3) each Selling Securityholder
shall only be liable under this paragraph with respect to (A) information
pertaining to such Selling Securityholder furnished by or on behalf of such
Selling Securityholder expressly for use in any Preliminary Prospectus or the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto or (B) facts that would result in an inaccuracy in any representation
or warranty of such Selling Securityholder set forth in Section 2(a) or 2(b)
hereof. The indemnity agreements of the Company and the Selling
Securityholders contained in this paragraph (a) and the representations and
warranties of the Company and the Selling Securityholders contained in Section
2 hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock.

(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its officers who signs the Registration Statement
on his own behalf or pursuant to a power of attorney, each of its directors,
each other Underwriter and each person (including each partner or officer
thereof) who controls the Company or any such other Underwriter within the
meaning of Section 15 of the Securities Act, and the Selling Securityholders
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or the common law or otherwise and
to reimburse each of them for any legal or other expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) registration statement) or any post-effective
amendment thereto (including any Rule 462(b) registration statement) or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus (as amended or as supplemented if the Company shall
have filed with the Commission any amendment thereof or supplement thereto) or
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, if such statement or omission

13.
<PAGE> 14
was made in reliance upon and in conformity with information furnished as
herein stated or otherwise furnished in writing to the Company by or on behalf
of such indemnifying Underwriter for use in the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto. The indemnity
agreement of each Underwriter contained in this paragraph (b) shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any indemnified party and shall survive the delivery of and
payment for the Stock.

(c) Each party indemnified under the provision of paragraphs (a)
and (b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall
not relieve such indemnifying party or parties from any liability which it or
they may have to the indemnified party for contribution or otherwise than on
account of such indemnity agreement. Any indemnifying party shall be entitled
at its own expense to participate in the defense of any action, suit or
proceeding against, or investigation or inquiry of, an indemnified party. Any
indemnifying party shall be entitled, if it so elects within a reasonable time
after receipt of the Notice by giving written notice (herein called the Notice
of Defense) to the indemnified party, to assume (alone or in conjunction with
any other indemnifying party or parties) the entire defense of such action,
suit, investigation, inquiry or proceeding, in which event such defense shall
be conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or
parties shall be entitled to conduct the defense to the extent reasonably
determined by such counsel to be necessary to protect the interests of the
indemnified party or parties and (ii) in any event, the indemnified party or
parties shall be entitled to have counsel chosen by such indemnified party or
parties participate in, but not conduct, the defense. If, within a reasonable
time after receipt of the Notice, an indemnifying party gives a Notice of
Defense and the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under paragraphs (a) through (c) of this
Section 7 for any legal or other expenses subsequently incurred by the
indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding, except that (A) the indemnifying
party or parties shall bear the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the proviso to
the preceding sentence and (B) the indemnifying party or parties shall bear
such other expenses as it or they have authorized to be incurred by the
indemnified party or parties. If, within a reasonable time after receipt of the
Notice, no Notice of Defense has been given, the indemnifying party or parties
shall be responsible for any legal or other expenses incurred by the
indemnified party or parties in connection with the defense of the action,
suit, investigation, inquiry or proceeding.

(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party,

14.
<PAGE> 15
in lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims,
damages or liabilities referred to in paragraph (a) or (b) of this Section 7
(i) in such proportion as is appropriate to reflect the relative benefits
received by each indemnifying party from the offering of the Stock or (ii) if
the allocation provided by clause (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 (i) above but also the relative fault of each
indemnifying party in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, or actions in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Securityholders on the one hand and the
Underwriters on the other shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Stock received
by the Company and the Selling Securityholders and the total underwriting
discount received by the Underwriters, as set forth in the table on the cover
page of the Prospectus, bear to the aggregate public offering price of the
Stock. Relative fault 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 each indemnifying party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission.

The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this
paragraph (d). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities, or actions in respect thereof, referred
to in the first sentence of this paragraph (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigation, preparing to defend or defending against any
action or claim which is the subject of this paragraph (d). Notwithstanding the
provisions of this paragraph (d), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to the
Stock purchased by such Underwriter. 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 Underwriters' obligations in this paragraph
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.

Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in paragraph (c) of this Section 7).

(e) Neither the Company nor the Selling Securityholders will,
without the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not such Underwriter or any person who controls such
Underwriter within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act is a party to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of such Underwriter and each such controlling person from all liability arising
out of such claim, action, suit or proceeding.

15.
<PAGE> 16
(f) The liability of each Selling Securityholder under the
indemnity and reimbursement agreements contained in the provisions of Section 7
and Section 11 hereof shall be limited to an amount equal to the public
offering price of the stock sold by such Selling Securityholder to the
Underwriters. The Company and the Selling Securityholders may agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible, including, without limitation, allocating between the
Company and the Selling Securityholders the liability resulting from a breach
of the representations and warranties of the Company and the Principal
Securityholders hereunder.

8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States
on or after the date hereof, (ii) any outbreak of hostilities or other national
or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change in
economic or political conditions in the financial markets of the United States
would, in the Underwriters' reasonable judgment, make the offering or delivery
of the Stock impracticable, (iii) suspension of trading in securities generally
or a material adverse decline in value of securities generally on the New York
Stock Exchange, the American Stock Exchange, or The Nasdaq Stock Market, or
limitations on prices (other than limitations on hours or numbers of days of
trading) for securities on either such exchange or system, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of, or commencement of any proceeding or
investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and
adversely affects or will materially or adversely affect the business or
operations of the Company, (v) declaration of a banking moratorium by either
federal or New York State authorities or (vi) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in the Underwriters' reasonable opinion has a material
adverse effect on the securities markets in the United States. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company or the Selling Securityholders to the Underwriters and
no liability of the Underwriters to the Company or the Selling Securityholders;
provided, however, that in the event of any such termination the Company and
the Selling Securityholders agree to indemnify and hold harmless the
Underwriters from all costs or expenses incident to the performance of the
obligations of the Company and the Selling Securityholders under this
Agreement, including all costs and expenses referred to in paragraphs (i) and
(j) of Section 6 hereof.

9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing
Date or any later date on which Option Stock is to be purchased, as the case
may be, and to the following further conditions:

(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.

(b) The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing the Stock,
all corporate proceedings and other legal matters incident to the foregoing,
and the form of the Registration Statement and of the Prospectus (except as to
the financial

16.
<PAGE> 17
statements contained therein), shall have been approved at or prior to the
Closing Date by Cooley Godward LLP, counsel for the Underwriters.

(c) You shall have received from Wilson, Sonsini, Goodrich &
Rosati, Professional Corporation, counsel for the Company and the Selling
Securityholders, an opinion, addressed to the Underwriters and dated the
Closing Date, covering the matters set forth in Annex A hereto, and if Option
Stock is purchased at any date after the Closing Date, an additional opinion
from such counsel, addressed to the Underwriters and dated such later date,
confirming that the statements expressed as of the Closing Date in such
opinions remain valid as of such later date.

(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such
a supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken
as a whole, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein, (iv)
neither the Company nor any of its subsidiaries has any material contingent
obligations that are not disclosed in the Registration Statement and the
Prospectus, (v) there are not any pending or known threatened legal proceedings
to which the Company or any of its subsidiaries is a party or of which property
of the Company or any of its subsidiaries is the subject which are material and
which are not disclosed in the Registration Statement and the Prospectus, (vi)
there are not any franchises, contracts, leases or other documents which are
required to be filed as exhibits to the Registration Statement which have not
been filed as required, (vii) the representations and warranties of the Company
herein are true and correct in all material respects as of the Closing Date or
any later date on which Option Stock is to be purchased, as the case may be,
and (viii) there has not been any material change in the market for securities
in general or in political, financial or economic conditions from those
reasonably foreseeable as to render it impracticable in your reasonable
judgment to make a public offering of the Stock, or a material adverse change
in market levels for securities in general (or those of companies in
particular) or financial or economic conditions which render it inadvisable to
proceed.

(e) You shall have received on the Closing Date and on any later
date on which Option Stock is purchased a certificate, dated the Closing Date
or such later date, as the case may be, and signed by the President and the
Chief Financial Officer of the Company, stating that the respective signers of
said certificate have carefully examined the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein
and any supplements or amendments thereto, and that the statements included in
clauses (i) through (vii) of paragraph (d) of this Section 9 are true and
correct.

(f) You shall have received from Coopers & Lybrand LLP a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Option Stock is purchased, confirming that they are independent
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable published rules and regulations thereunder
and based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (herein called the Original
Letter), but carried out to a date not more than three business days prior to

17.
<PAGE> 18
the Closing Date or such later date on which Option Stock is purchased (i)
confirming, to the extent true, that the statements and conclusions set forth
in the Original Letter are accurate as of the Closing Date or such later date,
as the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of the Original Letter or to reflect the availability of more recent
financial statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company or any of its subsidiaries that, in your
sole judgment, makes it impractical or inadvisable to proceed with the public
offering of the Stock or the purchase of the Option Stock as contemplated by
the Prospectus.

(g) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.

(h) Prior to the Closing Date, the Stock to be issued and sold by
the Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.

(i) On or prior to the Closing Date, you shall have received from
all directors, officers, and beneficial holders of more than 5% of the
outstanding Common Stock (other than FMR Corp.) agreements, in form reasonably
satisfactory to Hambrecht & Quist LLC, stating that without the prior written
consent of Hambrecht & Quist LLC on behalf of the Underwriters, such person or
entity will not, for a period of 180 days following the commencement of the
public offering of the Stock by the Underwriters, directly or indirectly, (i)
sell, offer, contract to sell, make any short sale, pledge, 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 any
shares of Common Stock or any securities convertible into or exchangeable or
exercisable for or any rights to purchase or acquire Common Stock or (ii) enter
into any swap or other agreement that transfers, in whole or in part, any of
the economic consequences or ownership of 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.

All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Cooley Godward LLP, counsel for the Underwriters,
shall be satisfied that they comply in form and scope.

In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; provided, however, that (i) in the event of such
termination, the Company and the Selling Securityholders agree to indemnify and
hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholders
under this Agreement, including all costs and expenses referred to in
paragraphs (i) and (j) of Section 6 hereof, and (ii) if this Agreement is
terminated by you because of any refusal, inability or failure on the part of
the Company or the Selling Securityholders to perform any agreement herein, to
fulfill any of the conditions herein, or to comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the transactions contemplated hereby.

18.
<PAGE> 19
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.

In case either of the conditions specified in this Section 10 shall
not be fulfilled, this Agreement may be terminated by the Company and the
Selling Securityholders by giving notice to you. Any such termination shall be
without liability of the Company and the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; provided, however, that in the event of any such
termination the Company and the Selling Securityholders jointly and severally
agree to indemnify and hold harmless the Underwriters from all costs or
expenses incident to the performance of the obligations of the Company and the
Selling Securityholders under this Agreement, including all costs and expenses
referred to in paragraphs (i) and (j) of Section 6 hereof.

11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement (and subject, in the case of a
Selling Securityholder, to the last sentence of this Section 11 and the
provisions of paragraph (f) of Section 7), the Company and the Selling
Securityholders hereby jointly and severally agree to reimburse on a quarterly
basis the Underwriters for all reasonable legal and other expenses incurred in
connection with investigating or defending any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in paragraph (a) of
Section 7 of this Agreement, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the obligations under
this Section 11 and the possibility that such payments might later be held to
be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due. Notwithstanding the foregoing, each Selling Securityholder will only
be obligated under this Section 11 if the statement or omission, or alleged
statement or omission, giving rise to the claim, action, investigation, inquiry
or other proceeding related to (A) information pertaining to such Selling
Securityholder furnished by or on behalf of such Selling Securityholder
expressly for use in any Preliminary Prospectus or the Registration Statement
or the Prospectus or any amendment thereof or supplement thereto or (B) facts
that would result in an inaccuracy in any representation or warranty made by
such Selling Securityholder in Section 2(a) or Section 2(b) hereof.

12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of the Company, the Selling Securityholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholders and
the several Underwriters) indemnified under the provisions of said Section 7,
and their respective personal representatives, successors and assigns. Nothing
in this Agreement is intended or shall be construed to give to any other
person, firm or corporation any legal or equitable remedy or claim under or in
respect of this Agreement or any provision herein contained. The term
"successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Stock from any of the several Underwriters.

13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters,
shall be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush
Street, San Francisco, California 94104; and if to the Company, shall be
mailed, telegraphed or delivered to it at its office, 5711 South 86th Circle,
Omaha, Nebraska 68127, Attention: President; and if to the Selling
Securityholders, shall be mailed, telegraphed or delivered to the Selling

19.
<PAGE> 20
Securityholders in care of Steven Purcell at the Company at the address set
forth above. All notices given by telegraph shall be promptly confirmed by
letter.

14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or the Selling Securityholders or their respective directors or
officers, and (c) delivery and payment for the Stock under this Agreement;
provided, however, that if this Agreement is terminated prior to the Closing
Date, the provisions of paragraph (l) of Section 6 hereof shall be of no
further force or effect.

This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California without regard to principles of conflicts
of laws.

Please sign and return to the Company and to the Selling
Securityholders in care of the Company the enclosed duplicates of this letter,
whereupon this letter will become a binding agreement among the Company, the
Selling Securityholders and the several Underwriters in accordance with its
terms.

Very truly yours,

AMERICAN BUSINESS INFORMATION, INC.

By:
--------------------------------------
[NAME]

------------------------------------------
[TITLE]

------------------------------------------
VINOD GUPTA

SELLING SECURITYHOLDERS:
[LIST NAMES]

By:
--------------------------------------
[ATTORNEY-IN-FACT]

20.
<PAGE> 21
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.

HAMBRECHT & QUIST LLC
ABN AMRO Chicago Corporation
BT Alex. Brown Incorporated
c/o Hambrecht & Quist LLC

By
-------------------------------
Managing Director

Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.

21.
<PAGE> 22
SCHEDULE I

UNDERWRITERS

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITERS TO BE PURCHASED
- ------------ ---------------
<S> <C>
Hambrecht & Quist LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ABN AMRO Chicago Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BT Alex. Brown Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
====================
</TABLE>
<PAGE> 23
SCHEDULE II

SELLING SECURITYHOLDERS

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
OF SELLING SECURITYHOLDERS TO BE SOLD
- -------------------------- ----------------
<S> <C>

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

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
====================
</TABLE>
<PAGE> 24
ANNEX A

MATTERS TO BE COVERED IN THE OPINION OF
WILSON, SONSINI, GOODRICH & ROSATI, PROFESSIONAL CORPORATION
COUNSEL FOR THE COMPANY
AND THE SELLING SECURITYHOLDERS

(i) Each of the Company and its Principal Subsidiaries has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, is duly qualified as a
foreign corporation and in good standing in each state of the United States of
America in which its ownership or leasing of property requires such
qualification (except where the failure to be so qualified would not have a
material adverse effect on the business, properties, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole),
and has full corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; all the issued
and outstanding capital stock of each of the Principal Subsidiaries has been
duly authorized and validly issued and is fully paid and nonassessable, and is
owned by the Company free and clear of all liens, encumbrances and security
interests, and to the best of such counsel's knowledge, no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in such Principal Subsidiaries are outstanding;

(ii) The authorized capital stock of the Company consists of:
____________________ shares of Class A Common Stock, $0.0025 par value per
share, of which there are outstanding ____________________ shares (including
the Underwritten Stock plus the number of shares of Option Stock issued on the
date hereof); ____________________ shares of Class B Common Stock, $0.0025 par
value per share, of which there are outstanding ____________________ shares;
____________________ shares of Series A Preferred Stock, none of which is
issued or outstanding; and ____________________ shares of Series B Preferred
Stock, none of which is issued or outstanding; proper corporate proceedings
have been taken validly to authorize such authorized capital stock; all of the
outstanding shares of such capital stock (including the Underwritten Stock and
the shares of Option Stock issued, if any) have been duly and validly issued
and are fully paid and nonassessable; any Option Stock purchased after the
Closing Date, when issued and delivered to and paid for by the Underwriters as
provided in the Underwriting Agreement, will have been duly and validly issued
and be fully paid and nonassessable; and no preemptive rights of, or rights of
refusal in favor of, stockholders exist with respect to the Stock, or the issue
and sale thereof, pursuant to the Certificate of Incorporation or Bylaws of the
Company and, to the knowledge of such counsel, there are no contractual
preemptive rights that have not been waived, rights of first refusal or rights
of co-sale that exist with respect to the Stock being sold by the Selling
Securityholders;

(iii) Except as described in or contemplated by the Prospectus, to
the best knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company or its Principal
Subsidiaries and there are no outstanding or authorized options, warrants or
rights of any character obligating the Company or its Principal Subsidiaries to
issue any shares of its capital stock or any securities convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of such stock and there is no commitment, plan or arrangement of the
Company or its subsidiaries to issue any such shares, securities, options,
warrants or rights and, except as described in the Prospectus, to the best
knowledge of such counsel, there is no holder of any securities of the Company
or any other person who has the right, contractual or otherwise, to cause the
Company to sell or otherwise issue to

A-1.
<PAGE> 25
them, or to permit them to underwrite the sale of, any of the Stock or the
right to have any Common Stock or other securities of the Company included in
the Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Securities Act of any
shares of Common Stock or other securities of the Company or its subsidiaries.

(iv) The Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus is in effect and no proceedings for that
purpose have been instituted or are pending or contemplated by the Commission;

(v) The Registration Statement and the Prospectus (except as to
the financial statements and schedules and other financial data contained
therein, as to which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Securities Act, the Exchange
Act and with the rules and regulations of the Commission thereunder;

(vi) The statements under the caption "Description of Capital
Stock" in the Prospectus, insofar as such statements constitute a summary of
documents or case law referred to therein or descriptions of other laws, are
accurate summaries or descriptions and fairly and correctly present the
information contained therein;

(vii) To the best knowledge of such counsel and except as described
in the Prospectus, there are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is or is likely to
become a party that can reasonably be expected to have a material adverse
effect on the business, properties or results of operations of the Company and
its subsidiaries taken as a whole;

(viii) To the best of such counsel's knowledge, neither the Company
nor any of its Principal Subsidiaries is in default under any agreement, lease,
contract, indenture or other instrument or obligation to which it is a party or
by which they or any of their respective properties is bound and which default
is of material significance in respect of the business, properties, condition
(financial or otherwise), prospects or results of operations of the Company and
its subsidiaries taken as a whole (in giving the opinion in this clause counsel
may state that in respect of matters of fact they are relying upon certificates
of officers of the Company or its subsidiaries, provided that counsel shall
state that they believe that both you and they are justified in relying upon
such certificates);

(ix) The information required to be set forth in the Registration
Statement in answer to Items 9 and 10 (insofar as it relates to such counsel)
of Form S-3 is to the best of such counsel's knowledge accurately and
adequately set forth therein in all material respects or no response is
required with respect to such Items, and, to the best of such counsel's
knowledge, the description of the Company's stock option plans and the options
granted and that may be granted thereunder and the options granted otherwise
than under such plans set forth or incorporated by reference in the Prospectus
accurately and fairly presents the information required to be shown with
respect to said plans and options to the extent required by the Securities Act
and the rules and regulations of the Commission thereunder;

(x) Such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, that in the opinion of
such counsel are of a character 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 and filed as required;

A-2.
<PAGE> 26
(xi) The Underwriting Agreement has been duly authorized, executed
and delivered by the Company;

(xii) The sale of the shares of Stock as contemplated by the
Underwriting Agreement will not conflict with, or result in a breach of, the
Certificate of Incorporation (including all Certificates of Designation) or
Bylaws of the Company or any of its subsidiaries or any agreement or instrument
known to such counsel to which the Company or any of its Principal Subsidiaries
is a party or any applicable law or regulation, or so far as is known to such
counsel, any order, writ, injunction or decree, of any jurisdiction, court or
governmental instrumentality.

(xiii) To such counsel's knowledge, no holders of securities of the
Company have any rights to cause the Company to register shares of Common Stock
or other securities except as set forth in the Prospectus.

(xiv) Each Selling Securityholder has full legal right, power and
authority and any approval required by law (other than as required by State
securities and Blue Sky laws as to which such counsel need express no opinion),
to sell, assign, transfer and deliver the portion of the Stock to be sold by
such Selling Securityholder.

(xv) The Custody Agreement executed and delivered by each Selling
Securityholder is a valid, irrevocable instrument legally sufficient for the
purposes intended. The Custody Agreement has been validly authorized, executed
and delivered by each of the Selling Securityholders and constitutes a valid
and binding agreement of each Selling Securityholder enforceable against each
Selling Securityholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity.

(xvi) The Underwriting Agreement has been duly executed and
delivered by or on behalf of the Selling Securityholders and the Custody
Agreement between the Selling Securityholders and ____________________, as
Custodian, and the Power of Attorney referred to in such Custody Agreement have
been duly executed and delivered by the several Selling Securityholders.

(xvii) Good and marketable title to the shares of Stock sold by the
Selling Securityholders under the Underwriting Agreement, free and clear of all
liens, encumbrances, equities, security interests and claims, has been
transferred to the Underwriters who have severally purchased such shares of
Stock under the Underwriting Agreement, assuming for the purpose of this
opinion that the Underwriters purchased the same in good faith without notice
of any adverse claims.

(xviii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions by the Selling Securityholders contemplated in the Underwriting
Agreement, except such as have been obtained under the Securities Act and such
as may be required under state securities or blue sky laws in connection with
the purchase and distribution of the Stock by the Underwriters.

(xix) The Stock sold by the Selling Securityholders is listed and
duly admitted to trading on the Nasdaq National Market, and the Stock issued
and sold by the Company will have been duly authorized for listing by the
Nasdaq National Market upon official notice of issuance.

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

A-3.
<PAGE> 27
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or of the corporate laws of
State of Delaware upon opinions of local counsel satisfactory in form and scope
to counsel for the Underwriters. Copies of any opinions so relied upon shall
be delivered to the representatives of the Underwriters and to counsel for the
Underwriters and the foregoing opinion shall also state that counsel knows of
no reason the Underwriters are not entitled to rely upon the opinions of such
local counsel.

In addition to the matters set forth above, counsel rendering the
foregoing opinion shall also include a statement to the effect that although
they have not independently verified the accuracy or completeness of the
statements contained in the Registration Statement or the Prospectus, based
upon their participation in the preparation of the Registration Statement and
the Prospectus and their review and discussion of the contents thereof, nothing
has come to the attention of such counsel during the course of their
representation of the Company that leads them to believe that the Registration
Statement or the prospectus (except as to the financial statements and
schedules and other financial data contained or incorporated by reference
therein, as to which such counsel need not express any opinion or belief) at
the time the Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made not misleading, or at the
Closing Date or any later date on which Option Stock is purchased, contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.

A-4.

<PAGE> 1
EXHIBIT 2.4

AGREEMENT OF AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of this 18th day of November, 1996 by and between American Business
Information, Inc., a Delaware corporation ("ABI"), American Business
Information Marketing, Inc., a Delaware corporation and a wholly-owned
subsidiary of ABI (the "Purchaser"), Marketing Data Systems, Inc., a New Jersey
corporation ("MDS") and Kevin Sheridan, Derek Miller and Nancy Sheridan, being
all of the shareholders of MDS (collectively referred to herein as the
"Shareholders").

W I T N E S S E T H:

WHEREAS, ABI is a corporation duly organized and existing under the
laws of Delaware with authorized capital stock of 75,000,000 shares of common
stock, par value $.0025 per share, of which 21,984,960 shares are issued and
outstanding and 165,000 are held in treasury, and 5,000,000 shares of preferred
stock, par value $.0025 per share, of which no shares are issued and
outstanding; and

WHEREAS, Purchaser is a corporation duly organized and existing under
the laws of Delaware with authorized capital stock of 10,000 shares of common
stock, par value $1.00 per share, of which 10,000 shares are issued and
outstanding and owned by ABI; and

WHEREAS, MDS is a corporation duly organized and existing under the
laws of New Jersey with authorized capital stock of 1,000 shares of common
stock, par value $.00 per share, of which 110 shares are issued and 58 shares
outstanding all of which are owned by the Shareholders; and

WHEREAS, pursuant to Sections 14A:10-4 and 14A:10-7 of the New Jersey
Business Corporation Act (the "New Jersey Act") and Section 252 of the Delaware
General Corporation Law (the "Delaware Law"), MDS and the Purchaser agree to
merge upon the terms and conditions set forth herein (the "Merger"), with the
Purchaser as the surviving corporation thereof. (The Purchaser and MDS are
sometimes referred to herein as the "Constituent Corporations");

NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration the sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:

<PAGE> 2

Section 1. THE MERGER. (a) The effective time of the Merger (the
"Effective Time") shall be the time at which the Delaware Certificate and the
New Jersey Certificate (each defined below) shall have been filed in accordance
with the Delaware Law and the New Jersey Act pursuant to paragraph (b) of this
Section 1. At the Effective Time, the separate existence of MDS shall cease and
MDS shall be merged with and into the Purchaser, which shall continue its
corporate existence and be the corporation surviving the merger.

(b) Contemporaneously with closing described in Section 2, and in no
event later than the next business day after the Closing Date (as defined in
Section 2), the parties hereto will cause the filing of a Certificate of
Ownership and Merger in substantially the form attached hereto as Exhibit A
(the "Delaware Certificate") with the Secretary of State of the State of
Delaware in accordance with the Delaware Law and the filing of Certificate of
Merger in substantially the form attached hereto as Exhibit B (the "New Jersey
Certificate") with the Secretary of State of the State of New Jersey in
accordance with the New Jersey Act.

(c) The Purchaser, as the corporation surviving the Merger, shall
possess all the rights, privileges, immunities and franchises, both public and
private, of the Constituent Corporations; shall be vested with all property,
whether real, personal, or mixed, and all debts due on whatever account, and
all other causes in action, and all and every other interest belonging to or
due to each of the Constituent Corporations; and shall be responsible and
liable for all the obligations and liabilities of each of the Constituent
Corporations, all with the effect set forth in the Delaware Law and New Jersey
Act. Notwithstanding the foregoing, each Shareholder acknowledges and agrees
that the Purchaser will not as a result of the Merger assume any liability for
the personal debts or other obligations of the Shareholders, including
obligations incurred by the Shareholders with respect to any employee or other
party related to MDS.

(d) The certificate of incorporation of the Purchaser at the Effective
Time of the Merger shall become and continue to be the certificate of
incorporation of the Purchaser as the surviving corporation of the Merger until
amended as provided therein and by law. The bylaws of the Purchaser at the
Effective Time of the Merger shall become and continue to be the bylaws of the
Purchaser as the surviving corporation until altered or amended in accordance
with the provisions thereof. The directors and officers of the Purchaser at the
Effective Time of the Merger shall become and continue to be the directors and
officers of the Purchaser as the surviving corporation until their respective
successors are chosen.

(e) At the Effective Time of the Merger, by virtue thereof and without
any action on the part of Purchaser, MDS or the Shareholders, each share of
common stock of MDS which was issued and outstanding immediately prior to the
Effective Time shall automatically be converted into the right to receive a
proportionate share of the merger consideration consisting of the following
(the "Merger Consideration"):

2
<PAGE> 3

(i) cash of $1,034,000; and

(ii) 118,000 shares of unregistered common stock of ABI.

The Merger Consideration allocated to each Shareholder shall be determined by
(A) multiplying the total amount of cash set forth in (i) above by a fraction
equal to (x) the total number of shares of the common stock of MDS owned by
such shareholder immediately prior to the Merger by (y) the total number of
issued and outstanding shares of common stock of MDS issued and outstanding at
such time and by (B) by multiplying the total number of ABI shares set forth in
(ii) above by such fraction. It is the intent of the parties that this merger
transaction qualify as tax free, except for the monetary consideration,
pursuant to Internal Revenue Code Section 368(a)(2) and (d), the Regulations
thereunder and the administrative and judicial interpretation thereof.

Section 2. CLOSING. (a) The Closing will take place at the offices of
Kutak Rock at 1650 Farnam Street, Omaha, Nebraska, 68102 at 1:00 p.m. local
time, on November 18, 1996 (the "Closing Date") or on such other place or such
later time as the Purchaser and MDS agree.

(b) On the Closing Date, MDS shall deliver to the Purchaser:

(i) a fully executed Certificate of Merger;

(ii) a fully executed Articles of Merger;

(iii) written evidence that the Merger has been approved by
the Shareholders as required pursuant to Section 14A:10-3 of the New
Jersey Act;

(iv) a certified copy of the resolutions of MDS's board of
directors authorizing the execution of this Agreement and the
consummation of the transactions contemplated hereby; and

(v) all other documents reasonably requested by the
Purchaser and contemplated by this Agreement or required to be
delivered by MDS and the Shareholders to Purchaser pursuant to Section
6 this Agreement and not theretofore delivered.

(i) a fully executed Certificate of Merger;

(ii) a fully executed Articles of Merger;

3
<PAGE> 4

(iii) certified copies of the resolutions of ABI's and
Purchaser's boards of directors authorizing the execution of this
Agreement and the consummation of the transactions contemplated
hereby; and

(iv) all other documents reasonably requested by MDS and
contemplated by this Agreement or required to be delivered by ABI or
the Purchaser to MDS pursuant to Section 7 of this Agreement and not
theretofore delivered.

(d) On the Closing Date, the Purchaser shall deliver the Merger
Consideration to Kutak Rock (the "Paying Agent ") which shall remit
the Merger Consideration to the Shareholders as provided in Section
1(e) hereof at the Effective Time.

Section 3. REPRESENTATIONS AND WARRANTIES OF MDS AND THE SHAREHOLDERS.
MDS and the Shareholders represent, warrant and covenant to the Purchaser as of
the date of this Agreement and the Closing Date, which representations,
warranties and covenants shall survive Closing, as follows:

(a) Sole Owners. The shares of the common stock of MDS which
they own (the "Stock") represents of all of the issued and outstanding
shares of the capital stock of MDS and all of the Stock is owned by
the Shareholders free and clear of any liens and encumbrances.

(b) Corporate Existence. MDS is duly incorporated, validly
existing and in good standing as a corporation under the laws of the
State of New Jersey and has the requisite corporate power and
authority to carry on its business as it is now being conducted.

(c) Authority. MDS and each of the Shareholders has full
power and authority to execute and deliver this Agreement and to
perform each of its obligations under this Agreement. The execution,
delivery and performance of this Agreement by MDS has been duly
authorized by all necessary corporate action and this Agreement
constitutes the valid and legally binding obligation of MDS and each
of the Shareholders, enforceable in accordance with its terms and
conditions, subject only to bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles of
equity. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with,
any federal, state or local governmental authority will be required on
the part of MDS or any of the Shareholders in connection with the
consummation of the transactions contemplated by this Agreement.

(d) Noncontravention. The execution and delivery of this
Agreement by MDS and the Shareholders and the consummation of the
transactions contemplated in this Agreement do not or will not violate
or result, with the giving of notice or the lapse of time or both, in
a material violation of any provision of (a) any existing law or
regulation or any order, award or decree of any court, arbitrator or
governmental authority by

4
<PAGE> 5

which MDS or they are bound or (b) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify or cancel or
require any notice under MDS's certificate of incorporation or bylaws
or any agreement, contract, lease, license, instrument or other
arrangement to which MDS or any Shareholder is a party or by which it
is bound or to which any of its assets are subject.

(e) Claims and Proceedings. There are no pending or
threatened claims (except those customary in the business conducted by
MDS and which are not material to the Business), complaints,
proceedings, demands, liabilities, suits or actions against the
Shareholders or MDS (including, without limitation, proceedings by any
public or quasi-public authority, and foreclosure procedures or other
action by any mortgage or lienholder) before any court or
governmental, administrative or regulatory agency or authority.

(f) Compliance With Laws. MDS is in material compliance with
all, and has received no notice of any violation of any, laws or
regulations applicable to its operations.

(g) Financial Statements. Prior to the execution of this
Agreement, the Shareholders have delivered to the Purchaser true and
complete copies of the following financial statements:

(i) the audited balance sheet of MDS as of December
31, 1995 and the related audited statements of income, cash
flow and shareholders' equity of MDS for the year then ended
(the "Annual Financial Statements"); and

(ii) the unaudited balance sheet of MDS as of , 1996
and the related unaudited statements of income, cash flow and
shareholders' equity for the interim period then ended (the
"Interim Financial Statements" and, together with the Annual
Financial Statements, the "Financial Statements").

The Financial Statements were prepared in accordance with generally
accepted accounting principals consistently applied and present fairly
in all material respects the financial condition and results of
operations of MDS as of the respective dates thereof and for the
respective periods covered thereby except for such deviations as have
been disclosed therein or explained to the Purchaser. Except for the
execution and delivery of this Agreement and the transactions to take
place pursuant hereto on or prior to the Closing Date, since the date
of the Interim Financial Statements there has not been any material
adverse change in the financial condition or results of operations of
MDS which will have caused the current after tax earnings to have been
less than as determined according to the accounting principles applied
to financial statement.

5
<PAGE> 6
(h) Taxes. MDS has properly filed or caused to be filed all
federal, state, local and foreign income and other tax returns,
reports and declarations that are required by applicable law to be
filed by it, and has paid, or made full and adequate provision for the
payment of, all such taxes properly due for the periods covered by
such returns, reports and declarations.

(i) Ownership of Assets. MDS has good and marketable title
to, or hold by valid and existing lease or license, all real and
personal property used by it in the conduct of its business, free and
clear of any liens, claims, encumbrances and charges, except as may be
set forth in the Financial Statements (which shall include liens
related to payables) or which, singly or in the aggregate, are not
substantial in amount.

(j) Insurance. MDS has insurance policies covering all risks
normal for the operation of the Business including any property,
hazard and liability coverage for any automobiles, personal property
or real property it may own in full force and effect.

(k) Intellectual Property Rights. (a) Schedule 3(k) discloses
all trademark, service mark and copyright registrations, all material
unregistered trademarks and service marks and all software (other than
noncustomized software for use on personal computers) and computer
databases used by MDS on the date hereof (the "Intellectual Property")
and lists each license or other agreement or arrangement pursuant to
which MDS uses any of the Intellectual Property. To the best of
Seller's knowledge, all such Intellectual Property is exclusive to the
Shareholders and none of such Intellectual Property, or the use
thereof by MDS, infringes upon the proprietary rights of any third
party, and there have been no oppositions, interferences, challenges,
legal proceedings or suits pending or threatened either by MDS or the
Shareholders or any third party with respect to any of the
Intellectual Property.

(l) Contracts. Schedule 3(l) contains a true and
complete list of each material contract to which MDS is a party
including, but not limited to any of the following:

(i) employment or consulting contracts;

(ii) agreements prohibiting or materially limiting
the ability of MDS or the Shareholders to engage in any
business activity or compete with any person in connection
with the business conducted by MDS, or prohibiting or
materially limiting the ability of any person to compete with
MDS or the Shareholders in connection with such business;

(iii) all material partnership, joint venture,
shareholders' or other similar agreements;

(iv) all agreements relating to the future
disposition or acquisition of any material assets of MDS;

6
<PAGE> 7

(v) all collective bargaining or similar labor
agreements covering any employee of MDS; and

(vi) all other contracts or agreements of any nature
that (A) involve the payment or potential payment by MDS of
more than $10,000 annually and (B) cannot be terminated
within 90 days after giving notice of termination without
resulting in any material cost or penalty to MDS.

(vii) all contacts or agreements which require
consent for a transfer of control such as contemplated by
this Stock Purchase Agreement.

Each such material contract is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms and neither Corporation nor, to the
knowledge of Shareholders, any other party to such a contract is in
material violation or breach of or default under any such contract.

(m) Licenses. Schedule 3(m) contains a true and complete list
of all licenses held by MDS that are material to its business and all
such licenses are in full force and effect and no proceeding is
pending or threatened seeking the revocation or limitation of any such
license that, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on the operations or
financial condition of MDS.

(n) Labor Relations. No employee of MDS is presently a member
of a collective bargaining unit and there are no threatened or
contemplated attempts to organize for collective bargaining purposes
any of the employees of MDS. As of the date hereof, no work stoppage,
strike or other concerted action by the employees of MDS is pending or
threatened.

(o) Vehicles. Schedule 3(o) contains a true and complete list
of all motor vehicles owned or leased by MDS and MDS has good and
valid title to, or has valid leasehold interests in or valid rights
under contract to use, each such vehicle, free and clear of all liens.

(p) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the
Shareholders with the Purchaser without the intervention of any person
on behalf of the Shareholders in such manner as to give rise to any
valid claim by any person against the Purchaser or MDS for a finder's
fee, brokerage commission or similar payment.

(q) Employee Benefit Plans. All employee benefit plans,
vacation plans and sick leave policies maintained by MDS are set forth
in Schedule 3(q) hereto. MDS is not in default or delinquent in any
manner under any such employee benefit plan and each such employee
benefit plans is in full compliance with all applicable provisions of
the Employee Retirement Notification Act of 1974, as amended.

7
<PAGE> 8
(r) WARN Act. MDS has fewer than 40 employees at any one
location.

(s) Salaries and Business. Since May 31, 1996 there have been
no material changes in the conduct of business nor have there been any
material changes in salaries for employees of MDS except as set forth
in Schedule 3(s) attached hereto and incorporated herein by reference.

(t) No Intention to Sell. Each Shareholder intends to hold
indefinitely each share of common stock of ABI which will be issued to
such Shareholder as part of the Merger Consideration pursuant to the
terms of this Agreement and has no present intention to sell any of
such shares. This Representation shall survive Closing notwithstanding
any provision to the contrary contained herein.

(u) No Material Untrue Statements or Omissions. No
representation or warranty made by the Shareholders in this Agreement
or in any instrument or document furnished or to be furnished to the
Purchaser pursuant to this Agreement contains or will, as of the date
thereof, contain any untrue statement of a material fact, and such
representations and warranties, taken as a whole, do not and will not,
as of the date thereof, omit to state a material fact necessary to
make any statement herein or therein not materially misleading.

Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. ABI and
the Purchaser represent, warrant and covenant to MDS and the Shareholders as of
the date of this Agreement and the Closing Date, which representations,
warranties and covenants shall survive Closing, as follows:

(a) Corporate Existence. ABI and the Purchaser is each duly
incorporated, validly existing and in good standing as a corporation
under the laws of the State of Delaware.

(b) Authority. ABI and the Purchaser each has full power and
authority to execute and deliver this Agreement and to perform each of
their respective obligations under this Agreement. The execution,
delivery and performance of this Agreement by ABI and the Purchaser
has been duly authorized by all necessary corporate action and this
Agreement constitutes the valid and legally binding obligation of both
ABI and the Purchaser enforceable in accordance with its terms and
conditions, subject only to bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general principles of
equity. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with,
any federal, state or local governmental authority will be required on
the part of ABI or the Purchaser in connection with the consummation
of the transactions contemplated by this Agreement.

8
<PAGE> 9
(c) Noncontravention. The execution and delivery of this
Agreement by ABI or the Purchaser and the consummation of the
transactions contemplated in this Agreement do not or will not violate
or result, with the giving of notice or the lapse of time or both, in
a material violation of any provision of (a) any existing law or
regulation or any order, award or decree of any court, arbitrator or
governmental authority by which ABI or the Purchaser is bound or (b)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel or require any notice under
their respective certificates of incorporation or bylaws or any
agreement, contract, lease, license, instrument or other arrangement
to which ABI or the Purchaser is a party or by which it is bound or
to which any of its assets are subject.

(d) No Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by the
Purchaser directly with MDS and the Shareholders without the
intervention of any person on behalf of the Purchaser in such manner
as to give rise to any valid claim by any person against the
Shareholders for a finder's fee, brokerage commission or similar
payment.

Section 5. COVENANTS OF THE SHAREHOLDERS. (a) The Shareholders
covenant and agree that, prior to the Closing Date, they will:

(i) not enter into any contract, agreement or understanding
of any nature with any party other than the Purchaser with respect to
the sale, transfer, assignment, pledge or other disposition of the
Stock.

(ii) provide the Purchaser and its accountants, counsel and
other representatives with reasonable access during normal business
hours, to all of the books and records of MDS and its business and
allow the Purchaser and its representatives access to MDS's executive
offices and other property and to its officers and employees in order
to perform such investigations as the Purchaser shall deem reasonably
necessary.

(iii) cause MDS to conduct its business in the ordinary and
usual course, to keep intact its business organization and good will,
keep available the services of its officers and employees, maintain
its licenses and authorities and use their best efforts to maintain
good relationships with suppliers, lenders, creditors, employees,
customers and others and will promptly notify the Purchaser of any
material event or occurrence which is not in the ordinary course of
its business;

(iv) not amend MDS's Articles of Incorporation or Bylaws or
split, combine or reclassify any of its securities, declare or pay any
dividend or other distribution or make or agree to make any exchange
or redemption of any such securities except such dividends as shall be
required to pay the taxes of the shareholders caused by the income of
the corporation prior to closing which dividend shall be approved by
the Purchaser in Amendment.

9
<PAGE> 10
(v) not allow MDS to create or assume any indebtedness or
make any capital expenditures other than in the ordinary course of its
business and consistent with past practices and in any event not in an
amount greater than $10,000;

(vi) not allow MDS to sell, lease, mortgage, encumber or
otherwise dispose of or grant any interest in any of MDS's assets
other than in the ordinary course of business and consistent with past
practice;

(vii) not allow MDS to enter into or terminate any material
contract, agreement, commitment or understanding except this Agreement
and any duly executed amendments hereto;

(viii) cause MDS to continue to properly and timely file all
federal, state, and local tax returns required to be filed by it, and
to pay, when due, all taxes and governmental charges due from or
payable by it:

(ix) cause MDS to maintain in full force and effect all
insurance coverage presently in effect; and

(x) cooperate with the Purchaser and its counsel,
accountants and other representatives in every way reasonably
requested in carrying out the transaction contemplated by this
Agreement and the preparation and delivery of all documents and
instruments reasonably necessary to the accomplishment thereof.

(b) In addition, each Shareholder hereby covenants and agrees with ABI
and the Purchaser that such Shareholder will not sell any of the shares of
common stock of ABI which will be issued to such Shareholder as part of the
Merger Consideration for a period of no less than two (2) years from the
Effective Time. Each Shareholder acknowledges that the ABI shares are
restricted securities and agrees not to offer, sell, pledge or otherwise
transfer such securities without registration thereof under the Securities Act
of 1933, as amended, and appropriate state securities laws unless such offer,
sale, pledge or transfer is made pursuant to an available exemption from such
registration requirements. This covenant shall survive Closing notwithstanding
any provisions to the contrary contained herein.

Section 6. CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT CLOSING. The
obligation of the Purchaser at closing shall be subject to the fulfillment of
each of the following conditions at or prior to the Closing Date, unless the
Purchaser shall waive fulfillment of such condition:

(i) this Agreement and the transactions contemplated hereby
shall have received all approvals, consents, authorizations and
waivers from governmental and other regulatory agencies and other
third parties required to consummate the transaction including all
leases;

10
<PAGE> 11
(ii) the Shareholders shall have delivered to the
Purchaser each of the documents specified in Section 2(b) hereof;

(iii) the entire principal of each loan from the Company to
any of the Shareholders, members of the Shareholders' families or any
corporation or other entity controlled by any such person shall have
been repaid in full along with interest through the date of Closing;

(iv) the Shareholders shall have performed in all material
respects each of their agreements and obligations contained in this
Agreement and required to be performed by them on or prior to the
Closing and shall have complied with all material requirements, rules
and regulations of all regulatory authorities having jurisdiction
relating to the transaction;

(v) no material adverse change shall have taken place in
the business, condition (financial or otherwise, including the book
value of MDS and current ratios), operations or prospects of MDS
since the date of the last annual financial statements of MDS other
than those, if any, that result from the changes permitted by, and
transactions contemplated by, this Agreement;

(vi) the representations and warranties of the Shareholders
set forth in this Agreement shall have been true in all material
respects as of the date of this Agreement and, except in such respects
as, in the reasonable judgment of the Purchaser, do not materially and
adversely affect the business, condition (financial or otherwise),
operations or prospects of MDS, shall continue to be true as of the
Closing Date;

(vii) the Purchaser shall have received the resignation in
writing of all directors and officers of MDS in writing effective
immediately after the Closing, subject to the acceptance by the
Purchaser;

(viii) the Purchaser shall have satisfactorily completed its
due diligence of MDS;

(ix) the Shareholders shall have delivered Assignment and
Assumption Agreements covering all leases in which they are personally
parties;

(x) as of September 30, 1996, MDS shall have a net book
value of at least $340,000 and exclusive of assets being retained by
Shareholders, with cash and accounts receivable of at least $335,000
included as an asset; and

(xi) the Shareholders shall have executed all agreements
contemplated by this Agreement.

11
<PAGE> 12

Section 7. CONDITIONS TO THE OBLIGATIONS MDS AND THE SHAREHOLDERS AT
CLOSING. The obligations of MDS and the Shareholders at closing shall be
subject to the fulfillment of each of the following conditions at or prior to
the Closing Date, unless MDS and the Shareholders shall waive fulfillment of
such condition:

(ii) the Purchaser shall have delivered to MDS each of the
documents specified in Section 2(c) hereof;

(iii) the Purchaser shall have delivered to the Merger
Consideration to the Paying Agent;

(iv) Kevin Sheridan and Roberta Sheridan and any member of
their families shall be released from their guarantee of MDS's bank
loan;

(v) the Purchaser shall have enter into an employment
agreement with Kevin Sheridan in substantially the form attached as
Exhibit C hereto;

(vi) ABI and the Purchaser shall have performed in all
material respects their respective agreements and obligations
contained in this Agreement required to be performed by them on or
prior to the Closing and shall have complied with all material
requirements, rules and regulations of all regulatory authorities
having jurisdiction relating to the transaction;

(vii) the representations and warranties of ABI and the
Purchaser set forth in this Agreement shall be true in all material
respects as of the date of this Agreement and shall continue to be
true as of the Closing Date; and

(viii) ABI and the Purchaser shall have executed all
agreements contemplated by this Agreement.

Section 8. CONFIDENTIALITY. ABI and the Purchaser, for themselves and
on behalf of their respective officers, employees, counsel, accountants,
financial advisors, consultants, agents and other representatives ("the
Purchaser's Representatives"), agrees that all information regarding MDS
furnished by the Shareholders to the Purchaser or a Purchaser's Representative,
whether prior to or after the execution of this Agreement, in connection with
the transactions contemplated herein, will be kept confidential and, except as
otherwise required by law, will not be disclosed by the Purchaser or a the
Purchaser's Representative without the prior written consent of MDS until after
Closing or as required by law or regulation. If, as of the date hereof or at
any time hereafter the Purchaser becomes aware of or discovers any breach of
any representation or warranty contained herein or any circumstance or condition
that at the Closing would constitute such a breach, the Purchaser covenants
that it will promptly so inform Shareholders in writing.

12
<PAGE> 13

Section 9. TERMINATION. (a) This Agreement may be terminated, and
the transactions contemplated hereby may be abandoned:

(i) at any time before the Closing, by mutual written
agreement of MDS and the Purchaser;

(ii) at any time before the Closing, by MDS or the
Purchaser, in the event that any judicial order or law becomes
effective restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by
this Agreement, upon notification of the nonterminating party by the
terminating party; or

(iii) at any time after November 30, 1996 by MDS or the
Purchaser upon notification of the nonterminating party by the
terminating party if the Closing shall not have occurred on or before
such date and such failure to consummate is not caused by a breach of
this Agreement by the terminating party.

(b) If this Agreement is validly terminated, it will forthwith become
null and void, and there will be no liability or obligation on the part of MDS
or the Purchaser (or any of their respective officers, directors, employees,
agents or other representatives or affiliates), except that (i) the provisions
with respect to expenses in Section 10 will continue to apply following any
such termination, (ii) Section 8 shall survive any termination of this
Agreement and (iii) termination of this Agreement shall not relieve any party
hereto of any liability for any willful material breach of this Agreement.

Section 10. EXPENSES. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and the transactions
contemplated hereby.

Section 11. INDEMNIFICATION. (a) Subject to paragraph (c) of this
Section 11, from and after the Closing, the Shareholders shall indemnify the
Purchaser and its officers, directors, employees and agents in respect of, and
hold each of them harmless from and against, any and all claims, suits, causes
of action, losses suffered, incurred or sustained by any of them or to which
any of them becomes subject, resulting from, arising out of or relating to (i)
any breach of any representation, warranty, covenant or agreement of MDS or the
Shareholders contained herein or (ii) any matter relating to the conduct of the
business of MDS prior to the Effective Time.

13
<PAGE> 14

(b) Subject to paragraphs (c) of this Section 11, from and after
the Closing, the Purchaser shall indemnify the Shareholders in respect of, and
hold each of them harmless from and against, any and all claims, suits, causes
of action and losses suffered, incurred or sustained by any of them or to which
any of them becomes subject, resulting from, arising out of or relating to (i)
any breach of any representation, warranty, covenant or agreement of the
Purchaser contained herein or (ii) any matter relating to the conduct of the
business of the Constituent Corporations arising after the Effective Time.

(c) Notwithstanding anything to the contrary contained in this
Agreement, no amounts of indemnity shall be payable as a result of any claim in
respect of a loss arising under paragraph (a) or (b) of this Section 11 unless,
with respect to any claim, such claim involves a loss in excess of $1,000 and
all claims together aggregate at least $10,000.

(d) Any party claiming a right to payment under this Section 11 shall,
as a condition thereto, give written notice to the party from whom
indemnification is claimed and the nature and amount of such claim promptly
upon the claiming parties becoming aware thereof and, in any event, within the
later of (i) three years of Closing Date or (ii) for any matters related to tax
issues, the termination of the applicable statute of limitations.

Section 12. PUBLIC ANNOUNCEMENTS. At all times at or before the
Closing, MDS and the Purchaser will, except as required by law (and then only
after consultation in good faith with the other such party), not issue or make
any reports, statements or releases to the public or generally to the
customers, suppliers or other persons to whom MDS sells goods or provides
services or with whom MDS otherwise has significant business relationships with
respect to this Agreement or the transactions contemplated hereby without the
consent of the other party, which consent may be withheld for whatever reason.
Notwithstanding the above, both parties agree to cooperate in good faith in
preparing such announcements as may be necessary to satisfy the regulations of
NASDAQ and the SEC with regard to the transaction.

Section 13. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all of which shall constitute one in the same agreement.

Section 14. HEADINGS. All headings of sections of this Agreement are
inserted for convenience only and do not form a part of this Agreement or
limit, expand or otherwise alter the meaning of any provisions hereof.

Section 15. CONSTRUCTION. This Agreement shall be construed without
regard to any presumption or rule requiring construction against the party
causing such instrument to be drafted.

Section 16. ASSIGNMENT OR DELEGATION. No rights, obligations or duties
of either party hereto may be assigned or delegated without the prior written
consent of the other party.

14
<PAGE> 15

Section 17. SEVERABILITY. Should any provision of this Agreement be
deemed unenforceable by a court of competent jurisdiction, the unenforceable
provision shall be considered severed from this Agreement and the remainder
shall remain in force.

Section 18. ENTIRE AGREEMENT. This instrument contains and constitutes
the entire agreement of the parties regarding the subject matter hereof, and
there are no other agreements, written or oral, between the parties affecting
the subject matter hereof.

Section 19. NOTICES. All notices or other communications to be given
hereunder shall be given in writing and delivered by (i) certified mail, return
receipt requested, (ii) personal delivery, (iii) facsimile or (iv) overnight
express carrier addressed as follows: if to MDS or the Shareholders, c/o Kevin
Sheridan, Marketing Data Systems, Inc., 3 Route 46 West, Fairfield, New Jersey
07004, with a copy to John Hanamirian, Esq., Hersch, Ramsey & Berman, Post
Office Box 2249, Morristown, New Jersey, 07962-2249 and if to ABI or the
Purchaser, American Business Information, Inc., 5711 South 86th Circle, Omaha,
Nebraska, 68127, Attention: Vinod Gupta and Jon H. Wellman, with a copy to
Steven W. Seline, Esq., Kutak Rock, 1650 Farnam Street, Omaha, Nebraska, 68102,
or to such other address furnished by any party to the other in writing at any
time and from time to time for such notice purposes. Any notice served by
either party on the other shall be deemed effective on the third business day
following deposit in the mail if sent by certified mail, return receipt
requested, when received, if delivered personally or by facsimile, or on the
next business day following deposit with an overnight express carrier.

Section 20. NONWAIVER. No delay, forbearance or neglect by either
party in the enforcement of any of the conditions of this Agreement or any of
their respective rights or remedies hereunder shall constitute or be construed
as a waiver thereof.

Section 21. AMENDMENTS. This Agreement may not be modified or amended,
except by an agreement in writing signed by the parties hereto. The parties may
waive any of the conditions contained herein or any of the obligations of the
other parties hereunder, but any such waiver shall be effective only if it is
in writing and signed by the party waiving such condition or obligation.

Section 22. FURTHER ASSURANCES. Each of the parties hereto agrees to
take such further action and to execute such further instruments as may be
reasonably required by any of the other parties in order to consummate the
transactions contemplated by this Agreement and to carry out the intentions
expressed in this Agreement.

[SIGNATURES APPEAR ON NEXT PAGE]

15
<PAGE> 16

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.

AMERICAN BUSINESS INFORMATION,
INC., a Delaware corporation

By /s/ JON WELLMAN
--------------------------------------
Its Executive Vice President
--------------------------------------

AMERICAN BUSINESS INFORMATION
MARKETING, INC., a Delaware corporation

By /s/ JON WELLMAN
--------------------------------------
Its Vice President
--------------------------------------

MARKETING DATA SYSTEMS, INC., a
New Jersey corporation

By /s/ KEVIN SHERIDAN
--------------------------------------
Its President
--------------------------------------

SHAREHOLDERS:

/s/ KEVIN SHERIDAN
-----------------------------------------
Kevin Sheridan

/s/ DEREK MILLER
-----------------------------------------
Derek Miller

/s/ NANCY SHERIDAN
-----------------------------------------
Nancy Sheridan

<PAGE> 1
EXHIBIT 4.3

NUMBER SHARES

SEE REVERSE SIDE
FOR CERTAIN
DEFINITIONS

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

AMERICAN BUSINESS INFORMATION, INC.

CLASS A COMMON STOCK

THIS CERTIFIES THAT

is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK, OF THE PAR
VALUE OF $.0025 PER SHARE, OF

- ----------------------AMERICAN BUSINESS INFORMATION, INC.----------------------

transferable on the books of the Corporation by the holder hereof in person or
by Attorney upon surrender of this certificate properly endorsed. This
certificate is not valid unless countersigned by the Transfer Agent and
Registrar.

IN WITNESS WHEREOF, the said Corporation has caused this certificate
to be signed by facsimile signatures of its duly authorized officers and to be
sealed with the seal of the Corporation.

Dated:

[AMERICAN BUSINESS INFORMATION, INC. SEAL]

/s/ STEVEN PURCELL /s/ JON WELLMAN
SECRETARY CHAIRMAN OF THE BOARD

By Authorized Signature

Countersigned and Registered:
NORWEST BANK MINNESOTA, N.A.
Transfer Agent and Registrar
<PAGE> 2
EXHIBIT 4.3

THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN AMERICAN BUSINESS
INFORMATION, INC., AND NORTHWEST BANK MINNESOTA, N.A., AS THE RIGHTS AGENT,
DATED AS OF JULY 21, 1997, (THE "RIGHTS AGREEMENT") THE TERMS OF WHICH ARE
HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF AMERICAN BUSINESS INFORMATION, INC. UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE
EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS
CERTIFICATE. AMERICAN BUSINESS INFORMATION, INC., WILL MAIL TO THE HOLDER OF
THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF
A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN
ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF
SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.

THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED,
SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD OF
DIRECTORS TO DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT
CLASSES OR SERIES.

<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C>
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:

TEN COM - as tenants in common UTMA - Custodian
-------- ---------
TEN ENT - as tenants by entireties (Cust) (Minor)
under Uniform Transfer to Minors
JT TEN - as joint tenants with right of
survivorship and not as tenants in Act
common -------------------------
(State)

Additional abbreviations may also be used though not in the above list.
- ------------------------------------------------------------------------------------------
</TABLE>

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 POSTAL 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 -------------------------------------

-------------------------------------
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
certificate in every particular
without alteration or enlargement
or any change whatever.

SIGNATURE GUARANTEED

<PAGE> 1
EXHIBIT 5.1

October 22, 1997

American Business Information, Inc.
5711 South 86th Circle
Omaha, NE 68127

RE: REGISTRATION STATEMENT ON FORM S-3

Gentlemen:

We have examined the Registration Statement on Form S-3 to be filed by
you with the Securities and Exchange Commission on or about the date hereof
(the "Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 9,775,000 shares of your Class A Common
Stock (the "Shares"), 7,755,500 of which are authorized but heretofore unissued
(including an over-allotment option for 1,275,000 shares) and 2,019,500 of which
will be sold by certain selling shareholders. The Shares are to be sold to the
underwriters for resale to the public as described in the Registration
Statement and pursuant to the Underwriting Agreement filed as an exhibit
thereto. As your counsel, we have examined the proceedings proposed to be
taken in connection with said sale and issuance on the Shares.

It is our opinion that, upon completion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of
the Shares, and upon completion of the proceedings being taken in order to
permit such transactions to be carried out in accordance with the securities
laws of the various states, where required, the Shares when issued and sold in
the manner referred to in the Registration Statement will be legally and
validly issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.

Very truly yours,

/s/ Wilson Sonsini Goodrich & Rosati
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-3
(File No. 333-36669) of our report dated September 19, 1997, except for the
effects of the stock split described in Note 18, for which the date is October
3, 1997, on our audits of the consolidated financial statements of American
Business Information, Inc. and Subsidiaries as of December 31, 1995 and 1996 and
June 30, 1997 and for each of the three years in the period ended December 31,
1996 and the six months ended June 30, 1997. We also consent to the
incorporation by reference in this registration statement of our report dated
January 24, 1997, except for Notes 17 and 18, for which the dates are February
15, 1997 and July 31, 1997, respectively, on our audits of the consolidated
financial statements and financial statement schedules of American Business
Information, Inc. and Subsidiaries as of December 31, 1996 and 1995, and for
each of the three years in the period ended December 31, 1996, which report is
included in the Company's Annual Report on Form 10-K/A. We also consent to the
references to our firm under the captions "Experts" and "Selected Consolidated
Financial Data."

/s/ COOPERS & LYBRAND L.L.P.
------------------------------------

Coopers & Lybrand L.L.P.

Omaha, Nebraska

October 22, 1997