Abovenet Inc, et al. – ‘DEFM14A’ on 8/5/99

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Definitive Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEFM14A     Definitive Proxy Solicitation Material -- Merger     239   1.21M 
                          or Acquisition                                         

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SCHEDULE 14A
SCHEDULE 14A INFORMATION

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

Filed by the Registrant  /X/                                            
Filed by a Party other than the Registrant  / /                         

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

          ABOVENET COMMUNICATIONS INC.
          METROMEDIA FIBER NETWORK, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):                              

/ /  No fee required                                                            
/X/  Fee computed on table below per Exchange Act Rules 14a-6(i)(1)             
and 0-11.                                                             
(1) Title of each class of securities to which transaction applies:   
      Common Stock, par value $0.001 per share, of AboveNet Communications
Inc. ("AboveNet Common Stock")                                
         -----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:      
34,550,550 shares of AboveNet Common Stock                    
         -----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed  
pursuant to Exchange Act Rule 0-11:                           
         $39.75 (based on the average of the high and low prices of Common Stock
        of AboveNet Communications Inc. as quoted on The Nasdaq Stock Market's
National Market on June 24, 1999).                            
         -----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:                  
$1,373,384,363                                                
         -----------------------------------------------------------------------
(5) Total fee paid:                                                   
$274,677                                                      
         -----------------------------------------------------------------------

/ /  Fee paid previously with preliminary materials.                            

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

(1) Amount Previously Paid:                                           
         -----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:                     
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(3) Filing Party:                                                     
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(4) Date Filed:                                                       
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                                              [LOGO]

[LOGO]                                          

JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT

AboveNet Communications Inc. has agreed to merge with a subsidiary of   
Metromedia Fiber Network, Inc., so that AboveNet would become a wholly owned    
subsidiary of Metromedia.                                                       

   If the merger is completed, AboveNet stockholders will receive 1.175 shares
of Metromedia class A common stock for each AboveNet share they own.            

   Metromedia's shares are traded on The Nasdaq Stock Market's National Market
under the symbol "MFNX." As of August 3, 1999, Metromedia's stock price on The  
Nasdaq Stock Market's National Market was $28.13.                               

  Metromedia cannot complete the merger without the approval of the issuance
of the shares of Metromedia's class A common stock in the merger by the holders 
of a majority of the voting power of both classes of Metromedia common stock    
present in person or proxy at the special meeting of Metromedia stockholders.   
All of the holders of Metromedia's class B common stock, who control            
approximately 66% of Metromedia's voting power, have agreed to vote in favor of 
the issuance of the shares of Metromedia class A common stock in the merger. The
proposal will therefore be approved by holders of Metromedia common stock at the
Metromedia special meeting without requiring the vote of any additional         
Metromedia stockholders.                                                        

    AboveNet cannot complete the merger without the approval of the holders of a
majority of the common stock of AboveNet. Holders of approximately 15.5% of     
AboveNet's common stock have agreed to vote for the merger. This means that the 
holders of only approximately 34.6% more of AboveNet's shares must vote for the 
merger to ensure its approval by AboveNet.                                      

    Metromedia and AboveNet have each scheduled a special meeting to vote on the
merger. Whether or not you plan to attend, please take the time to vote by      
completing and mailing the enclosed voting form to us.                          

The date, time and place of the stockholder meetings are as follows:    

For Metromedia stockholders:                                                    

SEPTEMBER 8, 1999                                                       
9:00 A.M.                                                               
1285 AVENUE OF THE AMERICAS                                             
NEW YORK, NEW YORK 10019                                                

For AboveNet stockholders:                                                      

SEPTEMBER 8, 1999                                                       
9:00 A.M.                                                               
1285 AVENUE OF THE AMERICAS                                             
NEW YORK, NEW YORK 10019                                                

This joint proxy statement/prospectus provides our stockholders with    
detailed information about the merger. This document is also the prospectus of  
Metromedia for the Metromedia class A common stock that will be issued to       
AboveNet stockholders in the merger. We encourage you to read this entire       
document carefully.                                                             

                                                                [Download Table]
                                                                          
Stephen A. Garofalo                   Sherman Tuan                        
Chairman and Chief Executive Officer  Chairman and Chief Executive Officer

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

This document is dated August 4, 1999 and is being first mailed to stockholders 
on or about August 6, 1999. 

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METROMEDIA FIBER NETWORK, INC.
--------------------- 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 
TO BE HELD SEPTEMBER 8, 1999
--------------------- 

To the Stockholders of Metromedia Fiber Network, Inc.                           

NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of    
Metromedia Fiber Network, Inc., a Delaware corporation, will be held at 9:00    
a.m., local time, on September 8, 1999, at Paul, Weiss, Rifkind, Wharton &      
Garrison, 1285 Avenue of the Americas, New York, NY 10019, for the following    
purposes:                                                                       

 1.  For the approval of the issuance of shares of class A common stock in
connection with the merger agreement among Metromedia, AboveNet   
Communications Inc., and Magellan Acquisition, Inc.               

   2.  To transact such other business as may properly come before the special
meeting or any adjournment or postponement thereof.               

 METROMEDIA'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO
AND IN THE BEST INTERESTS OF METROMEDIA AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE TO APPROVE THE ISSUANCE OF CLASS A COMMON STOCK IN CONNECTION 
WITH THE MERGER.                                                                

  The accompanying proxy statement/prospectus contains important information
with respect to the proposed issuance of Metromedia's class A common stock, and 
we urge you to read it carefully.                                               

Stockholders of record at the close of business on July 14, 1999, are   
entitled to notice of and to vote at the special meeting and any adjournment or 
postponement thereof. Approval of the issuance of shares of class A common stock
will require the affirmative vote of the holders of Metromedia common stock     
representing a majority of the voting power of Metromedia stock present in      
person or proxy at the special meeting entitled to vote.                        

 TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE     
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL   
MEETING IN PERSON. ANY EXECUTED BUT UNMARKED PROXY CARDS WILL BE VOTED FOR      
APPROVAL OF THE ISSUANCE OF CLASS A COMMON STOCK. YOU MAY REVOKE YOUR PROXY IN  
THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME 
BEFORE IT HAS BEEN VOTED AT THE SPECIAL MEETING. ANY STOCKHOLDER ATTENDING THE  
SPECIAL MEETING MAY VOTE IN PERSON EVEN IF THE STOCKHOLDER HAS RETURNED A PROXY.

PLEASE DO NOT SEND METROMEDIA STOCK CERTIFICATES IN YOUR PROXY ENVELOPE.

                                      BY ORDER OF THE BOARD OF DIRECTORS

                                      [LOGO]

                    Arnold L. Wadler

             SECRETARY

White Plains, New York                                                          
August 4, 1999                                                                  

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ABOVENET COMMUNICATIONS INC.

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

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 
TO BE HELD SEPTEMBER 8, 1999

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

To the Stockholders of AboveNet Communications Inc.                             

NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of    
AboveNet Communications Inc., a Delaware corporation, will be held at 9:00 a.m.,
local time, on September 8, 1999, at Paul, Weiss, Rifkind, Wharton & Garrison,  
1285 Avenue of the Americas, New York, NY 10019, for the following purposes:    

    1. To consider and vote upon a proposal to approve the Agreement and Plan of
    Merger, dated as of June 22, 1999, among AboveNet, Metromedia Fiber Network,
Inc. and Magellan Acquisition, Inc., pursuant to which a wholly-owned   
 subsidiary of Metromedia Fiber Network, Inc. will be merged with and into
   AboveNet and, among other things, each outstanding share of AboveNet common
    stock will be converted into the right to receive 1.175 shares of Metromedia
class A common stock, as more fully described in the accompanying proxy 
statement/prospectus; and                                               

  2. To transact such other business as may properly come before the special
meeting or any adjournment or postponement thereof.                     

   ABOVENET'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF ABOVENET AND ITS STOCKHOLDERS AND RECOMMENDS THAT      
STOCKHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT.                              

  The accompanying proxy statement/prospectus contains important information
with respect to the proposed merger and we urge you to read it carefully.       

Stockholders of record at the close of business on July 14, 1999, are   
entitled to notice of and to vote at the special meeting and any adjournment or 
postponement thereof. Approval of the merger agreement will require the         
affirmative vote of the holders of AboveNet common stock representing a majority
of the outstanding shares of AboveNet common stock entitled to vote.            

 TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE     
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL   
MEETING IN PERSON. ANY EXECUTED BUT UNMARKED PROXY CARDS WILL BE VOTED FOR      
APPROVAL OF THE MERGER AGREEMENT. YOU MAY REVOKE YOUR PROXY IN THE MANNER       
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT  
HAS BEEN VOTED AT THE SPECIAL MEETING. ANY STOCKHOLDER ATTENDING THE SPECIAL    
MEETING MAY VOTE IN PERSON EVEN IF THE STOCKHOLDER HAS RETURNED A PROXY.        

PLEASE DO NOT SENT ABOVENET STOCK CERTIFICATES IN YOUR PROXY ENVELOPE.  

                                      BY ORDER OF THE BOARD OF DIRECTORS

                          [LOGO]

                     Stephen P. Belomy
             SECRETARY

San Jose, California                                                            
August 4, 1999                                                                  

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TABLE OF CONTENTS 

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QUESTIONS AND ANSWERS ABOUT THE METROMEDIA/ABOVENET MERGER................................................         1

SUMMARY...................................................................................................         2
  The Companies...........................................................................................         2
  What You Will Receive in the Merger.....................................................................         3
  AboveNet's Reasons for the Merger.......................................................................         3
  Metromedia's Reasons for the Merger.....................................................................         3
  Voting Agreements.......................................................................................         3
  Option Agreement........................................................................................         4
  Recommendation to AboveNet Stockholders.................................................................         4
  Opinions of AboveNet's Financial Advisors...............................................................         4
  Recommendation to Metromedia Stockholders...............................................................         4
  Opinion of Metromedia's Financial Advisor...............................................................         4
  No Dissenters' Rights of Appraisal......................................................................         4
  Conditions to the Merger................................................................................         4
  Accounting Treatment....................................................................................         5
  Comparison of Stockholder Rights........................................................................         5
  Termination of the Merger Agreement.....................................................................         5
  Termination Payments....................................................................................         5
  Income Tax Consequences of the Merger...................................................................         5
  Forward-Looking Statements..............................................................................         5
  Metromedia Selected Historical Financial Information....................................................         6
  AboveNet Selected Historical Financial Information......................................................         7
  AboveNet--Recent Operating Results......................................................................         8
  Selected Unaudited Pro Forma Combined Financial Data....................................................         8
  Comparative Per Share Information.......................................................................         9
  Comparative Per Share Market Price Information..........................................................         9

RISK FACTORS..............................................................................................        10
  Risk Factors Related to the Merger......................................................................        10
    The expected benefits of combining Metromedia and AboveNet may not be realized........................        10
    You will receive 1.175 shares of Metromedia class A common stock despite changes in the market value            
     of AboveNet common stock or Metromedia class A common stock..........................................        10
  Risk Factors Applicable to Metromedia...................................................................        11
    Metromedia has a limited history of operations........................................................        11
    Metromedia expects to continue to incur net losses....................................................        11
    Metromedia has substantial debt which may limit its ability to borrow, restrict the use of its cash             
     flows and constrain its business strategy, and it may not be able to meet its debt obligations.......        11
    Metromedia may not be able to successfully implement its business strategy because it depends on                
     factors beyond its control, which could adversely affect its results of operations...................        11
    Metromedia cannot assure you that it will successfully complete the construction of its networks......        12
    Metromedia cannot assure you that a market for its current or                                                   
      future services will develop........................................................................        12
    Several of Metromedia's customers may terminate their agreements with it if it does not perform by              
     specified times......................................................................................        12

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  Metromedia may be unable to raise the additional financing necessary to complete the construction of             
   its networks, which would adversely affect its long-term business strategy...........................         13
  Competitors in the telecommunications industry could offer services similar to Metromedia's in its               
   current or planned markets which would affect its results of operations..............................         13
  Metromedia depends on a limited number of customers and is more vulnerable to changing economic                  
   conditions and consumer preferences..................................................................         13
  The heavy regulation of the telecommunications industry may limit the development of Metromedia's                
   networks and affect Metromedia's competitive position................................................         14
  Metromedia's franchises, licenses or permits could be canceled or not renewed, which would impair the            
   development of major markets for its services........................................................         16
  Metromedia may not be able to obtain and maintain the rights-of-way and other permits necessary to               
   implement its business strategy......................................................................         16
  Rapid technological changes could affect the continued use of fiber optic cable and Metromedia's                 
   results of operations................................................................................         16
  Metromedia may experience risks as a result of expanding its networks into European and other foreign            
   countries, which may adversely affect its results of operations......................................         16
  Metromedia may not be able to successfully identify, manage and assimilate future acquisitions,                  
   investments and strategic alliances, which would adversely affect its results of operations..........         17
  In the telecommunications industry, continued pricing pressures from Metromedia's competitors and an             
   excess of network capacity continue to cause prices for its services to decline......................         17
  Metromedia's business depends on a limited number of key personnel the loss of whom could adversely              
   affect its business..................................................................................         17
  Metromedia Company effectively controls Metromedia Fiber Network and has the power to cause or prevent           
   a change of control..................................................................................         18
  Metromedia is involved in a legal proceeding which could adversely affect its financial condition.....         18
  Metromedia's services are limited to leasing fiber optic capacity which may limit its revenues........         18
  Failures to address the year 2000 problem may cause disruptions in the operation of Metromedia's                 
   networks and its services to customers...............................................................         18
Risk Factors Applicable to AboveNet.....................................................................         19
  Because AboveNet has a limited operating history, its business is difficult to evaluate...............         19
  AboveNet has incurred substantial losses and anticipates continuing and increasing losses.............         19
  AboveNet's business will suffer if it does not expand and maintain its customer base..................         20
  AboveNet expects its operating results to fluctuate...................................................         20
  AboveNet depends on third party suppliers.............................................................         21
  AboveNet may face problems in connection with its expansion plans.....................................         22
  AboveNet has a long sales cycle.......................................................................         22
  AboveNet depends on third parties to establish and operate international                                         
    Internet service exchanges..........................................................................         22
  AboveNet faces intense competition from other companies...............................................         23
  AboveNet may not be able to manage its growth effectively.............................................         24
  AboveNet may not be able to hire or retain the key employees it needs.................................         24
  AboveNet must maintain and increase peering relationships.............................................         25
  AboveNet's systems or other systems on which it depends may fail......................................         25
  The market for co-location and Internet connectivity services is new and may not grow.................         25
  AboveNet must be able to expand and adapt its network infrastructure..................................         26

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    AboveNet may face risks and costs associated with potential future acquisitions.......................        26
    AboveNet depends on the growth and performance of the Internet........................................        27
    AboveNet may not be able to keep pace with rapid technological changes or emerging                              
      industry standards..................................................................................        27
    AboveNet faces risks associated with the security of its systems......................................        27
    AboveNet operates in an uncertain legal landscape.....................................................        27
    AboveNet may face liability and other risks as a result of information disseminated                             
      through its network.................................................................................        28
    The protection of AboveNet's proprietary information is limited.......................................        29
    AboveNet may be accused of infringing the proprietary rights of others................................        29
    Additional funding may not be available if AboveNet needs it..........................................        29
    AboveNet faces risks associated with the year 2000 computer problem...................................        29

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.........................................................        30

THE METROMEDIA SPECIAL MEETING............................................................................        31
  Date, Time and Place of the Metromedia Special Meeting..................................................        31
  Purposes of the Metromedia Special Meeting; The Merger..................................................        31
  Record Date.............................................................................................        31
  Required Votes..........................................................................................        31
  Proxies; Voting and Revocation..........................................................................        32
  Expenses................................................................................................        32
  No Dissenters' Appraisal Rights.........................................................................        32

THE ABOVENET SPECIAL MEETING..............................................................................        33
  Date, Time and Place of the AboveNet Special Meeting....................................................        33
  Purposes of the AboveNet Special Meeting; The Merger....................................................        33
  Record Date.............................................................................................        33
  Required Votes..........................................................................................        33
  Proxies; Voting and Revocation..........................................................................        33
  Solicitation of Proxies.................................................................................        34
  No Dissenters' Appraisal Rights.........................................................................        34

THE MERGER................................................................................................        35
  Background of the Merger................................................................................        35
  Recommendation of the Metromedia Board; Metromedia's Reasons for the Merger.............................        37
  Recommendation of the AboveNet Board; AboveNet's Reasons for the Merger.................................        37
  Opinion of Financial Advisor to Metromedia..............................................................        40
  Opinions of Financial Advisors to AboveNet..............................................................        45
  Federal Income Tax Consequences to Holders of AboveNet Common Stock.....................................        58
  Accounting Treatment....................................................................................        59
  Dividend Policy.........................................................................................        59
  Interests of Directors and Officers in the Merger.......................................................        59
  Regulatory Approvals....................................................................................        60
  Stock Exchange Listing..................................................................................        61
  Federal Securities Laws Consequences....................................................................        61
  AboveNet Stockholder Litigation.........................................................................        61

THE MERGER AGREEMENT......................................................................................        62
  Terms of the Merger.....................................................................................        62
  Exchange of New Stock Certificates......................................................................        63
  Representations and Warranties..........................................................................        64

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  Covenants...............................................................................................        65
  No Solicitation of Transactions.........................................................................        67
  Indemnification and Insurance...........................................................................        67
  Conditions to the Merger................................................................................        68
  Termination.............................................................................................        68
  Termination Fees and Expenses...........................................................................        69

RELATED AGREEMENTS........................................................................................        70
  Voting Agreements.......................................................................................        70
  Employment Agreements...................................................................................        70
  Option Agreement........................................................................................        72

METROMEDIA UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION..................................        74
  Accounting Treatment....................................................................................        74

ABOVENET UNAUDITED PRO FORMA FINANCAL INFORMATION.........................................................        79

BUSINESS OF METROMEDIA....................................................................................        84

BUSINESS OF ABOVENET......................................................................................        84
  Recent Development--Acquisition of the Palo Alto Internet Exchange......................................        84
  General.................................................................................................        84
  The AboveNet Solution...................................................................................        86
  The AboveNet Internet Service Exchange..................................................................        88
  Customers...............................................................................................        91
  International Internet Service Exchanges................................................................        92
  Sales and Marketing.....................................................................................        92
  Network Architecture....................................................................................        94
  Customer Service and Quality Assurance..................................................................        95
  Competition.............................................................................................        95
  Intellectual Property Rights............................................................................        96
  Government Regulation...................................................................................        97
  Employees...............................................................................................        97
  Facilities..............................................................................................        98
  Legal Proceedings.......................................................................................        98

ABOVENET MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............        99
  Overview................................................................................................        99
  Recent Developments.....................................................................................       101
  Results of Operations...................................................................................       102
  Comparison of the Nine Months Ended March 31, 1998 and 1999.............................................       102
  Comparison of Fiscal Years Ended June 30, 1997 and 1998.................................................       104
  Inception Through June 30, 1996.........................................................................       106
  Year 2000 Compliance....................................................................................       106
  Quantitative and Quantitative Disclosures about Market Risk.............................................       107
  Liquidity and Capital Resources.........................................................................       107

OFFICERS OF ABOVENET TO BE ELECTED TO METROMEDIA'S BOARD OF DIRECTORS.....................................       109
  Executive Compensation..................................................................................       110
  Summary Compensation Table For Last Two Fiscal Years....................................................       110

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  Option Grants In Last Fiscal year.......................................................................       110
  Aggregate Option Exercises In Last Fiscal Year And Fiscal Year-End Option Values........................       112
  Employment Agreements...................................................................................       112
  Related Party Transactions..............................................................................       112

MARKET PRICE RANGE OF ABOVENET COMMON STOCK...............................................................       113

COMPARISON OF RIGHTS OF HOLDERS OF METROMEDIA COMMON STOCK AND ABOVENET COMMON STOCK......................       114
  General.................................................................................................       114
  Comparison of Stockholders' Rights......................................................................       114

INFORMATION REGARDING BENEFICIAL OWNERSHIP OF ABOVENET PRINCIPAL STOCKHOLDERS AND MANAGEMENT..............       118

DESCRIPTION OF MAGELLAN ACQUISITION, INC..................................................................       119

LEGAL MATTERS.............................................................................................       120

EXPERTS...................................................................................................       120

CHANGE IN ACCOUNTANTS.....................................................................................       120

SUBMISSION OF STOCKHOLDER PROPOSALS.......................................................................       120

WHERE YOU CAN FIND MORE INFORMATION.......................................................................       121

ABOVENET FINANCIAL STATEMENTS.............................................................................       F-1

APPENDIX A--THE MERGER AGREEMENT..........................................................................       A-1
APPENDIX B--THE OPTION AGREEMENT..........................................................................       B-1
APPENDIX C--OPINION OF SALOMON SMITH BARNEY INC...........................................................       C-1
APPENDIX D--OPINION OF CIBC WORLD MARKETS CORP............................................................       D-1
APPENDIX E--OPINION OF VOLPE BROWN WHELAN & COMPANY, LLC..................................................       E-1

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QUESTIONS AND ANSWERS ABOUT THE METROMEDIA/ABOVENET MERGER

Q.  WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?                              

A. By September 8, 1999.                                                        

Q.  WHAT DO I NEED TO DO NOW?                                                   

A. After carefully reading and considering the information contained in this    
   document, please indicate on your voting form how you want to vote and mail
    your signed and dated voting form in the enclosed return envelope as soon as
possible.                                                               

Q.  WHAT DO I DO IF I WANT TO CHANGE MY VOTE?                                   

A. Just send in a later-dated, signed voting form to the applicable person      
    listed below before the special meeting or attend your meeting in person and
vote.                                                                   

Q.  SHOULD ABOVENET STOCKHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?          

A. No. After the merger is completed, the exchange agent will send AboveNet     
  stockholders written instructions for exchanging their stock certificates.

Q.  IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY 
SHARES FOR ME WITHOUT MY INSTRUCTIONS?                                  

A. No. You should instruct your broker to vote your shares, following the       
  directions provided by your broker. The failure by AboveNet's stockholders
to instruct their brokers to vote their shares will be the equivalent of
voting against the merger.                                              

Q.  WHAT IF I PLAN TO ATTEND MY MEETING IN PERSON?                              

A. We recommend that you send in your voting form in any event. You may request 
 a ticket for admission to your special meeting by marking the appropriate
 box on the voting form and returning it no later than August 27, 1999. If
you hold Metromedia or AboveNet shares through a third party, such as a 
broker, you should send an account statement or similar documentation of
ownership to the person that holds your shares, requesting a ticket.    

WHO CAN HELP ANSWER YOUR QUESTIONS? 

AboveNet stockholders who have more questions about the merger should contact:

D.F. KING & CO., INC. 
77 WATER STREET 
NEW YORK, NEW YORK 10005
(800) 928-0153 (TOLL FREE)
(212) 269-5550 (COLLECT)

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SUMMARY 

   THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE      
MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE      
MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT, INCLUDING THE APPENDICES
AND THE OTHER DOCUMENTS TO WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU CAN FIND  
MORE INFORMATION" (PAGE 121). WE HAVE INCLUDED PAGE REFERENCES PARENTHETICALLY  
TO DIRECT YOU TO MORE COMPLETE DESCRIPTIONS OF THE TOPICS PRESENTED IN THIS     
SUMMARY.                                                                        

THE COMPANIES (PAGES 84 THROUGH 98)                                             

METROMEDIA FIBER NETWORK, INC.                                                  
One North Lexington Avenue                                                      
White Plains, NY 10601                                                          
(914) 421-6700                                                                  

    Metromedia Fiber Network is building metropolitan fiber optic infrastructure
in the local loop in strategic Tier One markets, enabling technologically       
sophisticated organizations to implement the latest data, video, Internet and   
multimedia applications. By offering virtually unlimited, unmetered bandwidth at
a fixed cost, Metromedia eliminates the bandwidth barrier, and is redefining the
way broadband capacity is sold.                                                 

   Utilizing Metromedia's infrastructure, customers are able to rapidly deploy
state-of-the-art optical networks. Communications carriers and Internet service 
providers gain local loop connectivity to the most highly populated metropolitan
areas. Corporate and government customers benefit from private                  
building-to-building networks featuring the fastest transmission speeds         
available and the highest levels of reliability and security.                   

ABOVENET COMMUNICATIONS INC.                                                    
50 W. San Fernando Street, #1010                                                
San Jose, CA 95113                                                              
(408) 367-6666                                                                  

AboveNet is a leading provider of facilities-based, managed services for
customer-owned Web servers and related equipment, known as co-location, and high
performance Internet connectivity solutions for electronic commerce and other   
business critical Internet operations. AboveNet has developed a network         
architecture based upon strategically located facilities. These facilities,     
known as Internet service exchanges, allow Internet content providers direct    
access to Internet service providers. AboveNet's West Coast campus is comprised 
of two San Jose, California Internet service exchange facilities, one of which  
is under development. AboveNet's East Coast campus is comprised of the existing 
Vienna, Virginia Internet service exchange facility and the planned facilities  
in New York, New York and the Washington D.C. area. AboveNet's network          
architecture and peering relationships are designed to reduce the number of     
network connections or "hops" for data traveling across the Internet. By having 
both Internet content providers and Internet service providers co-located at    
AboveNet's Internet service exchange facilities, AboveNet enables its Internet  
service provider customers to offer their users "one hop" connectivity, through 
AboveNet's local area network, to the sites of the Internet content providers   
that are co-located at its facilities. AboveNet's customers include Internet    
content providers, Web hosting companies and Internet service providers.        

   AboveNet designs its solutions to be flexible and to allow its customers to
easily expand their use of its services as their Internet operations grow.      
AboveNet charges its customers based on how much space and bandwidth they use.  
This provides AboveNet's customers with a flexible, cost-effective method to    
increase their Internet operations.                                             

 AboveNet designs its services to enhance performance through a high-speed
network, and AboveNet provides its customers with monitoring, notification and  
diagnostic services twenty-four hours a day, seven days a week. AboveNet's      
internally developed software monitors all of its direct and indirect network   
connections for delays in delivery of data packets and loss of data packets.    
This monitoring software allows AboveNet's network engineers to enhance         
performance by rerouting data traffic as problems occur to avoid congested      
points.                                                                         

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WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 62)                                   

Each share of AboveNet common stock you own will be exchanged for 1.175 
shares of Metromedia class A common stock. You will not receive any fractional  
shares of Metromedia common stock; instead, you will have the right to receive  
cash equal to the value of the fractional shares.                               

ABOVENET'S REASONS FOR THE MERGER (PAGE 37)                                     

  The AboveNet board of directors considered a number of relevant factors in
approving the merger agreement and recommending it to AboveNet stockholders,    
including:                                                                      

- the merger with Metromedia will create opportunities for significant  
efficiencies because AboveNet will be able to utilize Metromedia's  
high-bandwidth, fiber optic communications infrastructure;          

- the merger will facilitate AboveNet's ability to respond to customer  
   demands for transmission capacity and to grow its business by providing
access to Metromedia's network; and                                 

 - the merger will provide AboveNet's stockholders with the opportunity to
benefit from Metromedia's strong revenue growth, the strength and   
    experience of Metromedia's senior management team and an investment in a
combined company with significant potential for growth.             

To review AboveNet's reasons for the merger in more detail, see pages 37
through 40.                                                                     

METROMEDIA'S REASONS FOR THE MERGER (PAGE 37)                                   

    The Metromedia board of directors considered a number of relevant factors in
approving the merger agreement and the issuance of the shares of Metromedia     
class A common stock pursuant to the merger agreement and recommending the      
issuance to Metromedia stockholders, including:                                 

   - the acquisition of AboveNet will expand the product and service offerings
    Metromedia can make available to its existing and prospective customers,
particularly Internet service providers;                            

- the acquisition of AboveNet will allow Metromedia to combine its fiber
    optic network with AboveNet's high performance connectivity solutions in
 order to offer their customers more predictable and reliable Internet
traffic flow; and                                                   

   - the potential to market its services to existing and prospective AboveNet
customers.                                                          

As a result of these considerations and of those listed on page 37, the 
Metromedia board believes that the merger should increase stockholder value to  
you.                                                                            

  To review Metromedia's reasons for the merger in more detail, see page 37.

VOTING AGREEMENTS (PAGE 70)                                                     

  Holders of a majority of the voting power of those present in person or by
proxy at the Metromedia meeting are needed to approve the issuance of the shares
of Metromedia class A common stock that will be issued in the merger. All of the
holders of Metromedia's class B common stock, who control approximately 66% of  
Metromedia's voting power, have agreed in a voting agreement with AboveNet to   
vote in favor of the issuance of the shares of Metromedia class A common stock  
in the merger. The proposal will therefore be approved by holders of Metromedia 
common stock at the Metromedia special meeting without requiring the vote of any
additional Metromedia stockholders.                                             

  The vote of a majority of AboveNet's outstanding shares of common stock is
needed to approve the merger. Holders of approximately 15.5% of AboveNet's      
outstanding common stock have agreed in a voting agreement with Metromedia to   
vote for the merger. This means that the holders of only approximately 34.6%    
more of AboveNet's shares must vote for the merger to ensure its approval.      

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OPTION AGREEMENT (PAGES 72 AND 73)                                              

AboveNet has granted to Metromedia an option, exercisable under the     
circumstances in which a termination fee is payable by AboveNet to Metromedia,  
to acquire a number of shares of AboveNet common stock equal to up to 19.9% of  
AboveNet's common stock at an exercise price of $49.9375 per share. A copy of   
the option agreement is attached as Appendix B.                                 

RECOMMENDATION TO ABOVENET STOCKHOLDERS (PAGE 33)                               

   The AboveNet board has unanimously determined that the merger agreement and
the merger are fair to the AboveNet stockholders and in their best interests.   
The AboveNet board recommends that AboveNet stockholders vote for approval of   
the merger agreement.                                                           

OPINIONS OF ABOVENET'S FINANCIAL ADVISORS (PAGES 45 THROUGH 57)                 

    CIBC World Markets Corp. and Volpe Brown Whelan & Company, LLC, as financial
advisors to the AboveNet board, have each delivered written opinions to the     
AboveNet board that, as of June 22, 1999, the consideration to be received by   
stockholders of AboveNet in the merger was fair to those holders from a         
financial point of view. The full text of the opinions of CIBC World Markets    
Corp. and Volpe Brown Whelan & Company, LLC are attached as Appendix D and      
Appendix E, respectively. The opinions describe important assumptions and       
limitations and are not recommendations as to how the AboveNet stockholders     
should vote on the merger.                                                      

 WE URGE YOU TO READ THE CIBC WORLD MARKETS CORP. AND VOLPE BROWN WHELAN &
COMPANY, LLC OPINIONS CAREFULLY IN THEIR ENTIRETY.                              

RECOMMENDATION TO METROMEDIA STOCKHOLDERS (PAGE 31)                             

The Metromedia board has unanimously determined that the issuance of the
shares of Metromedia class A common stock in the merger is fair to Metromedia   
stockholders and in their best interests. The Metromedia board recommends that  
Metromedia stockholders vote for approval of the issuance of the shares of      
Metromedia class A common stock in the merger.                                  

OPINION OF METROMEDIA'S FINANCIAL ADVISOR (PAGES 40 THROUGH 44)                 

  In connection with the merger, the Metromedia board received an opinion of
Metromedia's financial advisor, Salomon Smith Barney Inc., as to the fairness,  
from a financial point of view, to Metromedia of the exchange ratio provided for
in the merger. The full text of Salomon Smith Barney's written opinion dated    
June 22, 1999, which is attached to the back of this document as Appendix C,    
describes the assumptions made, matters considered and limitations on the review
undertaken by Salomon Smith Barney in providing its opinion. Salomon Smith      
Barney's opinion is directed to the Metromedia board and is not a recommendation
to any stockholder with respect to any matter relating to the proposed merger.  

WE URGE YOU TO READ THE SALOMON SMITH BARNEY INC. OPINION CAREFULLY.            

NO DISSENTERS' RIGHTS OF APPRAISAL (PAGES 32 AND 34)                            

Under Delaware law, Metromedia and AboveNet stockholders do not have    
dissenters' rights of appraisal with respect to the merger.                     

CONDITIONS TO THE MERGER (PAGE 68)                                              

   We will not complete the merger unless a number of conditions are satisfied
or waived. These include:                                                       

    - a majority of the holders of AboveNet's outstanding common stock must have
 approved the merger agreement and holders of a majority of the voting
   power of Metromedia's common stock present in person or by proxy at the
   Metromedia special meeting must have approved the issuance of shares of
Metromedia class A common stock in the merger;                      

- the employment agreements entered into between AboveNet and each of   

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     Mr. Sherman Tuan and Mr. David Rand must be in full force and effect; and

 - AboveNet must receive a legal opinion confirming the tax-free nature of
the merger to the AboveNet stockholders.                            

ACCOUNTING TREATMENT (PAGE 59)                                                  

The merger is expected to be accounted for under the purchase method of 
accounting. This means that after the merger, Metromedia will be required to    
record as intangible assets the excess of the consideration paid over the       
estimated fair value of net assets acquired and will subsequently amortize this 
cost against earnings.                                                          

COMPARISON OF STOCKHOLDER RIGHTS (PAGES 114 THROUGH 117)                        

The certificates of incorporation and by-laws of AboveNet and Metromedia
vary. As a result, AboveNet stockholders will have different rights as          
Metromedia stockholders.                                                        

TERMINATION OF THE MERGER AGREEMENT (PAGES 68 AND 69)                           

We can agree to terminate the merger agreement without completing the   
merger. Either one of us can terminate the merger agreement:                    

- if the merger is not completed before December 31, 1999;              

- if a final decree or injunction prevents the completion of the merger;

- if the merger agreement is not approved by the requisite vote of      
    stockholders of AboveNet or the issuance of shares of Metromedia class A
common stock pursuant to the merger agreement is not approved by the
requisite vote of stockholders of Metromedia; or                    

- if the other company has failed to perform its obligations under the  
merger agreement.                                                   

In addition, Metromedia can terminate the merger agreement under those  
circumstances described on pages 68 and 69.                                     

TERMINATION PAYMENTS (PAGE 69)                                                  
   AboveNet is required to pay Metromedia a termination payment of $50 million
(plus up to $5 million of out-of-pocket expenses) if the merger agreement is    
terminated under those circumstances described on page 69.                      

INCOME TAX CONSEQUENCES OF THE MERGER (PAGES 58 AND 59)                         

  The merger is intended to be tax-free to holders of AboveNet common stock,
except with respect to cash received instead of fractional shares of Metromedia 
class A common stock.                                                           

  THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND ON THE FACTS OF YOUR
OWN SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISOR.                             

FORWARD-LOOKING STATEMENTS                                                      

  Statements in this document and in the documents incorporated by reference
in this document are or may be forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those expressed in such
statements, depending on a variety of factors. You should carefully review all  
information, including the financial statements and the notes to the financial  
statements, included or incorporated by reference into this document.           

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METROMEDIA SELECTED HISTORICAL FINANCIAL INFORMATION                            

Metromedia is providing the following selected historical financial     
information to aid you in your analysis of the financial aspects of the merger. 
The information is only a summary and you should read it together with          
Metromedia's consolidated financial statements and other financial information  
contained in its most recent annual and quarterly reports, which are            
incorporated by reference and from which Metromedia derived this information.   
See "Where You Can Find More Information" on page 121.                          

METROMEDIA--HISTORICAL FINANCIAL INFORMATION                            

  The selected consolidated financial data presented below as of and for the
years ended December 31, 1994, 1995, 1996, 1997 and 1998, have been derived from
our consolidated financial statements and related notes. Metromedia's financial 
statements as of December 31, 1997 and 1998 and for each of the three years in  
the period ended December 31, 1998 have been audited by Ernst & Young LLP,      
independent auditors, which are incorporated by reference into this document.   
The statement of operations data for the three months ended March 31, 1998 and  
1999 and the balance sheet data as of March 31, 1999 have been derived from     
Metromedia's unaudited financial statements that have been prepared on the same 
basis as the audited financial statements and, in the opinion of Metromedia's   
management, include all adjustments, consisting only of normal recurring        
accruals, necessary for a fair presentation of the financial data for the       
periods presented. The financial data for the interim periods are not           
necessarily indicative of results that may be expected for any other interim    
period or for the year as a whole.                                              

   In the summary consolidated financial data presented below, EBITDA consists
of earnings (loss) before income taxes plus all net interest expense and all    
depreciation and amortization expense. Adjusted EBITDA consists of earnings     
(loss) before income taxes plus all net interest expense, depreciation and      
amortization and noncash employment and consulting incentives and settlements.  
You should not think of EBITDA and adjusted EBITDA as alternative measures of   
operating results or cash flows from operating activities, as determined in     
accordance with generally accepted accounting principles. Metromedia has        
included EBITDA and adjusted EBITDA because they are widely used financial      
measures of the potential capacity of a company to incur and service debt.      
Metromedia's reported EBITDA and adjusted EBITDA may not be comparable to       
similarly titled measures used by other companies.                              

                                                        [Enlarge/Download Table]

                                                                                                      THREE MONTHS ENDED  
                                                            YEARS ENDED DECEMBER 31,                      MARCH 31,       
                                              -----------------------------------------------------  -------------------- 
                                                1994       1995       1996       1997       1998       1998       1999    
                                              ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                                                                                                          
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)                    
STATEMENT OF OPERATIONS DATA:                                                                                             
Revenues..................................... $      --  $      56  $     236  $   2,524  $  36,436  $   1,726  $  18,379 
Expenses:                                                                                                                 
  Cost of sales..............................        --         --        699      3,572     13,937      1,234      8,258 
  Selling, general and administrative........       874      3,886      2,070      6,303     14,712      2,733      6,073 
  Depreciation and amortization..............        --        162        613        757      1,532        209      1,195 
  Settlement agreement.......................        --         --         --         --      3,400      3,400         -- 
  Consulting and employment incentives.......        --         --      3,652     19,218        248         91         -- 
                                              ---------  ---------  ---------  ---------  ---------  ---------  --------- 
(Loss) income from operations................      (874)    (3,992)    (6,798)   (27,326)     2,607     (5,941)     2,853 
Interest income (expense), net...............        --       (327)    (3,561)     1,067      1,927      1,694     (8,467)
(Loss) from joint venture....................        --         --         --         --       (146)        --       (200)
Income taxes.................................        --         --         --         --      3,402         --         -- 
                                              ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Net (loss) income............................ $    (874) $  (4,319) $ (10,359) $ (26,259) $     986  $  (4,247) $  (5,814)
                                              ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                              ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Net (loss) income applicable to common                                                                                    
  stockholders per share..................... $   (0.02) $   (0.09) $   (0.14) $   (0.28) $    0.01  $   (0.02) $   (0.03)
                                              ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                              ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Weighted average number of shares                                                                                         
  outstanding................................    46,672     49,658     71,716     94,894    186,990    184,714    189,002 
EBITDA....................................... $    (874) $  (3,830) $  (6,185) $ (26,569) $   3,993  $  (5,732) $   4,048 
Adjusted EBITDA.............................. $    (874) $  (3,830) $  (2,533) $  (7,351) $   7,641  $  (2,241) $   4,048 

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                                                                                                          AS OF  
                                                                                   AS OF DECEMBER 31,   MARCH 31,
                                                                                  --------------------  ---------
                                                                                    1997       1998       1999   
                                                                                  ---------  ---------  ---------
                                                                                                                 
                                                                                          (IN THOUSANDS)         
BALANCE SHEET DATA:                                                                                              
Cash............................................................................. $ 138,846  $ 569,319  $ 415,580
Pledged securities...............................................................        --     91,896     92,949
Property and equipment, net......................................................    25,693    246,992    342,817
Total assets.....................................................................   167,378    974,417  1,006,326
Senior notes payable.............................................................        --    650,000    650,000
Total liabilities................................................................    17,838    816,903    857,208
Stockholders' equity............................................................. $ 149,540  $ 157,514  $ 149,118

ABOVENET SELECTED HISTORICAL FINANCIAL INFORMATION                              

ABOVENET--HISTORICAL FINANCIAL INFORMATION                              

  This section presents historical financial data of AboveNet Communications
Inc. You should read carefully the financial statements included in this        
document beginning on page F-1, including the notes to the financial statements.
The selected data in this section is not intended to replace the financial      
statements.                                                                     

   AboveNet derived the statement of operations data for the period from March
8, 1996 (inception) to June 30, 1996, for the years ended June 30, 1997 and     
1998, and for the nine months ended March 31, 1999, and the balance sheet data  
as of June 30, 1997 and 1998 and March 31, 1999 from the audited financial      
statements included in this document. Those financial statements were audited by
Deloitte & Touche LLP, AboveNet's independent auditors. AboveNet derived the    
balance sheet data as of June 30, 1996 from unaudited financial statements that 
are not included in this document. AboveNet derived the statement of operations 
data for the nine months ended March 31, 1998 from the unaudited financial      
statements included in this document. AboveNet believes that the unaudited      
financial statements contain all adjustments needed to present fairly the       
information included in those statements, and that the adjustments made consist 
only of recurring adjustments.                                                  

                                                        [Enlarge/Download Table]

                                                                                                          NINE MONTHS      
                                                                PERIOD FROM     YEAR ENDED JUNE 30,          ENDED         
                                                               MARCH 8, 1996                               MARCH 31,       
                                                              (INCEPTION) TO    --------------------  -------------------- 
                                                               JUNE 30, 1996      1997       1998       1998       1999    
                                                             -----------------  ---------  ---------  ---------  --------- 
                                                                                                                           
                                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)             
STATEMENT OF OPERATIONS DATA:                                                                                              
  Revenues..................................................     $      79      $     552  $   3,436  $   2,069  $   8,297 
                                                                    ------      ---------  ---------  ---------  --------- 
  Costs and expenses:                                                                                                      
    Data communications and telecommunications..............            --            559      2,200      1,268      5,705 
    Network operations......................................            20            417      1,572        857      3,721 
    Sales and marketing.....................................            19            382      1,618        908      6,348 
    General and administrative..............................            66            434      1,621        960      3,695 
    Depreciation and amortization...........................            52            133        476        299      2,005 
    Stock-based compensation expense........................            --             --      1,276        509      1,283 
    Joint venture termination fee...........................            --            431         --         --         -- 
                                                                    ------      ---------  ---------  ---------  --------- 
  Total costs and expenses..................................           157          2,356      8,763      4,801     22,757 
                                                                    ------      ---------  ---------  ---------  --------- 
  Loss from operations......................................           (78)        (1,804)    (5,327)    (2,732)   (14,460)
  Interest expense..........................................            --             (7)      (161)      (128)      (916)
  Interest income...........................................            --              8         63         31        976 
                                                                    ------      ---------  ---------  ---------  --------- 
  Net loss..................................................     $     (78)     $  (1,803) $  (5,425) $  (2,829) $ (14,400)
                                                                    ------      ---------  ---------  ---------  --------- 
                                                                    ------      ---------  ---------  ---------  --------- 
  Basic and diluted loss per share..........................     $   (0.31)     $   (4.58) $  (10.34) $   (5.92) $   (1.25)
                                                                    ------      ---------  ---------  ---------  --------- 
                                                                    ------      ---------  ---------  ---------  --------- 
  Shares used in basic and diluted loss per share...........           250            393        525        478     11,485 
                                                                    ------      ---------  ---------  ---------  --------- 
                                                                    ------      ---------  ---------  ---------  --------- 

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                                                                          JUNE 30,                         
                                                               -------------------------------   MARCH 31, 
                                                                 1996       1997       1998        1999    
                                                               ---------  ---------  ---------  -----------
                                                                              (IN THOUSANDS)               
                                                                                                           
BALANCE SHEET DATA:                                                                                        
  Cash, cash equivalents and short-term investments........... $      89  $     331  $   8,141   $  56,692 
  Working capital (deficit)...................................        88       (946)     5,061      44,725 
  Total assets................................................       151      1,171     13,693      96,183 
  Long-term obligations, net of current portion...............       210        116      9,325       9,973 
  Total stockholders' equity (deficiency).....................       (73)      (262)       661      71,091 

On March 30, 1999, AboveNet announced a two-for-one stock split to be   
effected as a stock dividend. The dividend for each outstanding share of common 
stock was distributed on May 7, 1999. All share and per share amounts in this   
document have been adjusted to give effect to this stock split.                 

See Notes 1 and 9 of Notes to Financial Statements of AboveNet for an   
explanation of the method used to determine the number of shares used in        
computing basic and diluted loss per share.                                     

ABOVENET--RECENT OPERATING RESULTS                                              

  On July 29, 1999, AboveNet announced its operating results for the quarter
and fiscal year ended June 30, 1999. For the quarter ended June 30, 1999,       
revenues were $5,670,000 and AboveNet's net loss was $12,155,000 or $(0.38) per 
share. For the fiscal year ended June 30, 1999, revenues were $13,968,000 and   
the net loss was $26,555,000 or $(1.60) per share.                              

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA                            

  The following unaudited pro forma combined financial data are derived from
the unaudited pro forma combined financial information included elsewhere in    
this document and should be read together with that data and with the notes to  
that data. These unaudited selected pro forma financial data: (a) are based upon
the historical financial statements of Metromedia, AboveNet and Palo Alto       
Internet Exchange (PAIX) as of and for the three months ended March 31, 1999 and
for the year ended December 31, 1998; (b) are adjusted to give effect to the    
mergers; (c) are adjusted to give effect to both the Metromedia and AboveNet    
stock splits, which were completed in May 1999; and (d) are adjusted for the    
restructuring of certain AboveNet outstanding credit facilities. With respect to
the balance sheet, the transactions referred to in the preceding sentence are   
assumed to have been completed as of March 31, 1999. With respect to the        
statement of operations data the transactions referred to above are assumed to  
have been completed as of January 1, 1998.                                      

These unaudited selected pro forma combined financial data are for      
illustrative purposes only and do not necessarily indicate the operating results
or financial position that would have been achieved had the merger and the      
restructuring described above been completed as of the dates indicated or of the
results that may be obtained in the future. In addition, the data does not      
reflect synergies that might be achieved from combining these operations.       

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                                                                          THREE MONTHS ENDED      YEAR ENDED    
                                                                            MARCH 31, 1999     DECEMBER 31, 1998
                                                                          -------------------  -----------------
                                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA) 
                                                                                                                
STATEMENT OF OPERATIONS DATA:                                                                                   
Revenues.................................................................     $    23,764          $  47,575    
Net loss.................................................................         (29,567)           (83,419)   
Loss per common share--basic.............................................     $     (0.13)         $   (0.37)   
Weighted average common shares outstanding...............................         229,166            227,154    
BALANCE SHEET DATA (AT END OF PERIOD):                                                                          
Total assets.............................................................     $ 2,793,197                       
Long-term debt and other long-term obligations...........................         711,713                       

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COMPARATIVE PER SHARE INFORMATION                                               

We have summarized below the per share information for our respective   
companies on an historical, pro forma and equivalent basis. The AboveNet        
equivalent pro forma share information assumes an exchange ratio of 1.175 shares
of Metromedia class A common stock for each share of AboveNet common stock.     

    You should read the data below in conjunction with Metromedia's consolidated
financial statements which are incorporated by reference in this document and   
with AboveNet's financial statements and related notes beginning on page F-1.   
See "WHERE YOU CAN FIND MORE INFORMATION" on page 121.                          

The companies may have performed differently if they had actually been  
combined during the periods presented. You should not rely on the pro forma     
information as being indicative of either the historical results that we would  
have had or the future results that we will experience after the merger is      
completed.                                                                      

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                                                                                             YEAR ENDED     YEAR ENDED 
                                                                   THREE MONTHS ENDED       DECEMBER 31,     JUNE 30,  
                                                                     MARCH 31, 1999             1998           1998    
                                                               --------------------------  ---------------  -----------
                                                                METROMEDIA     ABOVENET      METROMEDIA      ABOVENET  
                                                               -------------  -----------  ---------------  -----------
                                                                                                                       
HISTORICAL PER SHARE DATA:                                                                                             

Income (loss) per common share................................   $   (0.03)    $   (0.22)     $    0.01      $  (10.34)
Book value per common share at the end of period..............   $    0.78     $    2.60      $    0.83      $    0.91 

                                                        [Enlarge/Download Table]

                                                                                           METROMEDIA      ABOVENET   
                                                                                            PRO FORMA      PRO FORMA  
PRO FORMA AND PRO FORMA EQUIVALENT PER SHARE DATA:                                          COMBINED      EQUIVALENT  
                                                                                          -------------  -------------
                                                                                                                      

Loss per common share for the:                                                                                        
  Year ended December 31, 1998...........................................................   $   (0.37)     $   (0.43) 
  Three months ended March 31, 1999......................................................   $   (0.13)     $   (0.15) 

Book value per common share at March 31, 1999............................................   $    8.35      $    9.81  

 Neither Metromedia nor AboveNet has paid any cash dividends in any of the
periods presented.                                                              

COMPARATIVE PER SHARE MARKET PRICE INFORMATION                                  

Metromedia class A common stock is traded on The Nasdaq Stock Market's  
National Market under the symbol "MFNX." AboveNet common stock is traded on The 
Nasdaq Stock Market's National Market under the symbol "ABOV." We list below the
per share closing market price as reported on The Nasdaq Stock Market's National
Market for shares of Metromedia class A common stock and AboveNet common stock. 
We list this information as of June 22, 1999, the last trading day before public
announcement of the signing of the merger agreement, and as of August 3, 1999,  
the latest practicable date prior to the printing of this document.             

  We also list the implied equivalent per share value for shares of AboveNet
common stock, which is the Metromedia class A common stock price multiplied by  
the exchange ratio of 1.175.                                                    

 We urge you to obtain current market quotations for AboveNet common stock
and Metromedia class A common stock before voting on the proposals described in 
this document.                                                                  

                                                        [Enlarge/Download Table]

                                                                                                    ABOVENET    
                                                                                    METROMEDIA        SHARE     
                                                                        ABOVENET      CLASS A      EQUIVALENT   
                                                                       SHARE PRICE  SHARE PRICE       VALUE     
                                                                       -----------  -----------  ---------------
                                                                                                                
June 22, 1999.........................................................  $   36.75    $   42.50      $   49.94   
August 3, 1999........................................................  $   29.75    $   28.13      $   33.05   

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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE INFORMATION BELOW AS WELL AS ALL OTHER
INFORMATION PROVIDED TO YOU IN THIS DOCUMENT IN DECIDING WHETHER TO APPROVE THE 
MERGER, IN THE CASE OF THE ABOVENET STOCKHOLDERS, OR THE ISSUANCE OF THE SHARES 
OF METROMEDIA CLASS A COMMON STOCK, IN THE CASE OF THE METROMEDIA STOCKHOLDERS, 
INCLUDING INFORMATION IN THE SECTION OF THIS DOCUMENT ENTITLED "SPECIAL NOTE    
REGARDING FORWARD-LOOKING STATEMENTS."                                          

RISK FACTORS RELATED TO THE MERGER                                              

THE EXPECTED BENEFITS OF COMBINING METROMEDIA AND ABOVENET MAY NOT BE   
REALIZED                                                                

Metromedia and AboveNet entered into the merger agreement with the      
expectation that the merger will result in benefits to the combined companies,  
including the expansion of Metromedia's product and service offerings and the   
combination of Metromedia's fiber optic network with AboveNet's Internet        
connectivity solutions. If we are not able to integrate effectively our         
technology, operations and personnel in a timely and efficient manner, then the 
benefits of the merger will not be realized and, as a result, Metromedia's      
operating results and the market price of Metromedia class A common stock may be
adversely affected. In particular, if the integration is not successful:        

- we may lose key personnel; and                                        

- we may not be able to retain AboveNet's customers.                    

   In addition, the attention and effort devoted to the integration of the two
companies will significantly divert management's attention from other important 
issues, and could significantly harm the combined companies' business and       
operating results.                                                              

YOU WILL RECEIVE 1.175 SHARES OF METROMEDIA CLASS A COMMON STOCK DESPITE
  CHANGES IN THE MARKET VALUE OF ABOVENET COMMON STOCK OR METROMEDIA CLASS A
COMMON STOCK                                                            

 Each share of AboveNet common stock will be exchanged for 1.175 shares of
Metromedia class A common stock upon completion of the merger. This exchange    
ratio is a fixed number and will not be adjusted for changes in the market price
of either AboveNet common stock or Metromedia class A common stock. Neither     
party is permitted to terminate the merger agreement solely because of changes  
in the market price of Metromedia class A common stock. Consequently, the       
specific dollar value of Metromedia class A common stock to be received by      
AboveNet stockholders will depend on the market value of Metromedia at the time 
of completion of the merger and may decrease from the date that you submit your 
proxy. You are urged to obtain recent market quotations for Metromedia class A  
common stock and AboveNet common stock. We cannot predict or give any assurances
as to the market price of Metromedia class A common stock at any time before or 
after the merger. The prices of Metromedia class A common stock and AboveNet    
common stock may vary because of factors such as:                               

  - changes in the business, operating results or prospects of Metromedia or
AboveNet,                                                           

 - market assessments of the likelihood that the merger will be completed,

- the timing of the completion of the merger,                           

- the prospects of post-merger operations,                              

- regulatory considerations, and                                        

- general market and economic conditions.                               

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RISK FACTORS APPLICABLE TO METROMEDIA                                           

METROMEDIA HAS A LIMITED HISTORY OF OPERATIONS                          

 You will have limited historical financial information upon which to base
your evaluation of Metromedia's performance. Metromedia was formed in April 1993
and has a limited operating history. Metromedia currently has a limited number  
of customers and is still in the process of building many of its networks.      
Accordingly, you must consider Metromedia's prospects in light of the risks,    
expenses and difficulties frequently encountered by companies in their early    
stage of development.                                                           

METROMEDIA EXPECTS TO CONTINUE TO INCUR NET LOSSES                      

Metromedia cannot assure you that it will succeed in establishing an    
adequate revenue base or that its services will generate profitability. In      
connection with the construction of Metromedia's networks, it has incurred      
substantial losses. Metromedia expects to continue incurring losses while it    
concentrates on the development and construction of additional fiber optic      
networks and until its networks have established a sufficient revenue-generating
customer base. Metromedia also expects to incur losses during the initial       
startup phases of any services that it may provide. In addition, as a result of 
the merger, Metromedia will record significant amounts of goodwill amortization 
which will further increase its net losses. Accordingly, Metromedia expects to  
continue experiencing net operating losses for the foreseeable future.          

Continued losses may prevent Metromedia from pursuing its strategies for
growth and could cause it to be unable to meet its debt service obligations,    
capital expenditure requirements or working capital needs.                      

METROMEDIA HAS SUBSTANTIAL DEBT WHICH MAY LIMIT ITS ABILITY TO BORROW,  
   RESTRICT THE USE OF ITS CASH FLOWS AND CONSTRAIN ITS BUSINESS STRATEGY, AND
IT MAY NOT BE ABLE TO MEET ITS DEBT OBLIGATIONS                         

   Metromedia has substantial debt and debt service requirements. Metromedia's
substantial debt has important consequences, including:                         

- its ability to borrow additional amounts for working capital, capital 
expenditures or other purposes is limited,                          

    - a substantial portion of its cash flow from operations is required to make
debt service payments, and                                          

    - its leverage could limit its ability to capitalize on significant business
     opportunities and its flexibility to react to changes in general economic
conditions, competitive pressures and adverse changes in government 
regulation.                                                         

  Metromedia cannot assure you that its cash flow and capital resources will
be sufficient to repay its existing indebtedness and any indebtedness it may    
incur in the future, or that it will be successful in obtaining alternative     
financing. In the event that Metromedia is unable to repay its debts, it may be 
forced to reduce or delay the completion or expansion of its networks, sell some
of its assets, obtain additional equity capital or refinance or restructure its 
debt.                                                                           

  METROMEDIA MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT ITS BUSINESS STRATEGY
BECAUSE IT DEPENDS ON FACTORS BEYOND ITS CONTROL, WHICH COULD ADVERSELY 
AFFECT ITS RESULTS OF OPERATIONS                                        

    Metromedia's future largely depends on its ability to implement its business
strategy and proposed expansion in order to create the new business and revenue 
opportunities described in this document and the documents incorporated by      
reference. Metromedia's results of operations will be adversely affected if it  
cannot fully implement its business strategy.                                   

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 Successful implementation depends on numerous factors beyond Metromedia's
control, including economic, competitive and other conditions and uncertainties,
the ability to obtain licenses, permits, franchises and rights-of-way on        
reasonable terms and conditions and the ability to hire and retain qualified    
management personnel.                                                           

METROMEDIA CANNOT ASSURE YOU THAT IT WILL SUCCESSFULLY COMPLETE THE     
CONSTRUCTION OF ITS NETWORKS                                            

The construction of future networks entails significant risks, including
management's ability to effectively control and manage these projects, shortages
of materials or skilled labor, unforeseen engineering, environmental or         
geological problems, work stoppages, weather interference, floods and           
unanticipated cost increases. In addition, the failure to obtain necessary      
licenses, permits and authorizations could prevent or delay the completion of   
construction of all or part of Metromedia's networks or increase completion     
costs. Metromedia cannot assure you that the budgeted costs of its current and  
future projects will not be exceeded or that these projects will commence       
operations within the contemplated schedules, if at all.                        

METROMEDIA CANNOT ASSURE YOU THAT A MARKET FOR ITS CURRENT OR FUTURE    
SERVICES WILL DEVELOP                                                   

  The practice of leasing dark fiber, which is fiber optic cable without any
of the electronic or optronic equipment necessary to use the fiber for          
transmission, is not widespread and Metromedia cannot assure you that the market
will develop or that it will be able to enter into contracts, comply with the   
terms of these contracts or maintain relationships with communications carriers 
and corporate and government customers. Metromedia also cannot assure you that  
these contracts or relationships will be on economically favorable terms or that
communications carriers and corporate and government customers will not choose  
to compete against, rather than cooperate with it. If Metromedia is unable to   
enter into contracts, comply with the terms of the contracts or maintain        
relationships with these constituencies, its operations would be materially and 
adversely affected.                                                             

Metromedia cannot predict whether providing services to governments will
evolve into a significant market because governments usually already control    
existing rights-of-way and often build their own communications infrastructure. 

 Metromedia will need to strengthen its marketing efforts and increase its
staff to handle future marketing and sales requirements. If Metromedia fails to 
obtain significant, widespread commercial and public acceptance of its networks 
and access to sufficient buildings its visibility in the telecommunications     
market could be jeopardized. Metromedia cannot assure you that it will be able  
to secure customers for the commercial use of its proposed networks or access to
such buildings in each market.                                                  

  Metromedia may expand the range of services that it offers. These services
may include assisting customers with the integration of their leased dark fiber 
with appropriate electronic and optronic equipment by facilitating the          
involvement of third party suppliers, vendors and contractors. Metromedia cannot
assure you that a market will develop for its new services, that implementing   
these services will be technically or economically feasible, that it can        
successfully develop or market them or that it can operate and maintain its new 
services profitably.                                                            

   SEVERAL OF METROMEDIA'S CUSTOMERS MAY TERMINATE THEIR AGREEMENTS WITH IT IF
IT DOES NOT PERFORM BY SPECIFIED TIMES                                  

Metromedia currently has some contracts to supply leased fiber capacity 
which allow the lessee to terminate the contracts and/or provide for liquidated 
damages if it does not supply the stated fiber capacity by a specified time.    
Terminating any of these contracts could adversely affect Metromedia's          
operations.                                                                     

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METROMEDIA MAY BE UNABLE TO RAISE THE ADDITIONAL FINANCING NECESSARY TO 
   COMPLETE THE CONSTRUCTION OF ITS NETWORKS, WHICH WOULD ADVERSELY AFFECT ITS
LONG-TERM BUSINESS STRATEGY                                             

 Metromedia may need significant amounts of additional capital to complete
the build-out of its planned fiber optic communications networks and meet its   
long-term business strategies, including expanding its networks to additional   
cities and constructing its networks in Europe.                                 

   If Metromedia needs additional funds, its inability to raise them will have
an adverse effect on its operations. If Metromedia decides to raise additional  
funds by incurring debt, it may become subject to additional or more restrictive
financial covenants and ratios.                                                 

   COMPETITORS IN THE TELECOMMUNICATIONS INDUSTRY COULD OFFER SERVICES SIMILAR
TO METROMEDIA'S IN ITS CURRENT OR PLANNED MARKETS WHICH WOULD AFFECT ITS
RESULTS OF OPERATIONS                                                   

   The telecommunications industry is extremely competitive, particularly with
respect to price and service, which may adversely affect Metromedia's results of
operations. A significant increase in industry capacity or reduction in overall 
demand would adversely affect its ability to maintain or increase prices.       

 Metromedia competes against incumbent local exchange carriers, which have
historically provided local telephone services and currently dominate their     
local telecommunications markets, and competing carriers in the local services  
market, many of which have greater financial, research and development and other
resources than Metromedia does. In addition to these carriers, several other    
potential competitors, such as facilities-based communications service          
providers, cable television companies, electric utilities, microwave carriers,  
satellite carriers, wireless telephone system operators and large end-users with
private networks, are capable of offering services similar to those offered by  
Metromedia.                                                                     

    Some of Metromedia's principal competitors already own fiber optic cables as
part of their telecommunications networks. Accordingly, any of these carriers,  
some of which already have franchise and other agreements with the city of New  
York and other local and state governments and substantially greater resources  
and more experience than Metromedia, could directly compete with Metromedia in  
the market for leasing fiber capacity, if they are willing to offer this        
capacity to their customers. In addition, some communications carriers and local
cable companies have extensive networks in place that could be upgraded to fiber
optic cable, as well as numerous personnel and substantial resources to begin   
construction to equip their networks. If communications carriers and local cable
companies decide to equip their networks with fiber optic cable, they could     
become significant competitors of Metromedia.                                   

 Metromedia's franchise and other agreements with the city of New York and
other local and state governments are not exclusive. Potential competitors with 
greater resources and more experience than Metromedia could enter into franchise
and other agreements with the city of New York and other local and state        
governments and compete directly with Metromedia.                               

Other companies may choose to compete with Metromedia in its current or 
planned markets, including Europe, by leasing fiber capacity, including dark    
fiber, to its targeted customers. This additional competition could materially  
and adversely affect Metromedia's operations.                                   

  METROMEDIA DEPENDS ON A LIMITED NUMBER OF CUSTOMERS AND IS MORE VULNERABLE
TO CHANGING ECONOMIC CONDITIONS AND CONSUMER PREFERENCES                

   Metromedia is particularly dependent on a limited number of customers, such
as NextLink New York, L.L.C. and WinStar Communications, Inc., and is therefore 
more susceptible to the impact of poor economic conditions than its competitors 
with a more balanced mix of business.                                           

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THE HEAVY REGULATION OF THE TELECOMMUNICATIONS INDUSTRY MAY LIMIT THE   
DEVELOPMENT OF METROMEDIA'S NETWORKS AND AFFECT METROMEDIA'S COMPETITIVE
POSITION                                                                

Existing and future governmental regulations will greatly influence how 
Metromedia operates its business, its business strategy and ultimately, its     
viability. Federal and state telecommunications laws directly shape the         
telecommunications market. Consequently, regulatory requirements and/or changes 
could adversely affect its operations. However, Metromedia cannot predict the   
future regulatory framework of its business.                                    

  FEDERAL LAWS MAY IMPACT METROMEDIA'S BUSINESS AND RESULTS OF OPERATIONS BY
REGULATING ITS OPERATIONS AND ITS CUSTOMERS' OPERATIONS                 

   Federal telecommunications law imposes special legal requirements on common
carriers who engage in interstate or foreign communication by wire or radio, and
on telecommunications carriers. These regulatory requirements may have a        
material adverse impact on its business and results of operation. With respect  
to offering of telecommunications services, Metromedia will likely operate as a 
common carrier and therefore will be subject to the regulatory requirements     
applicable to common carriers and to telecommunications carriers.               

  If providing dark fiber facilities or related services provided by us were
deemed to be a telecommunications service, then revenues from facility leases to
end-users or such services could be subject to assessment by the Federal        
Communications Commission Universal Service Fund and the offering of those      
facilities or such services would be subject to common carrier regulation.      

 Local exchange carriers and long distance carriers are subject to various
federal telecommunications laws. These laws and Federal Communications          
Commission regulatory decisions may affect its business by virtue of the        
interrelationships that exist among Metromedia and many of these regulated      
telecommunications entities. For example, the Federal Communications Commission 
has recently taken steps to reduce the access charges or the fees paid by long  
distance carriers to incumbent local exchange carriers for originating and      
terminating long distance calls on the incumbent local exchange carriers' local 
networks, and to give the incumbent local exchange carriers greater flexibility 
in setting these charges. While Metromedia cannot predict the precise effect the
access charge changes will have on its operations, reduced access charges will  
likely make it more attractive for long distance carriers to use incumbent local
exchange carriers facilities, which could have a material adverse effect on long
distance carriers' use of Metromedia's fiber optic telecommunications network.  

Decisions by either the Federal Communications Commission or additional 
states or courts to require unbundling of incumbent local exchange carriers'    
dark fiber could decrease the demand for Metromedia's dark fiber, and thereby   
have an adverse effect on the results of Metromedia's operations.               

STATES' LEGISLATIONS AFFECT METROMEDIA'S PRICING POLICIES AND IMPACT ITS
COSTS                                                                   

    Metromedia's offering of transmission services, which is different from dark
fiber capacity, likely will be subject to regulation in each state to the extent
that these services are offered for intrastate use, and such regulation may have
an adverse effect on the results of Metromedia's operations. Metromedia cannot  
assure you that these regulations, as well as future regulatory, judicial, or   
legislative action will not have a material adverse effect on it.               

In particular, state regulators have the authority to determine both the
rates Metromedia will pay to incumbent local exchange carriers for certain      
interconnection arrangements such as physical collocation, and the prices that  
incumbent local exchange carriers will be able to charge Metromedia's potential 
customers for services and facilities that compete with Metromedia's services.  
Metromedia will also incur costs in order to comply with regulatory requirements
such as the filing of tariffs, submission                                       

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of periodic financial and operational reports to regulators, and payment of     
regulatory fees and assessments. In some jurisdictions, Metromedia's pricing    
flexibility for intrastate services may be limited because of regulation,       
although its direct competitors will be subject to similar restrictions.        

  LOCAL GOVERNMENTS' CONTROL OVER RIGHTS-OF-WAY CAN LIMIT THE DEVELOPMENT OF
METROMEDIA'S NETWORKS                                                   

Local governments exercise legal authority that impact Metromedia's     
business. These regulations may have an adverse effect on Metromedia's business.
For example, local governments, such as the city of New York, typically retain  
the ability to license public rights-of-way, subject to the limitation that     
local governments may not prohibit persons from providing telecommunications    
services. Local authorities affect the timing and costs associated with         
Metromedia's use of public rights-of-way.                                       

THE REGULATORY FRAMEWORK FOR METROMEDIA'S INTERNATIONAL OPERATIONS IS   
 EXTENSIVE AND CONSTANTLY CHANGING WHICH ADDS UNCERTAINTIES TO ITS PLANNED
EXPANSION INTO FOREIGN COUNTRIES                                        

Various regulatory requirements and limitations also will influence     
Metromedia's business as it attempts to enter international markets. Regulation 
of the international telecommunications industry is changing rapidly. Metromedia
is unable to predict how the Federal Communications Commission and foreign      
regulatory bodies will resolve the various pending international policy issues  
and the effect of such resolutions on it.                                       

Metromedia's US/UK undersea cable joint venture is a U.S. international 
common carrier subject to U.S. regulation under Title II of the Communications  
Act of 1934. Metromedia also is licensed as a U.S. international common carrier 
subject to U.S. regulation under Title II of the Communications Act of 1934     
which may adversely impact its business if it were deemed a dominant carrier    
under these rules. Metromedia's U.K. joint venture is, and Metromedia also is,  
required, under Sections 214 and 203 of the Communications Act of 1934,         
respectively, to obtain authorization and file an international service tariff  
containing rates, terms and conditions before initiating service. International 
carriers are also subject to certain annual fees and filing requirements such as
the requirement to file contracts with other carriers, including foreign carrier
agreements, and reports describing international circuit, traffic and revenue   
data service. Failure to obtain an appropriate U.S. license for international   
service or the revocation of a license could have a material adverse effect on  
Metromedia's future operations.                                                 

To the extent that Metromedia's US/UK undersea cable joint venture and  
Metromedia operate as international common carriers, they will also be required 
to comply with the rules of the Federal Communications Commission regarding the 
International Settlements Policy, which defines the permissible boundaries for  
U.S. carriers and their foreign correspondents to settle the cost of terminating
each other's traffic over their respective networks.                            

The international services provided by Metromedia's US/UK undersea cable
joint venture are and its international services may also be subject to         
regulation in the United Kingdom and other European jurisdictions in which it   
may operate. National regulations of relevant European countries, as well as    
policies and regulations on the European Union level, impose separate licensing,
service and other conditions on its foreign joint ventures and its international
service operations, and these requirements may have a material adverse impact on
Metromedia.                                                                     

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METROMEDIA'S FRANCHISES, LICENSES OR PERMITS COULD BE CANCELED OR NOT   
RENEWED, WHICH WOULD IMPAIR THE DEVELOPMENT OF MAJOR MARKETS FOR ITS    
SERVICES                                                                

 Termination or non-renewal of Metromedia's franchise with the city of New
York or of certain other rights-of-way or franchises that it uses for its       
networks would have a material adverse effect on its business, results of       
operations and financial condition. Metromedia will also need to obtain         
additional franchises, licenses and permits for its planned intracity networks, 
intercity networks and international networks. Metromedia cannot assure that it 
will be able to maintain on acceptable terms its existing franchises, licenses  
or permits or to obtain and maintain the other franchises, licenses or permits  
needed to implement its strategy.                                               

METROMEDIA MAY NOT BE ABLE TO OBTAIN AND MAINTAIN THE RIGHTS-OF-WAY AND 
OTHER PERMITS NECESSARY TO IMPLEMENT ITS BUSINESS STRATEGY              

Metromedia must obtain additional rights-of-way and other permits from  
railroads, utilities, state highway authorities, local governments and transit  
authorities to install underground conduit for the expansion of its intracity   
networks, intercity networks and international networks. Metromedia cannot      
assure you that it will be successful in obtaining and maintaining these        
right-of-way agreements or obtaining these agreements on acceptable terms. Some 
of these agreements may be short-term or revocable at will, and Metromedia      
cannot assure you that it will continue to have access to existing rights-of-way
after they have expired or terminated. If any of these agreements were          
terminated or could not be renewed and Metromedia was forced to remove its fiber
optic cable from under the streets or abandon its networks, the termination     
could have a material adverse effect on its operations. In addition, landowners 
have asserted that railroad companies and others to whom they granted easements 
to their properties are not entitled as a result of these easements to grant    
rights of way to telecommunications providers. If these disputes are resolved in
the landowners' favor, Metromedia could be obligated to make substantial lease  
payments to these landowners for the lease of these rights of way.              

    More specifically, Metromedia's New York/New Jersey network relies upon, and
its planned expansions into Long Island and Westchester County will rely upon,  
right-of-way agreements with Bell Atlantic Corporation and its subsidiary,      
Empire City Subway Company (Ltd.). The current agreements may be terminated at  
any time without cause with three months notice. In case of termination,        
Metromedia may be required to remove its fiber optic cable from the conduits or 
poles of Bell Atlantic. This termination would have a material adverse effect on
its operations.                                                                 

 RAPID TECHNOLOGICAL CHANGES COULD AFFECT THE CONTINUED USE OF FIBER OPTIC
CABLE AND METROMEDIA'S RESULTS OF OPERATIONS                            

   The telecommunications industry is subject to rapid and significant changes
in technology that could materially affect the continued use of fiber optic     
cable. Metromedia cannot predict the effect of technological changes on its     
business. Metromedia also cannot assure you that technological changes in the   
communications industry will not have a material adverse effect on its          
operations.                                                                     

  METROMEDIA MAY EXPERIENCE RISKS AS A RESULT OF EXPANDING ITS NETWORKS INTO
    EUROPEAN AND OTHER FOREIGN COUNTRIES, WHICH MAY ADVERSELY AFFECT ITS RESULTS
OF OPERATIONS                                                           

    Metromedia's strategy includes expanding its services to provide fiber optic
cable in Europe, particularly Germany and London, England. The following are    
risks Metromedia may experience as a result of doing business in Germany,       
England and other foreign countries in which it may expand its networks:        

 - difficulties in staffing and managing its operations in London, England
and Germany,                                                        

- longer payment cycles,                                                

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- problems in collecting accounts receivable,                           

- fluctuations in currency exchange rates,                              

    - delays from customs brokers or government agencies encountered as a result
   of transacting business between Metromedia in the United States and its
      business associates in Germany, England or other countries in which it may
operate, and                                                        

- potentially adverse consequences resulting from operating in multiple 
countries such as Germany and England which have different laws and 
regulations, including tax laws and industry related regulations.   

   Metromedia cannot assure you that it will be successful in overcoming these
risks or any other problems arising because of expansion into Europe.           

  METROMEDIA MAY NOT BE ABLE TO SUCCESSFULLY IDENTIFY, MANAGE AND ASSIMILATE
FUTURE ACQUISITIONS, INVESTMENTS AND STRATEGIC ALLIANCES, WHICH WOULD   
ADVERSELY AFFECT ITS RESULTS OF OPERATIONS                              

 In the future, Metromedia may acquire, make investments in, or enter into
strategic alliances with, companies which have customer bases, switching        
capabilities, existing networks or other assets in its current markets or in    
areas into which it intends to expand its networks. Any future acquisitions,    
investments, strategic alliances or related efforts will be accompanied by risks
such as:                                                                        

- the difficulty of identifying appropriate acquisition candidates,     

   - the difficulty of assimilating the operations of the respective entities,

- the potential disruption of its ongoing business,                     

  - the inability of management to capitalize on the opportunities presented
 by acquisitions, investments, strategic alliances or related efforts,

 - the failure to successfully incorporate licensed or acquired technology
and rights into its services,                                       

- the inability to maintain uniform standards, controls, procedures and 
policies, and                                                       

  - the impairment of relationships with employees and customers as a result
of changes in management.                                           

    Metromedia cannot assure you that it would be successful in overcoming these
risks or any other problems encountered with such acquisitions, investments,    
strategic alliances or related efforts.                                         

IN THE TELECOMMUNICATIONS INDUSTRY, CONTINUED PRICING PRESSURES FROM    
    METROMEDIA'S COMPETITORS AND AN EXCESS OF NETWORK CAPACITY CONTINUE TO CAUSE
PRICES FOR ITS SERVICES TO DECLINE                                      

Metromedia anticipates that prices for its services specifically, and   
transmission services in general, will continue to decline over the next several
years due primarily to the following:                                           

- price competition as various network providers continue to install    
networks that might compete with its networks,                      

- recent technological advances that permit substantial increases in the
transmission capacity of both new and existing fiber, and           

- strategic alliances or similar transactions, such as long distance    
  capacity purchasing alliances among regional Bell operating companies,
that increase the parties' purchasing power.                        

   METROMEDIA'S BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL THE LOSS
OF WHOM COULD ADVERSELY AFFECT ITS BUSINESS                             

Metromedia's business is managed by a small number of key management and
operating personnel. Metromedia believes that the success of its business       
strategy and its ability to operate profitably depend on the continued          
employment of its senior management team led by Stephen A.                      

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Garofalo, Chairman of the Board of Directors and Chief Executive Officer.       
Metromedia's business and financial results could be materially affected if Mr. 
Garofalo or other members of its senior management team became unable or        
unwilling to continue in their present positions.                               

    METROMEDIA COMPANY EFFECTIVELY CONTROLS METROMEDIA FIBER NETWORK AND HAS THE
POWER TO CAUSE OR PREVENT A CHANGE OF CONTROL                           

Mr. Stephen A. Garofalo currently controls approximately 26% of the     
outstanding shares of class A common stock. Metromedia Company and one of its   
general partners currently own 100% of the Metromedia class B common stock,     
which currently represents approximately 66% of Metromedia Fiber Network's total
voting power and also is entitled to elect 75% of the members of Metromedia     
Fiber Network's board of directors. Accordingly, Metromedia Company is able to  
control the board of directors and all stockholder decisions and, in general, to
determine the outcome of any corporate transaction or other matter submitted to 
the stockholders for approval, including mergers, consolidations and the sale of
all or substantially all of Metromedia Fiber Network's assets, without the      
consent of Metromedia Fiber Network's other stockholders. In addition,          
Metromedia Company has the power to prevent or cause a change in control of     
Metromedia Fiber Network.                                                       

 METROMEDIA IS INVOLVED IN A LEGAL PROCEEDING WHICH COULD ADVERSELY AFFECT
ITS FINANCIAL CONDITION                                                 

   Metromedia is involved in a legal proceeding in connection with the sale of
1,800,000 shares of its class A common stock.                                   

  If Metromedia is unsuccessful in defending against the allegations made in
this proceeding, an award of the magnitude being sought in this legal proceeding
could have a material adverse effect on its financial condition and results of  
operations. Metromedia intends to vigorously defend this action because it      
believes that it acted appropriately in connection with the matters at issue in 
this case. However, Metromedia cannot assure you that it will not determine that
the advantages of entering into a settlement outweigh the risk and expense of   
protracted litigation or that ultimately it will be successful in defending     
against these allegations.                                                      

   METROMEDIA'S SERVICES ARE LIMITED TO LEASING FIBER OPTIC CAPACITY WHICH MAY
LIMIT ITS REVENUES                                                      

Metromedia derives substantially all of its revenue from the leasing of 
fiber optic capacity to its customers, many of whom transmit voice, data and/or 
video information or provide switched voice and data services. Metromedia is not
currently engaged in the transmission of voice, data or video services and does 
not provide switched voice and data services, unlike other telecommunications   
companies. While Metromedia may later decide to provide those services, the     
limited nature of its current services could limit potential revenues and result
in it having lower revenues than competitors which provide a wider array of     
services.                                                                       

FAILURES TO ADDRESS THE YEAR 2000 PROBLEM MAY CAUSE DISRUPTIONS IN THE  
OPERATION OF METROMEDIA'S NETWORKS AND ITS SERVICES TO CUSTOMERS        

 Many computer systems and software products will not function properly in
the year 2000 and beyond due to a once-common programming standard that         
represents years using two digits. This problem is often referred to as the year
2000 problem. It is possible that Metromedia's currently installed computer     
systems, software products or other information technology systems, including   
imbedded technology, or those of its suppliers, contractors, or major systems   
developers working either alone or in conjunction with other softwares or       
systems, will not properly function in the year 2000 because of the year 2000   
problem. If Metromedia or its customers, suppliers, contractors, and major      
systems developers are unable to address their year 2000 issues in a timely     
manner, a material adverse effect on its results of operations and financial    
condition could result. Metromedia is currently working to evaluate and resolve 
the potential impact of the year 2000 on its processing of date-sensitive       
information and network systems. Metromedia plans to contact all its significant
suppliers, contractors                                                          

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and major systems developers to determine its vulnerability to their year 2000  
situations. Metromedia cannot assure you that the year 2000 problem will only   
have a minimal cost impact or that other companies will convert their systems on
a timely basis and that their failure will not have an adverse effect on its    
systems.                                                                        

RISK FACTORS APPLICABLE TO ABOVENET                                             

   BECAUSE ABOVENET HAS A LIMITED OPERATING HISTORY, ITS BUSINESS IS DIFFICULT
TO EVALUATE                                                             

  AboveNet was incorporated in March 1996 and began offering its co-location
and Internet connectivity services to content providers through its first       
facility in July 1996. AboveNet introduced its co-location and Internet         
connectivity services to Internet service providers in August 1997 and began    
operating its second Internet service exchange facility in Vienna, Virginia, in 
July 1998. Accordingly, AboveNet has a limited operating history, and faces all 
of the risks and uncertainties encountered by early-stage companies. Also,      
because AboveNet has a limited operating history, its past results may not be   
meaningful and you should not rely on them as indicators of its future          
performance. In addition, its prospects must be considered in light of the      
risks, expenses and difficulties associated with the new and rapidly evolving   
market for co-location and Internet connectivity services. In sum, because of   
AboveNet's limited history and the youth and inherent risks of AboveNet's       
industry, predictions of its future performance are very difficult.             

ABOVENET HAS INCURRED SUBSTANTIAL LOSSES AND ANTICIPATES CONTINUING AND 
INCREASING LOSSES                                                       

Since its inception, AboveNet has incurred substantial losses. AboveNet 
expects its losses to significantly increase as it makes further investments.   
AboveNet experienced net losses of $1.8 million, $5.4 million and $14.4 million 
in fiscal years 1997 and 1998, and for the nine months ended March 31, 1999. As 
of March 31, 1999, AboveNet had an accumulated deficit of $21.7 million.        
AboveNet's losses are expected to increase as it intends to:                    

- substantially increase its sales and marketing activities;            

- establish additional Internet service exchange facilities in San Jose,
California, New York, New York, and the Washington D.C. area;       

  - purchase additional rights to use capacity on fiber optic cable systems;

 - establish joint ventures with foreign entities developing international
Internet service exchange facilities; and                           

- expand its global network through purchases of long-term capacity and 
related equipment.                                                  

    AboveNet faces significant challenges before it can become profitable. These
challenges include its ability to:                                              

  - increase its customer base and maintain existing customer relationships;

- expand domestically and internationally;                              

- provide scalable, reliable and cost-effective services;               

- develop its infrastructure to accommodate expanded and new facilities,
additional customers and the increase of its network capacity;      

- expand its channels of distribution;                                  

- effectively establish its brand name;                                 

- retain and motivate qualified personnel; and                          

- continue to respond to competitive developments.                      

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  Although AboveNet has experienced significant growth in revenues in recent
periods, AboveNet does not believe that this growth rate is necessarily a good  
indication of future operating results. AboveNet might not ever achieve or      
sustain profitability. Please see "AboveNet Management's Discussion and Analysis
of Financial Condition and Results of Operations" for more detailed information 
concerning AboveNet's losses and other operating results.                       

ABOVENET'S BUSINESS WILL SUFFER IF IT DOES NOT EXPAND AND MAINTAIN ITS  
CUSTOMER BASE                                                           

   AboveNet's success depends on the continued growth of its customer base and
the retention of its customers. AboveNet's ability to attract new customers     
depends on a variety of factors, including:                                     

- the willingness of businesses to outsource their Internet operations; 

- the reliability and cost-effectiveness of its services; and           

- the ability to effectively market its services.                       

To attract new customers AboveNet intends to significantly increase its 
sales and marketing expenditures. However, its efforts might not result in more 
sales due to the following factors:                                             

- AboveNet may be unsuccessful in implementing its marketing strategies;

 - AboveNet may be unsuccessful in hiring a sufficient number of qualified
sales and marketing personnel; and                                  

- any implemented strategies might not result in increased sales.       

   AboveNet's marketing efforts include developing relationships with hardware
providers, system integrators, value added resellers and Web hosting companies. 
Failure to develop these relationships may limit AboveNet's ability to increase 
revenues.                                                                       

In the past, AboveNet has lost customers to other service providers for 
various reasons, including lower prices and other incentives offered by         
competitors that AboveNet does not match. AboveNet's customers might terminate  
or decide not to renew their commitments to use its services. A majority of     
AboveNet's customer contracts are cancelable on 30 days notice.                 

ABOVENET EXPECTS ITS OPERATING RESULTS TO FLUCTUATE                     

  AboveNet has experienced significant fluctuations in its operating results
from quarter to quarter. As a result of these fluctuations, period to period    
comparison of AboveNet's operating results is not necessarily meaningful and    
should not be relied upon as an indicator of future performance. AboveNet       
expects its future operating results to fluctuate. Factors that are likely to   
cause these fluctuations include:                                               

- demand for and market acceptance of its services;                     

- capacity utilization of its Internet service exchange facilities;     

- fluctuations in data communications and telecommunications costs;     

- customer retention;                                                   

- the timing and magnitude of capital expenditures;                     

- costs relating to the expansion of operations;                        

- expansion of existing facilities and completion of new facilities;    

- fluctuations in bandwidth used by customers;                          

- introductions of new services or enhancements by AboveNet and its     
competitors;                                                        

- the timing of customer installations and related payments;            

- the ability to maintain or increase peering relationships;            

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- provisions for customer discounts and credits;                        

- changes in AboveNet's pricing policies and those of its competitors;  

- changes in regulatory laws and policies;                              

   - economic conditions, particularly those related to the Internet industry;

   - difficulties in collecting accounts receivable, particularly because many
of AboveNet's customers are in an emerging stage;                   

- compensation costs related to certain option grants and warrants; and 

- decreased revenues due to potential seasonal effects on sales.        

   In addition, a relatively large portion of AboveNet's expenses are fixed in
the short-term, particularly with respect to data communications and            
telecommunications costs, depreciation, real estate and personnel. AboveNet's   
future operating results will be particularly sensitive to fluctuations in      
revenues because of these and other short-term fixed costs.                     

  AboveNet's operating results in the future may fall below the expectations
of securities analysts and investors. In this event, the trading price of       
AboveNet's common stock will likely decrease significantly. Please see "AboveNet
Management's Discussion and Analysis of Financial Condition and Results of      
Operations" for a more detailed analysis of AboveNet's period to period results.

ABOVENET DEPENDS ON THIRD PARTY SUPPLIERS                               

   AboveNet depends on third parties to maintain and provide it key components
for its network infrastructure. AboveNet's financial condition may suffer if the
third parties AboveNet depends on to provide its network infrastructure either  
increase the cost to AboveNet or fail to maintain the operational integrity of  
their networks. AboveNet, and its customers, depend upon data communications and
telecommunications providers, such as MCI WorldCom, Sprint, Pacific Bell,       
Teleport Communications Group, a subsidiary of AT&T, and WinStar Communications,
Inc. to provide the data communications and telecommunications capacity AboveNet
requires. As a result, the service AboveNet provides its customers may be       
interrupted if its data communications and telecommunications providers' systems
fail or if they stop providing the data communications and telecommunications   
capacity that AboveNet needs. If the systems of AboveNet's providers fail, its  
reputation could be harmed or its customers could leave. AboveNet recently      
settled a dispute with WinStar Communications, one of AboveNet's major suppliers
of telecommunications capacity, over currently invoiced amounts and credits     
available to apply against amounts in the future. As a result of the settlement 
AboveNet amended its agreement with WinStar and, among other things, extended   
the term under which WinStar will provide AboveNet with telecommunications      
capacity. In addition, MCI WorldCom is a current competitor of AboveNet. Other  
data communications providers are potential competitors of AboveNet.            

Furthermore, some equipment AboveNet depends on is available only from  
limited sources because of the quantities and quality AboveNet demands.         
Currently, AboveNet orders all of its routers from Cisco Systems, Inc. AboveNet 
believes that it could find alternative sources to supply routers in the event  
routers from Cisco Systems were unavailable. However, AboveNet would need to    
train its personnel in the use of these alternative routers. This training could
cause delay or interruption of its services.                                    

  AboveNet has purchased fiber optic cable capacity between the U.S. and the
United Kingdom from affiliates of Global Crossing Ltd. In August 1999, AboveNet 
entered into an agreement with Global Crossing to purchase additional fiber     
optic cable capacity between the U.S. and London. Accordingly, AboveNet will be 
dependent on Global Crossing for fiber optic cable connectivity to and within   
Europe. Global Crossing has entered into an agreement to acquire Frontier       
Corporation, a competitor of AboveNet.                                          

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ABOVENET MAY FACE PROBLEMS IN CONNECTION WITH ITS EXPANSION PLANS       

AboveNet is currently expanding its West Coast campus by developing an  
additional Internet service exchange facility in San Jose, California. In       
addition, AboveNet is planning to expand its East Coast campus by developing    
additional Internet service exchange facilities in New York, New York and in the
Washington D.C. area. The successful expansion of these campuses will involve   
significant planning and resources. AboveNet may face problems in connection    
with its expansion plans and, as a result, these expansion plans may be delayed 
or never completed. Please see "Business of AboveNet-- Facilities" for a more   
detailed description of AboveNet's planned Internet service exchange facilities.

  AboveNet's expansion plans will face many obstacles. In order to carry out
its expansion plans, AboveNet must:                                             

- obtain the necessary permits and approvals;                           

- enter into leases for proposed facilities;                            

- pass the required inspections; and                                    

- hire the necessary contractors, builders, electricians, architects and
designers.                                                          

AboveNet's expansion plans are subject to risks, such as:               

- construction delay;                                                   

- cost estimation errors or overruns;                                   

- equipment and material delays or shortages;                           

- inability to obtain necessary permits on a timely basis;              

- strain on management and diversion of its attention from day-to-day   
operations;                                                         

  - failure to timely hire the necessary employees, including management and
sales personnel; and                                                

- failure to predict customer demand for new facilities.                

  In addition, AboveNet's costs will increase as it expands. These increased
costs include:                                                                  

- expenses associated with hiring, training and managing new employees; 

- purchasing new equipment;                                             

- implementing power and redundancy systems;                            

- implementing multiple data communications and telecommunications      
connections; and                                                    

- leasing additional real estate and depreciation.                      

For a discussion of the risks associated with AboveNet's needs for      
additional funding, please see the Risk Factor entitled "Additional funding may 
not be available if AboveNet needs it."                                         

ABOVENET HAS A LONG SALES CYCLE                                         

    A customer's decision to purchase AboveNet's services involves a significant
commitment of resources. As a result, AboveNet has a long sales cycle. AboveNet 
also needs to educate customers regarding the benefits of co-location and       
Internet connectivity services. AboveNet generally incurs significant expenses  
in sales and marketing prior to getting customer commitments for its services.  
As a result, AboveNet's inability to get customer commitments or delays due to  
the lengthy sales cycles could significantly harm its operating results.        

ABOVENET DEPENDS ON THIRD PARTIES TO ESTABLISH AND OPERATE INTERNATIONAL
INTERNET SERVICE EXCHANGES                                              

  As part of its strategy, AboveNet plans to continue to make investments in
joint ventures and foreign companies that are expected to develop regional      
Internet service exchange facilities in Europe                                  

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and Asia and to license its trademarks and technology to these entities.        
AboveNet does not expect to control or manage any of these foreign entities. As 
a result, AboveNet will be required to depend on the management of these foreign
entities to successfully establish and operate these regional Internet service  
exchange facilities.                                                            

   The ability of these foreign entities to successfully establish and operate
Internet service exchange facilities is subject to a number of risks over which 
AboveNet will have little or no control. These risks include:                   

- the inability to set up a data communications and telecommunications  
infrastructure in a cost-effective manner;                          

- the inability to compete effectively in international markets; and    

- a potentially more rigorous set of laws within each foreign country.  

  These foreign entities are expected to operate under the AboveNet name. If
these foreign entities are not successful, they could significantly damage      
AboveNet's reputation and brand equity. Also, AboveNet has granted exclusive    
licenses in Austria, Germany and the United Kingdom and expects to do the same  
in other countries. Under the terms of the license agreements, the foreign      
companies have at least one year in which to meet their performance targets     
before they risk losing exclusivity in their territories. Because of these      
restrictions, if the foreign companies are not successful, AboveNet will not be 
able to enter those markets on its own or with other third parties for a        
significant period of time. For a description of AboveNet's international       
Internet service exchange facilities, please see "Business of                   
AboveNet--International Internet Service Exchanges."                            

While AboveNet's international sales are typically denominated in U.S.  
dollars, fluctuations in currency exchange rates could cause its services to    
become relatively more expensive to customers in a particular country,          
potentially leading to a reduction in sales to local customers.                 

ABOVENET FACES INTENSE COMPETITION FROM OTHER COMPANIES                 

AboveNet's business is intensely competitive. AboveNet expects to face  
additional competition from existing competitors and new market entrants in the 
future as there are few substantial barriers to entering the co-location service
business. AboveNet must distinguish itself through the quality of its network   
performance, service offerings and brand name recognition. AboveNet may be      
unsuccessful in doing this. In addition, AboveNet's business model of           
establishing centralized Internet service exchange facilities may not be widely 
adopted over the model established by other outsource providers who have        
developed and are continuing to develop numerous geographically dispersed       
facilities. AboveNet cannot be certain that it will have the resources or       
expertise to compete successfully in the future.                                

Some of AboveNet's competitors have certain advantages over it. These   
advantages include:                                                             

- substantially greater financial, technical and marketing resources;   

- larger customer bases;                                                

- longer operating histories;                                           

- greater name recognition; and                                         

- more established relationships in the industry.                       

AboveNet's competitors may be able to utilize these advantages to:      

- expand their offerings more quickly;                                  

    - adapt to new or emerging technologies and changes in customer requirements
more quickly;                                                       

- take advantage of acquisitions and other opportunities more readily;  

   - devote greater resources to the marketing and sale of their services; and

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- adopt more aggressive pricing and incentive policies.                 

In addition, some of AboveNet's competitors have offered co-location    
services at prices lower than AboveNet's. Furthermore, some competitors offer   
incentives AboveNet does not match. These incentives include free start-up and  
domain name registration, periods of free service and low-priced Internet       
access. This and future price competition may have a material adverse effect on 
AboveNet's business and operating results.                                      

   In addition, some competitors have entered into joint ventures, consortiums
or consolidations to provide services competitive with AboveNet's services. As a
result, these competitors may be able to provide customers with additional      
benefits, including reduced communications costs, which could reduce the overall
costs of their services relative to AboveNet's services. AboveNet might not be  
able to offset the effects of those price reductions. AboveNet also believes    
that companies seeking co-location and Internet connectivity for their business 
critical Internet operations may use more than one company to provide this      
service. As a result, these customers would be able to shift the amount of      
service and bandwidth usage from one provider to another more easily. AboveNet  
may also face competition from its suppliers.                                   

ABOVENET MAY NOT BE ABLE TO MANAGE ITS GROWTH EFFECTIVELY               

    AboveNet's operating results and financial condition could suffer if it does
not effectively manage any growth that may occur. AboveNet has recently         
experienced a period of rapid growth with respect to the expansion of its       
Internet service exchange facilities and its customer base. To manage its growth
effectively, AboveNet must continue to:                                         

- expand its operating and financial procedures and controls;           

  - replace or upgrade its operational, financial and management information
systems;                                                            

- attract, train, motivate, manage and retain key employees; and        

  - increase substantially the size of its sales and marketing organization.

ABOVENET MAY NOT BE ABLE TO HIRE OR RETAIN THE KEY EMPLOYEES IT NEEDS   

    The market for highly qualified personnel is very competitive. Particularly,
AboveNet is dependent on its ability to increase significantly the size of its  
sales and marketing organization. If AboveNet is unable to hire the key         
personnel it needs, AboveNet may provide poor service and have difficulty       
signing up new customers.                                                       

In addition, AboveNet depends on the ability of a new management team to
effectively execute its strategies. AboveNet recently hired many of its key     
employees. Because many members of its management team have worked together only
for a short period of time, AboveNet needs to integrate these officers into its 
operations.                                                                     

    AboveNet may lose some of its key personnel and any loss may have an adverse
effect on its business. It is important that AboveNet retain members of its     
senior management team, including its chief executive officer, Sherman Tuan, and
its chief technical officer, David Rand. AboveNet maintains a key man insurance 
policy in the amount of approximately $1.1 million on the life of Mr. Tuan, but 
no policy on any other executive officers.                                      

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ABOVENET MUST MAINTAIN AND INCREASE PEERING RELATIONSHIPS               

The Internet is comprised of network providers who operate their own    
networks and interconnect their networks at various public and private points.  
These interconnections are called peering arrangements. AboveNet's establishment
and maintenance of peering relationships is necessary in order to effectively   
exchange traffic with Internet service providers without having to pay the      
higher costs of transit services and in order to maintain high network          
performance levels. These arrangements are not subject to regulation and are    
subject to changes in terms, conditions or costs. AboveNet may not be able to   
provide its customers with affordable services if it is unable to maintain and  
increase peering relationships with Internet service providers.                 

In addition, any increase in the costs associated with access to the    
Internet that AboveNet is unable to pass to its customers may affect its        
financial condition and operating results. AboveNet may have to pay increasing  
amounts to maintain its relationships with Internet service providers to the    
point where it becomes necessary to find alternatives. These Internet service   
providers may increase their prices. In turn, AboveNet may be required to       
identify alternative methods to distribute its customers' content. These        
alternatives may not exist.                                                     

ABOVENET'S SYSTEMS OR OTHER SYSTEMS ON WHICH IT DEPENDS MAY FAIL        

    AboveNet's customers depend on its ability to provide continuous service. As
a result, if AboveNet's service is interrupted, its reputation will be harmed   
and its customers may leave. AboveNet's systems and its customers' systems risk 
damage from numerous forces, including:                                         

- human error;                                                          

- fire;                                                                 

- earthquakes;                                                          

- floods;                                                               

- power loss;                                                           

- telecommunications failures; or                                       

- sabotage or vandalism.                                                

 In addition, AboveNet's operations may be disrupted due to unannounced or
unexpected changes in transmission protocols or other technology.               

    AboveNet may be subject to legal claims and be liable for losses suffered by
its customers for disruption of service or damage to customer equipment.        
AboveNet's contracts with its customers attempt to eliminate its liability for  
consequential or punitive damages and for damage to customer equipment not      
caused by its gross negligence or willful acts. However, those provisions may   
not protect AboveNet from being held liable for those damages.                  

    THE MARKET FOR CO-LOCATION AND INTERNET CONNECTIVITY SERVICES IS NEW AND MAY
NOT GROW                                                                

The market for co-location and Internet connectivity services is new and
evolving. As a result, AboveNet's financial condition will be harmed if the     
market fails to develop, or develops more slowly than AboveNet expects. The     
growth of the market depends on several uncertain events or occurrences. These  
events or occurrences include:                                                  

   - the growth of the Internet as a global communication and commerce medium;

   - the willingness of businesses to co-locate their Internet operations; and

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- AboveNet's ability to successfully and cost-effectively market its    
services to a sufficiently large number of customers.               

AboveNet's business may also suffer if its services do not achieve      
widespread acceptance in this new market.                                       

ABOVENET MUST BE ABLE TO EXPAND AND ADAPT ITS NETWORK INFRASTRUCTURE    

   AboveNet must continue to expand and adapt its network as the number of its
users grow, as its users place increasing demands on it, and as requirements    
change. If AboveNet is unable to expand and adapt its network infrastructure,   
AboveNet may lose customers. AboveNet has had limited deployment of its         
services. Accordingly, it is difficult to determine if its network will be able 
to handle, connect and manage large numbers of users at high transmission       
speeds. AboveNet may not be able to provide its customers with the increasing   
levels of data transmission capacity that they may require for a number of      
reasons, such as AboveNet's possible inability to raise the funds needed to     
develop the network infrastructure to maintain adequate data transmission speeds
and the lack of additional network capacity from third-party suppliers. In      
addition, any future attempts AboveNet makes to bolster its network may be      
delayed or cause further complications. AboveNet may encounter equipment or     
software incompatibility, among other things, if AboveNet upgrades its network  
to increase its capacity. This may cause delays in AboveNet's attempts to expand
or improve its services. For more detailed information regarding AboveNet's     
network, please see "BUSINESS OF ABOVENET-- Network Architecture."              

On June 21, 1999, AboveNet acquired assets and assumed obligations from 
Compaq Computer Corporation related to Compaq's Palo Alto Internet Exchange     
(PAIX) for $70 million in cash and an obligation to provide various services.   
The PAIX business will be operated by a wholly owned subsidiary of AboveNet,    
with its own management and board of directors. Even so, AboveNet will be       
required to integrate the operation of PAIX into AboveNet's overall business,   
which will require the dedication of management resources which may temporarily 
divert management's attention away from AboveNet's day-to-day business. AboveNet
cannot assure you that the integration will be accomplished smoothly or         
successfully. AboveNet's inability to integrate successfully the operations of  
the PAIX business into AboveNet's overall business could cause AboveNet's       
business, financial condition and results of operations to be harmed. AboveNet's
ability to achieve the anticipated benefits of the acquisition of the PAIX      
depends in part upon the viability of the PAIX as an independent company, and   
AboveNet cannot assure you that the PAIX subsidiary will benefit AboveNet.      

ABOVENET MAY FACE RISKS AND COSTS ASSOCIATED WITH POTENTIAL FUTURE      
ACQUISITIONS                                                            

  The costs and risks AboveNet may face if AboveNet consummates acquisitions
of key technologies or companies in the future may have an adverse impact on    
AboveNet. An acquisition may result in the use of significant amounts of cash,  
potentially dilutive issuances of equity securities, incurrence of debt or      
amortization expenses related to goodwill and other intangible assets. Any      
acquisitions AboveNet may engage in may involve numerous risks. These risks     
include:                                                                        

    - difficulties in the assimilation of the operations, technologies, products
and personnel of the acquired company;                              

- the diversion of management's attention from other business concerns; 

- risks related to entering markets in which AboveNet has no or limited 
direct prior experience; and                                        

- potential loss of key employees of the acquired company.              

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AboveNet's financial condition and operating results may be adversely   
affected if any acquisitions occur.                                             

ABOVENET DEPENDS ON THE GROWTH AND PERFORMANCE OF THE INTERNET          

AboveNet's success will depend in large part on growth in the use of the
Internet. The growth of the Internet is highly uncertain and depends on a       
variety of factors. These factors include security, reliability, cost, ease of  
access, quality of service and necessary increases in bandwidth availability. In
addition, broad adoption of the Internet for most business applications will    
require the acceptance of a new medium of conducting business and exchanging    
information.                                                                    

The recent growth in the use of the Internet has placed strain on the   
Internet. This increased use has required the upgrade of routers and switches,  
telecommunications links and other components forming the infrastructure of the 
Internet by Internet service providers and other organizations with links to the
Internet. Any perceived weakening in the performance of the Internet could      
undermine the benefits of AboveNet's services. The benefits of AboveNet's       
services are ultimately dependent upon the speed and reliability of the networks
operated by third parties. Consequently, the emergence and growth of AboveNet's 
market is dependent on improvements being made to the entire Internet           
infrastructure to alleviate overloading and congestion.                         

 ABOVENET MAY NOT BE ABLE TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES OR
EMERGING INDUSTRY STANDARDS                                             

  AboveNet's services will become relatively less useful to its customers if
AboveNet is unable to respond to technological advances. AboveNet's future      
success depends, in part, on its ability to address the increasingly            
sophisticated and varied needs of its current and prospective customers. Keeping
pace with technological advances in its industry may require substantial        
expenditures and lead time.                                                     

In addition, future advances in technology may harm AboveNet's business.
AboveNet may not be able to incorporate technological advances on a             
cost-effective or timely basis into its business. Future technological advances 
may also make its services unnecessary or less cost-effective for its customers.
Also technological advances may encourage businesses to rely on in-house        
personnel and equipment to furnish the services AboveNet currently provides.    

AboveNet currently intends to support emerging standards if they become 
established. However, its failure to conform to prevailing standards or the     
failure of a common standard to emerge could hurt its business.                 

ABOVENET FACES RISKS ASSOCIATED WITH THE SECURITY OF ITS SYSTEMS        

Despite its design and implementation of a variety of network security  
measures, unauthorized access, computer viruses, accidental or intentional      
action and other disruptions could occur. In addition, AboveNet may incur       
significant costs to prevent breaches in security or to alleviate problems      
caused by such breaches. Any breaches that may occur could result in liability  
to AboveNet, loss of existing customers and the deterrence of future customers. 
AboveNet has been sued by a customer alleging that AboveNet negligently allowed 
the customer's consultant access to the customer's servers co-located at its San
Jose facility. Although this lawsuit was settled by the parties, similar        
incidents may occur in the future subjecting AboveNet to liability and lawsuits.

ABOVENET OPERATES IN AN UNCERTAIN LEGAL LANDSCAPE                       

The adoption and interpretation of any future or currently existing     
regulations might have a negative impact on AboveNet's business. The Internet   
and AboveNet's market are relatively new. Many of the laws and regulations that 
govern AboveNet have yet to be interpreted or enforced. It is likely            

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that in the future many new laws will take effect that will regulate the        
Internet and AboveNet's industry. The applicability to the Internet of existing 
laws governing issues such as property ownership, copyrights and other          
intellectual property issues, taxation, libel, obscenity and personal privacy is
uncertain. Current and future laws and regulations may:                         

- decrease the growth of the Internet;                                  

- decrease demand for AboveNet's services; and                          

   - impose taxes or other costly technical requirements or otherwise increase
the cost of doing business.                                         

AboveNet operates over the Internet in multiple states and foreign      
countries. In addition, AboveNet facilitates sales by its customers to end users
located in many states and foreign jurisdictions. As a result, AboveNet is      
potentially subject to the laws and regulations of jurisdictions in which       
AboveNet is not qualified to do business. These jurisdictions may claim that    
AboveNet is required to qualify to do business as a foreign corporation in each 
such state or foreign country, potentially subjecting AboveNet to additional    
taxes and lawsuits in these jurisdictions.                                      

ABOVENET MAY FACE LIABILITY AND OTHER RISKS AS A RESULT OF INFORMATION  
DISSEMINATED THROUGH ITS NETWORK                                        

The liability AboveNet may face as a result of information disseminated 
through its network could have a negative impact on its financial condition. The
law relating to the liability of online services companies and Internet access  
providers for information carried on or disseminated through their networks is  
currently unsettled. It is possible that claims could be made against online    
services companies, co-location companies and Internet access providers under   
both United States and foreign law for defamation, negligence, copyright or     
trademark infringement or under other legal theories. Content distributed by    
some of AboveNet's current or future customers may be regulated or banned.      
AboveNet may lose some of its customers if their content is regulated. AboveNet 
has received letters from recipients of information transmitted by its customers
objecting to the nature and content of the information. Several private lawsuits
seeking to impose liability on online services companies and Internet access    
providers are currently pending. In addition, legislation has been recently     
passed and continues to be proposed that imposes liability for or prohibits the 
transmission over the Internet of certain types of information.                 

AboveNet may need to implement measures to reduce its exposure to this  
potential liability. These measures may require the expenditure of substantial  
resources. AboveNet also may need to discontinue certain service offerings. The 
increased attention focused upon liability issues as a result of these lawsuits,
new laws and legislative proposals could impact the growth of Internet use.     
AboveNet carries general liability insurance, but it may not be adequate to     
compensate or may not cover AboveNet in the event it becomes liable for         
information carried on or disseminated through its networks.                    

  In addition, some of AboveNet's customers have sent unsolicited commercial
e-mails from servers co-located at its facilities to massive numbers of people, 
typically to advertise products or services. This practice, known as "spamming,"
can lead to complaints against service providers that enable such activities,   
particularly where recipients view the materials received as offensive. Internet
service providers and other online services companies might deny network access 
to AboveNet if undesired content or spamming were to be transmitted from servers
co-located at its facilities. In addition, legislation that prohibits "spamming"
has recently been passed, and continues to be proposed. The loss of these       
services could adversely affect AboveNet's business and operating results.      

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THE PROTECTION OF ABOVENET'S PROPRIETARY INFORMATION IS LIMITED         

AboveNet has no patented technology. AboveNet relies on a combination of
copyright, trademark, service mark and trade secret laws and contractual        
restrictions to establish and protect certain proprietary rights in its         
technology. The steps AboveNet has taken to protect its intellectual property   
may be insufficient. AboveNet's technology may be misappropriated or a third    
party may independently develop similar technologies. The laws of certain       
foreign countries may not protect its intellectual property rights to the same  
extent as do the laws of the U.S.                                               

ABOVENET MAY BE ACCUSED OF INFRINGING THE PROPRIETARY RIGHTS OF OTHERS  

AboveNet's business may be adversely affected by a claim that it is     
infringing the proprietary rights of others. AboveNet has not been notified that
it infringes the proprietary rights of third parties. However, AboveNet might   
face claims of infringement in the future. Any claim, whether meritorious or    
not, could be time-consuming, result in costly litigation, cause service delays 
or require AboveNet to enter into royalty or licensing agreements. Any royalty  
or licensing agreements required might not be available at all or on terms      
acceptable to AboveNet.                                                         

ADDITIONAL FUNDING MAY NOT BE AVAILABLE IF ABOVENET NEEDS IT            

   AboveNet's business may suffer if it requires additional funding and is not
able to obtain it. AboveNet expects to incur significant expenditures as part of
its expansion plans, including expenditures for the expansion of its facilities,
additional fiber optic capacity, and investments in joint ventures and foreign  
companies to develop international Internet service exchange facilities. If     
AboveNet needs additional funds, these funds, may not be available or may only  
be available on terms that are not favorable to AboveNet. If additional funds   
are raised through the issuance of equity securities, the percentage ownership  
of its AboveNet's stockholders could be significantly diluted. Any new equity   
securities may have rights, preferences or privileges senior to those of its    
current stockholders.                                                           

ABOVENET FACES RISKS ASSOCIATED WITH THE YEAR 2000 COMPUTER PROBLEM     

Although AboveNet has taken precautions, it may still encounter problems
attributable to the Year 2000 issue. Many currently installed computer systems  
and software products are coded to accept only two digit dates. These systems   
will need to distinguish 21st century dates from 20th century dates. Any        
inability to do so could result in system failures or miscalculations causing   
disruptions of operations, including a temporary inability to process           
transactions, send invoices or engage in similar normal business activities. As 
a result, many companies' software and computer systems may need to be upgraded 
or replaced in order to comply with such "Year 2000" requirements.              

AboveNet is in the process of establishing procedures for evaluating and
managing the risks and costs associated with this problem. AboveNet believes its
computer systems on a stand-alone basis are currently Year 2000 compliant.      
However, AboveNet cannot assure you that its computer systems are Year 2000     
compliant.                                                                      

    AboveNet may face losses due to the failure of its customers or suppliers to
ensure that their systems are Year 2000 compliant. Many of AboveNet's customers'
and suppliers' Internet operations may be impacted by Year 2000 complications.  
This impact may result in decreased Internet usage or the delay or inability to 
obtain necessary data communications and telecommunications capacity. These     
delays may have a direct effect on AboveNet's operations.                       

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

Any statements in this document about our expectations, beliefs, plans, 
objectives, assumptions or future events or performance are not historical facts
and are forward-looking statements. These statements are often, but not always, 
made through the use of words or phrases such as "will likely result," "expect,"
"will continue," "anticipate," "estimate," "intend," "plan," "projection,"      
"would" and "outlook." Accordingly, these statements involve estimates,         
assumptions and uncertainties which could cause actual results to differ        
materially from those expressed in them. Any forward-looking statements are     
qualified in their entirety by reference to the factors discussed throughout    
this document. The following cautionary statements identify important factors   
that could cause our actual results to differ materially from those projected in
the forward-looking statements made in this document. Among the key factors that
have a direct bearing on our results of operation are:                          

- general economic and business conditions; the existence or absence of 
adverse publicity; changes in, or failure to comply with, government
   regulations; changes in marketing and technology; changes in political,
social and economic conditions;                                     

    - competition in the telecommunications industry; industry capacity; general
risks of the telecommunications industries;                         

- success of acquisitions and operating initiatives; changes in business
strategy or development plans; management of growth;                

- availability, terms and deployment of capital;                        

- construction schedules; costs and other effects of legal and          
administrative proceedings; and                                     

- dependence on senior management; business abilities and judgment of   
      personnel; availability of qualified personnel; labor and employee benefit
costs.                                                              

These factors and the risk factors referred to above could cause actual 
results or outcomes to differ materially from those expressed in any            
forward-looking statements made by us, you should not place undue reliance on   
any such forward-looking statements. Further, any forward-looking statement     
speaks only as of the date on which it is made and we undertake no obligation to
update any forward-looking statement or statements to reflect events or         
circumstances after the date on which such statement is made or to reflect the  
occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for us to predict which will arise. In addition, we cannot      
assess the impact of each factor on our business or the extent to which any     
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.                         

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THE METROMEDIA SPECIAL MEETING

DATE, TIME AND PLACE OF THE METROMEDIA SPECIAL MEETING                          

   Metromedia is sending this document to Metromedia's stockholders as part of
the solicitation of proxies by the Metromedia board of directors for use at the 
Metromedia special meeting to be held on September 8, 1999, at 9:00 a.m., local 
time, at 1285 Avenue of the Americas, New York, New York 10019. Metromedia is   
first mailing this document, the attached notice of special meeting of          
stockholders and the enclosed voting form to Metromedia's stockholders on or    
about August 6, 1999.                                                           

PURPOSES OF THE METROMEDIA SPECIAL MEETING; THE MERGER                          

    At the Metromedia special meeting, Metromedia stockholders will consider and
vote upon a proposal to approve the issuance of shares of Metromedia class A    
common stock pursuant to the Agreement and Plan of Merger, dated as of June 22, 
1999, by and among Metromedia, Magellan Acquisition, Inc. and AboveNet. This    
agreement provides for the merger of Magellan into AboveNet, with AboveNet      
continuing as the surviving corporation. Upon completion of the merger, AboveNet
will become a wholly owned subsidiary of Metromedia. Metromedia is seeking the  
approval by its stockholders of the merger agreement because the rules of The   
Nasdaq Stock Market's National Market require stockholder approval of any       
transaction involving the issuance of 20% or more of a listed company's stock.  

   Metromedia knows of no matter to be brought before the Metromedia's special
meeting other than the issuance of shares of class A common stock. If any other 
business should properly come before the special meeting, the persons named in  
the voting form will vote in their discretion.                                  

THE METROMEDIA BOARD HAS UNANIMOUSLY APPROVED THE ISSUANCE OF SHARES OF 
METROMEDIA CLASS A COMMON STOCK PURSUANT TO THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE ISSUANCE OF SHARES OF METROMEDIA CLASS A COMMON
STOCK PURSUANT TO THE MERGER AGREEMENT.                                         

RECORD DATE                                                                     

    The Metromedia board has fixed the close of business on July 14, 1999 as the
record date for the Metromedia special meeting. Only holders of Metromedia class
A common stock and class B common stock on the record date will be entitled to  
vote at the Metromedia special meeting and any adjournments or postponements    
thereof. At the record date, 156,289,713 shares of Metromedia class A common    
stock and 33,769,272 shares of Metromedia class B common stock were outstanding 
and entitled to vote. The presence, in person or by proxy, of a majority of     
these shares of Metromedia common stock is necessary to constitute a quorum at  
the Metromedia special meeting. Abstentions and broker non-votes will be        
included in the determination of shares present at the Metromedia special       
meeting for purposes of determining a quorum.                                   

REQUIRED VOTES                                                                  

All properly executed proxies delivered and not properly revoked will be
voted at the Metromedia special meeting as specified in such proxies. If        
Metromedia stockholders do not specify a choice, their shares represented by a  
signed voting form will be voted for the approval of the issuance of shares of  
class A common stock. Holders of Metromedia class A common stock and Metromedia 
class B common stock will vote as a single class at the Metromedia special      
meeting. Holders of Metromedia class A common stock are entitled to one vote per
share and holders of Metromedia class B common stock are entitled to 10 votes   
per share on all proposals that will be considered at the Metromedia special    
meeting, including the issuance of the shares of Metromedia class A common stock
pursuant to the merger agreement.                                               

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   A majority of the voting power of those holders of class A common stock and
class B common stock present in person or by proxy at the Metromedia special    
meeting are needed to approve the issuance of the shares of Metromedia class A  
common stock that will be issued in the merger. Metromedia's directors,         
executive officers and their affiliates control in the aggregate in excess of   
50% of the voting power of Metromedia's common stock. All of the holders of     
Metromedia's class B common stock, who control approximately 66% of Metromedia's
voting power, have agreed to vote in favor of the issuance of the shares of     
Metromedia class A common stock in the merger. The proposal will therefore be   
approved by holders of Metromedia common stock at the Metromedia special meeting
without requiring the vote of any additional Metromedia stockholders.           

   Abstentions and broker non-votes will have the effect of a vote against the
issuance of shares of Metromedia class A common stock in the merger.            

PROXIES; VOTING AND REVOCATION                                                  

  Proxies may propose and vote for one or more adjournments or postponements
of the Metromedia special meeting to permit further solicitation of proxies in  
favor of such proposals. However, no proxy that is voted against the issuance of
shares of class A common stock pursuant to the merger agreement in this document
will be voted in favor of any adjournment or postponement. Votes will be        
tabulated at the Metromedia special meeting by inspectors of election appointed 
by Metromedia.                                                                  

   Metromedia stockholders may revoke their proxies at any time prior to their
being voted by filing an instrument of revocation with the secretary of         
Metromedia c/o Metromedia Company, One Meadowlands Plaza, East Rutherford, NJ   
07073. Metromedia stockholders may also revoke their proxies by filing a duly   
executed proxy bearing a later date or by appearing at the Metromedia special   
meeting in person, notifying the secretary and voting by ballot at the          
Metromedia special meeting. If Metromedia stockholders attend the meeting, they 
may vote in person whether or not they have previously given a proxy, but the   
presence of any Metromedia stockholder, without notifying the secretary of      
Metromedia, at the meeting will not revoke a previously given proxy. In         
addition, if Metromedia stockholders beneficially hold shares of Metromedia     
common stock that are not registered in their own name, they will need          
additional documentation from the record holder of such shares to attend and    
vote personally at the Metromedia special meeting.                              

EXPENSES                                                                        

Metromedia will share equally with AboveNet the expense of printing and 
mailing this document and the material used in this solicitation of proxies.    
Metromedia will reimburse banks, brokerage houses and other custodians, nominees
and fiduciaries for their reasonable expenses in forwarding these proxy         
materials to the principals.                                                    

NO DISSENTERS' APPRAISAL RIGHTS                                                 

Under Delaware law, Metromedia stockholders will not have appraisal or  
dissenters' rights in connection with the merger if the issuance of shares of   
Metromedia class A common stock pursuant to the merger agreement is approved or 
with respect to any other matter to be voted on at the Metromedia special       
meeting.                                                                        

   THE MATTERS TO BE CONSIDERED AT THE METROMEDIA SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO METROMEDIA STOCKHOLDERS. THE METROMEDIA BOARD URGES ALL METROMEDIA
STOCKHOLDERS TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS   
DOCUMENT, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED VOTING   
FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE.                                     

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THE ABOVENET SPECIAL MEETING

DATE, TIME AND PLACE OF THE ABOVENET SPECIAL MEETING                            

 AboveNet is sending this document to AboveNet stockholders as part of the
solicitation of proxies by the AboveNet board of directors for use at the       
AboveNet special meeting to be held on September 8, 1999, at 9:00 a.m., local   
time, at 1285 Avenue of the Americas, New York, New York, 10019. AboveNet is    
first mailing this document, the attached notice of annual meeting of           
stockholders and the enclosed voting form to AboveNet stockholders on or about  
August 6, 1999.                                                                 

PURPOSES OF THE ABOVENET SPECIAL MEETING; THE MERGER                            

   At the special meeting, AboveNet stockholders will consider and vote upon a
proposal to approve the Agreement and Plan of Merger, dated as of June 22, 1999,
by and among Metromedia, Magellan Acquisition, Inc. and AboveNet. This agreement
provides for the merger of Magellan into AboveNet, with AboveNet continuing as  
the surviving corporation. Upon completion of the merger, AboveNet will become a
wholly owned subsidiary of Metromedia.                                          

AboveNet knows of no matter to be brought before the AboveNet special   
meeting other than the merger agreement. If any other business should properly  
come before the special meeting, the persons named in the voting form will vote 
in their discretion.                                                            

THE ABOVENET BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND    
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.  

RECORD DATE                                                                     

  The AboveNet board has fixed the close of business on July 14, 1999 as the
record date for the AboveNet special meeting. Only holders of AboveNet common   
stock on the record date will be entitled to vote at the AboveNet special       
meeting and any adjournments or postponements thereof. At the record date,      
34,587,496 shares of AboveNet common stock were outstanding and entitled to     
vote. The presence, in person or by proxy, of a majority of these shares of     
AboveNet common stock is necessary to constitute a quorum at the AboveNet       
special meeting. Abstentions and broker non-votes will be included in the       
determination of shares present at the AboveNet special meeting for purposes of 
determining a quorum.                                                           

REQUIRED VOTES                                                                  

All properly executed proxies delivered and not properly revoked will be
voted at the AboveNet annual meeting as specified in such proxies. If AboveNet  
stockholders do not specify a choice, their shares represented by a signed      
voting form will be voted for the approval of the merger agreement.             

    The affirmative vote of the holders of record of a majority of the shares of
AboveNet common stock outstanding on the record date is required to approve the 
merger agreement. AboveNet's directors, executive officers and their affiliates 
beneficially own in the aggregate approximately 22.0% of AboveNet outstanding   
common stock. Holders of approximately 15.5% of AboveNet's common stock have    
already agreed to vote for the merger agreement. This means that holders of only
approximately 34.6% more of AboveNet's shares must vote for the merger agreement
to ensure its approval.                                                         

    Non-voting shares, including broker non-votes, and abstentions will have the
effect of a vote against the merger agreement.                                  

PROXIES; VOTING AND REVOCATION                                                  

   Each share of AboveNet common stock is entitled to one vote with respect to
the merger agreement. The proxies may propose and vote for one or more          
adjournments or postponements of the                                            

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AboveNet special meeting to permit further solicitation of proxies in favor of  
such proposals. However, no proxy that is voted against the merger agreement    
will be voted in favor of any adjournment or postponement. Votes will be        
tabulated at the special meeting by inspectors of election appointed by         
AboveNet.                                                                       

 AboveNet stockholders may revoke their proxies at any time prior to their
being voted by filing an instrument of revocation with the secretary of         
AboveNet, c/o AboveNet Communications Inc., 50 W. San Fernando Street, #1010,   
San Jose, California 95113. AboveNet stockholders may also revoke their proxies 
by filing a duly executed proxy bearing a later date or by appearing at the     
AboveNet special meeting in person, notifying the secretary and voting by ballot
at the special meeting. If AboveNet stockholders attend the meeting, they may   
vote in person whether or not they have previously given a proxy, but the       
presence of any AboveNet stockholder, without notifying the secretary of        
AboveNet, at the meeting will not revoke a previously given proxy. In addition, 
if AboveNet stockholders beneficially hold shares of AboveNet common stock that 
are not registered in their own name, they will need additional documentation   
from the record holder of such shares to attend and vote personally at the      
AboveNet meeting.                                                               

SOLICITATION OF PROXIES                                                         

AboveNet will share equally with Metromedia the expense of printing and 
mailing this document and the material used in this solicitation of proxies.    
Proxies will be solicited through the mail and directly by officers, directors  
and regular employees of AboveNet not specifically employed for such purpose,   
without additional compensation. AboveNet will reimburse banks, brokerage houses
and other custodians, nominees and fiduciaries for their reasonable expenses in 
forwarding these proxy materials to the principals. AboveNet has engaged D.F.   
King & Co., Inc. to represent it in connection with the solicitations of proxies
at a cost of approximately $10,000 plus expenses.                               

NO DISSENTERS' APPRAISAL RIGHTS                                                 

Under Delaware law, AboveNet stockholders will not have appraisal or    
dissenters' rights in connection with the merger if the merger agreement is     
approved or with respect to any other matter to be voted on at the special      
meeting.                                                                        

 THE MATTERS TO BE CONSIDERED AT THE ABOVENET SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO ABOVENET STOCKHOLDERS. THE ABOVENET BOARD URGES ALL ABOVENET      
STOCKHOLDERS TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS   
DOCUMENT, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED VOTING   
FORM IN THE ENCLOSED POSTAGE-PAID ENVELOPE.                                     

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THE MERGER

BACKGROUND OF THE MERGER                                                        

   In 1998, AboveNet entered into an agreement with Metromedia to lease access
to Metromedia's fiber optic network between Virginia and New York City and      
within New York City. In late March 1999, senior officers of Metromedia         
contacted senior officers of AboveNet to set up a meeting to discuss how the    
business relationship between the two companies might be expanded.              

As a result of these contacts, during late March and April 1999 senior  
executives of AboveNet and senior executives of Metromedia held several meetings
to discuss their respective business strategies and various ways in which the   
two companies could work together to their mutual benefit. At these meetings,   
senior executives of AboveNet and Metromedia did not discuss a possible business
combination transaction and in mid-April, representatives of AboveNet indicated 
that further discussions between the companies would have to be postponed       
because AboveNet management would be occupied by a planned common stock offering
and the negotiation of several international joint ventures.                    

Senior executives of AboveNet and Metromedia met again during early May 
1999, and during these meetings representatives of Metromedia raised the        
possibility of a business combination transaction. The parties held lengthy     
discussions concerning the business benefits of such a transaction, but did not 
address the price, structure or other terms of a possible business combination. 

   On May 15, 1999, senior executives of Metromedia met with senior executives
of AboveNet and a representative of CIBC. At that meeting, Metromedia proposed a
stock-for-stock merger between the two companies. Metromedia also indicated its 
desire that Mr. Tuan and Mr. Rand join Metromedia's board of directors upon     
completion of a merger. The AboveNet executives asked questions about           
Metromedia's proposal, but the parties did not negotiate the terms of a merger  
at this meeting.                                                                

   On May 20, 1999, the AboveNet board met and discussed Metromedia's proposal
and the advantages and disadvantages of the proposed combination, including     
those discussed below under                                                     
"--Recommendation of the AboveNet Board; AboveNet's Reasons for the Merger."    
Representatives of CIBC and Volpe made presentations to the AboveNet board      
concerning Metromedia's business, business strategy, financial condition,       
results of operations and prospects. Because of the rapid changes occurring in  
the Internet business, AboveNet engaged CIBC in February 1999 and Volpe in March
1999 to assist AboveNet in exploring a range of strategic business alternatives,
including acquisitions, joint ventures or other alliances, sale of an equity    
stake in AboveNet to a strategic investor or a business combination. In this    
capacity, CIBC had made inquiries of, and in some cases held preliminary        
discussions with, at least nine other companies considered logical business     
partners for AboveNet. These companies included some of Metromedia's major      
competitors who also are developing large fiber optic communications networks.  
CIBC reported to the AboveNet board at the May 20, 1999 meeting that these      
companies either were not interested in pursuing a combination transaction with 
AboveNet or, because of other strategic initiatives, were not prepared to do so 
in the same time frame as Metromedia. The AboveNet board authorized management  
to proceed with exploratory talks with Metromedia.                              

 Between May 20 and June 3, 1999, the parties, including CIBC on behalf of
AboveNet, held a series of discussions concerning a mutually acceptable exchange
ratio. On June 3, 1999, after further negotiations between the senior executives
of both companies, those senior executives agreed to recommend to their         
respective boards of directors, subject to negotiation of mutually acceptable   
agreements, a preliminary exchange ratio of 1.175 shares of Metromedia class A  
common stock for each share of AboveNet common stock. As a result of this       
prelimary understanding with respect to a                                       

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mutually acceptable exchange ratio, the parties decided to commence due         
diligence reviews of each other and negotiations on the terms of a merger       
agreement and other ancillary documents.                                        

 Beginning June 4, 1999 and continuing through June 22, 1999, AboveNet and
Metromedia conducted intensive mutual due diligence, including a review of each 
other's business plans, budgets and capital requirements. The parties began     
negotiation of a merger agreement on June 9, 1999 and continued their           
negotiations until shortly before the merger agreement was signed on June 22,   
1999.                                                                           

  The AboveNet board met on four occasions between June 10 and June 22, 1999
to consider and ultimately approve the merger agreement and the transactions    
contemplated thereby. Each meeting of the AboveNet board was attended by senior 
management, independent legal counsel and AboveNet's financial advisors. Legal  
counsel made presentations concerning the fiduciary duties of the AboveNet      
directors under Delaware law in deciding whether to approve the merger. Counsel 
also described the principal terms of the proposed agreements with Metromedia.  
CIBC and Volpe made presentations to the AboveNet board and discussed with the  
AboveNet board their views and analyses of Metromedia and various aspects of the
proposed business combination transaction. The AboveNet board reviewed and      
considered, among other things, the background of the proposed transaction,     
financial and valuation analyses of the proposed transaction, the terms of      
merger and the other matters described below under "--Recommendation of the     
AboveNet Board; AboveNet's Reasons for the Merger."                             

    On June 22, 1999, the AboveNet board convened. CIBC and Volpe each delivered
its opinion to the AboveNet board to the effect that, as of June 22, 1999, the  
consideration to be received was fair to the holders of the common stock of     
AboveNet from a financial point of view. After further deliberation, the        
AboveNet board unanimously determined that the merger agreement and the         
transactions contemplated thereby are fair to, and in the best interests of, its
stockholders. It unanimously approved the merger agreement and the transactions 
contemplated by the merger agreement and authorized the execution of the merger 
agreement.                                                                      

On June 21, 1999, the board of directors of Metromedia held a meeting at
which its legal advisors made a presentation of the principal terms of the      
proposed agreements with AboveNet, as well as legal analyses of the transaction.
In anticipation of the meeting, each board member was provided with the most    
current draft of the transaction documents and with information about AboveNet. 
At this meeting, Salomon Smith Barney discussed with the board its financial    
analysis of the exchange ratio provided for in the merger and delivered its oral
opinion, subsequently confirmed by delivery of a written opinion dated June 22, 
1999, the date of the merger agreement, to the effect that, as of the date of   
the opinion and based on the matters stated in the opinion, the exchange ratio  
was fair to Metromedia from a financial point of view. After discussion, the    
board unanimously determined that the merger agreement, the merger with AboveNet
and the issuance of shares of Metromedia class A common stock pursuant to the   
merger agreement are advisable and in the best interests of Metromedia's        
stockholders and the board approved the merger agreement and the issuance of the
shares of Metromedia class A common stock pursuant to the merger agreement. The 
board also unanimously resolved to recommend that Metromedia's stockholders vote
to approve the issuance of the shares of Metromedia class A common stock        
pursuant to the merger agreement. Following the meeting on June 21, 1999,       
extensive negotiations took place between representatives of Metromedia and     
representatives of Sherman Tuan and David Rand concerning amendments to their   
existing employment agreements. These amendments were a condition to            
Metromedia's willingness to enter into the merger agreement. See "RELATED       
AGREEMENTS--Employment Agreements." Following the conclusion of these           
negotiations, Metromedia and AboveNet executed the merger agreement on June 22, 
1999.                                                                           

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RECOMMENDATION OF THE METROMEDIA BOARD; METROMEDIA'S REASONS FOR THE MERGER     

In deciding to approve the merger, the Metromedia board concluded that  
acquiring AboveNet was in the best interests of Metromedia and its stockholders.
In evaluating the merger, the board considered all relevant factors and         
information, including the following:                                           

   - the acquisition of AboveNet will expand the product and service offerings
    Metromedia can make available to its existing and prospective customers,
      particularly Internet service providers, to include those services offered
by AboveNet;                                                        

- the acquisition of AboveNet will allow Metromedia to combine its fiber
    optic network with AboveNet's high performance connectivity solutions in
     order to offer their customers Internet traffic flow more predictably and
reliably;                                                           

- the increased growth potential that may result from a combination of  
     Metromedia and AboveNet, including the greater access to capital markets,
and strength of the combined company;                               

  - the opinion of Salomon Smith Barney as to the fairness, from a financial
point of view, to Metromedia of the exchange ratio;                 

- the nature of the parties' representations, warranties, covenants and 
agreements in the merger agreement;                                 

    - the regulatory approvals required to complete the merger and the prospects
for receiving those approvals; and                                  

- the potential adverse effects on Metromedia's business, operations and
financial condition if the merger was not completed following public
announcement of the merger agreement.                               

 This discussion is not intended to be exhaustive, but Metromedia believes
the above includes all significant factors considered by the board. In light of 
the number and variety of information and factors the board considered, the     
board did not find it practicable to, and did not, assign any specific or       
relative weights to the factors listed above. In addition, individual directors 
may have given differing weights to different factors.                          

RECOMMENDATION OF THE ABOVENET BOARD; ABOVENET'S REASONS FOR THE MERGER         

   The AboveNet board has unanimously determined that the merger agreement and
the transactions contemplated by the merger agreement are fair to, and in the   
best interests of, its stockholders. In reaching this determination, the        
AboveNet board concluded that the merger was likely to increase the value of    
stockholders' investment in AboveNet as compared to the value of AboveNet stock 
without the merger. Further, the AboveNet board was of the view that the        
opportunities created by the merger to increase stockholder value more than     
offset the risks associated with the merger. In reaching these conclusions, the 
AboveNet board gave significant consideration to a variety of factors,          
including, without limitation, those described below. In view of the wide       
variety of factors bearing on its decision, the AboveNet board did not consider 
it practical to, nor did it attempt to, quantify or assign relative or specific 
weight to the factors it considered in reaching its decision. In addition,      
individual directors may have given differing weights to different factors. The 
AboveNet board received the advice of its senior management, financial advisors 
and independent counsel throughout its consideration of the merger agreement.   
AboveNet's board does not intend the following discussion of the information and
factors to be exhaustive but believes the discussion includes the material      
factors it considered.                                                          

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In reaching the determination to approve the merger agreement and the   
transactions contemplated by the merger agreement, the AboveNet board considered
the following potential advantages and opportunities of the merger:             

- The merger should create opportunities for significant efficiencies   
     because AboveNet should be able to reduce costs by utilizing Metromedia's
  high-bandwidth, fiber optic communications infrastructure. Payments to
  communications network providers currently represent AboveNet's single
largest item of expense.                                            

- The merger should facilitate AboveNet's ability to respond to customer
demands and to increase rapidly the scale of AboveNet's business by 
substantially increasing AboveNet's access to high-bandwidth        
      communications paths. Currently, AboveNet's ability to grow depends, among
   other things, on the availability of additional communications capacity
from third-party providers.                                         

- Because the merger will provide AboveNet with access to Metromedia's  
  high-bandwidth system, AboveNet should be able to improve the services
 that it provides to its customers, including greater connectivity and
reduced latency.                                                    

    - Combining with Metromedia could increase the scope of AboveNet's potential
      customer base because the availability of additional bandwidth will permit
      AboveNet to offer potential customers, including major Internet businesses
      not physically located in AboveNet's Internet service exchange facilities,
  the opportunity to maintain a "virtual presence" by connecting through
Metromedia's network.                                               

- By combining with Metromedia, AboveNet's stockholders will have the   
opportunity to benefit from Metromedia's strong revenue growth and  
    prospects for future growth, the strength and experience of Metromedia's
senior management team, and an investment in a combined company with
significant potential for growth.                                   

- The exchange ratio in the merger represents a premium over the average
     closing prices of AboveNet common stock over the 10 day, 30 day and three
month periods prior to the announcement of the merger.              

  Among the factors considered by AboveNet's board in its deliberations were
the following:                                                                  

  - historical information concerning Metromedia's and AboveNet's respective
financial performance, results of operations, assets, liabilities,  
operations, management and competitive position;                    

- AboveNet management's view of the financial condition, results of     
     operations, assets, liabilities, businesses and prospects of the combined
company after the merger;                                           

   - current market conditions and historical trading information with respect
to Metromedia class A common stock and AboveNet common stock;       

- comparable merger transactions in the Internet-related market;        

- the terms and conditions of the merger agreement, including:          

- the expected tax-free treatment to AboveNet's stockholders;     

   - what actions of AboveNet would be prohibited pending closing of the
merger without Metromedia's consent; and                      

    - the circumstances under which a termination fee and reimbursement of
   Metromedia's expenses would be paid and the amount of the fee and
maximum amount of reimbursed expenses;                        

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   - the analyses prepared by CIBC and Volpe and presented to AboveNet's board
 of directors and the opinions of CIBC and Volpe, that, as of June 22,
     1999, the consideration to be received by AboveNet stockholders was fair,
from a financial point of view, to AboveNet's stockholders;         

- Metromedia's track record, which clearly demonstrated an ability to   
compete effectively in its markets;                                 

- the ability of AboveNet's board to enter into discussions with another
party in response to an unsolicited offer superior to the merger if 

  - AboveNet's board determined in good faith that entering into those
        discussions is legally advisable for the AboveNet board to comply with
its fiduciary duties to stockholders;                         

      - the unsolicited offer is not subject to any financing contingencies or
  is, in the good faith judgment of the AboveNet board, reasonably
capable of being financed; and                                

     - AboveNet's board determines in good faith that the unsolicited offer,
        if consummated, would be more favorable from a financial point of view
to AboveNet stockholders than the merger;                     

- AboveNet's prospects if it continued as an independent company and the
 availability of other strategic alternatives through which similar or
greater value could be achieved for AboveNet stockholders;          

- whether Metromedia should be granted an option to purchase 19.9% of   
  AboveNet's common stock and the relationship between the value of that
option and the termination fee and expense reimbursement obligation;

- the interests of the officers and directors of AboveNet in the merger,
 including the matters described under "RELATED AGREEMENTS--Employment
Agreements"; and                                                    

    - that two executive officers of AboveNet would be nominated to serve on the
Metromedia board.                                                   

 The AboveNet board weighed the advantages and opportunities of the merger
against the risks associated with the merger, including the following:          

- the challenges inherent in the combination of two businesses and the  
possible resulting diversion of management attention for an extended
period of time;                                                     

    - the impact of limitations in the merger agreement on AboveNet's ability to
undertake new initiatives prior to the effective time of the merger;

- the possibility that the anticipated operating benefits of the merger 
would be more difficult to achieve than expected;                   

  - the possibility that the merger would not occur, including the condition
  to consummation of the merger requiring that the employment agreements
    between AboveNet and Mr. Tuan and Mr. Rand be in effect and that each of
    them is not deceased or permanently incapacitated and has not refused to
   perform services for AboveNet or otherwise be in material breach of the
employment agreement;                                               

- the possibility that AboveNet might be able to negotiate a combination
with another company on terms superior to the proposed merger with  
Metromedia;                                                         

   - the fact that the merger agreement does not provide a "collar" that would
 limit the effect of decreases in the price of Metromedia stock on the
 value of the consideration to be received by AboveNet's stockholders;

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- Metromedia's requirement that AboveNet grant Metromedia an irrevocable
 option to purchase 19.9% of AboveNet's common stock, exercisable upon
termination of the merger agreement under certain circumstances. The
     AboveNet board was advised that the exercise of the option could preclude
      for up to two years AboveNet's ability to enter into a merger with another
      party accounted for under the "pooling of interests" method of accounting;
and                                                                 

    - Metromedia's requirement that AboveNet not be able to terminate the merger
agreement prior to AboveNet's stockholders' meeting to vote upon the
merger, even in the event of a superior proposal by another party.  

OPINION OF FINANCIAL ADVISOR TO METROMEDIA                                      

  Metromedia retained Salomon Smith Barney to act as its exclusive financial
advisor and requested that Salomon Smith Barney evaluate the fairness, from a   
financial point of view, to Metromedia of the exchange ratio provided for in the
merger. On June 21, 1999, at a meeting of the Metromedia board held to evaluate 
the proposed merger, Salomon Smith Barney delivered to the Metromedia board an  
oral opinion, subsequently confirmed by delivery of a written opinion dated June
22, 1999, the date of the merger agreement, to the effect that, as of the date  
of the opinion and based on the matters stated in the opinion, the exchange     
ratio was fair, from a financial point of view, to Metromedia.                  

In arriving at its opinion, Salomon Smith Barney:                               

- reviewed the merger agreement and certain related documents;          

    - held discussions with senior officers, directors and other representatives
    and advisors of Metromedia and senior officers and other representatives
and advisors of AboveNet concerning the businesses, operations and  
prospects of Metromedia and AboveNet;                               

    - examined publicly available business and financial information relating to
Metromedia and AboveNet;                                            

- reviewed publicly available financial forecasts for Metromedia and    
    AboveNet and other information and data for Metromedia and AboveNet that
    the managements of Metromedia and AboveNet provided to or discussed with
it, including information relating to strategic implications and    
operational benefits anticipated to result from the merger;         

- reviewed the financial terms of the merger as described in the merger 
agreement;                                                          

- reviewed current and historical market prices and trading volumes of  
Metromedia common stock and AboveNet common stock;                  

    - reviewed the historical and projected earnings and other operating data of
Metromedia and AboveNet;                                            

- reviewed the capitalization and financial condition of Metromedia and 
AboveNet;                                                           

    - considered, to the extent publicly available, the financial terms of other
     similar recent transactions that it considered relevant in evaluating the
merger;                                                             

   - analyzed financial, stock market and other publicly available information
relating to the businesses of other companies whose operations it   
considered relevant in evaluating those of Metromedia and AboveNet; 

- evaluated the potential pro forma financial impact of the merger on   
Metromedia; and                                                     

   - conducted other analyses and examinations and considered other financial,
    economic and market criteria as it deemed appropriate in arriving at its
opinion.                                                            

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  In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial   
and other information and data that it reviewed and considered. With respect to 
publicly available financial forecasts for Metromedia and AboveNet reviewed by  
or discussed with Salomon Smith Barney, the management of Metromedia advised    
Salomon Smith Barney that the forecasts reflected reasonable estimates and      
judgments as to the future financial performance of Metromedia and AboveNet.    
With respect to other information and data, including information relating to   
the strategic implications and operational benefits anticipated to result from  
the merger, the managements of Metromedia and AboveNet advised Salomon Smith    
Barney that the information and data were reasonably prepared on bases          
reflecting the best currently available estimates and judgments of the          
managements of Metromedia and AboveNet as to the matters covered thereby.       
Salomon Smith Barney assumed, with the consent of Metromedia, that the merger   
will be treated as a tax-free reorganization for federal income tax purposes.   

Salomon Smith Barney did not express any opinion as to what the value of
Metromedia common stock will be when issued to AboveNet stockholders in the     
merger or the price at which the Metromedia common stock will trade after the   
merger. Salomon Smith Barney did not make and was not provided with an          
independent evaluation or appraisal of the assets or liabilities, contingent or 
otherwise, of Metromedia or AboveNet. It also did not make any physical         
inspection of the properties or assets of Metromedia or AboveNet. Salomon Smith 
Barney did not express any view as to, and its opinion does not address, the    
relative merits of the merger as compared to any alternative business strategies
that might exist for Metromedia or the effect of any other transaction in which 
Metromedia might engage. Salomon Smith Barney's opinion was necessarily based on
information available, and financial, stock market and other conditions and     
circumstances existing and disclosed, to it as of the date of its opinion.      
Although Salomon Smith Barney evaluated the exchange ratio from a financial     
point of view, it was not asked to and did not recommend the specific exchange  
ratio or consideration payable in the merger. The exchange ratio provided for in
the merger was determined through negotiation between Metromedia and AboveNet.  
No other instructions or limitations were imposed by Metromedia on Salomon Smith
Barney with respect to the investigations made or procedures followed by it in  
rendering its opinion.                                                          

    THE FULL TEXT OF SALOMON SMITH BARNEY'S WRITTEN OPINION DATED JUNE 22, 1999,
WHICH DESCRIBES THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE 
REVIEW UNDERTAKEN, IS ATTACHED TO THIS DOCUMENT AS APPENDIX C AND SHOULD BE READ
CAREFULLY IN ITS ENTIRETY. SALOMON SMITH BARNEY'S OPINION IS DIRECTED TO THE    
METROMEDIA BOARD AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A  
FINANCIAL POINT OF VIEW TO METROMEDIA, DOES NOT ADDRESS ANY OTHER ASPECT OF THE 
MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT 
TO ANY MATTER RELATING TO THE PROPOSED MERGER. THE SUMMARY OF SALOMON SMITH     
BARNEY'S OPINION INCLUDED IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY      
REFERENCE TO THE FULL TEXT OF THE OPINION.                                      

In preparing its opinion, Salomon Smith Barney performed a variety of   
financial and comparative analyses, including those described below. The summary
of these analyses is not a complete description of the analyses. The preparation
of a fairness opinion is a complex analytic process involving various           
determinations as to the most appropriate and relevant methods of financial     
analysis and the application of those methods to the particular circumstances   
and, therefore, a fairness opinion is difficult to summarize. Accordingly,      
Salomon Smith Barney believes that its analyses must be considered as a whole   
and that selecting portions of its analyses and factors, or focusing on         
information presented in tabular format, without considering all analyses and   
factors or the narrative description of the analyses, could create a misleading 
or incomplete view of the processes underlying its analyses and opinion.        

In its analyses, Salomon Smith Barney considered industry performance,  
general business, economic, market and financial conditions and other matters   
existing as of the date of its opinion, many of which are beyond the control of 
Metromedia and AboveNet. No company, transaction or                             

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business used in those analyses as a comparison is identical to Metromedia,     
AboveNet or the proposed merger. An evaluation of those analyses also is not    
entirely mathematical. Rather, the analyses involve complex considerations and  
judgments concerning financial and operating characteristics and other factors  
that could affect the acquisition, public trading or other values of the        
companies, business segments or transactions analyzed.                          

    The estimates contained in Salomon Smith Barney's analyses and the valuation
ranges resulting from any particular analysis do not necessarily reflect actual 
values or future results or values. Those values may be significantly more or   
less favorable than those suggested by the analyses. In addition, analyses      
relating to the value of businesses or securities do not necessarily purport to 
be appraisals or to reflect the prices at which businesses or securities        
actually may be sold. Accordingly, Salomon Smith Barney's analyses and estimates
are inherently subject to substantial uncertainty.                              

 Salomon Smith Barney's opinion and analyses were only one of many factors
considered by the Metromedia board in its evaluation of the merger and should   
not be viewed as determinative of the views of the Metromedia board or          
management with respect to the proposed merger or the exchange ratio provided   
for in the merger.                                                              

  The following is a summary of the material financial analyses that Salomon
Smith Barney performed in connection with the rendering of its opinion. THE     
FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED IN TABULAR    
FORMAT. IN ORDER TO FULLY UNDERSTAND THESE FINANCIAL ANALYSES, THE TABLES MUST  
BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT         
CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE    
DATA SET FORTH BELOW WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE  
FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE  
ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF SALOMON SMITH BARNEY'S
FINANCIAL ANALYSES.                                                             

DISCOUNTED CASH FLOW ANALYSES.                                                  

 Salomon Smith Barney performed separate discounted cash flow analyses for
Metromedia and AboveNet to estimate the projected free cash flows that each     
could generate for fiscal years 1999 through 2003, based on publicly available  
research analysts' estimates as provided by Metromedia's management. Ranges of  
estimated terminal values were calculated by applying terminal value multiples  
of 7.0x to 9.0x to AboveNet's fiscal year 2003 projected revenue and 28.0x to   
36.0x to Metromedia's fiscal year 2003 projected earnings before interest,      
taxes, depreciation and amortization. The cash flows and terminal values were   
discounted to present value using discount rates ranging from 19.0% to 20.0% for
AboveNet and 12.5% to 13.5% for Metromedia. Salomon Smith Barney then derived an
implied exchange ratio reference range based on the relative discounted cash    
flow reference ranges for Metromedia and AboveNet implied by this analysis. This
analysis resulted in an implied exchange ratio reference range of 0.895 to      
1.586, as compared to the exchange ratio in the merger of 1.175.                

ADJUSTED REVENUE GROWTH PUBLIC MARKET ANALYSIS.                                 

Using publicly available information, Salomon Smith Barney reviewed the 
market values and trading multiples of AboveNet as compared to Exodus           
Communications, Inc., a company whose operations are similar to those of        
AboveNet. Salomon Smith Barney analyzed the adjusted market values of AboveNet, 
calculated as equity market value, plus debt, less cash, as a multiple of latest
quarter annualized revenue and estimated calendar years 1999 and 2000 revenue,  
after adjustment for the projected revenue growth differential between AboveNet 
and Exodus. All multiples were based on closing stock prices on June 16, 1999.  
Estimated financial data for AboveNet and Exodus were based on publicly         
available research analysts' estimates. Salomon Smith Barney then derived an    
implied exchange ratio reference range by comparing the implied reference range 
for AboveNet based on this analysis to the implied reference range for          
Metromedia based on the discounted cash flow analysis described above. This     
analysis resulted in an implied exchange ratio reference range of 0.710 to      
1.605, as compared to the exchange ratio in the merger of 1.175.                

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CONTRIBUTION ANALYSIS.                                                          

  Salomon Smith Barney compared the relative contributions of Metromedia and
AboveNet to the combined company's estimated revenues for fiscal years 1998     
through 2003 and estimated earnings before interest, taxes, depreciation and    
amortization for fiscal years 2001 through 2003, based on publicly available    
research analysts' estimates as provided by Metromedia's management. Salomon    
Smith Barney then derived an implied exchange ratio reference range based on the
relative contributions of each of Metromedia and AboveNet implied by this       
analysis. This analysis indicated the following implied exchange ratios based on
these relative contributions as compared to the exchange ratio in the merger of 
1.175:                                                                          

                                                        [Enlarge/Download Table]

REVENUES                                                                   IMPLIED EXCHANGE RATIO 
                                                                           -----------------------
                                                                                                  
  Estimated fiscal years:                                                                         
      1998................................................................           1.282x       
      1999................................................................           2.564x       
      2000................................................................           3.024x       
      2001................................................................           3.123x       
      2002................................................................           2.913x       
      2003................................................................           3.271x       

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION                                    
  Estimated fiscal years:                                                                         
      1998................................................................               NM       
      1999................................................................               NM       
      2000................................................................               NM       
      2001................................................................               NM       
      2002................................................................               NM       
      2003................................................................           1.016x       

HISTORICAL EXCHANGE RATIO ANALYSIS.                                             

Salomon Smith Barney compared the exchange ratio in the merger with the 
historical ratio of the daily closing prices of Metromedia class A common stock 
and AboveNet common stock over the 20-day, 30-day and 60-day periods beginning  
December 10, 1998, the date of AboveNet's initial public offering. This analysis
resulted in an implied exchange ratio reference range of 0.430 to 2.530, as     
compared to the exchange ratio in the merger of 1.175.                          

PREMIUMS ANALYSIS.                                                              

 Salomon Smith Barney analyzed the premiums paid in 14 selected merger and
acquisition transactions involving Internet companies completed since January 1,
1998 that had transaction values of over $100 million. The premiums paid in the 
selected transactions were calculated based on the target company's stock price 
one week and one month prior to public announcement of the transaction. This    
analysis indicated the following mean premiums in the selected transactions, as 
compared to the following premiums implied in the merger for AboveNet based on  
the closing stock price of Metromedia class A common stock one week and one     
month prior to June 16, 1999:                                                   

                                                                [Download Table]

                                          ONE WEEK PRIOR TO   ONE MONTH PRIOR TO 
                                         PUBLIC ANNOUNCEMENT  PUBLIC ANNOUNCEMENT
                                         -------------------  -------------------
                                                MEAN                 MEAN        
                                         -------------------  -------------------
                                                                                 
Selected Transactions (14)..............          42.4%                60.7%     

                                                                [Download Table]

                                          ONE WEEK PRIOR TO   ONE MONTH PRIOR TO 
                                            JUNE 16, 1999        JUNE 16, 1999   
                                         -------------------  -------------------
                                                                                 
Implied Premiums in the Merger..........          43.2%                30.6%     

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PRO FORMA MERGER ANALYSIS.                                                      

  Salomon Smith Barney analyzed the potential pro forma effect of the merger
on Metromedia's estimated revenue and earnings before interest, taxes,          
depreciation and amortization for calendar years 1999 through 2003, based on    
publicly available research analysts' estimates for Metromedia and AboveNet as  
provided by Metromedia's management and before taking into account possible cost
savings and other synergies anticipated by the managements of Metromedia and    
AboveNet to result from the merger. The results of the pro forma merger analysis
suggested that the merger could be accretive to Metromedia's revenue and        
dilutive to Metromedia's earnings before interest, taxes, depreciation and      
amortization in calendar years 1999 through 2003. The actual results achieved by
the combined company may vary from projected results and the variations may be  
material.                                                                       

OTHER FACTORS.                                                                  

In rendering its opinion, Salomon Smith Barney considered other factors,
including:                                                                      

- historical financial results of Metromedia and AboveNet and publicly  
available research analysts' financial projections for AboveNet;    

- a business overview of AboveNet;                                      

- the history of trading prices for Metromedia class A common stock and 
      AboveNet common stock and the relationship between movements in Metromedia
class A common stock, AboveNet common stock and the common stock of 
     selected companies, and movements in the S&P 500 Index and the NASDAQ 100
Index;                                                              

- selected published analysts' reports on AboveNet; and                 

- the pro forma ownership of the combined company.                      

MISCELLANEOUS.                                                                  

Under the terms of its engagement, Metromedia has agreed to pay Salomon 
Smith Barney upon completion of the merger an aggregate fee of $5.0 million.    
Metromedia has also agreed to reimburse Salomon Smith Barney for its reasonable 
travel and other out-of-pocket expenses, including the reasonable fees and      
expenses of its legal counsel, and to indemnify Salomon Smith Barney and related
persons against liabilities, including liabilities under the federal securities 
laws, arising out of Salomon Smith Barney's engagement.                         

   In the ordinary course of business, Salomon Smith Barney and its affiliates
may actively trade or hold the securities of Metromedia and AboveNet for their  
own account or for the account of customers and, accordingly, may at any time   
hold a long or short position in those securities. Salomon Smith Barney has in  
the past provided investment banking services to Metromedia unrelated to the    
proposed merger, for which services Salomon Smith Barney has received           
compensation. In addition, Salomon Smith Barney and its affiliates, including   
Citigroup Inc. and its affiliates, may maintain relationships with Metromedia,  
AboveNet and their respective affiliates.                                       

    Metromedia selected Salomon Smith Barney based on its experience, expertise,
reputation and familiarity with Metromedia and its business. Salomon Smith      
Barney is an internationally recognized investment banking firm that, as a      
customary part of its business, evaluates businesses and their securities in    
connection with mergers and acquisitions, negotiated underwritings, competitive 
bids, secondary distributions of listed and unlisted securities, private        
placements and valuations for estate, corporate and other purposes.             

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OPINIONS OF FINANCIAL ADVISORS TO ABOVENET                                      

OPINION OF CIBC WORLD MARKETS CORP.                                     

CIBC has acted as financial advisor to AboveNet in connection with the  
merger. At the request of AboveNet, on June 22, 1999, CIBC delivered an oral    
opinion to the AboveNet board, which was subsequently confirmed by a written    
opinion delivered on June 22, 1999, that, based upon and subject to the various 
assumptions, limitations and other matters set forth in the opinion, as of such 
date, the consideration to be received by the stockholders of AboveNet in the   
merger is fair to those holders from a financial point of view. No limitations  
were imposed by AboveNet upon CIBC with respect to investigations made or       
procedures followed by CIBC in rendering its opinion.                           

    THE FULL TEXT OF THE WRITTEN OPINION OF CIBC DATED JUNE 22, 1999, WHICH SETS
FORTH ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND     
LIMITS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY CIBC, IS ATTACHED AS APPENDIX D 
AND IS INCORPORATED HEREIN BY REFERENCE. ABOVENET'S STOCKHOLDERS ARE URGED TO   
AND SHOULD READ AND CAREFULLY CONSIDER THE ENTIRE OPINION. THE SUMMARY SET FORTH
HEREIN OF THE CIBC OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THE OPINION ATTACHED HERETO AS APPENDIX D.                              

CIBC'S OPINION ADDRESSES ONLY THE FAIRNESS TO THE HOLDERS OF SHARES OF  
ABOVENET COMMON STOCK, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO  
BE RECEIVED BY THE STOCKHOLDERS OF ABOVENET PURSUANT TO THE MERGER AND DOES NOT 
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE ON ANY MATTERS RELATING TO THE MERGER.                                     

CIBC reviewed the June 21, 1999 draft of the merger agreement in the    
preparation of its opinion. While AboveNet and Metromedia had the opportunity to
agree to materially add, delete or alter material and other terms of the merger 
agreement prior to its execution, the agreement entered into by the parties was 
substantially similar to the June 21, 1999 draft.                               

In connection with rendering its opinion, CIBC reviewed:                

- the June 21, 1999 draft of the merger agreement;                      

 - AboveNet's audited financial statements for the fiscal years ended June
30, 1997 and 1998;                                                  

 - certain unaudited financial statements of AboveNet, including financial
statements for the nine months ended March 31, 1998 and 1999;       

 - financial projections of AboveNet for the four fiscal years ending June
30, 2002, prepared by AboveNet's management;                        

 - financial projections of AboveNet for the four fiscal years ending June
30, 1999 through 2002, appearing in published research reports;     

- audited financial statements of Metromedia for the fiscal years ended 
December 31, 1997 and 1998;                                         

   - certain unaudited financial statements of Metromedia, including financial
statements for the three months ended March 31, 1998 and 1999;      

 - financial projections for Metromedia for the four years ending December
31, 1999 through 2002, appearing in published research reports;     

- public information concerning AboveNet and Metromedia that CIBC deemed
relevant;                                                           

 - historical market prices, trading volume and relative price performance
    for shares of AboveNet common stock and Metromedia class A common stock;

- certain publicly available financial data and historical trading price
information for certain public companies CIBC deemed comparable to  
AboveNet and Metromedia; and                                        

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- certain publicly available information for transactions CIBC deemed   
comparable to the merger.                                           

    CIBC also performed such analyses and investigations and reviewed such other
information as CIBC deemed appropriate and held discussions with the senior     
management of AboveNet and Metromedia with respect to their respective          
businesses, operations, financial conditions and prospects for future growth.   

    In the course of its review, CIBC, at the direction of AboveNet, relied upon
and assumed, without independent verification or investigation, the accuracy and
completeness of all of the financial and other information reviewed by it, as   
well as all of the financial and other information provided to or discussed with
it by AboveNet and Metromedia and their employees, representatives and          
affiliates. With respect to forecasts of future financial condition and         
operating results of AboveNet provided to CIBC or discussed with it, CIBC       
assumed, at the direction of AboveNet's management, without independent         
verification or investigation, that such forecasts were reasonably prepared on  
bases reflecting the best available information, estimates and judgments of     
AboveNet's management and provided a reasonable basis upon which CIBC could form
its opinion. CIBC further relied upon the assurance of management of AboveNet   
that they are unaware of any facts that would make the information provided to  
CIBC incomplete in any meaningful respect or misleading in any respect. In      
arriving at its opinion, with the consent of AboveNet, CIBC assumed, as to the  
future financial performance of Metromedia, that the publicly available         
estimates of research analysts were a reasonable basis upon which to evaluate   
the future financial performance of Metromedia. CIBC assumes no responsibility  
for and expresses no view as to any forecasts or the information or assumptions 
on which they are based.                                                        

CIBC neither made nor was provided with any independent valuations or   
appraisals of any assets or liabilities of AboveNet or Metromedia and made no   
physical inspection of the properties and facilities of AboveNet or Metromedia. 
CIBC further assumed, with the consent of AboveNet, that:                       

   - the representations and warranties of the parties contained in the merger
agreement are true and correct;                                     

  - the merger will be consummated in accordance with the terms described in
 the merger agreement and related agreements, without any amendment to
those terms;                                                        

  - the merger will qualify as a tax-free reorganization pursuant to Section
368(a) of the Internal Revenue Code;                                

  - the merger will be accounted for under the purchase method in accordance
with generally accepted accounting principles; and                  

  - the merger will be consummated in a manner that complies in all material
    respects with all applicable federal, foreign, state and local statutes,
rules, regulations and other laws.                                  

  CIBC's opinion was necessarily also based upon the information reviewed by
it and general economic, financial and stock market conditions and circumstances
as they existed on the date of its opinion.                                     

In connection with rendering its opinion to the AboveNet board, CIBC    
performed a variety of financial analyses, the material portions of which are   
summarized below. The summary set forth below does not purport to be a complete 
description of the analyses performed by CIBC. In addition, CIBC believes that  
its analyses must be considered as a whole and that selecting portions of such  
analyses and the factors considered in those analyses, without considering all  
factors and analyses, could create an incomplete view of the analyses and       
processes on which CIBC's opinion was based. Some of the financial analyses     
summarized below include information presented in tabular format. In order to   
understand CIBC's financial analysis fully, the tables must be read together    
with the text of each summary. Considering the data set forth in the tables     
below without considering the full narrative                                    

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description of the financial analyses, including the methodologies and          
assumptions underlying the analyses, could create a misleading or incomplete    
view of CIBC's financial analysis.                                              

The preparation of a fairness opinion is a complex process involving    
subjective judgments and is not susceptible to partial analysis or summary      
description. CIBC performed certain procedures, including each of the financial 
analyses described below, and reviewed with management of AboveNet the          
assumptions on which the analyses were based and other factors, including       
historical, current and projected financial results. The forecasts for AboveNet 
and Metromedia in published research reports and the forecasts for AboveNet     
provided by management of AboveNet underlying CIBC's analyses are forward       
looking, are not necessarily indicative of future results or values, which may  
be significantly more or less favorable than such forecasts, and are subject to 
numerous risks and uncertainties. Estimates of values of companies do not       
purport to be appraisals or necessarily reflect the prices at which companies or
their securities may be sold.                                                   

The following is a brief summary of all material financial analyses     
performed by CIBC in connection with its presentation to the AboveNet board on  
June 22, 1999.                                                                  

COMPARABLE COMPANIES ANALYSIS                                           

 Using publicly available information, CIBC compared financial information
for AboveNet with similar information for three selected companies that provide 
similar services and are similar in size to AboveNet. The companies evaluated   
were Applied Theory Corp., Exodus Communications, Inc. and Globix Corp. For each
of these companies, CIBC calculated firm value, which is defined as market value
of equity plus net debt, of the comparable companies as a multiple of their     
estimated revenues for calendar years 1999, 2000 and 2001, which produced the   
following results.                                                              

                                                        [Enlarge/Download Table]

                                                                                   LOW       HIGH   
                                                                                ---------  ---------
                                                                                                    
FIRM VALUE AS A MULTIPLE OF ESTIMATED REVENUES:                                                     
Estimated 1999 Revenues........................................................      7.8x      25.9x
Estimated 2000 Revenues........................................................      4.2x      13.8x
Estimated 2001 Revenues........................................................      2.5x       4.7x

The results of these calculations were then compared to the results of  
similar calculations made with respect to AboveNet. Using the multiples in the  
above table and applying them to the estimated revenues for AboveNet for        
calendar years 1999, 2000 and 2001, this analysis produced a range of per common
share equity values for AboveNet common stock of between $22.60 and $52.24.     

Because of the inherent differences between the businesses, operations, 
financial conditions and prospects of AboveNet and the businesses, operations,  
financial conditions and the prospects of the companies included in its         
comparable company groups, CIBC believes that is inappropriate to rely solely on
the quantitative results of the analysis, and accordingly, also made qualitative
judgments concerning differences between the financial and operating            
characteristics of AboveNet and the comparable companies that would affect the  
public trading values of AboveNet and the comparable companies.                 

PRECEDENT TRANSACTIONS ANALYSIS                                         

  CIBC compared the financial terms of the merger to the financial terms, to
the extent publicly available, of 24 transactions CIBC believed to be comparable
that occurred within the Internet-related market since April 30, 1996. These    
transactions were deemed to be comparable because they reflect valuations paid  
in negotiated transactions among companies, both public and private, that       
operate in the Internet market.                                                 

    For each of these transactions, CIBC calculated, to the extent possible, the
enterprise value of the acquired company as a multiple of estimated revenues for
the next two calendar years following the                                       

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date of the announcement of the transaction. In the case of companies with      
non-calendar fiscal years, the next two fiscal years following the date of the  
announcement of the transaction were used for purposes of the analysis. The     
following table presents the results of these calculations. The enterprise value
of AboveNet was calculated based on the exchange ratio of 1.175 shares of       
Metromedia class A common stock for each AboveNet share of common stock,        
resulting in an implied purchase price per share of $49.94 based on the $42.50  
per share closing price of Metromedia class A common stock on June 18, 1999.    

                                                        [Enlarge/Download Table]

                                                                                   LOW       HIGH   
                                                                                ---------  ---------
                                                                                                    
ENTERPRISE VALUE AS A MULTIPLE OF ESTIMATED REVENUES:                                               
Estimated 1999 Revenues........................................................      1.0x      10.0x
Estimated 2000 Revenues........................................................      0.9x       5.7x

 Using the multiples in the above table and applying them to the estimated
revenues for AboveNet for calendar years 1999 and 2000, this analysis produced a
range of per common share equity values for AboveNet common stock of between    
$6.96 to $23.42.                                                                

Because the reasons for and the circumstances surrounding each of the   
transactions analyzed were so diverse and because of the inherent differences in
the business, operations, financial condition and prospects of AboveNet and the 
businesses, operations, financial conditions and prospects of the companies     
included in the precedent transactions group, CIBC believed that a purely       
quantitative comparable transaction analysis would not be particularly          
meaningful in the context of the merger. CIBC believed that the appropriate use 
of comparable transaction analysis in this instance would involve qualitative   
judgments concerning the differences between the characteristics of these       
transactions and the merger that would affect the acquisition values of the     
acquired companies and AboveNet.                                                

DISCOUNTED CASH FLOW ANALYSIS                                           

Using a discounted cash flow analysis based on forecasts provided by    
AboveNet's management, CIBC estimated the present value of the future streams of
free cash flows that AboveNet could produce during the five fiscal years ending 
June 30, 2004. In this analysis, CIBC estimated the terminal value based on     
multiples of 8.0 to 10.0 times AboveNet's estimated earnings before interest,   
taxes, depreciation and amortization for the twelve months ended June 30, 2004. 
The free cash flows and terminal values were discounted to present values using 
rates of 25%, 30% and 35%. After deducting net debt, preferred and minority     
interest from, and adding back cash to, the present value of free cash flows and
terminal values, this analysis produced a range of per common share equity      
values for AboveNet common stock of between $42.69 and $75.80.                  

PREMIUMS PAID ANALYSIS                                                  

 Using publicly available information, CIBC reviewed the premiums paid, or
proposed to be paid, in the case of transactions pending as of the date of the  
CIBC opinion, for 45 transactions in the technology sector having transaction   
values between $500 million and $3 billion, since January 1, 1997. CIBC         
calculated the premium per share paid, or proposed to be paid in the case of    
pending transactions, by the acquiror compared to the share price of the target 
company as of one day, one week and one month prior to the announcement of the  
transaction. These calculations produced the following results:                 

                                                        [Enlarge/Download Table]

                                                              ONE DAY      ONE WEEK       ONE MONTH  
                                                            -----------  -------------  -------------
                                                                                                     
TRANSACTION PREMIUMS:                                                                                
Technology Transactions (mean).............................       27.4%         32.7%          42.9% 

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   These premium percentages were compared to the premium percentages obtained
by taking the $49.94 implied purchase price, which was calculated based on the  
exchange ratio and the closing price for AboveNet common stock and Metromedia   
class A common stock on June 18, 1999, and comparing that amount to the closing 
price, or average closing prices, for AboveNet's common stock as of the day, and
for the 10-day, 30-day and three-month periods, preceding June 18, 1999. This   
calculation produced the following percentage premiums.                         

                                                        [Enlarge/Download Table]

                                                                       10-DAY       30-DAY       90-DAY   
                                                          ONE DAY      AVERAGE      AVERAGE      AVERAGE  
                                                        -----------  -----------  -----------  -----------
                                                                                                          
TRANSACTION PREMIUM:                                                                                      
AboveNet/Metromedia....................................       43.7%        61.3%        49.3%        16.9%

RELATIVE STOCK TRADING ANALYSIS                                         

CIBC analyzed various historical data concerning the trading prices for 
AboveNet common stock, the weighted average closing stock prices, based on      
market capitalization, of three AboveNet comparables as a group, and the Nasdaq 
composite index. CIBC analyzed this data for the period from December 10, 1998, 
the date of AboveNet's initial public offering, through June 18, 1999. The      
AboveNet comparables used were Applied Theory Corp., Exodus Communications, Inc.
and Globix Corp. Using December 10, 1998 as the initial reference point, this   
analysis indicated that the closing price for AboveNet common stock increased as
much as approximately 800% over its initial public offering price during the    
period and was approximately 300% over its initial public offering price at the 
end of the period. During the same period, the weighted average closing stock   
price for the AboveNet comparables as a group increased as much as approximately
300% over the December 10, 1998 reference point and had increased over 200% as  
of June 18, 1999. During the same period, the Nasdaq composite index had        
increased but was relatively flat in comparison to the first two sets of data.  

CIBC analyzed various historical data concerning the trading prices for 
Metromedia class A common stock, the weighted average closing stock prices,     
based on market capitalization, of six Metromedia comparables as a group, and   
the Nasdaq composite index. CIBC analyzed this data for the one year period from
June 18, 1998 through June 18, 1999. The Metromedia comparables used were Globix
Corp., ITC Deltacom, IXC Communications, Level 3 Communications, NorthEast Optic
Network and Qwest Communications. Using June 18, 1998 as the initial reference  
point, this analysis indicated that the closing price for Metromedia class A    
common stock increased as much as approximately 900% during the period and was  
approximately 800% over that price at the end of the period. During the same    
period, the weighted average closing stock prices for the Metromedia comparables
as a group increased as much as approximately 250% and were approximately 200%  
over the June 18, 1998 price at the end of the period. During the same period,  
the Nasdaq composite index had increased but was relatively flat in comparison  
to the first two sets of data.                                                  

CIBC then compared historical data concerning the trading prices for    
AboveNet common stock, Metromedia class A common stock and the Nasdaq composite 
index. CIBC analyzed this data for the period from December 10, 1998, the date  
of AboveNet's initial public offering, through June 18, 1999. Using December 10,
1998 as the initial reference point, this analysis indicated that the closing   
price for AboveNet common stock increased as much as approximately 800% over its
initial public offering price during the period and was approximately 300% over 
its initial public offering price at the end of the period. During the same     
period, the closing price for Metromedia class A common stock increased as much 
as over 200% during the period and was approximately 200% over the December 10, 
1998 price at the end of the period. During the same period, the Nasdaq         
composite index had increased but was relatively flat in comparison to the first
two sets of data.                                                               

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HISTORICAL EXCHANGE RATIO ANALYSIS                                      

CIBC compared historical ratios of the closing trading price or average 
closing trading prices for AboveNet common stock to the closing trading price or
average closing trading prices for Metromedia class A common stock for the      
period from December 10, 1998 to June 18, 1999. CIBC then calculated the premium
in the merger that would have resulted using the exchange ratio in the merger of
1.175. These calculations produced the following results:                       

  - based on their respective closing trading prices as of the day preceding
the announcement of the merger;                                     

- based on their respective average closing trading prices for the ten, 
thirty and ninety trading day periods preceding June 18, 1999; and  

 - based on their respective average closing trading prices for the period
from December 10, 1998 to June 18, 1999.                            

                                                        [Enlarge/Download Table]

                                                                       10-DAY     30-DAY     90-DAY    12/18/98 TO
                                                            ONE DAY    PERIOD     PERIOD     PERIOD      6/18/99  
                                                           ---------  ---------  ---------  ---------  -----------
                                                                                                                  
Ratio of closing prices for AboveNet common stock to                                                              
  Metromedia class A common stock.........................    0.8176     0.7435     0.8141     1.2212      0.9774 
Premium...................................................     43.7%      58.0%      44.3%      (3.8%)      20.2% 

CONTRIBUTION ANALYSIS                                                   

CIBC utilized publicly available historical financial data regarding    
AboveNet and Metromedia and estimates for the future financial performance of   
AboveNet and Metromedia to calculate the relative contributions of AboveNet and 
Metromedia to the pro forma combined company with respect to revenues, earnings 
before interest, taxes, depreciation and amortization (EBITDA), and EBITDA      
margin, for the three years ending December 31, 2001. CIBC calculated the       
contributions based on third party research analyst estimates and AboveNet      
management estimates for the future financial performance of AboveNet and based 
on third party analyst estimates for the future financial performance of        
Metromedia. For the year ending December 31, 1999, both companies were expected 
to have losses, and the percentage shown for AboveNet is a percentage of the    
combined losses. CIBC also reviewed the pro forma stock ownership and pro forma 
enterprise value of the combined company. The pro forma enterprise value was    
calculated based on the exchange ratio in the merger.                           

                                                        [Enlarge/Download Table]

                                                                                     1999       2000       2001    
                                                                                   ---------  ---------  --------- 
                                                                                                                   
ABOVENET CONTRIBUTION:                                                                                             
Percentage of Combined Revenues...................................................      41.5%      47.8%      51.6%
Percentage of Combined EBITDA or Combined Losses..................................      83.4%      25.5%      55.7%
Percentage of Combined EBITDA Margin..............................................    (a)           6.7%      36.5%
PRO FORMA STOCK OWNERSHIP:                                                                                         
AboveNet..........................................................................      16.3%                      
Metromedia........................................................................      83.7%                      
PRO FORMA ENTERPRISE VALUE:                                                                                        
AboveNet..........................................................................      15.4%                      
Metromedia........................................................................      84.6%                      

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

(a) Not meaningful.                                                             

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PRO FORMA MERGER ANALYSIS:                                              

 CIBC analyzed the pro forma impact of the merger on Metromedia's earnings
per share for the three years ending December 31, 2002, based on management and 
third party research analysts' financial projections for AboveNet and third     
party research analysts' financial projections for Metromedia. As a result of   
these analyses, CIBC concluded the merger would be dilutive in 2000 and         
accretive in 2001 and 2002.                                                     

The foregoing is a summary of the financial analyses used by CIBC in    
connection with rendering its opinion but does not purport to be a complete     
description of the analyses performed by CIBC. The preparation of a fairness    
opinion is a complex process and involves various determinations as to the most 
appropriate and relevant methods of financial analysis and the application of   
these methods to the particular circumstances, and therefore is not necessarily 
susceptible to a partial analysis or summary description. CIBC believes that its
analyses must be considered as a whole and that selecting portions of its       
analyses, without considering the analyses taken as a whole, would create an    
incomplete view of the process underlying the analyses set forth in the opinion.
In addition, CIBC considered the results of all such analyses and did not assign
relative weights to any of the analyses, so that the ranges of valuations       
resulting from any particular analysis described above should not be taken to be
CIBC's view of AboveNet or the combined entity. No company used in the          
comparable company analyses summarized above is identical to AboveNet, and no   
transaction used in the comparable transaction analysis is identical to the     
merger. Any analysis of the fairness of the merger, from a financial point of   
view, to the stockholders of AboveNet involves complex considerations and       
judgments concerning differences in the potential financial and operating       
characteristics of the comparable companies and transactions and other factors  
in relation to the trading and acquisition values of comparable companies.      
Analyses based upon forecasts of future results are not necessarily indicative  
of actual future results, which may be significantly more or less favorable than
those suggested by such analyses. As described above, CIBC's opinion and the    
related presentation to the AboveNet board on June 22, 1999 was one of many     
factors taken into consideration by the AboveNet board in making its            
determination to approve the merger agreement. The foregoing summary does not   
purport to be a complete description of the analyses performed by CIBC.         

  CIBC was selected by AboveNet because of its familiarity with AboveNet and
its business and CIBC's qualifications and expertise in the Internet industry   
and in providing valuations of businesses and securities in connection with     
acquisitions and mergers, underwritings, secondary distributions of securities, 
private placements and valuations for other purposes. In its ordinary course of 
business, CIBC acts as a market maker and broker in the publicly traded         
securities of AboveNet and receives customary compensation in connection        
therewith, and also provides research coverage for AboveNet. In its ordinary    
course of business, CIBC and its affiliates may actively trade securities of    
AboveNet and Metromedia for their own accounts and for the accounts of their    
customers and, accordingly, may at any time hold long or short positions in such
securities.                                                                     

 CIBC has provided certain investment banking and advisory services in the
past to AboveNet. These services included acting as:                            

 - lead manager in AboveNet's December 1998 initial public offering of its
common stock;                                                       

    - lead manager in AboveNet's April 1999 public offering of its common stock;
and                                                                 

 - financial advisor in connection with AboveNet's acquisition of the Palo
Alto Internet Exchange from Compaq Computer Corp. in May 1999.      

  CIBC has been paid an aggregate of approximately $12.8 million by AboveNet
for these services, which includes $50,000 paid to date in connection with the  
merger, as described below. In furnishing its opinion, CIBC does not admit that 
it is an expert within the meaning of the term "expert" as used in              

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the Securities Act, nor does it admit that its opinion constitutes a report or  
valuation within the meaning of the Securities Act.                             

Pursuant to a letter agreement dated March 31, 1999, which has been     
subsequently modified, AboveNet engaged CIBC to act as its financial advisor in 
connection with the merger. Pursuant to the terms of this agreement, AboveNet   
paid CIBC a retainer of $50,000 and agreed to reimburse CIBC for certain        
expenses incurred. AboveNet also agreed to pay CIBC a fee of $2.5 million for   
rendering its fairness opinion and an additional transaction fee of $7.5 million
upon consummation of the merger. In the event that the merger agreement is      
terminated, the fee for rendering the fairness opinion would be reduced to      
$300,000. The $50,000 retainer would be credited to any of these future         
payments. AboveNet also agreed to indemnify CIBC against certain liabilities,   
including liabilities under United States federal securities laws.              

OPINION OF VOLPE BROWN WHELAN & COMPANY, LLC                            

 On June 22, 1999, Volpe delivered its oral opinion to the AboveNet board,
which was subsequently confirmed by its written opinion dated June 22, 1999,    
that as of that date and based on and subject to the assumptions made, matters  
considered and limitations on the review set forth in the opinion, the          
consideration to be received by the stockholders of AboveNet pursuant to the    
merger agreement was fair, from a financial point of view. No limitations were  
imposed by the AboveNet board on Volpe with respect to the investigations made  
or procedures followed by it in furnishing its opinion. The exchange ratio in   
the merger was determined through negotiations between the managements of       
AboveNet and Metromedia. Although Volpe did assist the management of AboveNet in
those negotiations, it was not asked by AboveNet whether, and did not recommend 
to AboveNet that, any specific purchase price constituted the appropriate       
consideration for the merger.                                                   

The full text of Volpe's opinion, which sets forth, among other things, 
assumptions made, matters considered and limitations on the review undertaken,  
is attached as Appendix E and is incorporated in this document by reference.    
Stockholders of AboveNet are urged to read Volpe's opinion in its entirety.     
Volpe's opinion was prepared at the request and for the use of the AboveNet     
board in its consideration of the merger and does not constitute a              
recommendation to the stockholders of AboveNet as to how they should vote upon  
or take any other action with respect to the merger. Volpe's opinion is limited 
to the fairness of the consideration received in the merger, from a financial   
point of view and as of its date, to the stockholders of AboveNet. Volpe's      
opinion does not address:                                                       

    - the value of any employee agreements or other arrangements entered into in
connection with the merger,                                         

- any tax or other consequences that might result from the merger, or   

   - the price at which the shares of Metromedia class A common stock that are
issued in the merger may be traded in the future.                   

  Volpe's opinion does not address the relative merits of the merger and any
other business strategies that the AboveNet board has considered or may be      
considering or the decision of the AboveNet board to proceed with the merger.   
Volpe's opinion as to the fairness of the consideration to be received does not 
take into account the particular tax status or position of any stockholder of   
AboveNet. The summary of Volpe's opinion set forth in this document is a summary
of the material provisions of Volpe's opinion and is qualified in its entirety  
by reference to the full text of the opinion attached as Appendix E to this     
document.                                                                       

 In connection with the preparation of Volpe's opinion, Volpe, among other
things:                                                                         

- reviewed the merger agreement;                                        

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- held discussions with management of AboveNet and Metromedia concerning
their respective businesses, past and current operations, financial 
   condition and future prospects as standalone concerns and as a combined
enterprise;                                                         

 - reviewed certain AboveNet and Metromedia financial statements and other
relevant financial and operating data prepared by the AboveNet and  
Metromedia management teams respectively;                           

- reviewed the historical stock trading patterns of both AboveNet and   
Metromedia and analyzed implied historical exchange ratios;         

- reviewed the premium of the per share consideration, in relation to   
    selected merger and acquisition transactions that it deemed relevant and
comparable to the merger;                                           

- reviewed the valuation of selected publicly traded companies it deemed
comparable and relevant to AboveNet and Metromedia;                 

- reviewed, to the extent publicly available, the financial terms of    
      selected merger and acquisition transactions that it deemed comparable and
relevant to the merger;                                             

- performed a valuation based upon AboveNet's and Metromedia's relative 
contribution to pro forma combined revenue and cash earnings;       

- performed discounted cash flow analyses of AboveNet and Metromedia as 
standalone entities;                                                

 - performed a pro forma financial impact analysis of the combined entity,
  based upon information established from publicly available sources and
discussions with AboveNet and Metromedia management; and            

   - performed such other studies, analyses, and inquiries and considered such
other information as it deemed relevant.                            

   In connection with its review and analysis, and in arriving at its opinion,
Volpe assumed and relied upon the accuracy and completeness of all of the       
financial and other information provided to it or publicly available and neither
attempted independently to verify nor assumed responsibility for verifying any  
of this information. Volpe relied upon the assurances of the managements of     
AboveNet and Metromedia that they were not aware of any facts that would make   
this information inaccurate or misleading. Furthermore, Volpe did not obtain or 
make, or assume any responsibility for obtaining or making, any independent     
evaluation or appraisal of the properties or assets and liabilities (contingent 
or otherwise) of AboveNet or Metromedia, nor was Volpe furnished with any such  
evaluations or appraisals. With respect to all of the financial and other       
information and analyses provided by AboveNet and Metromedia, Volpe assumed that
this financial and other information was prepared in a reasonable manner, on a  
good faith basis and represented the best currently available judgments of      
AboveNet and/or Metromedia. Further, Volpe assumed that the historical financial
statements of each of AboveNet and Metromedia that it reviewed were prepared and
fairly presented in accordance with United States generally accepted accounting 
principles, consistently applied. Volpe also assumed that the merger will be    
consummated upon the terms of the merger agreement provided to it without       
material alteration. Volpe relied as to all legal matters relevant to rendering 
its opinion on the advice of counsel.                                           

   The Volpe opinion is necessarily based upon financial, market, economic and
other conditions that exist on, and the information made available to Volpe as  
of, the date of the Volpe opinion. It should be understood that subsequent      
developments may affect the conclusion expressed in the Volpe opinion and that  
Volpe disclaims any undertaking or obligation to advise any person of any change
in any fact or matter affecting the Volpe opinion which may come or be brought  
to Volpe's attention after the date of the Volpe opinion.                       

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   The following paragraphs summarize the material analyses performed by Volpe
in arriving at its opinion, but do not purport to be a complete description of  
the analyses performed by Volpe. These summaries of analyses include information
presented in tabular format. In order to fully understand the analyses used by  
Volpe, the tables must be read together with the text of each summary. The      
tables alone do not constitute a complete description of the analyses. These    
summaries and tables also include results of analyses in dollar amounts.        

    COMPARABLE COMPANY ANALYSIS.  Volpe analyzed, among other things, the market
values plus net debt and trading multiples of AboveNet and the following        
selected publicly traded companies in the Internet infrastructure industry:     

- Concentric Network Corporation                                        

- Exodus Communications, Inc.                                           

- Globix Corporation                                                    

- Level 3 Communications, Inc.                                          

- Verio, Inc.                                                           

    Based on the multiples of these companies, Volpe derived ranges of multiples
of total enterprise value, defined as market value of common equity plus the    
value of the total debt less cash, to each of the revenue estimates set forth in
the following table. Volpe then calculated equity values per share implied by   
each of these ranges and multiples. The results of these derivations and        
calculations are summarized below. All multiples were based on closing stock    
prices as of June 18, 1999.                                                     

                                                        [Enlarge/Download Table]

                                                                                      RANGE OF IMPLIED EQUITY    
                                                               MULTIPLE RANGE        VALUE PER ABOVENET SHARE    
                                                             -------------------  -------------------------------
                                                                                                                 
REVENUE CATEGORIES                                                                                               
  Estimated 1999 Revenues...................................    3.7x to 55.6x            $ 8.29 to $ 61.12       
  Estimated 2000 Revenues...................................    2.6x to 32.1x            $13.97 to $123.29       
  Estimated 2001 Revenues...................................    1.8x to 20.5x            $21.29 to $194.72       

As a result of this analysis, Volpe established a reference range for   
AboveNet common stock of $24.96 to $74.57. This reference range of equity values
per share for AboveNet common stock compares with the closing price of AboveNet 
common stock on June 18, 1999 of $34.75 and, based on the 1.175 exchange ratio  
offered by Metromedia and the closing price of Metromedia class A common stock  
on that same date, $49.94 of Metromedia class A common stock for each share of  
AboveNet common stock.                                                          

All multiples described above were based on publicly available research 
analysts' estimates available on June 18, 1999. None of the companies that Volpe
compared to AboveNet is identical to AboveNet. Accordingly, a complete analysis 
of the results of the foregoing calculations cannot be limited to a quantitative
review of these results and involves complex considerations and judgments       
concerning differences in financial and operating characteristics of these      
companies and other factors that could affect the public trading value of these 
companies as well as that of AboveNet.                                          

DISCOUNTED CASH FLOW ANALYSIS:  Volpe performed a discounted cash flow  
analysis of the unlevered (before interest expense) after-tax cash flows of     
AboveNet, without giving effect to the merger, using Volpe estimates based on   
discussions with AboveNet management and available public information for the   
calendar years 1999 through 2004. AboveNet's unlevered after-tax cash flows were
calculated as the after-tax operating earnings of AboveNet adjusted to add back 
non-cash expenses and deduct uses of cash not reflected in the income statement.
Using discount rates ranging from 25.0% to 35.0% and terminal value multiples of
estimated 2004 earnings before interest, tax, depreciation and amortization     
ranging from 8.0x to 10.0x, Volpe calculated the following range of implied     
equity values                                                                   

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per share for AboveNet common stock. The range of terminal value multiples      
selected reflects Volpe's judgment as to an appropriate range of multiples at   
the end of the referenced period. The discounted cash flow valuation resulted in
an equity reference range, without giving effect to the merger, of approximately
$36.11 to $64.84 per share. This reference range of equity values per share for 
AboveNet common stock compares with the closing price of AboveNet common stock  
on June 18, 1999 of $34.75 and, based on the 1.175 exchange ratio offered by    
Metromedia and the closing price of Metromedia class A common stock on that same
date, $49.94 of Metromedia class A common stock for each share of AboveNet      
common stock.                                                                   

PRECEDENT TRANSACTION ANALYSIS:  Volpe analyzed the enterprise value,   
defined as the market value of common equity plus the value of total debt less  
cash, and implied transaction value multiples paid in selected mergers and      
acquisitions in the internet infrastructure industry. Volpe considered, among   
other things, the total enterprise value in these transactions as a multiple of 
latest twelve months revenues and estimates of future projected revenues which  
were generated by extrapolating each of the identified target companies' most   
recent publicly available quarterly revenues. Based on the multiples of these   
transactions, Volpe then calculated equity values per share implied by each of  
these ranges and multiples. The results of these derivations and calculations   
are summarized below.                                                           

                                                        [Enlarge/Download Table]

                                                                                      RANGE OF IMPLIED EQUITY    
                                                               MULTIPLE RANGE           VALUE PER ABOVENET       
                                                             -------------------  -------------------------------
                                                                                                                 
Latest Twelve Months Revenues(1)............................    2.2x to 10.1x             $2.21 to $10.18        
Projected Revenues(2).......................................    1.8x to  8.5x             $6.76 to $31.35        

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

Notes:                                                                          

(1) In order to generate a comparable range of implied equity values per share  
   for AboveNet based on this analysis, Volpe applied the latest twelve months
revenues multiple range to its 1999 revenue estimate for AboveNet.      

(2) In order to generate a comparable range of implied equity values per share  
 for AboveNet based on this analysis, Volpe applied the projected revenues
multiple range to its 2000 revenue estimate for AboveNet.               

As a result of this analysis, Volpe established a reference range for   
AboveNet's common stock of $4.48 to $20.76. This reference range of equity      
values per share for AboveNet common stock compares with the closing price of   
AboveNet common stock on June 18, 1999 of $34.75 and, based on the 1.175        
exchange ratio offered by Metromedia and the closing price of Metromedia class A
common stock on that same date, $49.94 of Metromedia class A common stock for   
each share of AboveNet common stock.                                            

No company, transaction or business used in the precedent transaction   
analysis as a comparison is identical to AboveNet, Metromedia or the merger.    
Accordingly, an analysis of the results of these analyses is not entirely       
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics and other factors that   
could affect the acquisition, public trading and other values of the analyzed   
companies and transactions or the business segment, company or transactions to  
which they are being compared.                                                  

PREMIUM PAID ANALYSIS:  Volpe also compared the premiums paid in certain
transactions in the technology industry and the overall market over the public  
equity closing stock prices one day, one week and one month prior to the        
announcement of such transactions. Using the closing price of AboveNet common   
stock on June 18, 1999 of $34.75, Volpe calculated a reference range of implied 
equity values per share for AboveNet common stock by applying premiums in the   
range of 29.7% to 40.1%. This analysis resulted in a reference range of implied 
equity values per share of AboveNet common stock of $45.07 to $48.70. This      
reference range compares with the closing price of AboveNet                     

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common stock on June 18, 1999 of $34.75 and, based on the 1.175 exchange ratio  
offered by Metromedia and the closing price of Metromedia class A common stock  
on that same date, $49.94 of Metromedia class A common stock for each share of  
AboveNet common stock.                                                          

HISTORICAL EXCHANGE RATIO ANALYSIS:  Volpe reviewed the historical stock
prices of AboveNet common stock and Metromedia class A common stock and the     
implied market exchange ratios determined by dividing the price per share of    
AboveNet common stock by the price per share of Metromedia class A common stock.
The following table sets forth the average ratios of closing prices of AboveNet 
common stock to Metromedia class A common stock for the various periods ending  
June 18, 1999.                                                                  

                                                        [Enlarge/Download Table]

                                                                    RATIO OF CLOSING PRICES     
PERIOD ENDING                                                        OF ABOVENET COMMON TO      
JUNE 18, 1999                                                      METROMEDIA CLASS A COMMON    
-------------------------------------------------------------  ---------------------------------
                                                                                                
Current......................................................                 0.818x            
Latest Week..................................................                 0.742x            
Latest 3 Months..............................................                 1.221x            
Since IPO....................................................                 0.941x            

  The historical exchange ratios set out in the above table compare with the
exchange ratio for the merger of 1.175. During the period commencing with       
AboveNet's initial public offering and ending June 18, 1999, the high ratio was 
2.526x and the low ratio was 0.430x                                             

   CONTRIBUTION ANALYSIS:  As set forth in the following table, Volpe analyzed
the respective contributions of AboveNet and Metromedia to the estimated        
revenues, gross profit, earnings before interest, tax, depreciation and         
amortization and earnings before interest and tax of the combined company for   
calendar years 1999, 2000 and 2001. The pro forma contribution analysis         
indicated that, excluding the effect of the potential synergies to be derived   
from the merger, AboveNet would make the following pro forma contributions to   
the combined entity.                                                            

                                                        [Enlarge/Download Table]

ABOVENET CONTRIBUTION                                                                                      
AS A PERCENTAGE                                                                                            
OF ESTIMATED COMBINED                                                    1999       2000       2001        
---------------------------------------------------------------------  ---------  ---------  ---------     
                                                                                                           
Revenues.............................................................       31.3%      34.8%      38.8%    
Gross Profit.........................................................        0.0%      17.7%      28.2%    
Earnings Before Interest, Tax, Depreciation & Amortization...........         NM(1)       0.0%      31.6%  
Earnings Before Interest & Tax.......................................         NM(1)        NM(1)      28.0%

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

(1) NM = not meaningful                                                         

  Volpe contrasted these contributions with the resulting pro forma relative
equity ownership of the stockholders of AboveNet and Metromedia in the combined 
company. Volpe observed that, after giving effect to the issuance of Metromedia 
class A common stock in the merger, the current stockholders of AboveNet would  
own, on a fully diluted basis, approximately 16.2% of the outstanding common    
stock of the combined company, while the current stockholders of Metromedia     
would own, on a fully diluted basis, approximately 83.8% of the outstanding     
common stock of the combined company.                                           

    PRO FORMA MERGER ANALYSIS:  Volpe analyzed the pro forma effect on the fully
diluted earnings per share of common stock of the combined entity resulting from
the merger, including the potential synergies to be derived from the merger as  
well as the effects of the amortization of goodwill to be recorded in connection
with the merger. Based on the exchange ratio, financial forecasts discussed with
the managements of AboveNet and Metromedia and available public information,    
Volpe calculated that the merger would be dilutive in 2000 and 2001 and         
accretive in 2002.                                                              

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 While this summary describes the material analyses and factors that Volpe
considered in rendering its opinion to the AboveNet board, it is not a complete 
description of all analyses and factors considered by Volpe. The preparation of 
a fairness opinion is a complex process that involves various determinations as 
to the most appropriate and relevant methods of financial analysis and the      
application of these methods to the particular circumstances. Therefore, such an
opinion is not readily susceptible to partial analysis or summary description.  
In arriving at its opinion, Volpe did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, Volpe  
believes that its analyses must be considered as a whole and that selecting     
portions of its analyses and of the factors considered by it, without           
considering all analyses and factors, could create a misleading or incomplete   
view of the evaluation process underlying its opinion. Several analytical       
methodologies were employed and no one method of analysis should be regarded as 
critical to the overall conclusion reached by Volpe. Each analytical technique  
has inherent strengths and weaknesses, and the nature of the available          
information may further affect the value of particular techniques. The          
conclusion reached by Volpe is based on all analyses and factors taken as a     
whole and also on application of Volpe's own experience and judgment. This      
conclusion may involve significant elements of subjective judgment and          
qualitative analysis. Volpe therefore gives no opinion as to the value or merit 
standing alone of any one or more parts of the analysis it performed. In        
performing its analyses, Volpe made numerous assumptions with respect to        
industry performance, general business and other conditions and matters, many of
which are beyond the control of AboveNet or Volpe. Any estimates contained in   
these analyses are not necessarily indicative of actual values or predicative of
future results or values, which may be significantly more or less favorable than
those suggested by these analyses. Accordingly, analyses relating to the value  
of businesses do not purport to be appraisals or to reflect the prices at which 
these businesses actually may be sold in the future, and these estimates are    
inherently subject to uncertainty.                                              

AboveNet engaged Volpe to act as its advisor in connection with possible
strategic combination transactions. For its services, Volpe is entitled to      
receive, contingent upon consummation of the merger, a transaction fee equal to 
$5.0 million. AboveNet has also agreed to reimburse Volpe for its out-of-pocket 
expenses and to indemnify and hold harmless Volpe and its affiliates and any    
other person, director, employee or agent of Volpe or any of its affiliates, or 
any person controlling Volpe or its affiliates, for certain losses, claims,     
damages, expenses and liabilities relating to or arising out of services        
provided by Volpe as financial advisor to AboveNet. The terms of the fee        
arrangement with Volpe, which AboveNet and Volpe believe are customary in       
transactions of this nature, were negotiated at arm's length between AboveNet   
and Volpe. Volpe was retained based on Volpe's experience as a financial advisor
in connection with mergers and acquisitions and in securities valuations        
generally, as well as Volpe's investment banking relationship and familiarity   
with AboveNet. Volpe has provided financial advisory and investment banking     
services to AboveNet from time to time, including acting as a co-managing       
underwriter for AboveNet's initial public offering in December 1998 and as      
co-managing underwriter for its follow-on offering in April 1999.               

   Volpe is a nationally recognized investment banking firm that is focused on
serving emerging growth companies in the areas of technology and healthcare. As 
part of its investment banking business, Volpe is frequently engaged in the     
valuation of businesses and their securities in connection with mergers and     
acquisitions, negotiated underwritings, secondary distributions of securities,  
private placements and other purposes. Volpe may actively trade the equity of   
AboveNet for its own account and for the account of its customers and,          
accordingly, may at any time hold a long or short position in these securities. 

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FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF ABOVENET COMMON STOCK             

GENERAL                                                                 

   The following describes the material federal income tax consequences of the
merger to AboveNet stockholders. However, this discussion does not address all  
aspects of taxation that may be relevant to particular stockholders in light of 
their personal investment or tax circumstances, nor does it address all the tax 
consequences for stockholders subject to special treatment under the federal    
income tax laws, such as insurance companies, financial institutions,           
broker-dealers, foreign corporations and persons who are not citizens or        
residents of the United States. In addition, this discussion does not give a    
detailed discussion of any state, local or foreign tax considerations. This     
discussion may not be applicable to holders who acquired AboveNet common stock  
pursuant to the exercise of options or warrants or otherwise as compensation. WE
URGE YOU TO CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF 
THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX      
CONSEQUENCES TO YOU OF THE MERGER.                                              

 This discussion is based on the Internal Revenue Code of 1986, applicable
Department of Treasury regulations, judicial authority, and administrative      
rulings and practice, all as of the date of this document. Future legislative,  
judicial, or administrative changes or interpretations may adversely affect the 
accuracy of the statements and conclusions described in this document. Any such 
changes or interpretations could be applied retroactively and could affect the  
tax consequences of the merger to you.                                          

MATERIAL TAX CONSEQUENCES OF THE MERGER                                 

The material United States federal income tax consequences of the merger
will be as follows:                                                             

(a) The merger will constitute a reorganization within the meaning of   
   Section 368(a) of the Internal Revenue Code for United States federal
 income tax purposes, and Metromedia, Magellan Acquisition, Inc. and
       AboveNet will each be a party to the reorganization within the meaning of
Section 368(b) of the Internal Revenue Code;                      

   (b) No gain or loss will be recognized by Metromedia, Magellan Acquisition,
Inc. or AboveNet as a result of the merger;                       

(c) No gain or loss will be recognized by you upon your receipt of      
  Metromedia class A common stock in exchange for your AboveNet common
      stock, except with respect to cash received instead of fractional shares
of Metromedia class A common stock;                               

    (d) The aggregate tax basis of the shares of Metromedia class A common stock
received in exchange for your AboveNet common stock in the merger,
      including fractional shares for which cash is received, will be the same
 as the aggregate tax basis of your AboveNet common stock exchanged;

(e) The holding period for shares of Metromedia class A common stock    
    received in the merger will include the holding period of the AboveNet
       common stock exchanged, but only if you held the AboveNet common stock as
a capital asset at the time we complete the merger; and           

   (f) If you receive cash instead of a fractional share of Metromedia class A
       common stock, you will recognize gain or loss equal to the difference, if
      any, between your tax basis in the fractional share (as described in (d)
above) and the amount of cash received.                           

    AboveNet's obligation to complete the merger is conditioned upon its receipt
of an opinion from Skadden, Arps, Slate, Meagher & Flom LLP that the merger will
be treated as a reorganization within the meaning of Section 368(a) of the      
Internal Revenue Code and that Metromedia, Magellan Acquisition, Inc. and       
AboveNet will each be a party to the reorganization within the meaning of       
Section 368(b) of the Internal Revenue Code. No ruling has been sought from the 
Internal Revenue                                                                

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Service as to the United States federal income tax consequences of the merger,  
and the opinion of counsel will not be binding upon the Internal Revenue Service
or any court.                                                                   

BACKUP WITHHOLDING                                                      

Noncorporate holders of AboveNet common stock may be subject to backup  
withholding at a rate of 31% on cash payments received instead of a fractional  
share interest in Metromedia class A common stock. Backup withholding will not  
apply, however, to a stockholder who (a) furnishes a correct taxpayer           
identification number and certifies, under penalties of perjury, that he or she 
is not subject to backup withholding on a Form W-9, (b) provides a certificate  
of foreign status on Form W-8 or (c) is otherwise exempt from backup            
withholding. A stockholder who fails to provide the correct taxpayer            
identification number on Form W-9 may be subject to a $50 penalty imposed by the
internal revenue service. We will provide a Form W-9 to you after the merger.   

REPORTING REQUIREMENTS                                                  

You will be required to attach a statement to your tax returns for the  
taxable year in which the merger is completed that contains the information set 
forth in Section 1.368-3(b) of the Department of Treasury regulations. The      
statement must include your tax basis in the AboveNet common stock surrendered  
and a description of the Metromedia class A common stock and cash, if any,      
received in the merger.                                                         

ACCOUNTING TREATMENT                                                            

The merger is expected to be accounted for under the purchase method of 
accounting. This means that, after the merger, Metromedia will be required to   
record as intangible assets the excess of the consideration paid over the       
estimated fair value of net assets acquired and will subsequently amortize this 
cost against earnings.                                                          

DIVIDEND POLICY                                                                 

   Metromedia currently has no plans to pay cash dividends on its common stock
in the foreseeable future and its existing long term indebtedness restricts     
Metromedia's ability to pay cash dividends. Metromedia intends to retain        
earnings to finance the development and expansion of its businesses. The        
decision of the Metromedia board as to whether or not to pay cash dividends in  
the future will depend upon a number of factors, including Metromedia's future  
earnings, capital requirements, financial condition, and the existence or       
absence of any contractual limitations on the payment of dividends.             

 AboveNet has agreed not to declare, set aside, or pay any dividend on its
common stock until the completion of the merger.                                

INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER                               

GENERAL                                                                 

  Members of the respective boards and management of Metromedia and AboveNet
may be deemed to have interests in the merger that are different from or in     
addition to your interests as a stockholder. The board recognized these         
interests and determined that these interests neither supported nor detracted   
from the fairness of the merger to you.                                         

EMPLOYMENT AGREEMENTS                                                   

Messrs. Tuan and Rand have entered into amended and restated employment 
agreements with AboveNet which will become effective upon the completion of the 
merger and end on the anniversary date of the consummation of the merger in 2002
and 2004, respectively, unless terminated prior to that date or extended as     
provided in their employment agreements. The merger agreement also provides     

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that Mr. Tuan and Mr. Rand will be elected to Metromedia's board of directors   
upon consummation of the merger. For a discussion of the terms of these         
agreements, see "RELATED AGREEMENTS-- Employment Agreements."                   

INDEMNIFICATION                                                         

  Metromedia has agreed to cause AboveNet, from and after the effective time
of the merger, to indemnify the present and former directors and officers of    
AboveNet and has agreed to maintain directors' and officers' liability insurance
for these individuals in place for six years following completion of the merger.
For further details regarding these arrangements, see "THE MERGER               
AGREEMENT--Indemnification and Insurance."                                      

ACCELERATED VESTING OF OPTIONS                                          

Metromedia agreed to assume all outstanding employee stock options of   
AboveNet vested or unvested. According to the terms of two of the three AboveNet
stock option plans, all of the options issued under those two plans will        
automatically vest as a result of the merger. The merger agreement permits      
AboveNet to also, at its option, cause the acceleration of unvested options to  
purchase an additional 317,000 shares that do not automatically accelerate as a 
result of the merger. Of these options to purchase 317,000 shares, 87,500 are   
held by Mr. Sherman Tuan, the Chief Executive Officer and Chairman of the Board 
of AboveNet (and such 87,500 options would have vested by March 8, 2000 in      
accordances with their terms). No other director of AboveNet held any of such   
options. As a result of the above-described accelerations, all the outstanding  
options held by the named executive officers and directors of AboveNet will     
accelerate upon completion of the merger. The following table discloses for each
AboveNet named executive officer and director the number of options that will be
subject to accelerated vesting upon the merger:                                 

                                                        [Enlarge/Download Table]

                                                                                     NUMBER OF 
                                                                                    NON-VESTED 
NAME AND TITLE                                                                        OPTIONS  
----------------------------------------------------------------------------------  -----------
                                                                                               
Stephen P. Belomy.................................................................      65,001 
Robert A. Burgelman...............................................................      18,750 
Peter C. Chen, Ph.D...............................................................          -- 
Warren J. Kaplan..................................................................      15,000 
Frank A. Kline....................................................................      30,000 
David Rand........................................................................     211,113 
James Sha.........................................................................          -- 
Tom Shao, Ph.D....................................................................          -- 
Kimball W. Small..................................................................      25,000 
Sherman Tuan......................................................................     250,217 
Fred A. Vierra....................................................................      18,750 

REGULATORY APPROVALS                                                            

Federal antitrust laws prohibit us from completing the merger until a   
required notification and report form is filed and a required waiting period has
expired or been terminated. On July 6, 1999, we filed the required notification 
and report forms. The waiting period for the filings has terminated.            
Notwithstanding this termination, the Antitrust Division of the Department of   
Justice or the Federal Trade Commission could still take action under the       
antitrust laws that could adversely affect the merger. However, we do not       
believe that the completion of the merger will result in the violation of any   
applicable antitrust laws.                                                      

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STOCK EXCHANGE LISTING                                                          

  The Metromedia class A common stock to be issued to you in the merger will
be listed on The Nasdaq Stock Market's National Market, subject to official     
notice of issuance.                                                             

FEDERAL SECURITIES LAWS CONSEQUENCES                                            

  All shares of Metromedia common stock received by AboveNet stockholders in
the merger will be freely transferable under the Federal securities laws, except
for shares received by persons who are deemed to be "affiliates" of AboveNet    
prior to the completion of the merger. These shares may be resold by them only  
in transactions permitted by the resale provisions of Rule 145 of the Securities
Act of 1933 (or Rule 144 in the case of persons who become affiliates of        
Metromedia) or as otherwise permitted under the Securities Act of 1933. Persons 
who may be deemed to be affiliates of Metromedia or AboveNet generally include  
individuals or entities that control, are controlled by, or are under common    
control with, such parties.                                                     

ABOVENET STOCKHOLDER LITIGATION                                                 

On June 29, 1999, an alleged stockholder of AboveNet filed a lawsuit,   
captioned KAUFMAN V. TUAN, ET AL., Del. Ch. C.A. No. 17259NC, in the Court of   
Chancery of the State of Delaware in and for New Castle County. The plaintiff,  
who purports to represent a class of all AboveNet stockholders, challenges the  
terms of the proposed merger between AboveNet and Metromedia. The complaint     
names, as defendants, AboveNet, the directors of AboveNet, and Metromedia (as an
aider and abettor). The complaint alleges generally that AboveNet's directors   
breached their fiduciary duties to stockholders of AboveNet, and seeks an       
injunction against the merger, or, in the alternative, rescission and the       
recovery of unspecified damages, fees and expenses. The case has been assigned  
to Chancellor William B. Chandler III. AboveNet, Metromedia and the individual  
defendants believe the lawsuit is without merit and intend to defend themselves 
vigorously. The Company's and the individual director defendants' responses were
filed on July 22, 1999. In connection with these responses, a motion to dismiss 
the complaint in its entirety and a motion to stay discovery pending the outcome
of the motion to dismiss were filed by the Company and the individual directors 
of the Company on July 22, 1999. Similar motions to dismiss the complaint and   
stay discovery were filed by Metromedia on July 26, 1999.                       

Four other complaints, which are virtually identical to the complaint in
KAUFMAN V. TUAN, have also been filed in the Delaware Court of Chancery. None of
these four complaints has been served. The four actions are captioned BROSIOUS  
V. TUAN, Del. Ch. C.A. No. 17271NC, CHONG V. TUAN, Del. Ch. C.A. No. 17281NC,   
EHLERT V. TUAN, Del. Ch. C.A. No. 17284NC, and HORN V. TUAN, Del. Ch. C.A. No.  
17300NC.                                                                        

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THE MERGER AGREEMENT

 The following is a brief summary of the material provisions of the merger
agreement. A copy of the merger agreement is attached as Appendix A to this     
document and is incorporated in this document by reference. WE URGE YOU TO READ 
THE MERGER AGREEMENT CAREFULLY AND IN ITS ENTIRETY.                             

TERMS OF THE MERGER                                                             

GENERAL                                                                 

The merger agreement contemplates the merger of a Metromedia subsidiary,
Magellan Acquisition, Inc., into AboveNet. After the merger, AboveNet will      
survive as a wholly owned subsidiary of Metromedia. The merger will be completed
once we file the Certificate of Merger with the Delaware Secretary of State.    
This filing will occur as soon as is practicable after the closing under the    
merger agreement. Unless we agree otherwise, the closing will occur at 10:00    
a.m. on the business day on which the satisfaction or waiver of the conditions  
set forth in the merger agreement is completed.                                 

CONVERSION OF SECURITIES                                                

Once we complete the merger, the following will occur:                  

Unless described differently below in the sections labeled "--Fractional
Shares," "--Dividends and Distributions" and "--Withholding Rights," each of the
shares of AboveNet common stock will be converted into 1.175 shares of class A  
common stock of Metromedia.                                                     

If there is a change in the number of shares, or securities or other    
instruments convertible or exchangeable into, or exercisable for, common stock  
of AboveNet or Metromedia prior to the completion of the merger, the exchange   
ratio will be adjusted to eliminate the effects of that event.                  

FRACTIONAL SHARES                                                       

   Metromedia will not issue any fractional shares of its stock in the merger.
As promptly as practicable after we complete the merger, ChaseMellon Shareholder
Services, L.L.C., as our exchange agent in the merger, will determine the       
aggregate number of fractional shares which would be distributed to all AboveNet
stockholders. ChaseMellon Shareholder Services will then sell a number of shares
of Metromedia class A common stock equal to such aggregate number of fractional 
shares, and fractional stockholders will receive a cash payment in lieu of the  
fractional shares.                                                              

Until the net proceeds of those sales have been distributed to AboveNet 
stockholders, ChaseMellon Shareholder Services will hold those proceeds in trust
for the benefit of those holders. Metromedia will pay the costs of the sale of  
the excess shares. ChaseMellon Shareholder Services will determine the portion  
of the proceeds to which each holder of fractional shares will be entitled, if  
any, by multiplying the amount of the aggregate net proceeds from the sale by   
the holder's proportionate interest in the proceeds, which will depend on the   
holder's fractional share ownership. Instead of this procedure, however,        
Metromedia may satisfy payment for the excess shares by delivering cash (without
interest) to ChaseMellon Shareholder Services in an amount equal to the         
aggregate amount of all of these excess shares multiplied by the closing sales  
price of Metromedia class A common stock on The Nasdaq Stock Market's National  
Market on the trading day immediately following the date we complete the merger.

STOCK OPTIONS AND OTHER STOCK RIGHTS                                    

 Once we complete the merger, each option or warrant to purchase shares of
AboveNet common stock will be assumed by Metromedia. This means that each       
AboveNet stock option or warrant will be converted into an option or warrant to 
acquire shares of Metromedia class A common stock. The number of shares of      
Metromedia class A common stock to be subject to the option or warrant will be  
equal to the product of (a) the number of shares of AboveNet common stock       
subject to the original option or warrant and (b) the exchange ratio, rounded up
to the nearest whole share, if necessary                                        

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(except in the case of an incentive stock option, where the product will be     
rounded down). The exercise price for each AboveNet option and warrant will also
be adjusted and will be equal to the quotient of (a) the exercise price of the  
original AboveNet option and warrant divided by (b) the exchange ratio, rounded 
to the nearest cent.                                                            

EXCHANGE OF NEW STOCK CERTIFICATES                                              

EXCHANGE AGENT                                                          

  Once we complete the merger, ChaseMellon Shareholder Services will mail to
each AboveNet stockholder a letter of transmittal and instructions for use in   
surrendering its AboveNet shares in exchange for certificate(s) representing    
shares of Metromedia class A common stock. Upon surrender of its AboveNet stock 
certificate to ChaseMellon Shareholder Services, each AboveNet stockholder will 
be entitled to receive a certificate representing that number of whole shares of
Metromedia class A common stock and cash instead of any fractional share of     
Metromedia class A common stock, plus any dividends, which that stockholder has 
a right to receive in the merger. AboveNet stock certificates will then be      
canceled.                                                                       

DIVIDENDS AND DISTRIBUTIONS                                             

  NO DIVIDENDS OR OTHER DISTRIBUTIONS DECLARED OR MADE AFTER THE MERGER WITH
RESPECT TO METROMEDIA CLASS A COMMON STOCK WITH A RECORD DATE AFTER THE DATE WE 
COMPLETE THE MERGER WILL BE PAID TO ABOVENET STOCKHOLDERS UNTIL AN ABOVENET     
STOCKHOLDER SURRENDERS ITS ABOVENET STOCK CERTIFICATE(S). NO CASH PAYMENT       
INSTEAD OF FRACTIONAL SHARES WILL BE PAID TO AN ABOVENET STOCKHOLDER UNTIL IT   
SURRENDERS SUCH CERTIFICATE(S).                                                 

Following surrender to ChaseMellon Shareholder Services of any such     
certificate(s), as a record holder of certificates representing whole shares of 
Metromedia class A common stock, each AboveNet stockholder will be paid, without
interest:                                                                       

    - the amount of any cash payable instead of a fractional share of Metromedia
class A common stock to which it is entitled;                       

 - the amount of dividends or other distributions with a record date after
      the date we complete the merger already paid with respect to each AboveNet
stockholder's whole shares of Metromedia class A common stock; and  

- at the appropriate payment date, the amount of dividends or other     
      distributions with a record date after the date we complete the merger but
      prior to surrender and a payment date after surrender payable with respect
    to each AboveNet stockholder's whole shares of Metromedia class A common
stock.                                                              

TRANSFERS                                                               

    As soon as we complete the merger, the stock transfer books of AboveNet will
be closed, and there will be no further registration of transfers of AboveNet   
common stock.                                                                   

TERMINATION OF EXCHANGE FUND                                            

 Metromedia will receive any portion of Metromedia class A common stock or
the proceeds from the sale of any excess Metromedia shares which remains        
undistributed to AboveNet stockholders twelve months after the date we complete 
the merger. Any AboveNet stockholder who has not previously complied with the   
exchange procedures may then look only to Metromedia for payment.               

NO LIABILITY                                                            

   We will not be liable to any AboveNet stockholder or Metromedia stockholder
for any undistributed Metromedia class A common stock or cash from the proceeds 
of the sale of any excess                                                       

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Metromedia shares which is delivered to a public official pursuant to any       
applicable abandoned property or similar laws.                                  

NO INTEREST                                                             

 No interest will be paid or accrued on cash paid to AboveNet stockholders
instead of fractional shares. In addition, no interest will be paid or accrued  
on unpaid dividends and distributions, if any, which may be payable upon        
surrender of AboveNet stock certificates.                                       

REPRESENTATIONS AND WARRANTIES                                                  

The merger agreement contains various representations and warranties of 
AboveNet relating to, among other things:                                       

- its organization and qualification and its subsidiaries;              

- the completeness and correctness of AboveNet's certificate of         
incorporation and by-laws;                                          

- capitalization;                                                       

- its authority relative to the merger agreement;                       

 - no violation of laws or other agreements in connection with the merger;

- receipt of consents and approvals required for the merger;            

  - possession of franchises, licenses, permits and other approvals required
for operation of business and compliance with laws;                 

- filings with the Securities and Exchange Commission and its financial 
statements;                                                         

- absence of certain changes or events;                                 

- employee benefit plans;                                               

  - identification of material contracts and absence of defaults thereunder;

- absence of litigation;                                                

- environmental matters;                                                

- intellectual property;                                                

- tax matters;                                                          

- absence of non-competition agreements;                                

   - absence of agreements that would alter or increase certain obligations of
AboveNet;                                                           

- real property;                                                        

- labor matters;                                                        

   - the lack of any requirement to be registered under the Investment Company
Act of 1940;                                                        

   - the opinion of CIBC World Markets Corp. and Volpe Brown Whelan & Company,
   LLC with respect to the fairness of the exchange ratio from a financial
point of view;                                                      

- absence of brokers;                                                   

- no impact of anti-takeover statutes;                                  

  - the accuracy of information supplied by AboveNet in connection with this
document; and                                                       

- vote necessary to approve the merger.                                 

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   The merger agreement also contains customary representations and warranties
made by Metromedia and its merger subsidiary as to, among other things:         

- their organization and qualification and their subsidiaries;          

 - the completeness and correctness of their certificates of incorporation
and by-laws;                                                        

- capitalization;                                                       

- their authority relative to the merger agreement;                     

 - no violation of laws or other agreements in connection with the merger;

- consents and approvals required for the merger;                       

  - possession of franchises, licenses, permits and other approvals required
for operation of businesses;                                        

- filings with the Securities and Exchange Commission and Metromedia's  
financial statements;                                               

- absence of certain changes or events;                                 

- employee benefit plans;                                               

- absence of defaults under material contracts                          

- absence of litigation;                                                

- environmental matters;                                                

- intellectual property;                                                

- tax matters;                                                          

- real property;                                                        

- labor matters;                                                        

   - the lack of any requirement to be registered under the Investment Company
Act of 1940;                                                        

 - the opinion of Salomon Smith Barney with respect to the fairness of the
exchange ratio from a financial point of view;                      

- absence of brokers;                                                   

- the accuracy of information supplied for inclusion or incorporation by
reference in this document;                                         

- vote necessary to approve the merger; and                             

- interim operations of the merger subsidiary.                          

COVENANTS                                                                       

    AboveNet has agreed between the date of the merger agreement and the closing
of the merger, except for scheduled exceptions or with the consent of           
Metromedia, it will generally:                                                  

- conduct its business in the ordinary course of business and consistent
with past practice;                                                 

- not amend its organizational documents;                               

    - not (a) pay any dividends on its capital stock, (b) reclassify its capital
 stock in any way or issue any other securities instead of its capital
stock or (c) acquire any shares of its capital stock;               

- except for pay or benefits increases made in the ordinary course of   
    business, in connection with new hires, and bonuses paid in the ordinary
    course of business, not change the terms of its existing pay or benefits
     arrangements with management or its employees or otherwise enter into new
employment or severance agreements with any of those persons;       

- not issue any shares of its capital stock;                            

- except for activities in the ordinary course of business, not acquire 
   sell, lease, license, encumber or dispose of any material properties or
assets or enter into any material commitment or transaction;        

  - except for borrowings made in the ordinary course of business, not incur
   or prepay any debt, guarantee any obligations of another person or make
any loans or capital contributions to any other person;             

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 - not terminate, cancel or make any significant change in any contract or
agreement material to AboveNet and its subsidiaries;                

- not make any capital expenditures in excess of those provided for in  
AboveNet's budget;                                                  

   - not adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, or other reorganization, other than the merger with  
Metromedia;                                                         

- not alter through merger, liquidation, reorganization, or in any other
     fashion the corporate structure and ownership of any AboveNet subsidiary;

    - not enter into any arrangement or agreement that would materially limit or
      otherwise materially restrict the surviving corporation and its affiliates
   from engaging or competing in any line of business or in any geographic
    area, other than in the ordinary course of business consistent with past
practices;                                                          

- not take any action with respect to accounting policies, other than as
required by law or by generally accepted accounting principles;     

- not waive, release, assign, settle or compromise any material rights, 
claims or litigation; and                                           

- not make any material tax election or settle any material income tax  
liability.                                                          

Metromedia has agreed between the date of the merger agreement and the  
closing of the merger, except with the consent of AboveNet, it will generally:  

  - not amend its organizational documents in a manner that would be adverse
to the holders of its class A common stock ;                        

- not (a) pay any dividends on its capital stock, (b) issue any other   
    securities instead of its class A common stock or (c) acquire any shares
of its capital stock;                                               

    - not issue any of its securities other than upon the exercise or conversion
      of outstanding warrants or options or the issuance of stock options in the
ordinary course of business and consistent with past practice;      

- not make any sale, transfer, disposition or acquisition of assets or  
 businesses that would cause a material delay in the completion of the
    transactions contemplated by the merger agreement or could reasonably be
expected to have a material adverse effect on Metromedia; and       

- not adopt a plan of complete of partial liquidation, dissolution,     
restructuring, recapitalization or other reorganization.            

Each of us has also agreed to, among other things, to:                  

 - not voluntarily take any action that would, or that could reasonably be
expected to, result in any of the conditions to the merger not being
satisfied;                                                          

    - cooperate with each other in the preparation of information filed with the
Securities and Exchange Commission, including this document;        

    - update the other with respect to changes to our respective companies until
      we complete the merger, particularly with respect to any change that could
be expected to violate the merger agreement;                        

   - ensure that there are no material misstatements or omissions contained in
the documents we file with the Securities and Exchange Commission in
connection with the merger;                                         

- use its reasonable best efforts to obtain the necessary stockholder   
approval required to approve the merger agreement, in the case of   
    AboveNet, and the issuance of shares of its class A common stock, in the
case of Metromedia;                                                 

- except as required under any confidentiality agreement or similar     
      agreement, provide to each other such information concerning the business,
      properties, contracts, assets, liabilities, personnel and other aspects as
the other party may reasonably request; and                         

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- offer employee benefits to AboveNet employees for a period of one year
  following consummation of the merger substantially comparable to those
offered prior to the merger.                                        

NO SOLICITATION OF TRANSACTIONS                                                 

    AboveNet has generally agreed that it will not: (a) take actions which could
cause a third party to make a proposal to acquire an interest in AboveNet or (b)
propose, enter into or participate in any discussions or negotiations regarding 
any such proposal.                                                              

However, this does not prohibit AboveNet from:                          

  - furnishing information to any person that makes an unsolicited bona fide
written acquisition proposal; or                                    

- engaging in discussions or negotiations with the third party which has
made such an unsolicited proposal.                                  

    However, in each case referred to above, the AboveNet board must conclude in
good faith, following consultation with its outside counsel, that its action is 
legally advisable for the AboveNet board to satisfy its fiduciary obligations to
its stockholders. The AboveNet board must also conclude that the unsolicited    
proposal is more favorable, from a financial point of view, to AboveNet's       
stockholders and that such unsolicited proposal, is not subject to any financing
contingencies or in the good faith judgment of the AboveNet board (after        
consultation with a nationally recognized financial advisor) is reasonably      
capable of being financed. In addition, following receipt of an unsolicited     
proposal AboveNet may take a position contemplated by the federal securities    
laws or make disclosures regarding the unsolicited proposal if the AboveNet     
board, after consultation with outside legal counsel, determines that failure to
make any disclosure would be inconsistent with its obligations under applicable 
law.                                                                            

If the board receives such a proposal, AboveNet must immediately inform 
Metromedia of the material terms and conditions of the proposal and the identity
of the person making it and keep Metromedia fully informed regarding any        
significant details or developments with respect to the proposal and of all     
significant steps it is taking in response to the proposal.                     

 AboveNet has agreed that its board will not propose to withdraw or modify
its approval or recommendation of the merger agreement. However, the AboveNet   
board, to the extent it concludes in good faith, following consultation with its
outside counsel, that such action is legally advisable for the AboveNet board to
comply with its fiduciary obligations to its stockholders, may withdraw or      
modify its approval or recommendation of the merger agreement if there is an    
unsolicited bona fide acquisition proposal which the board determines in its    
good faith judgment (after consultation with a nationally recognized financial  
advisor) to be more favorable from a financial point of view to AboveNet's      
stockholders than the merger and which is not subject to any financing          
contingencies or which, in the good faith judgment of the AboveNet board (after 
consultation with a nationally recognized financial advisor), is reasonably     
capable of being financed.                                                      

  If the AboveNet board withdraws or modifies its approval or recommendation
of the merger agreement, Metromedia may nonetheless require that the approval of
the merger agreement be submitted to a vote of AboveNet's stockholders at       
AboveNet's special meeting. In this case, Metromedia may no longer terminate the
merger agreement for any of the reasons specified in the fourth bullet-point    
under the heading "Termination" below.                                          

INDEMNIFICATION AND INSURANCE                                                   

After the merger is completed, Metromedia will preserve all rights to   
indemnification existing as of June 22, 1999, the date of the merger agreement, 
in favor of any current or former director, officer, agent or employee of       
AboveNet for a period of at least six years following the merger. Metromedia    
will also indemnify directors, officers, agents and employees of AboveNet       
against liabilities or claims arising before the merger is completed and as a   
result of their positions at AboveNet. Finally, Metromedia will                 

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pay such persons legal and other expenses in connection with any proceeding     
arising out of any matter occurring until the merger is completed and, subject  
to limitations as to cost, maintain AboveNet's current directors' and officers' 
liability insurance in place for at least six years following the merger.       

CONDITIONS TO THE MERGER                                                        

Our respective obligations to complete the merger are subject to the    
satisfaction or waiver of each of the following conditions:                     

  - the approval of the merger by the AboveNet stockholders and the approval
   of the issuance of the shares of Metromedia class A common stock in the
merger by the Metromedia stockholders;                              

- The Nasdaq Stock Market's National Market listing of the shares of    
  Metromedia class A common stock to be issued in the merger, subject to
official notice of issuance;                                        

    - the expiration of the waiting period under the Hart-Scott-Rodino Antitrust
    Improvement Act of 1976 and obtaining of all approvals and consents from
governmental authorities that are necessary to complete the merger; 

   - no law, order, injunction or decree that prohibits, restrains, enjoins or
   otherwise prohibits consummation of the merger shall have been enacted,
 issued, promulgated, enforced or entered by, or be pending before any
court or governmental entity of competent jurisdiction; and         

    - the effectiveness of the registration statement to register the Metromedia
     class A common stock to be issued to AboveNet stockholders in the merger.

    Metromedia's obligation to complete the merger agreement also depends on the
satisfaction or waiver of each of the following conditions:                     

 - the employment agreements entered into between AboveNet and each of Mr.
     Sherman Tuan and Mr. David Rand, as amended and restated, must be in full
  force and effect on the closing date and neither Mr. Tuan nor Mr. Rand
     shall have died, become permanently incapacitated or otherwise refused to
perform services or be in material breach under those employment    
agreements in violation of their terms;                             

- AboveNet's representations and warranties are true and correct in all 
material respects when made and as of the closing date; and         

- AboveNet has performed or complied with in all material respects all  
    obligations to be performed by it under the merger agreement at or prior
to the closing date.                                                

  AboveNet's obligation to complete the merger agreement also depends on the
satisfaction or waiver of each of the following conditions:                     

 - Metromedia's representations and warranties are true and correct in all
material respects when made and as of the closing date;             

- Metromedia has performed or complied in all material respects with all
     obligations to be performed by it under this agreement at or prior to the
closing date; and                                                   

   - AboveNet shall have received the opinion of Skadden, Arps, Slate, Meagher
  & Flom LLP, counsel to AboveNet, dated the closing date, to the effect
     that the merger will be treated as a reorganization within the meaning on
  section 368(a) of the Internal Revenue Code and that each party to the
      merger agreement will be treated as a "party to the reorganization" within
the meaning of section 368(b) of the Internal Revenue Code.         

TERMINATION                                                                     

  The merger may be abandoned, at any time before we complete the merger and
before or after any stockholder approval, in the following circumstances:       

- by our mutual written consent;                                        

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 - by either one of us, if the merger is not completed before December 31,
1999 through no fault of the party wishing to terminate the merger  
agreement;                                                          

- by either one of us, if a final nonappealable decree or injunction    
prevents the completion of the merger;                              

   - by Metromedia, if (a) the AboveNet board of directors withdraws, modifies
    or changes its approval or recommendation of the merger agreement or (b)
   the AboveNet board of directors recommends to AboveNet's stockholders a
      competing proposal or transaction or enters into an agreement with respect
    to a "superior proposal"or (c) a tender offer or exchange offer for more
than 35% of the outstanding shares of capital stock of AboveNet is  
commenced and the board of directors of AboveNet fails to recommend 
  against or takes no position with respect to acceptance of that tender
offer or exchange offer by its stockholders;                        

- by either one of us, if the merger agreement is not approved by the   
   requisite vote of stockholders of AboveNet or the issuance of shares of
    Metromedia class A common stock is not approved by the requisite vote of
stockholders of Metromedia;                                         

   - by Metromedia, if AboveNet's representations and warranties become untrue
 or because AboveNet breaches any material representation, warranty or
covenant, if the breach is not cured by December 31, 1999; and      

   - by AboveNet, if Metromedia's representations and warranties become untrue
   or because Metromedia breaches any material representation, warranty or
covenant, if the breach is not cured by December 31, 1999.          

TERMINATION FEES AND EXPENSES                                                   

    Except as otherwise stated in the merger agreement, all expenses incurred in
the merger will be paid by the party incurring the expenses.                    

    AboveNet has agreed to pay Metromedia all of its out-of-pocket expenses, not
to exceed $5,000,000, plus a $50,000,000 termination fee if the merger agreement
is terminated by Metromedia:                                                    

 (a) if the AboveNet board of directors withdraws, modifies or changes its
       approval or recommendation of the merger agreement, if the AboveNet board
       of directors recommends to the AboveNet stockholders a competing proposal
    or transaction or enters into an agreement with respect to a "superior
    proposal", or if a tender offer or exchange offer for more than 35% of
      the outstanding shares of capital stock of AboveNet is commenced and the
AboveNet board of directors fails to recommend against or takes no
     position with respect to acceptance of that tender or exchange offer by
its stockholders;                                                 

 (b) by virtue of AboveNet not obtaining the requisite stockholder vote to
approve the merger agreement; or                                  

    (c) by virtue of a willful and material breach by AboveNet of any agreement,
   representation, warranty or covenant it made in the merger agreement.

However, AboveNet WILL NOT have to pay the termination fee in connection
with (b) and (c) above unless and until:                                        

- at the time of the stockholder meeting or the breach, as applicable,  
    AboveNet has received a bona fide alternative acquisition proposal, or a
   third party has made or publicly announced its intention to make such a
proposal, and                                                       

  - within twelve months after termination of the merger agreement, AboveNet
enters into a definitive agreement providing for, or consummates, an
alternative acquisition proposal with any third party.              

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RELATED AGREEMENTS

VOTING AGREEMENTS                                                               

  In connection with the merger agreement, Metromedia Company and one of its
general partners, which together hold 33,769,272 shares of Metromedia class B   
common stock representing approximately 66% of the outstanding combined voting  
power of Metromedia's common stock, entered into a voting agreement with        
AboveNet. These stockholders have agreed to vote in favor of the issuance of the
shares of Metromedia's class A common stock pursuant to the merger, thereby     
assuring its approval, and to not transfer or assign any of their shares of     
Metromedia class B common stock prior to the closing date or termination of the 
merger agreement.                                                               

In connection with the merger agreement, six stockholders (and certain  
related entities) of AboveNet (five of whom are directors or officers of        
AboveNet), who together hold shares of AboveNet's common stock representing     
approximately 15.5% of the outstanding voting power of AboveNet common stock,   
entered into a voting agreement with Metromedia. These stockholders have agreed 
to vote in favor of the merger, the merger agreement, and the transactions      
contemplated by the merger agreement. They have also agreed to vote against any 
proposal for any extraordinary corporate transaction between AboveNet and any   
person (other than Metromedia or its subsidiaries) or any other action or       
agreement in each case that is intended or could reasonably be expected to (1)  
result in a breach of any covenant, representation or warranty or any other     
obligation or agreement of AboveNet under the merger agreement, (2) result in   
any of the conditions to AboveNet's obligations under the merger agreement not  
being fulfilled or (3) materially impede, interfere with, delay, postpone or    
materially adversely affect the merger and the transactions contemplated by the 
merger agreement. These stockholders have also agreed not to transfer or assign 
any of their shares of AboveNet common stock prior to the closing date or       
termination of the merger agreement.                                            

EMPLOYMENT AGREEMENTS                                                           

TUAN EMPLOYMENT AGREEMENT                                                       

    In anticipation of the merger and as a condition to Metromedia's willingness
to enter into the merger agreement, on June 22, 1999, AboveNet and Sherman Tuan,
chairman and chief executive officer of AboveNet, entered into an employment    
agreement which will become effective upon consummation of the merger and will  
replace Mr. Tuan's existing employment agreement. The following is a summary of 
the material terms of the employment agreement.                                 

TERM                                                                    

   The employment agreement with Mr. Tuan provides for his employment from the
effective date of the merger through the third anniversary of the merger. After 
this initial term of employment, the employment agreement will be automatically 
renewed for successive one-year periods unless terminated by either party upon  
written notice given not less than three months prior to the expiration of the  
then-current term.                                                              

POSITION                                                                

  Mr. Tuan will act as chief executive officer of AboveNet. As such, he will
be responsible for those duties consistent with his position. Mr. Tuan is also  
to be elected to Metromedia's board of directors at the closing of the merger.  

COMPENSATION                                                            

  The employment agreement with Mr. Tuan provides for an initial base salary
of $250,000 for each year of the term or at such higher rate as the board of    
Metromedia determines in its sole discretion. The base salary will be increased 
by at least 10% in each year of the term. The employment agreement also provides
for an annual bonus of $150,000 based upon performance targets established by   
the board of Metromedia at the beginning of each employment year.               

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STOCK OPTIONS                                                           

  Upon completion of the merger, Mr. Tuan will receive first incentive stock
options, up to the extent legally permissible, and then nonqualified stock      
options to purchase 500,000 shares of Metromedia's class A common stock at an   
exercise price equal to the fair market value on the date of grant. Mr. Tuan    
will be vested as to one-third of the option shares on each of the first three  
anniversaries of the effective date of the employment agreement.                

TERMINATION                                                             

   The employment agreement may be terminated in the event of Mr. Tuan's death
or disability, for cause or as a result of a material breach by Metromedia      
(including if Mr. Tuan is not elected to the Metromedia board of directors). If 
Mr. Tuan's employment agreement is terminated for cause, he will be entitled to 
receive only his base salary through the date of termination and any previously 
accrued and unpaid benefits. If the employment agreement is terminated for death
or disability, Mr. Tuan will be entitled to base salary though the date of      
termination and any additional compensation to which he is entitled, prorated to
the date of termination.                                                        

If the employment agreement is terminated without cause by Metromedia or
upon a material breach of the agreement by Metromedia, Mr. Tuan is entitled to  
base salary through the date of termination, any additional compensation to     
which he is entitled prorated to the date of termination, continuing payments of
base salary for 18 months following termination, coverage for Mr. Tuan and his  
dependents for 2 years under certain insurance plans sponsored by Metromedia or 
AboveNet, and immediate vesting of all options.                                 

INSURANCE                                                               

Metromedia and AboveNet will be obligated to continue to pay all current
insurance policies covering Mr. Tuan.                                           

NON-COMPETITION PROVISIONS                                              

  The employment agreement subjects Mr. Tuan during, and for 18 months after
the termination of, his employment to a restriction on, among other things,     
directly or indirectly competing with AboveNet by serving as an officer,        
director or employee of, or consultant to, any competitor of Metromedia or      
AboveNet that sells or offers to sell any products or services which compete    
with those offered or sold by Metromedia or AboveNet. He is also restricted in  
his dealings with customers of Metromedia and AboveNet.                         

RAND EMPLOYMENT AGREEMENT                                                       

    In anticipation of the merger and as a condition to Metromedia's willingness
to enter into the merger agreement, on June 22, 1999, AboveNet and David Rand,  
chief technology officer of AboveNet, entered into an employment agreement which
will become effective upon consummation of the merger and will replace Mr.      
Rand's existing employment agreement. The following is a summary of the material
terms of the employment agreement.                                              

TERM                                                                    

The letter agreement with Mr. Rand provides for his employment for five 
years from the closing of the merger. After this initial term of employment, the
letter agreement will be automatically extended for additional periods of one   
year unless terminated by either party upon written notice given not less than  
three months prior to the expiration of the then-current term.                  

POSITION                                                                

Mr. Rand will act as chief technology officer of AboveNet. Mr. Rand will
also be elected to the Metromedia board of directors.                           

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COMPENSATION                                                            

 The letter agreement with Mr. Rand provides for an initial base salary of
$250,000 for each year of the term or at such higher rate as the board of       
Metromedia shall determine in its sole discretion. The letter agreement also    
provides for an annual bonus of $125,000 based upon performance targets         
established by the board of Metromedia at the beginning of each employment year.

STOCK OPTIONS                                                           

Upon completion of the merger, Mr. Rand will receive stock options to   
purchase 500,000 shares of Metromedia's class A common stock at an exercise     
price equal to the fair market value on the date of grant. Mr. Rand will be     
vested in 25% of the option shares on the first anniversary of the effective    
date of the employment agreement and 25% of the options on each anniversary for 
the next three years.                                                           

TERMINATION                                                             

The letter agreement with Mr. Rand may be terminated in the event of his
death or disability, for cause or as a result of a material breach of Metromedia
(including if Mr. Rand is not elected to the Metromedia board of directors). If 
the letter agreement is terminated for cause, Mr. Rand will be entitled to no   
further compensation. If the letter agreement is terminated for disability, he  
will be entitled to compensation and reimbursement amounts provided in the      
letter agreement prorated to the date of termination.                           

If the letter agreement is terminated because of a material breach by   
Metromedia, Mr. Rand will be entitled to his unpaid salary through the date of  
termination, all previously earned and accrued entitlement and benefits from    
Metromedia and its employee benefit plans, an amount equal to the product of Mr.
Rand's base salary as determined in accordance with the letter agreement        
multiplied by two, continued coverage for Mr. Rand and any covered dependents   
for two years under all health, life and disability insurance plans sponsored by
Metromedia or AboveNet at premium rates in effect at the time of the            
termination, and immediate vesting of all options held by Mr. Rand.             

NON-COMPETITION PROVISIONS                                              

 The employment agreement subjects Mr. Rand during and 24 months after the
termination of his employment to a restriction on, among other things, directly 
or indirectly competing with AboveNet by serving as an officer, director or     
employee of, or consultant to, any competitor of Metromedia or AboveNet that    
sells or offers to sell any products or services which compete with those       
offered or sold by Metromedia or AboveNet. He is also restricted in his dealings
with customers of Metromedia and AboveNet.                                      

OTHER AGREEMENTS                                                        

At the closing of the merger, Mr. Rand will enter into a proprietary    
information and inventions agreement with AboveNet whereby he agrees, among     
other things, to license or assign specified intellectual property to AboveNet  
and to hold certain information concerning AboveNet and Metromedia confidential.

OPTION AGREEMENT                                                                

In connection with the merger agreement, AboveNet granted Metromedia an 
irrevocable option to purchase 6,875,560 shares of AboveNet common stock at a   
purchase price equal to $49.9375 per share. The option may be exercised, in     
whole or in part, at any time prior to the termination of the option agreement, 
after the occurrence of any event as a result of which the merger agreement is  
terminated and Metromedia is entitled to receive payment of the termination fee 
described above in the section entitled "THE MERGER AGREEMENT--Termination Fees 
and Expenses." The following is a brief summary on the material provisions of   
the option agreement. A copy of the option agreement is attached as Appendix B  
to this document and is incorporated in this document by reference. WE URGE YOU 
TO READ THE OPTION AGREEMENT CAREFULLY AND IN ITS ENTIRETY.                     

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TERM                                                                    

The option terminates on the earliest of:                               

- the effective time of the merger;                                     

- the termination of the merger agreement other than under circumstances
      which would (either immediately or upon satisfaction of conditions to such
entitlement) entitle Metromedia to receive the termination fee as   
described above; or                                                 

    - the date which is twelve months after termination of the merger agreement,
    under circumstances which would (either immediately or upon satisfaction
of conditions to such entitlement) entitle Metromedia to receive the
termination fee as described above.                                 

REGISTRATION OF SHARES                                                  

    If the option is exercised by Metromedia, the shares received by it would be
unregistered securities under the Securities Act of 1933. As such, no           
disposition of those shares could be made except pursuant to an effective       
registration statement under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act.                            

   AboveNet has agreed that, if requested by Metromedia at any time within two
years of the first exercise of the option, it will prepare, file, and cause to  
be made effective, up to two registration statements under the Securities Act,  
in order to permit the offering, sale and delivery or other disposition of the  
shares acquired through exercise of the option.                                 

ADJUSTMENT UPON CHANGES IN CAPITALIZATION                               

In the event of any change in the issued and outstanding common stock of
AboveNet, by reason of a distribution, reclassification, stock dividend,        
split-up, combination, recapitalization, exchange of shares or similar          
transaction, the type and number of shares subject to the option, and the       
exercise price thereof, shall be adjusted appropriately, so that Metromedia will
receive, upon exercise of the option, the same class and number of outstanding  
shares as would have been received had the option been exercised before the     
proposed change.                                                                

REPURCHASE OPTIONS                                                      

   At any time after the option is exercisable and prior to the termination of
the option, Metromedia may require AboveNet to repurchase that portion of the   
option that remains unexercised at a purchase price per share subject to the    
option equal to the difference between the average closing sales price per share
of AboveNet common stock during the 20 trading days prior to such request and   
the exercise price per share of the option; provided that the repurchase price  
shall not exceed $1.00 per share. In addition, upon receiving notice of         
Metromedia's intention to exercise the option, AboveNet is entitled, immediately
following exercise of the option, to repurchase any shares of AboveNet common   
stock issued upon exercise at a repurchase price per share equal to the exercise
price per share of the option plus $1.00.                                       

PROFIT LIMITATION                                                       

 Metromedia may not exercise its rights under the option agreement and the
termination fee provisions of the merger agreement as described above in the    
section entitled "The Merger Agreement--Termination Fee and Expenses" in a      
manner that would result in a cash payment to Metromedia of an aggregate amount 
of more than the sum of: (a) the aggregate price paid by Metromedia for any     
option shares as to which the option had been previously exercised, plus (b)    
$50,000,000. Any amounts payable pursuant to the option agreement and the       
termination fee provisions of the merger agreement will be reduced appropriately
so that the aggregate amount payable by AboveNet will not exceed such sum.      

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METROMEDIA
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION 

   The following unaudited pro forma condensed combining financial information
illustrates the effect of the merger of AboveNet with a wholly owned subsidiary 
of Metromedia under the terms of the merger agreement. Under the terms of the   
merger agreement, the holders of AboveNet common stock will receive 1.175 shares
of Metromedia class A common stock for each share of AboveNet common stock. The 
share price used to determine the acquisition cost was derived by taking the    
average of the closing price of Metromedia's class A common stock for the two   
days prior to and subsequent to the announcement of the proposed merger, which  
was June 23, 1999.                                                              

On June 21, 1999, AboveNet acquired the assets and assumed obligations  
related to the Palo Alto Internet Exchange (PAIX) from Compaq Computer          
Corporation for approximately $76.5 million, consisting of $70 million in cash, 
an obligation to provide various services to Compaq Computer Corporation with a 
value currently estimated to be approximately $5 million and expenses of        
approximately $1.5 million.                                                     

   On April 30, 1999, AboveNet sold 5,650,356 shares of its common stock in an
underwritten public offering at a price of $42.50 per share and on May 5, 1999  
sold an additional 1,200,000 shares through the exercise of the underwriters'   
over-allotment option. Net proceeds to AboveNet were approximately $273.5       
million.                                                                        

    On May 20, 1999, Metromedia completed a two-for-one stock split of its class
A and class B common stock in the form of a 100% stock dividend to all          
stockholders of record as of the close of business on May 3, 1999. On May 7,    
1999, AboveNet completed a two-for-one stock split of its common stock in the   
form of a 100% stock dividend to all stockholders of record as of the close of  
business on April 14, 1999.                                                     

   The unaudited pro forma condensed combining financial information presented
herein gives effect to Metromedia's acquisition of AboveNet, AboveNet's         
acquisition of PAIX, AboveNet's sales of common stock and each of Metromedia's  
and AboveNet's stock splits. The pro forma condensed combining financial        
information is based on the historical financial statements of Metromedia,      
AboveNet and PAIX.                                                              

AboveNet has a fiscal year end of June 30. The unaudited historical     
information for AboveNet for the year ended December 31, 1998 consists of the   
period from January 1, 1998 to June 30, 1998 combined with the period from July 
1, 1998 to December 31, 1998 derived from AboveNet's historical unaudited       
financial statements.                                                           

    The unaudited pro forma condensed combining statements of operations for the
three months ended March 31, 1999 and for the year ended December 31 1998 give  
effect to the above transactions as if they had been consummated at January 1,  
1998. The unaudited pro forma condensed combining balance sheets, as of March   
31, 1999, give effect to the above transactions as if they had been consummated 
on March 31, 1999.                                                              

ACCOUNTING TREATMENT                                                            

 Metromedia plans to record the acquisition of AboveNet using the purchase
method of accounting. Accordingly, the assets acquired and liabilities assumed  
will be recorded at their estimated fair values, which are subject to further   
adjustment based upon appraisals and other analyses.                            

  AboveNet plans to record the acquisition of PAIX using the purchase method
of accounting. Accordingly, the assets acquired and obligations assumed will be 
recorded at their estimated fair values, which are subject to further           
adjustments based upon appraisals and other analyses.                           

The pro forma adjustments are based upon available information and      
assumptions that we believe are reasonable at the time made. The unaudited pro  
forma condensed combined financial statements do not purport to present our     
financial position or results of operations had the transactions occurred on the
dates specified, nor are they necessarily indicative of the financial position  
or results of operations that may be achieved in the future. The unaudited pro  
forma condensed combined statements of operations do not reflect any adjustments
for synergies that we expect to realize following consummation of the           
transactions. No assurances can be made as to the amount of cost savings or     
revenue enhancements, if any, that may be realized.                             

  The unaudited pro forma condensed combining financial statements should be
read in conjunction with the consolidated financial statements and notes of     
Metromedia, AboveNet and PAIX. Metromedia has incorporated its historical       
financial statements in this document by reference and the AboveNet and PAIX    
financial statements and related notes are included in this document beginning  
on page F-1.                                                                    

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METROMEDIA FIBER NETWORK, INC.

PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS

(UNAUDITED) 

FOR THE THREE MONTHS ENDED MARCH 31, 1999 

(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                          PRO FORMA FOR                                        
                                    ABOVENET       PAIX                     ACQUIRED     METROMEDIA                            
                                   HISTORICAL   HISTORICAL   ADJUSTMENTS    ENTITIES     HISTORICAL   ADJUSTMENTS   PRO FORMA  
                                   -----------  -----------  -----------  -------------  -----------  -----------  ----------- 
                                                                                                                               
Revenue..........................   $   3,851    $   1,534    $      --     $   5,385     $  18,379    $      --    $  23,764  
Expenses:                                                                                                                      
  Cost of sales..................       4,573          516           --         5,089         8,258           --       13,347  
  Selling, general and                                                                                                         
    administrative...............       4,490          131           --         4,621         6,073           --       10,694  
  Consulting and employment                                                                                                    
    incentives...................         113           --           --           113            --           --          113  

  Depreciation and                                                1,828(1)                                (1,828)(3)           
    amortization.................         802          993         (893)(1)       2,730       1,195       18,964(4)     21,061 
                                   -----------  -----------  -----------  -------------  -----------  -----------  ----------- 

Income (loss) from                                                                                                             
      operations.................      (6,127)        (106)        (935)       (7,168)        2,853      (17,136)     (21,451) 
  Interest income................         694           --           --           694         7,437         (143)(5)      7,988
  Interest expense...............        (423)          --           --          (423)      (15,904)         423(5)    (15,904)
  Loss in joint venture..........          --           --           --            --          (200)          --         (200) 
                                   -----------  -----------  -----------  -------------  -----------  -----------  ----------- 
Net loss before income taxes.....      (5,856)        (106)        (935)       (6,897)       (5,814)     (16,856)     (29,567) 
  Income taxes...................          --           --           --            --            --           --           --  
                                   -----------  -----------  -----------  -------------  -----------  -----------  ----------- 
Net loss.........................   $  (5,856)   $    (106)   $    (935)    $  (6,897)    $  (5,814)   $ (16,856)   $ (29,567) 
                                   -----------  -----------  -----------  -------------  -----------  -----------  ----------- 
                                   -----------  -----------  -----------  -------------  -----------  -----------  ----------- 
Net loss per share--basic........                                                         $   (0.03)                $   (0.13) 
                                                                                         -----------               ----------- 
                                                                                         -----------               ----------- 
Net loss per share--diluted......                                                               n/a                       n/a  
                                                                                         -----------               ----------- 
                                                                                         -----------               ----------- 
Weighted average number of shares                                                                                              
  outstanding--basic (6) (7).....                                                           189,002                   229,166  
                                                                                         -----------               ----------- 
                                                                                         -----------               ----------- 
Weighted average number of shares                                                                                              
  outstanding--diluted...........                                                               n/a                       n/a  
                                                                                         -----------               ----------- 
                                                                                         -----------               ----------- 

See accompanying notes to unaudited pro forma condensed combining financial 
statements

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METROMEDIA FIBER NETWORK, INC.

PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS
(UNAUDITED) 

FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                      PRO FORMA                                           
                                                                         FOR                                              
                               ABOVENET       PAIX                     ACQUIRED    METROMEDIA                             
                              HISTORICAL   HISTORICAL   ADJUSTMENTS    ENTITIES    HISTORICAL   ADJUSTMENTS   PRO FORMA   
                              -----------  -----------  -----------  ------------  -----------  -----------  -----------  
                                                                                                                          
Revenue......................  $   6,777    $   4,362    $      --    $   11,139    $  36,436    $      --    $  47,575   
Expenses:                                                                                                                 
  Cost of sales..............      7,551        2,583           --        10,134       13,937           --       24,071   
  Selling, general and                                                                                                    
    administrative...........      7,843          450           --         8,293       14,712           --       23,005   
  Consulting and employment                                                                                               
    incentives...............      2,396           --           --         2,396        3,648           --        6,044   
  Depreciation and                                          (1,944)(1)                              (7,313)(4)            
    amortization.............      1,497        2,349        7,313(1)       9,215       1,532       75,854(4)     79,288  
                              -----------  -----------  -----------  ------------  -----------  -----------  -----------  
Income (loss) from                                                                                                        
  operations.................    (12,510)      (1,020)      (5,369)      (18,899)       2,607      (68,541)     (84,833)  
  Interest income............        337           --           --           337        8,788          (50)(5)      9,075 
  Interest expense...........       (529)          --           --          (529)      (6,861)        (125)(5)     (7,515)
  Loss in joint venture......         --           --           --            --         (146)          --         (146)  
                              -----------  -----------  -----------  ------------  -----------  -----------  -----------  
Net income (loss) before                                                                                                  
    income taxes.............    (12,702)      (1,020)      (5,369)      (19,091)       4,388      (68,716)     (83,419)  
  Income taxes...............         --           --           --            --        3,402       (3,402)(8)         -- 
                              -----------  -----------  -----------  ------------  -----------  -----------  -----------  
Net income (loss)............  $ (12,702)   $  (1,020)   $  (5,369)   $  (19,091)   $     986    $ (65,314)   $ (83,419)  
                              -----------  -----------  -----------  ------------  -----------  -----------  -----------  
                              -----------  -----------  -----------  ------------  -----------  -----------  -----------  
Net income (loss) per                                                                                                     
  share--basic...............                                                       $    0.01                 $   (0.37)  
                                                                                   -----------               -----------  
                                                                                   -----------               -----------  
Net income (loss) per                                                                                                     
  share--diluted.............                                                       $    0.00                       n/a   
                                                                                   -----------               -----------  
                                                                                   -----------               -----------  
Weighted average number of                                                                                                
  shares outstanding-basic                                                                                                
  (6) (7)....................                                                         186,990                   227,154   
                                                                                   -----------               -----------  
                                                                                   -----------               -----------  
Weighted average number of                                                                                                
  shares outstanding--                                                                                                    
  diluted....................                                                         219,524                       n/a   
                                                                                   -----------               -----------  
                                                                                   -----------               -----------  

See accompanying notes to unaudited pro forma condensed combining financial 
statements

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METROMEDIA FIBER NETWORK, INC.

PRO FORMA CONDENSED COMBINING BALANCE SHEETS
(UNAUDITED) 

MARCH 31, 1999
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                               PRO FORMA                                           
                                                                  FOR                                              
                         ABOVENET      PAIX                     ACQUIRED   METROMEDIA                              
                        HISTORICAL  HISTORICAL   ADJUSTMENTS    ENTITIES   HISTORICAL    ADJUSTMENTS     PRO FORMA 
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------
                                                                                                                   
ASSETS                                                                                                             
Current assets:                                                                                                    
  Cash and cash                                                                                                    
    equivalents.......   $44,948     $    --    $(71,500)(1)   $246,948    $  415,580  $  (11,921)(3)    $ 630,607 
                                                273,500(2)                                (20,000)(3)              
  Short-term                                                                                                       
    investments.......    11,744          --         --          11,744            --          --           11,744 
  Pledged                                                                                                          
    securities........        --          --         --              --        62,089          --           62,089 
  Accounts                                                                                                         
    receivable........     1,851         102         --           1,953        52,174          --           54,127 
  Prepaid amd other                                                                                                
    current assets....     1,301          29         --           1,330         2,187          --            3,517 
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------
      Total current                                                                                                
        assets........    59,844         131    202,000         261,975       532,030     (31,921)         762,084 
Fiber optic                                                                                                        
  transmission network                                                                                             
  and related                                                                                                      
  equipment, net......     9,080          --         --           9,080       339,730          --          348,810 
Property and                                                                                                       
  equipment, net......    24,394       3,405         --          27,799         3,087          --           30,886 
Pledged securities and                                                                                             
  restricted cash.....     1,220          --         --           1,220        91,284          --           92,504 
Other assets..........     1,645          --         --           1,645        40,195          --           41,840 
Intangible assets.....        --      32,864    (32,864)(1)      73,130            --     (73,130)(3)    1,517,073 
                                                 73,130(1)                              1,517,073(3)               
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------
      Total assets....   $96,183     $36,400    $242,266       $374,849    $1,006,326  $1,412,022        $2,793,197
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------
LIABILITIES AND                                                                                                    
  STOCKHOLDERS' EQUITY                                                                                             
Current liabilities:                                                                                               
  Accounts payable....     8,521          --         --           8,521        14,036          --           22,557 
  Accrued expenses....     2,116          --         --           2,116       126,802          --          128,918 
  Current portion of                                                                                               
    deferred                                                                                                       
    revenue...........       971         166        250(1)        1,387        10,148          --           11,535 
  Current portion of                                                                                               
    long-term                                                                                                      
    obligations.......     3,511          --         --           3,511            55      (2,494)(3)        1,072 
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------
      Total current                                                                                                
        liabilities...    15,119         166        250(1)       15,535       151,041      (2,494)         164,082 
Notes payable.........        --          --         --              --       650,000          --          650,000 
Capital lease                                                                                                      
  obligation, net of                                                                                               
  current portion.....        --          --         --              --        22,823          --           22,823 
Deferred revenue......        --          --      4,750(1)        4,750        33,344          --           38,094 
Long-term                                                                                                          
  obligations.........     9,973          --         --           9,973            --      (9,427)(3)          546 
Total stockholders'                                                                                                
  equity..............    71,091      36,234    237,266(1)(2)   344,591       149,118   1,423,943(3)(6)  1,917,652 
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------
      Total                                                                                                        
        liabilities                                                                                                
        and                                                                                                        
        stockholders'                                                                                              
        equity........   $96,183     $36,400    $242,266       $374,849    $1,006,326  $1,412,022        $2,793,197
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------
                        ----------  ----------  -------------  ----------  ----------  ---------------   ----------

See accompanying notes to unaudited pro forma condensed combining financial 
statements

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METROMEDIA FIBER NETWORK, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS 

(1) Reflects the acquisition by AboveNet of PAIX at March 31, 1999 for the      
balance sheet and January 1, 1998 for the income statements as follows: 

(i) the payment of cash for the acquisition of PAIX in the amount of $70
million; and                                                      

(ii) the excess of cost (currently estimated to be approximately $76.5  
 million) over net tangible assets acquired of PAIX of $3.4 million.

 AboveNet has made a preliminary allocation to intangible assets of excess
cost over estimated net tangible assets as PAIX's tangible assets and   
   liabilities approximate fair value. However, there can be no assurance that
the actual allocation will not differ significantly from the pro forma  
allocation.                                                             

(2) Reflects the sale of 6,850,356 shares of AboveNet common stock for net      
proceeds of $273.5 million in May 1999.                                 

(3) Reflects the acquisition by Metromedia of AboveNet at March 31, 1999 for the
balance sheet and January 1, 1998 for the income statements as follows: 

   (i) the issuance of approximately 40.2 million shares of Metromedia class A
     common stock in exchange for shares of AboveNet common stock at a ratio
of 1.175;                                                         

(ii) the payment of AboveNet's outstanding credit facility, which is    
required to be repaid under the terms of Metromedia's senior note 
indenture;                                                        

    (iii) the elimination of AboveNet's historical net tangible assets acquired;
and                                                               

(iv) issuance of shares of Metromedia class A common stock.             

                                                                [Download Table]
                                                                                  
Number of shares issued to acquire AboveNet............. 40,164,245               
Per share price of stock................................    $40.36                
                                                         ---------                
Value of shares issued..................................            $1,621,029,000
Value of Metromedia options and warrants issued in                                
  exchange for AboveNet's options and warrants..........               156,635,000
Transaction costs.......................................                20,000,000
                                                                    --------------
Total acquisition cost..................................             1,797,664,000
AboveNet's net tangible assets acquired.................               280,591,000
                                                                    --------------
Excess of cost over net tangible assets acquired........            $1,517,073,000
                                                                    --------------
                                                                    --------------

   Metromedia has made a preliminary allocation to intangible assets of excess
cost over estimated net tangible assets acquired as AboveNet's tangible 
assets and liabilities are estimated to approximate fair value. However,
there can be no assurance that the actual allocation will not differ    
significantly from the pro forma allocation.                            

(4) Reflects amortization of the excess of cost over net tangible assets        
acquired in the merger by use of the straight-line method over 20 years.

(5) Reflects the elimination of interest expense attributable to the AboveNet   
    credit facility and the elimination of interest income for funds utilized in
the repayment of the AboveNet credit facility.                          

(6) The average common shares outstanding used in calculating pro form loss per 
   common share are calculated assuming that the estimated number of shares of
   Metromedia class A common stock to be issued in the merger were outstanding
from the beginning of the periods presented.                            

(7) Reflects the stock splits of both Metromedia and AboveNet.                  

(8) Reflects the adjustment of the tax provision.                               

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ABOVENET
UNAUDITED PRO FORMA FINANCIAL INFORMATION 

The following unaudited pro forma financial information illustrates the 
effect of the acquisition by AboveNet of assets and assumed obligations related 
to the Palo Alto Internet Exchange (PAIX) from Compaq Computer Corporation      
(Compaq) on June 21, 1999. The consideration included $70.0 million in cash and 
an obligation to provide various services to Compaq, with a value currently     
estimated to be approximately $5.0 million, and AboveNet incurred costs of $1.5 
million, resulting in a total purchase cost of $76.5 million.                   

  The unaudited pro forma financial information presented herein is based on
the historical financial statements of AboveNet and PAIX. The historical        
financial statements of PAIX include (i) a combined statement of assets to be   
acquired and liabilities to be assumed (which includes only the assets to be    
acquired and liabilities to be assumed by AboveNet in accordance with the asset 
purchase agreement entered into with Compaq), and (ii) a combined statement of  
revenues and direct expenses (which includes only those revenues and expenses   
directly related to the PAIX business).                                         

    The unaudited pro forma condensed combining statements of operations for the
nine months ended March 31, 1999 and for the year ended June 30, 1998 give      
effect to the acquisition of PAIX as if it had been consummated on July 1, 1997.
The unaudited pro forma condensed combining balance sheet as of March 31, 1999  
gives effect to the acquisition of PAIX as if it had been consummated on March  
31, 1999. This method of combining the companies is only for the presentation of
pro forma financial information. Actual statements of operations will include   
the results of PAIX from the date of acquisition, with no retroactive           
restatement.                                                                    

    The pro forma adjustments are based on available information and assumptions
that AboveNet believes are reasonable at the time made. The unaudited pro forma 
condensed combining financial statements do not purport to present AboveNet's   
financial position or results of operations had the acquisition of PAIX occurred
on the dates specified, nor are they necessarily indicative of the financial    
position or results of operations that may be achieved in the future. The       
unaudited pro forma condensed combining statements of operations do not reflect 
any adjustments for synergies that might be realized upon consummation of the   
acquisition of PAIX. No assurances can be made as to the amount of cost savings 
or revenue enhancements, if any, that may be realized.                          

  The unaudited pro forma condensed combining financial statements should be
read in conjunction with the historical financial statements of AboveNet and    
PAIX.                                                                           

AboveNet plans to account for the acquisition of PAIX using the purchase
method of accounting. Accordingly, the assets acquired and liabilities assumed  
have been recorded at their estimated fair values, which are subject to further 
adjustment based on future events and further analysis.                         

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ABOVENET COMMUNICATIONS INC.
PRO FORMA CONDENSED COMBINING BALANCE SHEET 
MARCH 31, 1999
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                               PRO FORMA        PRO FORMA      
                                                ABOVENET          PAIX        ADJUSTMENTS       COMBINED       
                                             --------------  --------------  --------------  ---------------   
                                                                                                               
ASSETS                                                                                                         
Current assets:                                                                                                
  Cash and equivalents...................... $   44,947,700  $           --  $  (44,000,000 (1) $       947,700
  Short-term investments....................     11,744,200              --     (11,744,200 (1)              --
  Accounts receivable, net..................      1,851,000         102,000              --        1,953,000   
  Prepaid expenses and other current                                                                           
    assets..................................      1,301,200          29,000              --        1,330,200   
                                             --------------  --------------  --------------  ---------------   

  Total current assets......................     59,844,100         131,000     (55,744,200)       4,230,900   

Property and equipment, net.................     24,393,800       3,405,000              --       27,798,800   
Rights to use fiber optic capacity..........      9,080,000              --              --        9,080,000   
Restricted cash.............................      1,220,000              --              --        1,220,000   
Other assets................................      1,644,800              --              --        1,644,800   
Intangible assets...........................             --      32,864,000     (32,864,000 (4)      73,130,000
                                                                                 73,130,000(3)                 
                                             --------------  --------------  --------------  ---------------   
  Total..................................... $   96,182,700  $   36,400,000  $  (15,478,200) $   117,104,500   
                                             --------------  --------------  --------------  ---------------   
                                             --------------  --------------  --------------  ---------------   

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                           
Current liabilities:                                                                                           
  Accounts payable.......................... $    8,521,000  $           --  $           --  $     8,521,000   
  Remaining obligation for rights to use                                                                       
    fiber optic capacity....................        800,000              --              --          800,000   
  Accrued liabilities.......................      1,315,800              --              --        1,315,800   
  Customer deposits.........................        971,300         166,000              --        1,137,300   
  Current portion of long-term                                                                                 
    obligations.............................      3,511,200              --         250,000(2)      19,517,000 
                                                                                 15,755,800(1)                 
                                             --------------  --------------  --------------  ---------------   
  Total current liabilities.................     15,119,300         166,000      16,005,800       31,291,100   

Other long-term obligations.................      9,972,500              --       4,750,000(2)      14,722,500 
                                             --------------  --------------  --------------  ---------------   
Total stockholders' equity..................     71,090,900      36,234,000     (36,234,000 (5)      71,090,900
                                             --------------  --------------  --------------  ---------------   
  Total..................................... $   96,182,700  $   36,400,000  $  (15,478,200) $   117,104,500   
                                             --------------  --------------  --------------  ---------------   
                                             --------------  --------------  --------------  ---------------   

See accompanying notes to unaudited pro forma condensed combining financial 
statements

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ABOVENET COMMUNICATIONS INC.
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS 
TWELVE MONTHS ENDED JUNE 30, 1998 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                                 PRO FORMA       PRO FORMA       
                                                   ABOVENET         PAIX        ADJUSTMENTS       COMBINED       
                                                --------------  -------------  --------------  --------------    
                                                                                                                 
Revenues....................................... $    3,436,400  $   3,164,000  $           --  $    6,600,400    
Costs and expenses:                                                                                              

  Cost of revenues.............................             --      2,896,000              --       2,896,000    
  Data communications and telecommunications...      2,199,800             --              --       2,199,800    
  Network operations...........................      1,571,800         35,000              --       1,606,800    
  Sales, general and administrative............      3,240,200        686,000              --       3,926,200    
  Depreciation and amortization................        475,500             --              --         475,500    
  Amortization of intangibles..................             --        188,000        (188,000 (4)      7,313,000 
                                                            --             --       7,313,000(6)             --  
  Stock-based compensation expense.............      1,276,400             --              --       1,276,400    
                                                --------------  -------------  --------------  --------------    
    Total costs and expenses...................      8,763,700      3,805,000       7,125,000      19,693,700    

Loss from operations...........................     (5,327,300)      (641,000)     (7,125,000)    (13,093,300)   
Interest expense...............................       (160,800)            --     (10,650,000 (7)    (10,810,800)
Interest and other income......................         63,100             --              --          63,100    
                                                --------------  -------------  --------------  --------------    
Net loss....................................... $   (5,425,000) $    (641,000) $  (17,775,000) $  (23,841,000)   
                                                --------------  -------------  --------------  --------------    
                                                --------------  -------------  --------------  --------------    

Basic and diluted loss per share............... $       (10.34)                                $       (45.45)   
Shares used in basic and diluted loss per                                                                        
  share........................................        524,608                                        524,608    

See accompanying notes to unaudited pro forma condensed combining financial 
statements

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ABOVENET COMMUNICATIONS INC.
PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS 
NINE MONTHS ENDED MARCH 31, 1999
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                                 PRO FORMA       PRO FORMA       
                                                   ABOVENET         PAIX        ADJUSTMENTS       COMBINED       
                                                --------------  -------------  --------------  --------------    
                                                                                                                 
Revenues....................................... $    8,297,400  $   4,067,000                  $   12,364,400    
Costs and expenses:                                                                                              
  Cost of revenues.............................             --      2,050,000                       2,050,000    
  Data communications and telecommunications...      5,705,100             --                       5,705,100    
  Network operations...........................      3,720,600          9,000                       3,729,600    
  Sales, general and administrative............     10,043,700        317,000                      10,360,700    
  Depreciation and amortization................      2,005,100                                      2,005,100    
  Amortization of intangibles..................             --      2,678,000  $   (2,678,000 (4)      5,484,700 
                                                                                    5,484,700(6)                 
  Stock-based compensation expense.............      1,282,800             --                       1,282,800    
                                                --------------  -------------  --------------  --------------    
    Total costs and expenses...................     22,757,300      5,054,000       2,806,700      30,618,000    
                                                --------------  -------------  --------------  --------------    
Loss from operations...........................    (14,459,900)      (987,000)     (2,806,700)    (18,253,600)   
Interest expense...............................       (916,400)                    (9,185,600 (7)    (10,102,000)
Interest and other income......................        976,800                                        976,800    
                                                --------------  -------------  --------------  --------------    
Net loss....................................... $  (14,399,500) $    (987,000) $  (11,992,300) $  (27,378,800)   
                                                --------------  -------------  --------------  --------------    
                                                --------------  -------------  --------------  --------------    
Basic and diluted loss per share............... $        (1.25)                                $        (2.38)   
Shares used in basic and diluted loss per                                                                        
  share........................................     11,484,816                                     11,484,816    

See accompanying notes to unaudited pro forma condensed combining financial 
statements

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ABOVENET COMMUNICATIONS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS 

The following pro forma adjustments have been made to the pro forma     
combining financial statements:                                                 

(1) Reflects funds used for the acquisition of PAIX of approximately $71.5      
    million, including acquisition costs. Funds for the purchase were assumed to
be derived from the following sources:                                  

                                                                [Download Table]
                                                                            
Cash and equivalents...........................................  $44,000,000
Short-term investments.........................................  11,744,200 
Assumed borrowings.............................................  15,755,800 
                                                                 ---------- 
Total..........................................................  $71,500,000
                                                                 ---------- 

(2) Reflects an obligation to provide various services to Compaq, with a value  
currently estimated to be approximately $5 million.                     

(3) Reflects the excess of cost over net tangible assets acquired.              

(4) Reflects the elimination of PAIX historical intangibles and related         
amortization.                                                           

(5) Reflects the elimination of PAIX stockholders' equity.                      

(6) Reflects amortization of the excess of cost over net assets acquired by use 
of the straight-line method over 10 years.                              

(7) Reflects interest expense on assumed borrowings of $71,500,000, which were  
    assumed to be necessary to complete the acquisition of PAIX on July 1, 1997,
at AboveNet's assumed incremental borrowing rate of 15%, compounded     
 annually. At July 1, 1997, AboveNet had limited cash resources available,
    and accordingly it was assumed that the entire $71,500,000 was financed with
debt.                                                                   

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BUSINESS OF METROMEDIA

Metromedia is a facilities-based provider of technologically advanced,  
high-bandwidth, fiber optic communications infrastructure to carrier and        
corporate/government customers in the United States and Europe. Metromedia has  
installed and intends to install local intracity networks that will consist of  
in excess of 1.2 million fiber miles which is equal to the number of strands of 
fiber in a length of fiber optic cable multiplied by the length of the cable in 
miles, covering approximately 9,250 route miles which is equal to the number of 
miles spanned by fiber optic cable calculated without including physically      
overlapping segments of cable, in 17 metropolitan markets in the United States  
and Europe.                                                                     

Metromedia focuses on leasing or otherwise making available for use its 
broadband communications infrastructure to two main customer groups:            
communications carriers and corporate/ government customers located in selected 
top 15 cities in the United States based on population.                         

Metromedia was founded in 1993 and is a Delaware corporation and its    
executive offices are located at One North Lexington Avenue, White Plains, NY   
10601.                                                                          

BUSINESS OF ABOVENET

 You should read the following description of AboveNet's business together
with the information included elsewhere in this document. This description      
contains certain forward-looking statements based upon current expectations that
involve risks and uncertainties. Any statements contained herein that are not   
statements of historical fact may be deemed to be forward-looking statements.   
You can identify these statements by words such as "may," "will," "should,"     
"estimates," "predicts," "potential," "continue," "strategy," "believes,"       
"anticipates," "plans," "expects," "intends" and similar expressions. AboveNet's
actual results and the timing of certain events may differ significantly from   
the results discussed in the forward-looking statements. Factors that might     
cause such a discrepancy include those discussed in "Risk Factors" and elsewhere
in this document.                                                               

RECENT DEVELOPMENT--ACQUISITION OF THE PALO ALTO INTERNET EXCHANGE              

  On June 21, 1999, AboveNet completed its acquisition of assets and assumed
obligations related to the Palo Alto Internet Exchange, or PAIX, a network      
exchange facility for managing traffic over the Internet. PAIX was acquired from
Compaq Computer Corporation and its subsidiary Digital Equipment Corporation for
a purchase price of $70 million in cash and an obligation to provide various    
services. PAIX, which began operations in July 1996, offers Internet            
interconnection and related services to telecommunications carriers, Internet   
service providers, Internet content providers and business customers. AboveNet  
believes that PAIX is the only major commercial Internet exchange that is not   
owned by a telecommunications company. PAIX will be managed as a separate       
entity, with its own management, board of directors and advisory board to ensure
its neutrality, but will remain a wholly owned subsidiary of AboveNet. AboveNet 
has agreed, among other things, to make available to Compaq and Digital         
communications capacity on an OC-3 circuit and up to 155 Mbps bandwidth of      
Internet access, and to not relocate PAIX.                                      

GENERAL                                                                         

AboveNet is a leading provider of facilities-based, managed services for
customer-owned Web servers and related equipment, known as co-location, and high
performance Internet connectivity solutions for electronic commerce and other   
business critical Internet operations. AboveNet has developed a network         
architecture based upon strategically located, fault-tolerant facilities known  
as Internet service exchanges, or ISXs. AboveNet's ISXs combine co-location     
services for Internet content providers with direct access to Internet service  
providers, or ISPs. As of March 31, 1999, AboveNet had 257 direct public and    
private data exchange connections, known as peering arrangements, including     
relationships with most major network providers. AboveNet's network architecture
and extensive peering relationships are designed to reduce the number of network
connections or "hops" for data                                                  

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traveling across the Internet. By having both Internet content providers and    
ISPs at its ISXs, AboveNet enables its ISP customers to provide their users with
"one hop" connectivity, through AboveNet's local area network, to the Web sites 
of the Internet content providers that are co-located at the same facility.     
AboveNet's customers include a wide range of Internet content providers, Web    
hosting companies and ISPs.                                                     

THE GROWTH OF THE INTERNET                                                      

  The Internet has experienced tremendous growth and is emerging as a global
medium for communications and commerce. The growth of the Internet is being     
driven by a number of factors, including the large and growing installed base of
personal computers, improvements in network architectures, increasing numbers of
network-enabled applications, the emergence of compelling content and           
commerce-enabling technologies, and easier, faster and cheaper Internet access. 
The future growth in Internet usage is also projected to be fueled by increased 
use of high speed access devices, such as cable, ADSL and other high speed      
access devices as these become more widely available and affordable. The        
increase in the availability of high-speed access devices is also expected to   
increase the demand for emerging high bandwidth technologies such as audio and  
video streaming and voice over the Internet.                                    

THE EXPANSION OF ELECTRONIC COMMERCE                                            

 The functionality and accessibility of the Internet and commercial online
services have created an increasingly attractive commercial medium by providing 
features that historically have been unavailable through traditional channels.  
In the last several years, many enterprises that focus solely on delivering     
services over the Internet have emerged and many businesses have implemented Web
sites and electronic commerce applications. Internet-based businesses have      
developed Internet products and services in areas such as finance, banking,     
entertainment, education and advertising, while other businesses are using the  
Internet for an expanding variety of applications, ranging from corporate       
publicity and advertising to sales, customer service, employee training and     
communication with business partners. The ability to offer these kinds of       
products and services requires high bandwidth Internet sites and operations. In 
addition, due to advances in on-line security and payment mechanisms, the number
of businesses establishing commerce-enabled Web sites is expected to increase   
dramatically.                                                                   

THE INTERNET INFRASTRUCTURE                                                     

   The Internet is a worldwide network of private and public computer networks
that link businesses, individuals, government agencies, universities and other  
users having disparate computer systems and networks. A multi-tiered system of  
local, regional and national ISPs has evolved to provide connectivity among     
Internet users. Data traveling across the Internet is broken down into multiple 
packets. ISPs exchange these packets of data generated by their users through   
either direct or indirect connections with other ISPs. Large ISPs often have    
multiple direct data exchange connections with other ISPs, known as peering     
relationships, either through private line connections between their routers or 
through a public peering arrangement where multiple ISPs can be connected       
through a single interface. However, significant peering relationships are      
generally unavailable to many small and mid-sized ISPs and, even if available,  
the associated telecommunications costs could be prohibitive. As a result, these
ISPs typically need to purchase indirect connection services, known as          
"transit," from a third party ISP.                                              

To address the needs of ISPs to exchange data at centralized points, a  
series of Internet exchanges were established by Internet backbone providers.   
Although there are numerous exchanges, AboveNet believes two principal exchanges
in the United States, based upon traffic volume, are MAE West in San Jose,      
California, and MAE East in Vienna, Virginia. Despite the relatively centralized
nature of these exchange points, data traveling across the dispersed Internet   
architecture often must make multiple connections or "hops" through a variety of
local, regional and national ISPs, as data moves from the originating site to   
the Internet backbone and back to the destination site.                         

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THE TREND TOWARD OUTSOURCING OF INTERNET OPERATIONS                             

 Internet operations are increasingly becoming critical to an enterprise's
commercial and communication operations. Internet-based businesses and other    
enterprises need non-stop, non-congested, fault-tolerant and scalable Internet  
operations to allow them to perform sophisticated digital communications and    
commerce transactions globally over the Internet. However, many businesses that 
are seeking to establish these sophisticated Internet operations lack the       
resources and expertise to cost-effectively develop, maintain and continually   
enhance the necessary facilities and network systems. In addition, individuals  
with the expertise to establish and maintain a sophisticated Internet service   
are scarce and their services are costly. Furthermore, businesses often find it 
difficult to keep up with new technology introductions and to integrate new     
technologies into their own information technology infrastructure. Finally, many
businesses are currently being forced to deploy their limited information       
technology resources to address the impending Year 2000 issues. As a result of  
these and other factors, many enterprises are seeking outsourcing arrangements  
to enhance Web site reliability and performance, provide continuous operation of
their Internet solutions, reduce related operating expenses and focus on their  
core business. By outsourcing these services, businesses, particularly non      
Internet-centric enterprises, can focus on their core business rather than using
their resources to support their Internet operations.                           

THE EMERGENCE OF CO-LOCATION SERVICES                                           

  A variety of companies including Web hosting companies and ISPs have begun
to focus on providing Internet co-location services. These co-location companies
typically build networks of numerous geographically dispersed data centers in   
order to be physically close to their customers. As a result of this dispersed  
geographic network, data moving from one customer to another is subject to      
increased risks of latency and data loss, as data travels across multiple       
network connections or "hops." These problems are compounded by the lack of     
available tools to monitor all of the various connection points on the Internet 
in order to identify and avoid the congested links which can cause latency and  
data loss. While these problems existed to some extent with early, less data    
intensive applications, such as e-mail, they are becoming increasingly acute    
with the growth of bandwidth intensive applications such as audio and video     
streaming. In addition, many co-location providers do not have the flexibility  
or capacity to quickly scale their services to meet the sharp growth and high   
bandwidth requirements of business critical Internet operations.                

    Internet co-location companies also typically fail to address the increasing
need of local and regional ISPs to provide enhanced connectivity to compelling  
content for their customers. Without the ability to maintain extensive peering  
relationships with large ISPs, the cost of providing redundant, reliable and    
scalable connectivity is often prohibitive for these local and regional ISPs. As
a result, they face increasing congestion as emerging applications consume more 
bandwidth. International ISPs are also seeking a means to obtain fast, reliable 
access to the large concentration of U.S.-based content. While many of these    
problems could be addressed if these ISPs co-located their facilities with      
content providers, many of the Web hosting and co-location companies also       
compete with ISPs for sales of Internet access and, therefore, ISPs are often   
reluctant to co-locate in their facilities.                                     

THE ABOVENET SOLUTION                                                           

AboveNet provides high performance, managed co-location and Internet    
connectivity services to a wide range of Internet content providers, Web hosting
companies and ISPs. Its ISX facilities provide high performance, reliable and   
scalable solutions for electronic commerce and other business critical          
applications. AboveNet currently operates two ISX campuses, located near MAE    
West and MAE East, using its suite of sophisticated network management and      
remote monitoring tools. AboveNet believes that its centralized network         
architecture provides enhanced connectivity while eliminating the need to build 
numerous geographically dispersed data centers. AboveNet's ISX model offers     
customers the benefits of combining co-location services with direct ISP access.
The convergence of content providers                                            

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and ISPs at AboveNet's ISXs enables ISPs to provide their users with "one hop"  
connectivity, through AboveNet's local area network, to the co-located content  
site. This direct connectivity minimizes the risk of delays and data loss often 
encountered in the transmission of data over the public Internet infrastructure.

   AboveNet's solution provides the following key advantages to its customers:

   SCALABILITY AND FLEXIBILITY.  AboveNet's services are designed to be highly
scalable and flexible in order to meet the needs of its customers as their      
Internet operations expand. AboveNet's network is designed to enable it to      
quickly scale bandwidth to meet its customers' needs. In addition, since        
AboveNet charges its customers based on the amount of space and bandwidth they  
use, customers are afforded a flexible, cost-effective path to increasing their 
Internet operations. AboveNet also provides flexibility for its customers by    
supporting most leading Internet hardware and software systems vendor platforms.

HIGH PERFORMANCE AND ENHANCED CONNECTIVITY.  AboveNet's services are    
designed to enhance Internet performance through redundant and high speed       
network design and AboveNet provides monitoring, notification and diagnostic    
services twenty-four hours a day, seven days a week. AboveNet is able to address
the high bandwidth needs and rapid growth of its customers' business critical   
operations by maintaining an extensive number of direct public and private      
network peering interconnections, including peering relationships with major    
network providers. In order to provide its customers with available and         
uncongested bandwidth during network traffic spikes, AboveNet is committed to   
maintaining excess network capacity. The amount of excess bandwidth at any given
time depends upon many factors including the timing of the addition of new      
circuits, the timing of customer additions and increases in usage by existing   
customers.                                                                      

 ENHANCED ACCESS FOR ISPS.  By connecting within AboveNet's ISX, ISPs have
"one hop" connectivity to content providers co-located in the same facility.    
AboveNet believes that by providing a means to reduce the number of "hops" in   
the transmission of data, its network design offers significant benefits to     
international ISPs as they seek to gain fast, reliable access to U.S.-based     
content. In addition, ISPs that participate in AboveNet's Internet service      
exchanges are able to take advantage of peering relationships generally         
available only to major network providers.                                      

SOPHISTICATED NETWORK MANAGEMENT SERVICES AND TOOLS.  By leveraging the 
knowledge gained from supporting many leading-edge Internet operations, AboveNet
provides sophisticated network management and monitoring services on twenty-four
hours a day, seven days a week basis. AboveNet's proprietary ASAP software      
monitors all of its direct and indirect network connections for latency and     
packet loss, allowing its network engineers to dynamically reroute traffic to   
avoid congested points. By utilizing ASAP, AboveNet is able to identify and     
resolve many potential problems before they impact an Internet site's           
availability or performance.                                                    

REMOTE MANAGEMENT CAPABILITIES.  AboveNet provides its customers with   
sophisticated monitoring, reporting and management tools that can be accessed by
customers remotely to control their Internet hardware, software and application 
environments. AboveNet's monitoring system probes each customer's equipment     
every five minutes and provides the customer with notice of potential problems. 
AboveNet believes that these tools, combined with its trained twenty-four hours 
a day, seven days a week support staff, provide customers with a highly         
effective means of monitoring, responding to and resolving problems,            
significantly reducing customers' needs for on-site access to their equipment.  

FAULT-TOLERANT FACILITIES.  AboveNet has built fault-tolerant facilities
designed to enable the uninterrupted operations necessary for business critical 
Internet operations. Each of its facilities is equipped with an uninterruptible 
DC and AC power supply and back-up generators for power redundancy, multi-tiered
fire suppression systems, seismically braced racks, separate and redundant      
cooling zones and security systems.                                             

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THE ABOVENET INTERNET SERVICE EXCHANGE                                          

    AboveNet's ISXs provide co-location services, Internet connectivity services
and network management services and tools. AboveNet's ISXs are designed to      
provide customers with the high performance, scalability, connectivity,         
security, reliability and expertise they need to enhance their business critical
Internet applications. AboveNet creates solutions for its customers based on    
their specific business and technical requirements, modifying the services as   
each customer's needs evolve. AboveNet's services are primarily delivered       
through centralized campuses located near MAE West and MAE East. AboveNet's     
planned New York facility will be connected to its facility located near MAE    
East by high speed, high capacity fiber optic cable. This planned facility is   
intended to facilitate access to European Internet traffic. AboveNet's          
management services and tools enable it and its customers to continuously manage
customers' Internet operations jointly, proactively and remotely.               

CO-LOCATION SERVICES                                                            

AboveNet provides co-location services designed to meet the demands of  
sophisticated, multi-vendor business critical Internet operations. AboveNet     
supports most leading Internet hardware and software system vendor platforms,   
including those from Ascend Communications, Inc., Nortel Networks, Cisco        
Systems, Inc., Compaq Computer Corporation, Dell Computer Corporation, EMC      
Corporation, Hewlett-Packard Company, International Business Machines           
Corporation, Lucent Technologies Inc., Microsoft Corporation, Apple Computer,   
Inc., Network Appliance, Inc., Silicon Graphics Inc., Sun Microsystems Inc. and 
3Com Corporation. This multi-vendor compatibility enables its customers to      
retain control over their choice of technical solution and to integrate their   
Internet operations into AboveNet's existing information technology             
architecture. Because business critical Internet operations are dynamic and     
often require timely hardware and software upgrades to maintain targeted service
levels, customers have twenty-four hours a day, seven days a week physical and  
remote access to the ISX facilities. Additional space and electrical power can  
be added as needed in order to provide AboveNet's customers with access to      
additional server co-location services. Customers install and manage their own  
hardware and software at AboveNet's facilities. AboveNet does not provide any   
Web hosting services.                                                           

AboveNet's co-location facilities include dedicated electrical power    
circuits to ensure that each customer's electrical power requirements are met.  
Each ISX facility is constructed to address the requirements of business        
critical network operations with an uninterruptible DC and AC power supply and  
back-up generators, FM-200 Fire Suppression with pre-action backup, HVAC,       
separate cooling zones, seismically braced racks, twenty-four hours a day, seven
days a week operations, and high levels of physical security. Any damage to or  
failure of the systems of AboveNet's service providers could result in          
reductions in, or terminations of, services supplied to AboveNet's customers,   
which could have a significant adverse effect on AboveNet's business and        
operating results. See "RISK FACTORS--Risk Factors Applicable to                
AboveNet--AboveNet's systems or other systems on which it depends may fail."    

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Customers can select from shared rack facilities, secure cabinets or    
enclosed cage facilities, based upon their business and technical requirements. 
These facilities have the following features:                                   

                                                        [Enlarge/Download Table]

TYPE OF SPACE                      SIZE                                        FEATURES                         
---------------------  -----------------------------  ----------------------------------------------------------
                                                                                                                

Open Rack              Single shelf, 1/4, 1/2, or     Entry-level service providing a cost-effective solution   
                       full 9' or 6' racks            for AboveNet customers who do not need dedicated          
                                                      environments. Secured environment that is shared by       
                                                      multiple customers.                                       

Cabriolet              9' or 6' stainless steel       Dedicated, locked cabinet. Provides a single rack with the
                       enclosed, secure cabinet,      security of a dedicated environment.                      
                       1/4, 1/2, or full rack                                                                   

Cage                   8' X 6', 8' X 8' or            Dedicated, locked cage. Provides flexibility in designing 
                       customized to order            and configuring Internet servers, including space for     
                                                      multiple racks and other equipment.                       

INTERNET CONNECTIVITY                                                           

AboveNet's Internet connectivity services are designed to meet the      
requirements of high bandwidth, business critical Internet operations by        
providing highly reliable, scalable, non-stop and uncongested operations. On    
March 31, 1999, AboveNet had peering relationships with 257 network providers,  
including 78 private peering relationships. Any failure by AboveNet to maintain 
and increase peering relationships would have a material adverse effect on its  
business, results of operations and financial condition. See "RISK FACTORS--Risk
Factors Applicable to AboveNet--AboveNet must maintain and increase peering     
relationships."                                                                 

AboveNet's network is designed to minimize the likelihood of service    
interruptions. Each ISX has multiple physical fiber paths into the facility.    
AboveNet maintains multiple network links from multiple vendors and regularly   
checks that its network traffic traverses physically separated paths. This      
network architecture enhances the availability of a customer's site, even in the
event of a link failure. In addition, since AboveNet's customers' Internet      
operations often experience network traffic spikes due to promotions or events, 
AboveNet has a policy of maintaining significant excess capacity. AboveNet might
not be able to expand or adapt its telecommunications infrastructure to meet    
additional demand or its customers' changing requirements on a timely basis and 
at a commercially reasonable cost, or at all. See "RISK FACTORS--Risk Factors   
Applicable to AboveNet--AboveNet must be able to expand and adapt its network   
infrastructure."                                                                

AboveNet's Internet connectivity services are also designed to reduce   
latency and to enhance network performance. AboveNet's engineering personnel    
continuously monitor traffic patterns and congestion points throughout the      
Internet and dynamically reroute traffic flows to improve end-user response     
times. AboveNet also enhances network performance by maintaining what AboveNet  
believes is among the largest number of direct public and private network       
peering interconnections in the industry. For customers seeking a direct        
communications link to the site of another customer that is located at the same 
ISX, AboveNet offers highly secure, fast and efficient cross-connections.       

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   AboveNet's connectivity services utilize its proprietary ASAP technology to
enhance Internet connectivity by monitoring all of its direct and indirect      
network connections for congestion.                                             

                                                        [Enlarge/Download Table]

TOOL                            DESCRIPTION                                    BENEFITS                         
---------------------  -----------------------------  ----------------------------------------------------------
                                                                                                                

ASAP--                 ASAP automatically monitors    If packet loss and congestion is detected on any of the   
Asymmetric Allocation  all of AboveNet's major        links that directly affect customers' performance,        
of Packets             providers' and peers' direct   AboveNet's network engineers are able to dynamically      
                       and indirect connections on a  reroute traffic temporarily away from the problem link.   
                       real-time 24-hour basis to     This functionality is particularly important for emerging 
                       identify congestion.           applications such as audio and video streaming and voice  
                                                      over the Internet.                                        

MANAGEMENT SERVICES AND TOOLS                                                   

   AboveNet's management services and tools support business critical Internet
operations by providing the customer with detailed monitoring, reporting and    
management tools to control their hardware, network, software and application   
environments. Through AboveNet's network management services and tools,         
customers are able to remotely manage their business critical Internet          
operations housed at AboveNet's ISX facilities. AboveNet believes that this     
provides an important advantage to enterprises that seek to outsource a portion 
of their Internet operations and to link the management of the outsourced       
operations with in-house operations. AboveNet's proactive management services   
and tools enable AboveNet to identify and resolve hardware, software, network   
and application problems, often before the customer is aware that a problem     
exists.                                                                         

    Customers may access their co-located equipment by visiting the ISX facility
or by using AboveNet's software tools and services for remote access. Using     
AboveNet's remote access tools, customers can perform emergency tasks, control  
power functions and monitor their own system usage. These remote access tools   
alleviate the need for AboveNet to build numerous, geographically dispersed ISX 
facilities. In the event of a system problem, AboveNet notifies its customer who
can then attempt to resolve the issue remotely. AboveNet intends to continue to 
enhance its software tools in order to meet the needs of customers with business
critical Internet operations. AboveNet's space requirement charges include      
access to all of its management services and tools. See "RISK FACTORS--Risk     
Factors Applicable to AboveNet--AboveNet may not be able to keep pace with rapid
technological changes or emerging industry standards."                          

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AboveNet offers the tools and services summarized below:                

                                                        [Enlarge/Download Table]

TOOL/SERVICES                          DESCRIPTION                                     BENEFITS                  
---------------------  --------------------------------------------  --------------------------------------------
                                                                                                                 

MRTG                   MRTG is a widely used tool licensed by        MRTG shows customers the amount of bandwidth
                       AboveNet that provides real-time monitoring   being used and, therefore, the actual cost  
                       and management of bandwidth. Currently used   of that bus expense. Through a graphical    
                       by most major backbone providers, MRTG        interface, users can view, in real-time, the
                       generates HTML pages containing GIF images    actual amount of bandwidth flowing through  
                       which provide a real-time visual              their servers and/or networking equipment.  
                       representation of this traffic. MRTG can      MRTG also allows AboveNet and its customers 
                       also be used to display historical            to view its connections and bandwidth usage 
                       statistical data in graphic form.             with each of its backbone providers.        

EtherValve             EtherValve is a tool licensed by AboveNet     EtherValve allows AboveNet to provide each  
                       that regulates the actual flow of bandwidth   customer a clear channel of the bandwidth   
                       from a customer's server through a 10Mbps or  purchase. This assures customers that they  
                       100 Mbps Ethernet segment.                    will have the bandwidth they have purchased 
                                                                     available to them at any given time.        
                                                                     EtherValve also allows the customer's       
                                                                     bandwidth to be scaled up immediately, in   
                                                                     increments as small as 8 bps (0.009 Kbps).  

APS--Automatic         APS is a suite of proprietary tools           APS provides real-time information about a  
Pro-Active Services    developed to continually monitor the          customer's remote equipment. APS            
                       performance of customer equipment. Three      automatically notifies the customer and     
                       levels of predetermined escalation            AboveNet's technical personnel of system    
                       procedures include automatic notification by  malfunctions. Predetermined escalation      
                       e-mail, notification by pager and automatic   procedures customized for each customer are 
                       power cycle.                                  then carried out by AboveNet personnel.     
                                                                     Automatic rebooting and other predetermined 
                                                                     procedures often serve to correct problems  
                                                                     before the customer is aware of the problem.

As-Ur-Here Service     As-Ur-Here provides various service aspects   As-Ur-Here allows customers to maintain     
                       including automatic remote power cycle and    access and control over their equipment and 
                       remote services terminal server access.       perform effective equipment maintenance and 
                                                                     problem solving while they outsource their  
                                                                     servers and/or networking equipment.        

CUSTOMERS                                                                       

   AboveNet has established a diversified base of customers including Internet
content providers, Web hosting companies and ISPs. One customer, RemarQ         
Communities, Inc. (formerly named Supernews, Inc.), accounted for 12% and 14% of
AboveNet's revenues in fiscal 1997 and 1998, respectively. No other customer    
accounted for more than 10% of revenues in either fiscal 1997 or 1998.          

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INTERNATIONAL INTERNET SERVICE EXCHANGES                                        

AboveNet is seeking to create a global network by investing in joint    
ventures and foreign companies that can develop regional ISXs in Europe and     
Asia. In March 1999, AboveNet entered into agreements with local partners to    
establish regional ISXs in Austria, Germany and the United Kingdom. AboveNet    
intends to continue to expand its European network through additional           
investments in joint ventures in other major business centers and countries with
high levels of Internet traffic. These regional service exchanges will be based 
on AboveNet's business model and facility design and will offer co-location and 
Internet connectivity services to both Internet content providers and ISPs in   
their markets.                                                                  

AUSTRIA.  AboveNet founded AboveNet Austria GmbH (AboveNet Austria) in  
partnership with Raiffeisen Rechenzentrum RRZ, an affiliate of the Raiffeisen   
group. AboveNet acquired a 50% ownership interest in AboveNet Austria in        
consideration of a cash investment and the grant of a royalty-free license to   
AboveNet's tools and trademarks. The Austrian ISX expects to be operational by  
the second half of calendar year 1999. However, the development of this ISX     
might encounter unanticipated delays.                                           

GERMANY.  AboveNet founded AboveNet Germany GmbH (AboveNet Germany) in  
partnership with three German nationals. The German partners include founders of
EUNet Germany, a large German ISP which was subsequently acquired by UUNet, and 
managing directors of the German Internet exchange point DE-CIX. AboveNet       
acquired a 50% ownership interest in AboveNet Germany for a cash investment and 
the grant of a royalty-free license to AboveNet's tools and trademarks. In July 
1999, AboveNet entered into two additional joint ventures in Germany relating to
property to be leased to the German ISX. AboveNet will be required to make      
equity contributions totaling approximately $25 million, of which approximately 
$10 million will be paid as initial equity contributions, with the remainder to 
be contributed over the following 18 to 24 months. See note 17 of notes to      
financial statements of AboveNet included elsewhere in this document. The German
ISX is currently expected to be operational by the first quarter of calendar    
year 2000. However, the development of this ISX might encounter unanticipated   
delays.                                                                         

UNITED KINGDOM.  AboveNet founded AboveNet UK Limited (AboveNet UK) in  
partnership with two Scottish nationals who were the founders of Teledata       
Holdings, a call center and Internet services company which was acquired by     
Scottish Telecom in 1995. AboveNet currently has a 18% ownership interest in    
AboveNet UK for a cash investment and the grant of a royalty-free license for   
AboveNet's tools and trademarks. The UK ISX is currently expected to be         
operational in the fourth quarter of calendar year 1999. However, the           
development of this ISX might encounter unanticipated delays.                   

As of March 31, 1999, AboveNet had committed up to an aggregate of      
approximately $8.4 million in additional financing to the joint ventures (which 
does not include the amounts committed to the two additional German joint       
ventures described above) and has the right to participate in future financings 
to maintain its percentage of interest. AboveNet also has a right of first      
refusal to purchase the shares of its foreign partners if they seek to transfer 
them to a third party. In addition, in Germany and the United Kingdom, AboveNet 
has an option to purchase the shares of its partners in years three through five
at a price determined through an independent appraisal mechanism.               

The investment in these regional ISXs subjects AboveNet to a number of  
risks. See "RISK FACTORS--Risk Factors Applicable to AboveNet--AboveNet depends 
on third parties to establish and operate international Internet service        
exchanges."                                                                     

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SALES AND MARKETING                                                             

AboveNet's sales and marketing objective is to achieve broad market     
penetration and increase brand name recognition among Internet content          
providers, Web hosting companies and ISPs on a global basis through investments 
in the expansion of its sales organization and extensive marketing activities.  
AboveNet has developed a two-tiered sales strategy to target leading Internet   
content providers, Web hosting companies and ISPs through direct sales and      
channel relationships. See "RISK FACTORS--Risk Factors Applicable to            
AboveNet--AboveNet may not be able to hire and retain the key employees it      
needs."                                                                         

DIRECT SALES FORCE                                                              

    AboveNet maintains a direct sales force of highly trained individuals in San
Jose, California, and Vienna, Virginia. These persons target Internet content   
providers, Web hosting companies and ISPs. AboveNet also has personnel          
responsible for addressing the development of customers in Asia and Europe.     
AboveNet is actively seeking to expand its direct sales force and sales         
engineers. Substantially all of its sales are currently generated by its direct 
sales force. AboveNet's sales force is supported in their sales efforts by      
AboveNet's sales engineers and, in many instances, by AboveNet's senior         
management. AboveNet believes that the integration of its sales engineers with  
its sales account managers assists in both the establishment of customer        
relationships as well as the migration of customers to increased use of its     
services. AboveNet has developed programs to attract and retain high quality,   
motivated sales representatives that have the necessary technical skills,       
consultative sales experience and knowledge of their local markets. These       
programs include technical and sales process training and instruction in        
consultative selling techniques. AboveNet has also developed sales compensation 
plans which provide for significant incentives for exceeding performance        
targets.                                                                        

 Under the terms of license, connectivity and marketing agreements entered
into between AboveNet and the joint venture entities, AboveNet has granted those
entities the exclusive right to use its tools and trademarks in their respective
countries, subject to meeting certain minimum performance targets. In return,   
the joint ventures have agreed that, so long as they maintain their exclusivity 
under the license, connectivity and marketing agreements, AboveNet will be their
exclusive provider of connectivity services.                                    

DEVELOP CHANNEL RELATIONSHIPS                                                   

    AboveNet is seeking to develop relationships with potential channel partners
including hardware vendors, value added resellers, system integrators,          
application hosting and Web hosting companies in order to leverage their sales  
organizations. AboveNet believes that by leveraging the sales forces of these   
companies, AboveNet can attract customers for its services in a cost-effective  
manner, as well as provide co-branded Internet service offerings for its channel
partners. For example, some of Web hosting customers market its service as part 
of their overall bundled offering and AboveNet has been involved in joint       
marketing and sales efforts with those customers. AboveNet is actively seeking  
to hire experienced channel managers to focus exclusively on developing these   
relationships. AboveNet also plans to develop seminar programs and other        
cooperative sales programs to further develop these relationships.              

MARKETING                                                                       

AboveNet's strategy is to significantly expand its marketing efforts to 
stimulate increased demand for its services and build the AboveNet brand.       
AboveNet plans to aggressively invest in building the AboveNet brand through    
integrated marketing campaigns, including traditional and online advertising in 
business and trade publications, trade show participations, direct mail and     
public relations campaigns                                                      

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to increase customer awareness and demand. AboveNet has also established a      
client advisory council to strengthen its relationship with its customers.      

NETWORK ARCHITECTURE                                                            

AboveNet's high performance network is designed to provide enhanced     
connectivity to its customers. AboveNet's two Internet service exchange campuses
are connected to one another with high speed SONET circuits, and connected to   
the Internet through public and private peering arrangements.                   

   AboveNet's Internet service exchange campuses are located near MAE West and
MAE East and are connected to local Internet exchange points by multiple        
high-speed backbone connections, provided by MCI WorldCom, Sprint, Pacific Bell,
Teleport Communications Group, a subsidiary of AT&T, and WinStar Communications.
These links to the local exchange points, combined with private exchanges with  
ISPs, connect AboveNet's customers' traffic to the Internet. AboveNet has       
engineered its peering using a geographically diverse fiber path to provide high
reliability, even in the event of a link failure. AboveNet has developed dynamic
rerouting and load balancing technologies to enhance the performance of its     
customers' Internet operations.                                                 

   AboveNet has determined that as voice, video and other services are carried
across the Internet, the need for ATM in network infrastructures is reduced.    
AboveNet has built its network using DS-3 and OC-3 clear channel circuits. By   
using clear channel circuits, AboveNet is able to make highly efficient use of  
these connections, lowering infrastructure costs and providing high performance 
connectivity. Inside of each ISX facility, AboveNet has multiple local area     
networks, each connected to the outside network through redundant routers and   
network connections. These routers are configured such that in case of failure  
of a single connection, or piece of equipment, alternative equipment or network 
paths are automatically utilized, without human intervention, or performance    
degradation. See "RISK FACTORS--Risk Factors Applicable to AboveNet--AboveNet   
depends on third party suppliers."                                              

 AboveNet utilizes a combination of public and private peering in order to
provide a high level of network performance. On March 31, 1999, AboveNet had    
peering relationships with 257 network providers including 78 private peering   
relationships. AboveNet's ISXs are connected to all of the major U.S. Internet  
exchange points.                                                                

 The combination of public and private peering sessions allows AboveNet to
provide high levels of performance and reliability to its customers. To ensure  
that this connectivity is not degraded, AboveNet has a policy of providing      
significant excess capacity on all local area network, wide area network and    
Internet exchange point connections in its network. Any failure to maintain and 
increase peering relationships would have a material adverse effect on          
AboveNet's business, results of operations and financial condition. See "RISK   
FACTORS--Risk Factors Applicable to AboveNet--AboveNet must maintain and        
increase peering relationships."                                                

   AboveNet's operations are dependent upon its ability to protect its network
infrastructure and customers' equipment against damage from human error, fire,  
earthquakes, floods, power loss, telecommunications failures, sabotage,         
intentional acts of vandalism and similar events. Despite precautions taken by, 
and planned to be taken by AboveNet, the occurrence of a natural disaster or    
other unanticipated problem at one or more of AboveNet's Internet service       
exchange facilities could result in interruptions in the services AboveNet      
provides. Such an event could significantly impact the ability of suppliers to  
provide the data communications capacity required by AboveNet and could result  
in interruptions in AboveNet's services. See "RISK FACTORS--Risk Factors        
Applicable to AboveNet--AboveNet's systems or other systems on which AboveNet   
depends on may fail" and "--AboveNet faces risks associated with the security of
its systems."                                                                   

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CUSTOMER SERVICE AND QUALITY ASSURANCE                                          

 AboveNet offers a high level of customer service and quality assurance by
understanding the technical requirements and business objectives of its         
customers and addressing their needs proactively on an individual basis. By     
working closely with its customers, AboveNet is able to enhance the performance 
of its customers' Internet operations, avoid downtime, resolve quickly any      
problems that may arise and make appropriate adjustments in services as customer
needs change over time. AboveNet works with its customers to ensure that        
AboveNet is offering the appropriate types and quality of service. AboveNet uses
advanced software tools to aid in its customer monitoring and service efforts.  
AboveNet received its ISO 9002 certification in March 1998.                     

Customer service begins before a sale, when AboveNet provides technical 
support for complex orders. During the installation phase, AboveNet assigns a   
transition team and a project manager, who also retains responsibility for the  
account after installation, to assist the new customer with the installation    
process. After installation, the customer's equipment is overseen by AboveNet's 
network operation center in San Jose, California, which is operated twenty-four 
hours a day, seven days a week by engineers who answer customer calls, monitor  
site and network operations and activate teams to solve problems that arise.    
AboveNet's customer service personnel are also available to assist customers    
whose operations require specialized procedures.                                

 AboveNet believes that its quality assurance programs are key to building
its brand name. The objectives of AboveNet's quality assurance system are to    
comply with ISO 9002: 1994 quality administration systems; to achieve and       
maintain a level of quality that enhances its reputation with its customers; to 
ensure compliance with relevant safety and environmental requirements; and to   
endeavor to deliver high quality services to customers in an environment        
centered on adherence to high legal and ethical standards.                      

COMPETITION                                                                     

AboveNet's business is intensely competitive. There are few substantial 
barriers to entering the co-location service business, and AboveNet expects that
it will face additional competition from existing competitors and new market    
entrants in the future. AboveNet believes that participants in this market must 
grow rapidly and achieve a significant presence in the market in order to       
compete effectively. AboveNet believes that the principal competitive factors in
its market are uncongested connectivity, quality of facilities, level of        
customer service, price, the financial stability and credibility of the         
provider, brand name and the availability of network management tools. AboveNet 
might not have the resources or expertise to compete successfully in the future.
AboveNet's current and potential competitors in the market include:             

 - providers of co-location services, such as Exodus Communications, Inc.,
    Frontier Corporation, which has entered into an agreement to be acquired
    by Global Crossing Ltd., Hiway Technologies, Inc., which was acquired by
Verio Inc. and Globix Corporation;                                  

- national and regional ISPs, such as Concentric Network Corporation,   
   PSINet, Inc., MCI WorldCom and certain subsidiaries of GTE Corporation;

  - global, regional and local telecommunications companies, such as Sprint,
   MCI WorldCom and regional bell operating companies, some of whom supply
capacity to AboveNet; and                                           

- large information technology outsourcing firms, such as International 
Business Machines Corporation and Electronic Data Systems.          

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Some of these companies operate in one or more of these markets. In     
addition, many of AboveNet's current and potential competitors have             
substantially greater financial, technical and marketing resources, larger      
customer bases, longer operating histories, greater name recognition and more   
established relationships in the industry than AboveNet does. As a result, some 
of these competitors may be able to develop and expand their network            
infrastructures and service offerings more quickly, adapt to new or emerging    
technologies and changes in customer requirements more quickly, take advantage  
of acquisitions and other opportunities more readily, devote greater resources  
to the marketing and sale of their services and adopt more aggressive pricing   
policies than AboveNet can. In an effort to gain market share, some of          
AboveNet's competitors have offered co-location services similar to AboveNet's  
at lower prices or with incentives not matched by AboveNet, including free      
start-up and domain name registration, periods of free service and low-priced   
Internet access. As a result of these policies, AboveNet may encounter          
increasing pricing pressure which could have a significant adverse effect on its
business and operating results.                                                 

In addition, these competitors have entered and will likely continue to 
enter into joint ventures, consortiums or consolidations to provide additional  
services competitive with those provided by AboveNet. As a result, these        
competitors may be able to provide customers with additional benefits in        
connection with their co-location and network management solutions, including   
reduced communications costs, which could reduce the overall costs of their     
services relative to AboveNet's services. AboveNet might not be able to offset  
the effects of any such price reductions. In addition, AboveNet expects         
competition to intensify as its current and potential competitors incorporate a 
broader range of bandwidth, connectivity and Internet networking services and   
tools into their service offerings. AboveNet believes that companies seeking    
co-location and Internet connectivity providers for their business critical     
Internet operations may use more than one company to provide this service. As a 
result, these customers would be able to shift the amount of service and        
bandwidth usage from one provider to another. AboveNet may also face competition
from its suppliers. AboveNet's agreements with its suppliers and other partners 
do not limit or restrict those parties from offering similar services to its    
customers, thereby enabling such parties to compete against AboveNet.           

INTELLECTUAL PROPERTY RIGHTS                                                    

  AboveNet relies on a combination of copyright, trademark, service mark and
trade secret laws and contractual restrictions to establish and protect certain 
proprietary rights in its software. AboveNet has no patented technology that    
would preclude or inhibit competitors from entering its market. AboveNet has    
generally entered into confidentiality and invention assignment agreements with 
its employees in order to limit access to and disclosure of certain of its      
proprietary information. AboveNet cannot be certain that these contractual      
arrangements or the other steps it takes to protect its intellectual property   
will prove sufficient to prevent misappropriation of its technology or to deter 
independent third-party development of similar technologies. The laws of certain
foreign countries may not protect AboveNet's services or intellectual property  
rights to the same extent as do the laws of the U.S. AboveNet also relies on    
certain technologies that AboveNet licenses from third parties. Two key         
technologies offered by AboveNet, MRTG and EtherValve, are licensed from David  
Rand, AboveNet's Chief Technical Officer. AboveNet has perpetual, irrevocable,  
royalty-free worldwide licenses to both technologies. The license to MRTG is    
non-exclusive and the license to EtherValve is exclusive subject to one         
previously granted license. AboveNet does not license any other technology which
is not generally available. To date, AboveNet has not been notified that it     
infringes the proprietary rights of third parties, but it cannot be certain that
third parties will not claim infringement by it. AboveNet expects that          
participants in its markets will be increasingly subject to infringement claims 
as the number of technologies and competitors in its industry segment grows. Any
infringement claim, whether meritorious or not, could be time-consuming, result 
in costly litigation, cause service delays or require AboveNet to enter into    
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not be available on terms acceptable to AboveNet or at all. As a result, any    
infringement claim could have a material adverse effect upon AboveNet's         
business, results of operations and financial condition.                        

GOVERNMENT REGULATION                                                           

    There is currently a small but growing body of laws and regulations directly
applicable to access to or commerce on the Internet. Due to the increasing      
popularity and use of the Internet, it is likely that a growing number of laws  
and regulations will be adopted at the international, federal, state and local  
levels with respect to the Internet, covering issues such as user privacy,      
freedom of expression, pricing, characteristics and quality of products and     
services, taxation, advertising, intellectual property rights, information      
security and the convergence of traditional telecommunications services with    
Internet communications. Moreover, a number of laws and regulations have been   
proposed and are currently being considered by federal, state and foreign       
legislatures with respect to such issues. The nature of any new laws and        
regulations and the manner in which existing and new laws and regulations may be
interpreted and enforced cannot be fully determined. For example, although      
sections of the Communications Decency Act of 1996 that, among other things,    
proposed to impose criminal penalties on anyone distributing "indecent" material
to minors over the Internet, were held to be unconstitutional by the U.S.       
Supreme Court, AboveNet cannot be certain that similar laws will not be proposed
and adopted. Legislation similar to the Communications Decency Act could subject
AboveNet and/or its customers to potential liability, which in turn could have  
an adverse effect on its business, operating results and financial condition. In
addition, legislation that prohibits or limits sending unsolicited commercial   
e-mails has recently been passed, and continue to be proposed which could       
subject AboveNet and its customers to potential liability. The adoption of any  
future laws or regulations might decrease the growth of the Internet, decrease  
demand for its services, impose taxes or other costly technical requirements or 
otherwise increase the cost of doing business or in some other manner have a    
significant adverse effect on AboveNet or its customers, which, in turn, could  
have a significant adverse effect on AboveNet's business and operating results. 
In addition, applying existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity   
and personal privacy to the Internet is uncertain. The vast majority of these   
laws were adopted prior to the advent of the Internet and related technologies  
and, as a result, do not contemplate or address the unique issues of the        
Internet and related technologies. Changes to these laws intended to address    
these issues, including some recently proposed changes, could create uncertainty
in the marketplace which could reduce demand for AboveNet's services or increase
the cost of doing business as a result of costs of litigation or increased      
service delivery costs, or could in some other manner have a significant adverse
effect on AboveNet's business and operating results. In addition, as AboveNet's 
services are available over the Internet in multiple states and foreign         
countries, and as AboveNet facilitates sales by its customers to end users      
located in these states and foreign countries, these jurisdictions may claim    
that AboveNet is required to qualify to do business as a foreign corporation in 
each of these states or foreign countries. Any new legislation or regulation, or
the application of laws or regulations from jurisdictions whose laws may not    
currently apply to its business, could have a significant adverse effect on its 
business and operating results.                                                 

EMPLOYEES                                                                       

As of March 31, 1999, AboveNet had 130 employees, including 46 people in
sales and marketing, 62 people in customer service, network and backbone        
engineering and product development and 22 people in general and administration.
AboveNet believes that its future success will depend in part on its continued  
ability to attract, hire and retain qualified personnel. The competition for    
these personnel is intense, and AboveNet might not be able to hire or retain    
these personnel. See "RISK FACTORS-- Risk Factors Applicable to                 
AboveNet--AboveNet may not be able to manage its growth effectively," and       
"--AboveNet may not be able to hire or retain the key employees it needs."      

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FACILITIES                                                                      

    AboveNet's principal executive and administrative offices are located in San
Jose, California and consist of approximately 20,000 square feet that are leased
until 2008, with an option by AboveNet to expand to 2018. AboveNet recently     
entered into a lease of office space in Palo Alto, California, consisting of    
approximately 2,100 square feet, with a term ending in 2007, as well as two     
options to extend. AboveNet leases its ISX facilities in San Jose, California   
and Vienna and Reston, Virginia (in the Washington, D.C. area). The San Jose,   
California facility consists of approximately 10,000 square feet, including     
6,800 square feet of co-location space and is leased until 2008, with an option 
for AboveNet to extend to 2018. The Vienna, Virginia facility, which consists of
approximately 17,000 square feet, including 12,000 square feet of co-location   
space is leased until 2007, with an option for AboveNet to extend to 2012. The  
Reston, Virginia facility, which consists of approximately 29,000 square feet,  
is leased until 2019, with an option for AboveNet to extend to 2029.            

AboveNet is establishing a West Coast campus by developing a second ISX 
facility of approximately 125,000 square feet, including approximately 63,500   
square feet of co-location space, near its San Jose, California facility.       
AboveNet opened this facility with an initial build-out of 4,500 square feet of 
co-location space in March 1999 and AboveNet intends to build out an additional 
9,000 square feet of co-location space by the fall of 1999. Afterwards, AboveNet
intends to build out approximately 50,000 additional square feet of co-location 
space by the spring of 2000. The build-out of additional co-location space will 
occur incrementally over time based on customer demand. The lease for this      
planned facility is a twenty year lease commencing on the earlier of such time  
when any portion of the facility can be occupied or one year following the      
earlier of the date on which construction on the planned facility commences or  
should have commenced.                                                          

In addition, AboveNet is establishing an East Coast campus with plans to
develop another ISX in New York, New York which will be connected by fiber optic
cable to its Vienna, Virginia facility. This facility is expected to be about   
27,000 square feet, including approximately 11,000 square feet of co-location   
space. AboveNet intends to initially complete the build-out of approximately    
5,500 square feet of co-location space and continue to add co-location space    
over time based on customer demand. The lease for this planned facility has a   
fifteen year term.                                                              

  AboveNet also plans to expand its East Coast campus by developing a second
Internet service exchange facility in the Washington D.C. area. AboveNet targets
opening the facility in the first quarter of calendar year 2000. AboveNet has   
entered into a lease for approximately 30,000 square feet of space for this     
facility.                                                                       

AboveNet has recently entered into an agreement to lease and become a   
non-managing member of Block 2 LLC, a limited liability company, one of the     
co-managing members of which is Kimball Small Properties. Block 2 LLC was formed
to develop a building in San Jose, California of approximately 292,415 square   
feet, of which AboveNet will lease approximately 159,000 square feet for        
facilities and office space. AboveNet's ownership participation, based on the   
equity requirement estimated to fund the development, will be $2 million or     
16.7%.                                                                          

  AboveNet leases approximately 19,000 square feet (as well as approximately
500 square feet of the rooftop for communications equipment) in Palo Alto,      
California for the use and occupation of its recently acquired subsidiary, the  
Palo Alto Internet Exchange. The term of the lease is 20 years, with a ten year 
renewal option.                                                                 

LEGAL PROCEEDINGS                                                               

    From time to time, AboveNet has been, and expects to continue to be, subject
to legal proceedings and claims in the ordinary course of its business. These   
claims, even if not meritorious, could result in the expenditure of significant 
financial and managerial resources. AboveNet is not aware of any legal          
proceedings or claims that AboveNet believes will, individually or in the       
aggregate, have a material adverse effect on AboveNet's business, operating     
results or financial condition. AboveNet and its directors have also been named 
as defendants in a lawsuit brought by an AboveNet stockholder discussed above.  
See "THE MERGER--AboveNet Stockholder Litigation."                              

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

YOU SHOULD READ THIS TOGETHER WITH THE ABOVENET FINANCIAL STATEMENTS AND
OTHER FINANCIAL INFORMATION INCLUDED IN THIS DOCUMENT. THIS DOCUMENT CONTAINS   
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ABOVENET'S     
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE INDICATED IN THE FORWARD-LOOKING
STATEMENTS. PLEASE SEE THE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS"  
ELSEWHERE IN THIS DOCUMENT. ABOVENET'S FISCAL YEAR ENDS ON JUNE 30.             

OVERVIEW                                                                        

   AboveNet is a leading provider of high performance, managed co-location and
Internet connectivity solutions for electronic commerce and other business      
critical Internet operations. AboveNet was founded in March 1996 and, in July   
1996, began providing co-location and Internet connectivity services to content 
providers at its San Jose, California facility. In August 1997, AboveNet        
expanded its service offerings to provide co-location and Internet connectivity 
services to Internet service providers, enabling the development of its Internet
service exchange model. In July 1998, AboveNet opened its second Internet       
service exchange facility, located in Vienna, Virginia, and completed an        
expansion of its San Jose Internet service exchange facility. The San Jose      
facility currently has approximately 6,800 square feet of co-location space and 
the Vienna facility has approximately 12,000 square feet of co-location space.  

AboveNet derives most of its revenues from bandwidth charges, with      
additional revenues generated from charges related to space requirements and    
one-time installation fees. Bandwidth and space requirement charges are billed  
on a monthly basis. Space requirement charges include access to AboveNet's      
network, proprietary tools and management services. In most instances, AboveNet 
charges its customers for a set amount of bandwidth availability and charges    
incremental fees if the customer uses additional bandwidth. AboveNet's contracts
range from month-to-month to multiple year commitments, a majority of which are 
cancelable on 30 days notice. Revenues relating to bandwidth usage and space    
requirement charges are generally recognized in the period in which the services
are performed. Installation fees are recognized in the period of installation.  

A significant component of AboveNet's expenses relates to data          
communications and telecommunications costs. Data communications costs consist  
primarily of payments to network providers, such as MCI WorldCom, Sprint,       
Pacific Bell, Teleport Communications Group, a subsidiary of AT&T, WinStar      
Communications, Inc and Global Crossing. Telecommunications charges generally   
consist of one time fees for circuit installation and variable recurring circuit
charges. Monthly circuit charges vary based upon circuit type, the distance the 
circuit spans and/or the circuit usage, as well as the term of the contract.    

AboveNet intends to create a global Internet service exchange network by
connecting centralized facilities in key domestic and international locations.  
As part of this strategy, AboveNet has made and intends to continue to make     
strategic investments in joint ventures and foreign companies to develop        
Internet service exchanges in Europe and Asia. In March 1999, AboveNet made an  
aggregate investment of approximately $600,000 in foreign entities in Austria,  
Germany and the United Kingdom. These entities will establish regional Internet 
service exchange facilities in those markets. AboveNet invested an additional   
approximately $2.0 million in the quarter ended June 30, 1999. AboveNet has     
committed to invest up to an additional $6.5 million in the aggregate in the    
German and United Kingdom entities. AboveNet will account for these investments 
under the equity method of accounting, which requires AboveNet to recognize its 
proportionate share of the net income or loss of these entities.                

    To further its global strategy, AboveNet entered into a series of agreements
in December 1998 with Global Crossing Ltd. for the acquisition of a right to use
capacity on a fiber optic cable system                                          

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between the U.S. and the United Kingdom. As of March 31, 1999, AboveNet has paid
$7.5 million and is obligated to pay an additional $800,000 under these         
agreements, which have 25 year terms. The capacity became available in March    
1999. In the short term, AboveNet plans to resell all or a portion of the       
additional capacity. In August 1999, AboveNet entered into another agreement    
with Global Crossing for the acquisition of a right to use additional capacity  
on a fiber optic cable system between the U.S. and London for a 25-year period. 
The agreement commits AboveNet to pay approximately $15.8 million in a series of
installments through October 1999. AboveNet intends to enter into agreements for
additional rights to use capacity on fiber optic cable systems or other types of
arrangements to secure capacity for Europe, Asia and the Pacific Rim. These     
agreements may require AboveNet to make substantial up front payments for       
long-term capacity. See Note 3 of Notes to Financial Statements of AboveNet     
included elsewhere in this document.                                            

AboveNet is establishing a West Coast campus by developing a second San 
Jose, California Internet service exchange facility of approximately 125,000    
square feet, including approximately 63,500 square feet of co-location space. In
March 1999, AboveNet opened this new facility with 4,500 square feet of         
co-location space and AboveNet intends to build out an additional 9,000 square  
feet of co-location space by the fall of 1999. Afterwards, AboveNet intends to  
build out approximately 50,000 square feet of additional co-location space by   
the spring of 2000. The build-out of the additional co-location space will occur
incrementally over time based on customer demand. In addition, AboveNet is      
establishing an East Coast campus. AboveNet has entered into a lease in New     
York, New York and intends to develop a smaller Internet service exchange       
facility there. AboveNet intends to connect the New York facility to its Vienna,
Virginia facility by a high speed, high capacity fiber optic cable connection.  
The New York facility is expected to be approximately 27,000 square feet,       
including approximately 11,000 square feet of co-location space. The new        
facility is targeted to open in the fall of 1999. AboveNet also plans to expand 
its East Coast campus by developing a second Internet service exchange facility 
in the Washington D.C. area. AboveNet targets opening the facility in the first 
quarter of calendar year 2000. AboveNet has entered into a lease for            
approximately 30,000 square feet of space for this facility. The development and
equipping of these facilities will significantly increase AboveNet's fixed and  
operating expenses, including expenses associated with hiring, training and     
managing new employees, purchasing new equipment, implementing power and        
redundancy systems, implementing multiple data communications and               
telecommunications connections, leasing additional real estate and depreciation.

  In connection with its international Internet service exchange investments
and its expansion plans, AboveNet expects its data communications and           
telecommunications costs to significantly increase in order to expand its       
network capacity. AboveNet expects this increase in costs to begin in the       
quarter ending June 30, 1999.                                                   

  AboveNet recently settled a dispute with Winstar Communications, Inc., one
of its major suppliers of telecommunications capacity, over currently invoiced  
amounts and credits available to apply against amounts invoiced in the future.  
As a result of the settlement, AboveNet amended its agreement with WinStar and, 
among other things, extended the term under which WinStar will provide AboveNet 
with telecommunications capacity. While the terms of the settlement will reduce 
AboveNet's per circuit costs related to Winstar, it also will accelerate the    
timing of some of AboveNet's expenses related to Winstar, as compared to what   
they would have been without the settlement. Expenses related to Winstar for the
quarter ended June 30, 1999 are discussed below under "Recent Developments."    

A key aspect of strategy is to significantly increase its sales and     
marketing activities through the expansion of its sales force, increased focus  
on developing reseller channels and increased marketing efforts to build the    
AboveNet brand. AboveNet expects sales and marketing expenses to increase       
substantially in future periods.                                                

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AboveNet recently hired many of its key employees and officers. Its     
President and Chief Operating Officer joined AboveNet in November 1997. Its     
Senior Vice President of Sales and Marketing joined AboveNet in April 1998. Its 
Vice President of Construction and Real Estate and Vice President of            
International--Europe each joined AboveNet in August 1998. Its Chief Financial  
Officer joined AboveNet in November 1998 and, in December 1998, AboveNet hired a
Vice President of Marketing and promoted an existing employee to serve as the   
new Vice President of Sales. AboveNet's Vice President of Engineering joined it 
in February 1999.                                                               

During late fiscal 1997 and 1998, AboveNet granted stock options and    
warrants to strategic business partners and non-employees. Additionally, during 
fiscal 1998 and the first quarter of fiscal 1999, AboveNet granted a key        
executive stock options at an exercise price below market. As a result, AboveNet
recognized stock-based compensation expense of approximately $1.3 million and   
$1.3 million in fiscal 1998 and the first nine months of fiscal 1999,           
respectively. At March 31, 1999, AboveNet had $57,000 of deferred stock         
compensation which will be amortized through fiscal 2000.                       

    Since AboveNet's inception in March 1996, AboveNet has experienced operating
losses and negative cash flows from operations in each quarterly and annual     
period. As of March 31, 1999, AboveNet had an accumulated deficit of $21.7      
million. The revenue and income potential of its business and market is         
unproven, and its limited operating history makes an evaluation of AboveNet and 
its prospects difficult. In addition, although AboveNet has experienced         
significant growth in revenues in recent periods, AboveNet does not believe that
this growth rate is necessarily indicative of future operating results. AboveNet
may never achieve profitability or, if AboveNet achieves profitability, AboveNet
might not sustain profitability.                                                

RECENT DEVELOPMENTS                                                             

  On July 29, 1999, AboveNet announced its operating results for the quarter
and fiscal year ended June 30, 1999. Revenues for the quarter ended June 30,    
1999 were $5,670,000, an increase of 47% over revenues of $3,851,000 for the    
quarter ended March 31, 1999, and a 315% increase over revenues of $1,368,000   
for the quarter ended June 30, 1998.                                            

    The net loss for the quarter ended June 30, 1999 was $12,155,000, or $(0.38)
per share (on 32,168,600 weighted average shares outstanding), compared with a  
net loss for the quarter ended March 31, 1999 of $5,856,000, or $(0.22) per     
share (on 27,189,200 weighted average shares outstanding), and a net loss of    
$2,596,000 or $(3.90) per share (on 666,000 weighted average shares             
outstanding), for the quarter ended June 30, 1998.                              

Operating costs for the quarter ended June 30, 1999 included increased  
telecommunications costs resulting from the dispute with Winstar and related    
settlement, which included an amendment of the Company's agreement with Winstar.
The amendment accelerated the commencement of certain expenses, but reduced     
capacity rates over the remaining term of the contract. Results were also       
affected by approximately $700,000 in legal and other expenses related to the   
proposed merger with Metromedia and by increased sales and marketing costs      
incurred during the quarter.                                                    

  For the fiscal year ended June 30, 1999, revenues were $13,968,000, a 306%
increase over revenues of $3,436,000 for fiscal year 1998. The net loss for     
fiscal year 1999 was $26,555,000, or $(1.60) per share (on 16,643,000 weighted  
average shares outstanding), compared with a net loss of $5,425,000, or $(10.34)
per share (on 524,600 weighted average shares outstanding), for the fiscal year 
ended June 30, 1998.                                                            

  As of June 30, 1999, cash and short-term investments totaled $220,871,000,
and working capital was $203,865,000.                                           

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RESULTS OF OPERATIONS                                                           

 The following table sets forth certain statements of operations data as a
percentage of revenues for the period from March 8, 1996 (inception) to June 30,
1996, for the years ended June 30, 1997 and 1998 and for the nine months ended  
March 31, 1998 and 1999. This information should be read in conjunction with    
AboveNet's financial statements and related notes included elsewhere in this    
document.                                                                       

                                                        [Enlarge/Download Table]

                                                                                            NINE MONTHS          
                                                   PERIOD FROM                                 ENDED             
                                                  MARCH 8, 1996   YEAR ENDED JUNE 30,        MARCH 31,           
                                                 (INCEPTION) TO   --------------------  --------------------     
                                                  JUNE 30, 1996     1997       1998       1998       1999        
                                                 ---------------  ---------  ---------  ---------  ---------     
                                                                                                                 
Revenues........................................        100.0%        100.0%     100.0%     100.0%     100.0%    
Costs and expenses:                                                                                              
  Data communications and telecommunications....           --         101.3       64.0       61.2       68.8     
  Network operations............................         24.7          75.5       45.7       41.4       44.8     
  Sales and marketing...........................         24.3          69.4       47.1       43.9       76.5     
  General and administrative....................         84.1          78.6       47.2       46.4       44.5     
  Depreciation and amortization.................         65.6          24.1       13.8       14.5       24.2     
  Stock-based compensation expense..............           --            --       37.2       24.6       15.5     
  Joint venture termination fee.................           --          78.1         --         --         --     
                                                        -----     ---------  ---------  ---------  ---------     
    Total costs and expenses....................        198.7         427.0      255.0      232.0      274.3     
                                                        -----     ---------  ---------  ---------  ---------     
Loss from operations............................        (98.7)       (327.0)    (155.0)    (132.0)    (174.3)    
Interest expense................................           --          (1.3)      (4.7)      (6.2)     (11.0)    
Interest and other income.......................           --           1.5        1.8        1.5       11.8     
                                                        -----     ---------  ---------  ---------  ---------     
Net loss........................................        (98.7)%      (326.8)%    (157.9)%    (136.7)%    (173.5)%
                                                        -----     ---------  ---------  ---------  ---------     
                                                        -----     ---------  ---------  ---------  ---------     

COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 1998 AND 1999                     

REVENUES.  AboveNet derives most of its revenues from monthly bandwidth 
charges, with additional revenues from space requirement charges and one-time   
installation fees. AboveNet's revenues increased 301% from $2.1 million for the 
nine months ended March 31, 1998, to $8.3 million for the nine months ended     
March 31, 1999. This growth in revenues resulted primarily from an increase in  
the number of customers, from 221 customers at March 31, 1998, to 449 customers 
at March 31, 1999. One customer, RemarQ Communities, Inc. (formerly named       
Supernews, Inc.), accounted for 13.3% of revenues for the nine months ended     
March 31, 1998 and 8.5% of revenues for the nine months ended March 31, 1999.   
AboveNet's agreement with RemarQ Communities, Inc. has a term of one year, which
expires July 1999, and does not contain any minimum bandwidth usage             
requirements.                                                                   

DATA COMMUNICATIONS AND TELECOMMUNICATIONS.  Data communications costs  
consist primarily of payments to network providers such as MCI Worldcom, Sprint 
and Winstar Communications. Telecommunications charges consist of one-time fees 
for circuit installation and variable recurring circuit charges. AboveNet's data
communications and telecommunications expenses increased 350% from $1.3 million 
for the nine months ended March 31, 1998 to $5.7 million for the nine months    
ended March 31, 1999. The increase is primarily due to the growth in AboveNet's 
customer base and usage of additional bandwidth. AboveNet expects that data     
communications and telecommunications costs will continue to increase in        
absolute dollars as AboveNet continues to expand its network infrastructure.    

   NETWORK OPERATIONS.  Network operations expenses are comprised primarily of
salaries, benefits and related expenses for AboveNet's operations and           
engineering personnel, as well as facility rent and expenses associated with    
maintaining AboveNet's co-location facilities. AboveNet's network operations    
expenses increased 334% from $856,000 for the nine months ended March 31, 1998  
to $3.7 million for the nine months ended March 31, 1999. The increase is       
primarily due to the hiring of additional                                       

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operations and engineering personnel and associated costs. Most recently, a     
significant factor in the increase has been due to the increased staffing at the
Vienna, Virginia Internet service exchange facility. AboveNet expects that      
network operations expenses will continue to increase in absolute dollars as    
AboveNet hires additional personnel to expand its operations and open its new   
facilities.                                                                     

   SALES AND MARKETING.  AboveNet's sales and marketing expenses are primarily
comprised of salaries, commissions and benefits related to its sales and        
marketing personnel, the cost of its marketing and promotional efforts,         
including advertising, printing and trade show costs, as well as related        
consultants' fees and travel and entertainment expenses. Sales and marketing    
expenses increased 599% from $908,000 for the nine months ended March 31, 1998  
to $6.3 million for the nine months ended March 31, 1999. This increase was due 
primarily to increased compensation and related expenses resulting from the     
hiring of additional sales and marketing personnel and increases in trade show, 
advertising and marketing program costs. AboveNet expects that sales and        
marketing expenses will increase substantially in future periods as AboveNet    
continues to expand its sales force and its brand-building activities.          

   GENERAL AND ADMINISTRATIVE.  AboveNet's general and administrative expenses
are comprised primarily of salaries and benefits for its management and         
administrative personnel, as well as fees paid for professional services and    
corporate overhead. General and administrative expenses increased 285% from     
$960,000 for the nine months ended March 31, 1998 to $3.7 million for the nine  
months ended March 31, 1999. This increase was primarily due to increased       
compensation and related benefits associated with additional personnel,         
increased professional services fees and the costs associated with supporting   
AboveNet's expansion. AboveNet expects that general and administrative expenses 
will continue to increase in absolute dollars as AboveNet expands its           
operations.                                                                     

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expenses  
relate primarily to AboveNet's facility improvement and construction efforts as 
well as telecommunications equipment. AboveNet's depreciation and amortization  
expenses increased 570% from $299,000 for the nine months ended March 31, 1998  
to $2.0 million for the nine months ended March 31, 1999. The increase is       
primarily due to capital expenditures incurred during the second half of fiscal 
1998 and the first three quarters of fiscal 1999 related to facility improvement
and construction costs in San Jose, California, the construction of AboveNet's  
Internet service exchange facility in Vienna, Virginia, and additional          
telecommunications equipment. AboveNet expects to incur increased depreciation  
and amortization expenses related to its planned Internet service exchange      
facilities, as well as the amortization of the rights to use capacity on fiber  
optic cable systems.                                                            

STOCK-BASED COMPENSATION.  During fiscal 1998 and 1999, AboveNet granted
stock options to a key executive that have exercise prices that were below the  
market prices on the dates of the grants. Additionally, during late fiscal 1997 
and fiscal 1998 and 1999, AboveNet granted stock options and warrants to        
strategic business partners and non-employees. Stock options and warrants result
in stock-based compensation charges, a portion of which is deferred and expensed
over the vesting period. On December 10, 1998, AboveNet completed its initial   
public offering, at which time the vesting of a significant number of these     
options accelerated. Consequently, the remaining deferred compensation costs    
related to those options were recognized. For the nine months ended March 31,   
1998 and March 31, 1999, stock-based compensation expenses were $509,000 and    
$1.3 million, respectively.                                                     

In connection with AboveNet's investments in entities developing        
international Internet service exchange facilities, in March 1999 AboveNet      
agreed to grant options to purchase up to 300,000 shares of common stock to     
employees of those entities upon meeting certain annual performance criteria    
over the next four years. AboveNet will recognize compensation expense for these
options as the performance criteria are being achieved. In addition, AboveNet   
granted 42,500 options to purchase shares of common stock to three              
non-employees, two of whom are members of its board of directors. These options 
vest over three years and have a three-year term. AboveNet will begin to        
recognize                                                                       

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compensation expense for these service options in the quarter ending June 30,   
1999. While the ultimate amount of compensation expense for these arrangements  
is unknown, the amount could be substantial as it will be measured based on the 
value of the options when the options vest.                                     

INTEREST INCOME (EXPENSE), NET.  Interest income (expense), net was     
$(97,000) for the nine months ended March 31, 1998 compared to $60,000 for the  
nine months ended March 31, 1999. Interest income for the nine months ended     
March 31, 1999 related primarily to AboveNet's higher cash balances as a result 
of its initial public offering partially offset by interest expense incurred    
related to borrowings to finance equipment purchases and improvements to its    
Internet service exchange facilities in San Jose, California and Vienna,        
Virginia. Interest expense for the nine months ended March 31, 1998, was        
primarily related to the issuance of warrants associated with AboveNet's        
issuance of convertible debt. AboveNet expect that interest expense will        
continue to increase in absolute dollars as AboveNet enters into additional     
equipment leases and borrowing facilities to finance expansion, including the   
development of its planned Internet service exchange facilities.                

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997 AND 1998                         

  REVENUES.  AboveNet's revenues increased 523% from $552,000 in fiscal 1997
to $3.4 million in fiscal 1998. This growth in revenues resulted primarily from 
an increase in the number of customers, from 110 customers at June 30, 1997 to  
278 customers at June 30, 1998. One customer, RemarQ Communities, Inc. (formerly
named Supernews, Inc.), accounted for 12% of revenues in fiscal 1997 and 14% of 
revenues in fiscal 1998.                                                        

   DATA COMMUNICATIONS AND TELECOMMUNICATIONS.  AboveNet's data communications
and telecommunications expenses increased 294% from $559,000 in fiscal 1997 to  
$2.2 million in fiscal 1998. This increase is primarily due to the growth in its
customer base and usage of additional bandwidth.                                

  NETWORK OPERATIONS.  AboveNet's network operations expenses increased 277%
from $417,000 in fiscal 1997 to $1.6 million in fiscal 1998. The increase is    
primarily due to the hiring of additional operations and engineering personnel  
and the costs associated therewith.                                             

SALES AND MARKETING.  Sales and marketing expenses increased 323% from  
$383,000 in fiscal 1997 to $1.6 million in fiscal 1998. Sales and marketing     
expenses as a percentage of total revenues decreased from 69% in fiscal 1997 to 
47% in fiscal 1998. Of this increase, approximately $700,000 was due to         
increased compensation and related expenses as the result of the hiring of      
additional sales and marketing personnel. The increase was also attributable to 
increased marketing program, trade show and advertising expenses. The decrease  
as a percentage of revenue in fiscal 1998 was primarily due to increased        
revenues associated with higher bandwidth utilization among the existing        
customer base, which had lower associated sales and marketing expenses.         

  GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased
274% from $434,000 in fiscal 1997 to $1.6 million in fiscal 1998. General and   
administrative expenses as a percentage of revenues decreased from 79% in fiscal
1997 to 47% in fiscal 1998 due to the increase in revenues. Of this increase,   
approximately $500,000 was due to increased compensation and related benefits   
associated with additional personnel in management, finance and administration, 
while the remaining increase was primarily attributable to the costs associated 
with supporting AboveNet's expansion.                                           

DEPRECIATION AND AMORTIZATION.  AboveNet's depreciation and amortization
expenses increased 258% from $133,000 in fiscal 1997 to $476,000 in fiscal 1998.
The increase is due to additional capital expenditures incurred during fiscal   
1998, primarily for telecommunications equipment.                               

 STOCK-BASED COMPENSATION.  Stock-based compensation expense during fiscal
1997 and fiscal 1998 was zero and $1.3 million, respectively. Stock-based       
compensation in fiscal 1998 related to services                                 

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rendered during fiscal 1998 and the acceleration of the vesting during the      
fourth quarter of 1998 of certain non-employee stock option and warrant grants. 

JOINT VENTURE TERMINATION FEE.  In fiscal 1996, AboveNet entered into a 
joint venture agreement with DSK, Inc. to cooperatively market and develop      
AboveNet's services. AboveNet paid $33,700 to DSK during the year ended June 30,
1997 related to this agreement. In the fourth quarter of fiscal 1997, AboveNet  
terminated this agreement and hired the majority shareholders of DSK as         
employees or consultants by issuing 1,000,000 fully vested shares of Series B   
preferred stock with a fair market value of $.60 per share, or $600,000, for the
outstanding shares of common stock of DSK. AboveNet recorded the transaction by 
allocating the value of the shares issued to property and equipment (at DSK's   
net book value of $169,000, which approximated fair market value), with the     
balance of $431,000 reflected as a joint venture termination fee.               

 INTEREST INCOME (EXPENSE), NET.  Interest income (expense), net decreased
from $1,000 in fiscal 1997 to $(98,000) in fiscal 1998. The decrease was        
primarily the result of higher interest expense related to the issuance of stock
purchase warrants in conjunction with the issuance of AboveNet's convertible    
debt during the first half of fiscal 1998 as well as increased borrowings to    
finance equipment purchases and improvements to its San Jose, California        
Internet service exchange facility and construction of its Vienna, Virginia     
Internet service exchange facility.                                             

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INCEPTION THROUGH JUNE 30, 1996                                                 

   AboveNet generated $79,000 in revenues in the period from inception to June
30, 1996, primarily as a result of consulting services provided as AboveNet was 
developing its tools and preparing to commence its current co-location and      
Internet connectivity operations. AboveNet's costs and expenses during this     
period consisted primarily of salaries, depreciation and amortization expenses  
and consulting services. Given the stage of its business and the shortness of   
the period, AboveNet does not believe that the results of operations for this   
period are comparable to fiscal 1997.                                           

YEAR 2000 COMPLIANCE                                                            

    Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields    
will need to distinguish 21st century dates from 20th century dates. This could 
result in system failures or miscalculations causing disruptions of operations  
including, among other things, a temporary inability to process transactions,   
send invoices or engage in similar normal business activities. As a result, many
companies' software and computer systems may need to be upgraded or replaced in 
order to comply with such "Year 2000" requirements.                             

 AboveNet has begun the first phase of its Year 2000 readiness review. The
review will include assessment, implementation, testing and contingency         
planning. To date, AboveNet has evaluated its internally developed software and 
believes that this software is Year 2000 compliant. However, AboveNet utilizes  
software and hardware developed by third parties both for its network and       
internal information systems. AboveNet has not done any testing of such third   
party software to determine if such software is Year 2000 compliant. AboveNet   
has sought assurances from some of its vendors, and intends to continue to seek 
assurances from others, that such vendors' products are or will be Year 2000    
compliant.                                                                      

   AboveNet expects to continue assessing and testing its internal information
technology and non-information technology systems into 1999. AboveNet is not    
currently aware of any material operations issues or costs associated with      
preparing its internal information technology and non-information technology    
systems for the Year 2000. However, AboveNet may experience material            
unanticipated problems and costs caused by undetected errors or defects in the  
technology used in its internal information technology and non-information      
technology systems.                                                             

Based upon the public filings and press releases of AboveNet's primary  
equipment, telecommunications and data communications providers, AboveNet is    
aware that all such providers are in the process of reviewing and implementing  
their own Year 2000 compliance programs. Since AboveNet does not believe that it
will be afforded the opportunity to test the systems of these providers,        
AboveNet will seek assurances from them that they are Year 2000 compliant. If   
AboveNet's primary vendors experience business interruptions as a result of the 
failure to achieve Year 2000 compliance, AboveNet's ability to provide Internet 
connectivity could be impaired, which could have a material adverse effect on   
AboveNet's business, results of operations and financial condition.             

AboveNet does not currently have any information regarding the Year 2000
status of its customers, most of whom are private companies. However, AboveNet  
is in the process of developing a plan to survey all of its customers regarding 
their Year 2000 compliance. As is the case with similarly situated companies, if
its customers experience Year 2000 problems, which result in business           
interruptions or otherwise impact their operations, AboveNet could experience a 
decrease in the demand for its services, which could have a material adverse    
impact on its business, results of operations and financial condition.          

  AboveNet has not incurred any significant expenses to date associated with
its Year 2000 plan and is not aware of any material costs associated with its   
anticipated Year 2000 efforts. AboveNet believes that a material loss of        
revenues would arise if its major customers or providers fail to achieve Year   

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2000 readiness. AboveNet has not yet developed a comprehensive contingency plan 
to address the issues which could result from such failure.                     

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                      

  AboveNet is exposed to fluctuations in interest rates and market values of
its investments. AboveNet's exposure to fluctuations in interest rates and      
market values of its investments relates primarily to its short-term investment 
portfolio, which is included in cash and cash equivalents and short-term        
investments. AboveNet has not used derivative financial instruments in its      
investment portfolio. AboveNet invests its excess cash in debt instruments of   
the U.S. Government, and, by policy, AboveNet limits the amount of credit       
exposure to any one issuer. Due to the short-term nature of its investments, the
impact of interest rate changes would not be expected to have a significant     
impact on the value of these investments. The effect of interest rate and       
investment risk on AboveNet have not been significant.                          

Investments in both fixed rate and floating rate interest earning       
instruments carry a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely impacted due to a rise in interest rates,     
while floating rate securities may produce less income than expected if interest
rates fall. Due in part to these factors, AboveNet's future investment income   
may fall short of expectations due to changes in interest rates or AboveNet may 
suffer losses in principal if is forced to sell securities which have declined  
in market value due to changes in interest rates.                               

AboveNet is also exposed to interest rate risk on its fixed rate debt   
obligations. At June 30, 1998 and March 31, 1999, fixed rate debt obligations   
totaled $1.2 million and $11.9 million, respectively. The fixed rate debt       
obligations bear interest at annual rates ranging from 13.3% to 15.1% and are   
payable in 42 monthly installments. While generally an increase in market       
interest rates will decrease the value of this debt, and decreases in rates will
have the opposite effect, AboveNet is unable to estimate the impact that        
interest rate changes will have on the value of the substantial majority of this
debt as there is no active public market for the debt and AboveNet is unable to 
determine the market interest rate at which alternate financing would have been 
available.                                                                      

LIQUIDITY AND CAPITAL RESOURCES                                                 

    AboveNet has financed its operations principally from the private and public
sale of equity securities and, to a lesser extent, lease financing. AboveNet had
cash and cash equivalents of approximately $44.9 million as of March 31, 1999.  
In May 1999, AboveNet completed the sale of 6,850,356 shares of common stock in 
an underwritten public offering, receiving net proceeds of approximately $273.5 
million.                                                                        

   Net cash used in operating activities was $2.1 million and $6.8 million for
the nine months ended March 31, 1998 and 1999, respectively, and $744,000 and   
$1.7 million in fiscal years 1997 and 1998, respectively. Net cash used in      
operating activities is primarily attributable to AboveNet's net losses. These  
losses were partially offset by depreciation and amortization, stock-based      
compensation expense and increases in accounts payable and accrued liabilities. 

    Net cash used by investing activities was $833,000 and $29.8 million for the
nine months ended March 31, 1998 and 1999, respectively, and $507,000 and $3.8  
million in fiscal years 1997 and 1998, respectively. Net cash used by investing 
activities consists primarily of purchases of property and equipment, including 
costs associated with the establishment of AboveNet's Internet service exchange 
facility in Vienna, Virginia and the expansion of its Internet service exchange 
facility in San Jose, California. In addition, for the nine months ended March  
31, 1999, AboveNet used cash to pay $8.3 million toward the purchase of rights  
to use fiber optic cable capacity.                                              

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    Net cash provided by financing activities was $4.1 million and $73.3 million
for the nine months ended March 31, 1998 and 1999, respectively, and $1.5       
million and $13.3 million in fiscal years 1997 and 1998, respectively. Net cash 
provided by financing activities for the nine months ended March 31, 1998, and  
in fiscal 1998 resulted primarily from the sale of notes and advances, partially
offset by debt and capital lease repayments. Net cash provided by financing     
activities for the nine months ended March 31, 1999 resulted primarily from the 
proceeds of AboveNet's initial public offering and, to a lesser extent, the     
issuance of convertible preferred stock and utilization of its equipment        
financing facility, partially offset by debt and capital lease repayments.      

    AboveNet has a $15 million equipment financing arrangement. Borrowings under
this arrangement are payable in 42 monthly installments. Borrowings incurred    
bear interest ranging from 13.3% to 15.1%. As of March 31, 1999, approximately  
$1.2 million remained available for borrowings under this arrangement. AboveNet 
expects to utilize the available credit for the development of the planned      
second Internet service exchange facility in San Jose, California. AboveNet also
has a $2.5 million equipment lease facility, of which $920,000 was available for
future use at March 31, 1999. Subsequent to March 31, 1999, AboveNet entered    
into an additional equipment financing arrangement for up to $10 million.       

  AboveNet has a $750,000 line of credit facility with a bank, none of which
was outstanding at March 31, 1999. Borrowings under the line of credit facility 
bear interest at the bank's prime rate plus 1% and the line of credit facility  
expires in May 1999.                                                            

  AboveNet expects to make capital expenditures of approximately $56 million
to $82 million in connection with the development of additional Internet service
exchange facilities in San Jose, California, New York, New York and in the      
Washington, D.C. area. AboveNet has made additional commitments with respect to 
its European ISX joint ventures. See "BUSINESS OF ABOVENET-- International      
Internet Service Exchanges."                                                    

  In connection with a December 1998 agreement for the purchase of the right
to use fiber optic cable capacity between the U.S. and the United Kingdom,      
AboveNet has a remaining commitment to pay $800,000 as of March 31, 1999. In    
August 1999, AboveNet entered into another agreement for the purchase of the    
right to use additional capacity on a fiber optic cable system between the U.S. 
and London for a 25-year period. The agreement commits AboveNet to pay          
approximately $15.8 million, in a series of installments through October 1999.  
AboveNet intends to enter into agreements for additional rights to use capacity 
on fiber optic cable systems or other types of arrangements to secure capacity  
for Europe, Asia and the Pacific Rim. These agreements may require AboveNet to  
make substantial up front payments for long-term capacity.                      

  In June 1999, AboveNet completed the acquisition from Compaq of assets and
assumed obligations related to the Palo Alto Internet Exchange, for which it    
paid $70.0 million in cash and an obligation to provide various services.       

Also in June 1999, AboveNet entered into a contract to purchase         
approximately nine acres of land in Fairfax County, Virginia for $7.75 million. 
AboveNet currently plans to build a facility on this site in fiscal 2000.       

AboveNet believes that it has sufficient working capital to finance its 
operations and planned capital expenditures for at least the next 12 months.    
AboveNet may require additional funds during or after this period to support its
working capital requirements or for other uses, including potential acquisitions
and investments, and may seek to raise additional funds through public or       
private equity or debt financings or other sources. Additional financing might  
not be available at all or on favorable terms.                                  

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OFFICERS OF ABOVENET TO BE ELECTED
TO METROMEDIA'S BOARD OF DIRECTORS

Under the merger agreement, the following executive officers of AboveNet
will be elected to Metromedia's board of directors at the closing of the merger:

                                                        [Enlarge/Download Table]

NAME                                     AGE                           POSITION WITH ABOVENET                      
---------------------------------------  ---     ------------------------------------------------------------------
                                                                                                                   
Sherman Tuan...........................      45  Chairman of the Board and Chief Executive Officer                 
David Rand.............................      36  Chief Technology Officer                                          

    MR. TUAN, the founder of AboveNet, has served as Chief Executive Officer and
a Director since 1996, and President until January 1998. Mr. Tuan has served as 
Chairman of the Board since August 1998. Mr. Tuan was President of InterNex     
Information Services, Inc., an Internet infrastructure provider, from November  
1994 to October 1995 and from February 1994 to November 1995 was President of   
Tiara Computer, Inc., a network equipment manufacturer, which merged with       
InterNex Information Services, Inc. in November 1994. From January 1992 to June 
1993, Mr. Tuan was Vice President of Worldwide Sales and Marketing of Primus    
Technologies, Inc., a provider of problem resolution and knowledge management   
software, and President of Celerite Graphics, Inc., a manufacturer of video     
chips. Mr. Tuan received an Electrical Engineering degree from Feng-Chia        
University in Taiwan.                                                           

    MR. RAND has served as AboveNet's Chief Technology Officer since March 1996,
initially as a consultant, and since May 1998 as an employee. Mr. Rand has      
served as a member of the Internet Engineering Task Force for the past seven    
years. Mr. Rand authored rfc 1962 and rfc 1663, developed the EtherValve        
technology, ASAP and APS, as well as co-developed MRTG. From September 1995 to  
May 1998, Mr. Rand was an engineer at Cisco Systems, Inc., a router             
manufacturer. From February 1994 to August 1995, Mr. Rand was an engineer at    
Innovative Systems and Technologies, a video compression company. From October  
1993 to February 1994, Mr. Rand was a software engineer at Novell, Inc., a      
network server company.                                                         

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EXECUTIVE COMPENSATION                                                          

The following table sets forth the compensation earned during the fiscal
years ended June 30, 1998 and June 30, 1999, by Messrs. Tuan and Rand for       
services rendered in all capacities for those fiscal years.                     

SUMMARY COMPENSATION TABLE FOR LAST TWO FISCAL YEARS                            

                                                                [Download Table]

                                                                    LONG TERM     
                                                               COMPENSATION AWARDS
                                                               -------------------
                                       ANNUAL COMPENSATION         SECURITIES     
                                      ----------------------       UNDERLYING     
NAME AND PRINCIPAL POSITION     YEAR  SALARY($)    BONUS($)          OPTIONS      
------------------------------  ----  ---------   ----------   -------------------
                                                                                  
Sherman Tuan..................  1999    190,625(1)  50,000(2)        298,000(3)   
  Chief Executive Officer       1998    132,500        --            135,000      
David Rand....................  1999    152,084(4)  85,000           337,500(5)   
  Chief Technology Officer      1998    103,333(6)      --            60,000      

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

(1) Mr. Tuan's annual base salary is currently $225,000 with a minimum annual   
increase of 10% each year. See "--Employment Agreements."               

(2) Mr. Tuan will receive a minimum annual bonus of $50,000 per year with a     
    minimum bonus increase of 10% each year. However, this bonus will not exceed
    the amount of Mr. Tuan's then current salary. See "--Employment Agreements."

(3) Includes an option to purchase 263,000 shares of common stock at an exercise
price of $6.00 per share, which Mr. Tuan received on August 18, 1998. On
December 1, 1998, AboveNet's board of directors approved an amendment to
reduce the exercise price of the option to $5.00 per share. All option  
   shares held by Mr. Tuan will become fully vested on the consummation of the
transaction contemplated by this document.                              

(4) Mr. Rand's employment started on May 1, 1998 at an annual salary of         
$140,000. Mr. Rand's annual base salary is currently $190,000.          

(5) Includes an option to purchase 202,500 shares of common stock at an exercise
price of $6.00 per share, which Mr. Rand received on August 18, 1998. On
December 1, 1998, AboveNet's board of directors approved an amendment to
reduce the exercise price of the option to $5.00 per share. All unvested
   option shares held by Mr. Rand will become fully vested on the consummation
of the merger.                                                          

(6) Includes $80,000 earned as a consultant.                                    

OPTION GRANTS IN LAST FISCAL YEAR                                               

    The following table sets forth each grant of stock options during the fiscal
year ended June 30, 1999 to Messrs. Tuan and Rand. No stock appreciation rights 
were granted during the last fiscal year.                                       

The assumed 5% and 10% rates of stock price appreciation are provided in
accordance with rules of the Securities and Exchange Commission and do not      
represent AboveNet's estimate or projection of its common stock price. Actual   
gains, if any, on stock option exercises are dependent on the future performance
of AboveNet's common stock, overall market conditions and the option holders'   
continued employment through the vesting period. Unless the market price of its 
common stock appreciates over the option term, no value will be realized from   
the option grants made to these executive officers. The potential realizable    
values shown in the table are calculated by assuming that the estimated fair    
market value of AboveNet's common stock on the date of grant increases by 5% and
10%, respectively, during                                                       

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each year of the option term. See footnote 5 below for information on how the   
fair market value was estimated prior to AboveNet's initial public offering.    

                                                        [Enlarge/Download Table]

                                                                                             POTENTIAL REALIZABLE 
                                                             INDIVIDUAL GRANTS                     VALUE AT       
                                                -------------------------------------------     ASSUMED ANNUAL    
                                    NUMBER OF      PERCENT OF                                RATES OF STOCK PRICE 
                                   SECURITIES         TOTAL                                    APPRECIATION FOR   
                                   UNDERLYING    OPTIONS GRANTED   EXERCISE OR                  OPTION TERM($)    
                                     OPTIONS     TO EMPLOYEES IN   BASE PRICE   EXPIRATION   ---------------------
NAME                               GRANTED(#)    FISCAL YEAR(5)    ($/SHARE)(6)   DATE(7)       5%         10%    
---------------------------------  -----------  -----------------  -----------  -----------  ---------  ----------
                                                                                                                  
Sherman Tuan.....................     263,000(1)          6.60         5.0000      8/18/08     826,996   2,095,771
                                        5,000(2)             *         6.0625     12/18/08      19,063      48,310
                                       30,000(3)             *        39.0000       5/6/09     735,807   1,864,679
David Rand.......................     202,500(1)          5.08         5.0000      8/18/08     636,756   1,613,664
                                        5,000(2)             *         6.0625     12/18/08      19,063      48,310
                                       50,000(4)          1.25        26.0938      3/19/09     820,513   2,079,340
                                       50,000(1)          1.25        26.0938      3/19/09     820,513   2,079,340
                                       30,000(3)             *        39.0000       5/6/09     735,807   1,864,679

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

*   Less than one percent.                                                      

(1) 20% of the shares were vested at the time of grant. 1/36 of the remaining   
 shares vest each month thereafter. All unvested option shares will become
   fully vested upon the consummation of the transactions contemplated by this
document.                                                               

(2) Each of the options granted to Messrs. Tuan and Rand on December 18, 1998   
were fully vested at the time of grant.                                 

(3) 50% of the shares were vested at the time of grant. 1/12 of the remaining   
 shares vest each month thereafter. All unvested options will become fully
vested upon the consummation of the transactions contemplated by this   
document.                                                               

(4) An option to purchase 50,000 shares of common stock granted to Mr. Rand on  
March 19, 1999 was fully vested at the time of grant.                   

(5) Based on an aggregate of 3,984,750 options granted to AboveNet's employees  
    under its 1997 and 1998 Stock Option Plans and options granted to AboveNet's
President in the amount of 638,850, fully vested.                       

(6) The exercise price is equal to the fair market value of AboveNet's common   
    stock on the date of grant. Prior to AboveNet's initial public offering, the
  fair market value of AboveNet's common stock was estimated by its board of
    directors on the basis of the purchase price paid by investors for shares of
its preferred stock, taking into account the liquidation preferences and
other rights, privileges and preferences associated with such preferred 
stock, and an evaluation by its AboveNet's board of directors of its    
revenues, operating history and prospects.                              

(7) Each of the options has a ten-year term. However, the options will terminate
earlier if the optionee ceases service with AboveNet.                   

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

   The following table sets forth information concerning the options exercised
by Messrs. Tuan and Rand in fiscal year 1999 and the year-end number and value  
of unexercised options with respect to each of these executive officers. No     
stock appreciation rights were exercised by these executive officers in fiscal  
year 1999 or were outstanding at the end of that year.                          

                                                        [Enlarge/Download Table]

                                                                   NUMBER OF SECURITIES                                  
                                                                  UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED    
                                                                         OPTIONS                 IN-THE-MONEY OPTIONS    
                                     SHARES                       AT FISCAL YEAR-END(#)        AT FISCAL YEAR-END($)(3)  
                                   ACQUIRED ON      VALUE      ----------------------------  ----------------------------
NAME                               EXERCISE(#)  REALIZED($)(1) EXERCISABLE(2) UNEXERCISABLE  EXERCISABLE(2) UNEXERCISABLE
---------------------------------  -----------  -------------  -------------  -------------  -------------  -------------
                                                                                                                         
Sherman Tuan.....................     175,000        451,500       520,500          87,500     18,467,125      3,531,063 
David Rand.......................     117,500      3,441,430       417,500         100,000     12,017,170      4,031,500 

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

(1) Based on the fair market value of AboveNet's common stock on the date of    
exercise, less the exercise price payable for such shares.              

(2) Some of the options are immediately exercisable for all the option shares as
  of the date of grant but any shares purchased are subject to repurchase by
AboveNet at the original exercise price paid per share if the optionee  
ceases service with AboveNet before vesting in such shares.             

(3) Based on the fair market value of AboveNet's common stock at fiscal year end
of $40.38 per share less the exercise price payable for such shares.    

EMPLOYMENT AGREEMENTS                                                           

   AboveNet entered into an employment agreement with Sherman Tuan dated as of
February 1, 1998. Under this employment agreement, Mr. Tuan receives certain    
compensation and benefits including, but not limited to, an annual base salary  
of $225,000, bonus, and stock options. Mr. Tuan's current bonus amount is at a  
minimum $50,000. The bonus cannot exceed the amount of Mr. Tuan's then current  
salary. In addition, Mr. Tuan is guaranteed a minimum annual salary and bonus   
increase of 10% each year. Mr. Tuan receives his base salary for twelve months  
and fully vests in his option shares following either a termination without     
cause or a material breach of his employment agreement by AboveNet before       
December 31, 1999. For the purposes of this agreement, "cause" means (1) Mr.    
Tuan's conviction of, guilty or "no contest" plea to or confession of guilt of a
felony, (2) a willful act by Mr. Tuan which constitutes gross misconduct and    
which is materially injurious to AboveNet or (3) violation by Mr. Tuan of       
AboveNet's proprietary information and inventions agreement without its prior   
written consent. "Material Breach" means (a) the failure of AboveNet to pay base
salary or additional compensation in accordance with his employment agreement,  
(b) the assignment to Mr. Tuan without Mr. Tuan's consent of duties             
substantially inconsistent with his duties as set forth in his employment       
agreement, (c) the relocation of AboveNet's principal offices to a geographic   
location other than Northern California, or (d) a failure to reelect Mr. Tuan as
a member of the board.                                                          

   AboveNet has entered into an employment agreement with David Rand effective
as of May 1, 1998. Under his employment agreement, Mr. Rand was appointed       
AboveNet's Chief Technology Officer. Mr. Rand's base salary is currently        
$190,000. Mr. Rand receives six months' severance if he is terminated without   
cause.                                                                          

See "RELATED AGREEMENTS--Employment Agreements."                        

RELATED PARTY TRANSACTIONS                                                      

    Since AboveNet's inception in March 1996, there has not been any transaction
or series of similar transactions to which AboveNet was or is a party in which  
the amount involved exceeded or exceeds                                         

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$60,000 and in which Messrs. Tuan or Rand or any member of the immediate family 
of any of the foregoing persons had or will have a direct or indirect material  
interest, other than the transactions described below.                          

David Rand, AboveNet's Chief Technology Officer, has granted to AboveNet
perpetual, non-royalty bearing worldwide licenses to the EtherValve and MRTG    
technologies and assigned the APS and ASAP technology to AboveNet pursuant to a 
technology agreement dated August 18, 1998. In consideration for entering into  
the agreement, Mr. Rand received options to purchase 202,500 shares of its      
common stock at an exercise price of $6.00 per share. On December 1, 1998, the  
Board approved an amendment to reduce the exercise price of the option to $5.00 
per share. The options generally vest over four years, however, upon the        
consummation of the merger, all unvested options will become fully vested.      

 On December 1, 1998, the board of directors approved the amendment of all
outstanding stock options under AboveNet's 1997 Stock Plan with an exercise     
price in excess of $5.00 per share. As a result, all options granted in August  
1998, September 1998 and October 1998 were repriced at $5.00 per share,         
including the options granted to Sherman Tuan, AboveNet's Chief Executive       
Officer and Chairman of its board of directors, on August 18, 1998 for 263,000  
shares and the option granted to David Rand, its Chief Technology Officer, on   
August 18, 1998 for 202,500 shares.                                             

AboveNet has also entered into agreements to indemnify its directors and
officers, including Messrs. Tuan and Rand. These agreements, among other things,
indemnify its directors and officers for specified expenses (including          
attorneys' fees and associated legal expenses), judgments, fines and amounts    
paid in settlement arising out of that person's services as an AboveNet director
or officer, any subsidiary of AboveNet or any other company or enterprise to    
which the person provides services at its request. AboveNet believes that those 
provisions and agreements are necessary to attract and retain qualified         
directors and officers.                                                         

   AboveNet believes that all of the transactions set forth above were made on
terms no less favorable to it than could have been obtained from unaffiliated   
third parties.                                                                  

MARKET PRICE RANGE OF ABOVENET COMMON STOCK 

   AboveNet's common stock began trading publicly on The Nasdaq Stock Market's
National Market on December 10, 1998 and is traded under the symbol "ABOV." The 
following table shows the high and low per share sale prices of AboveNet's      
common stock, as reported by The Nasdaq Stock Market's National Market for the  
periods indicated. All prices reflect the two-for-one stock split in the form of
a 100% stock dividend effected on May 7, 1999.                                  

                                                        [Enlarge/Download Table]

                                                                                                HIGH        LOW   
                                                                                              ---------  ---------
                                                                                                                  
1999                                                                                                              
  Second Fiscal Quarter (beginning December 10, 1998)........................................ $   13.44  $    5.75
  Third Fiscal Quarter....................................................................... $   65.94  $    9.00
  Fourth Fiscal Quarter...................................................................... $   75.50  $   23.88
2000                                                                                                              
  First Fiscal Quarter (through August 3, 1999).............................................. $   45.25  $   28.19

 As of June 15, 1999 there were approximately 200 holders of record of the
common stock.                                                                   

AboveNet has never declared or paid cash dividends on its common stock. 

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COMPARISON OF RIGHTS OF HOLDERS OF
METROMEDIA COMMON STOCK AND ABOVENET COMMON STOCK 

GENERAL                                                                         

   Metromedia is incorporated under the laws of Delaware and, accordingly, the
rights of the Metromedia stockholders are governed by the certificate of        
incorporation of Metromedia, the by-laws of Metromedia and the law of the state 
of Delaware. AboveNet is also incorporated under the laws of Delaware and,      
accordingly, the rights of the AboveNet stockholders are governed by the        
certificate of incorporation of AboveNet, the by-laws of AboveNet and the laws  
of the state of Delaware.                                                       

COMPARISON OF STOCKHOLDERS' RIGHTS                                              

Set forth on the following pages is a summary comparison of material    
differences among the rights of a Metromedia stockholder under the current      
Metromedia charter and by-laws (left column), and the rights of a AboveNet      
stockholder under the current AboveNet charter and by-laws (right column).      

  The summary set forth below highlights the material distinctions among the
governing documents of Metromedia, AboveNet and the combined company and is not 
intended to provide a comprehensive summary of each of such company's governing 
documents. Copies of the AboveNet charter and by-laws, the Metromedia charter   
and by-laws and the Magellan Acquisition charter and by-laws, will be sent to   
AboveNet and Metromedia stockholders upon request. See "WHERE YOU CAN FIND MORE 
INFORMATION" on page 120.                                                       

                                                        [Enlarge/Download Table]
                                                                                           
             CURRENT METROMEDIA                              CURRENT ABOVENET              
AUTHORIZED CAPITAL STOCK                                                                   
2,404,031,240 shares of class A common stock,  60,000,000 shares of common stock, par value
par value $.01 per share, entitled to one      $.001 per share, entitled to one vote per   
vote per share on all matters and to vote as   share and to elect all of the members of the
a class to elect 25% of the members of the     board of directors of AboveNet.             
board of directors of Metromedia.                                                          
522,254,782 shares of class B common stock,    None.                                       
par value $.01 per share, entitled to 10                                                   
votes per share on all matters and to vote as                                              
a separate class to elect 75% of the members                                               
of Metromedia's board of directors.                                                        
20,000,000 shares of preferred stock par       5,000,000 shares of preferred stock, par    
value $.01 per share.                          value $.001 per share.                      
PREEMPTIVE RIGHTS                                                                          
None.                                          None.                                       
                                     STOCKHOLDER ACTION                                    
ANNUAL MEETINGS                                                                            
On such date as may be designated by the       As set by the board of directors.           
board of directors or the President.                                                       

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             CURRENT METROMEDIA                              CURRENT ABOVENET               
SPECIAL MEETING                                                                             
May be called at any time by the Chairman of   May only be called by the President, the     
the board of directors, by the President of    Chairman of the Board or by resolution of a  
Metromedia or by the holders of at least 33%   majority of the total number of AboveNet     
of the voting power of the outstanding shares  directors (assuming no vacancies), or at the 
of common stock.                               written request of stockholders owning at    
                                               least 50% of the entire issued and           
                                               outstanding capital stock entitled to vote.  
ACTION BY WRITTEN CONSENT                                                                   
Allowed.                                       Prohibited.                                  
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND OTHER PROPOSALS                                  
None.                                          Annual Meeting: Generally, in writing, not   
                                               less than seventy (70) days nor more than    
                                               ninety (90) days before the first anniversary
                                               of the preceding year's annual meeting.      
                                               Special Meetings: Generally, in writing, not 
                                               earlier than ninety (90) days nor later than 
                                               seventy (70) days prior to the special       
                                               meeting or the tenth day following the first 
                                               public announcement of the special meeting.  
                                     BOARD OF DIRECTORS                                     
CLASSIFICATION                                                                              
Directors are classified into two classes.     Directors are classified into three classes. 
The class A directors serve a one year term    Each class serves a three-year term and one  
and are elected at each annual meeting by the  class is elected at each annual meeting of   
holders of the class A common stock. The       stockholders.                                
class B directors are elected by the class B                                                
directors at each annual meeting.                                                           
CUMULATIVE VOTING FOR DIRECTORS                                                             
None.                                          None.                                        
NUMBER OF DIRECTORS                                                                         
Twelve total; 75% designated by the holders    Initially seven, then to be fixed by the     
of class B common stockholders and 25%         board of directors.                          
designated by class A common stockholders.                                                  
REMOVAL                                                                                     
With or without cause, only by the holders of  May be removed, but only for cause, by the   
the class or classes of common stock or        holders of at least 80% of the voting power  
series of preferred stock that, as of the      of the then outstanding voting stock, voting 
date such removal is effected, would be        together as a single class.                  
entitled to elect such directorship at the                                                  
next annual meeting of stockholders.                                                        

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             CURRENT METROMEDIA                              CURRENT ABOVENET               
BOARD VACANCIES                                                                             
Vacancies in a directorship may be filled      May be filled by a majority of the remaining 
only by (a) the remaining directors elected    directors then in office, though less than a 
by holders of each class of common stock or    quorum.                                      
series of preferred stock that (x) elected                                                  
such directorship and (y) as of the date such                                               
vacancy is filled, would be entitled to elect                                               
such directorship at the next annual meeting                                                
of stockholders or, (b) if there are no such                                                
remaining directors, then by the vote of the                                                
holders of the class or classes of common                                                   
stock or series of preferred stock that, as                                                 
of the date such vacancy is filled, would be                                                
entitled to elect such directorship at the                                                  
next annual meeting of stockholders, voting                                                 
as a separate class at a meeting, special or                                                
otherwise, of the holders of common stock of                                                
such class or classes or series of preferred                                                
stock.                                                                                      
DIRECTOR QUALIFICATIONS                                                                     
No special requirements.                       No special requirements.                     
SPECIAL MEETINGS OF THE BOARD                                                               
Special meetings of the board of directors     May be called at the request of the Chairman 
shall be held at such time and place as shall  of the Board, the President or at the request
be designated in the notice of the meeting     of a majority of the board of directors.     
whenever called by the Chairman of the Board                                                
of Directors, if any, the President, or by a                                                
majority of the directors then in office.                                                   
TRANSACTIONS WITH INTERESTED STOCKHOLDERS EXTRAORDINARY TRANSACTIONS AND SECURITIES         
ISSUANCES                                                                                   
No issuance or selling of any shares of class  No specific requirements.                    
B common stock or any securities (including,                                                
without limitation, any rights, options,                                                    
warrants or other securities) convertible,                                                  
exchangeable or exercisable into shares of                                                  
class B common stock to any person who is not                                               
a class B permitted holder.                                                                 
CHARTER AMENDMENTS                                                                          
No specific requirements.                      Requires the affirmative vote of the holders 
                                               of a majority of the voting power of all the 
                                               then outstanding shares of capital stock of  
                                               AboveNet entitled to vote generally in the   
                                               election of directors, voting together as a  
                                               single class.                                

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             CURRENT METROMEDIA                              CURRENT ABOVENET               
BY-LAWS AMENDMENTS                                                                          
May be amended by a vote of a majority of the  May be amended by a vote of the board of     
entire board of directors. Any by-laws made,   directors or of the stockholders, provided   
amended or adopted by the board of directors   notice of the proposed change was given in   
may be amended or repealed, and any by-laws    the notice of the meeting (in the case of a  
may be adopted, by the stockholders of the     board meeting, at least 24 hours prior to the
corporation by vote of a majority of the       meeting); in addition to any affirmative vote
holders of shares of stock of the              of the holders of any particular class or    
corporation.                                   series of stock required by law, the charter 
                                               or the by-laws, the affirmative vote of 80%  
                                               of the voting stock, voting together as a    
                                               single class, is required for the            
                                               stockholders to alter, amend or repeal the   
                                               by-laws or to adopt any new by-laws.         

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INFORMATION REGARDING BENEFICIAL OWNERSHIP
OF ABOVENET PRINCIPAL STOCKHOLDERS AND MANAGEMENT 

The following table sets forth information regarding the beneficial     
ownership of common stock as of June 15, 1999 by the following individuals or   
groups:                                                                         

 - each person or entity who is known by AboveNet to own beneficially more
than 5% of its common stock;                                        

- each director of AboveNet;                                            

- AboveNet's chief executive officer and its three other most highly    
   compensated executive officers for its fiscal year ended June 30, 1998;
and                                                                 

- all of AboveNet's executive officers and directors as a group.        

Applicable percentage ownership in the following table is based on      
34,550,550 shares of AboveNet common stock outstanding as of June 15, 1999.     

   Except as otherwise indicated, and subject to applicable community property
laws, the persons named in the table have sole voting and investment power with 
respect to all shares of common stock held by them.                             

                                                        [Enlarge/Download Table]

                                                                             SHARES BENEFICIALLY  
                                                                                    OWNED         
                                                                            ----------------------
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS                                      NUMBER      PERCENT  
--------------------------------------------------------------------------  ---------  -----------
                                                                                                  
Robert A. Burgelman, Ph.D.(1).............................................     18,750       *     
Peter C. Chen, Ph.D.(2)...................................................    746,100         2.2%
Warren J. Kaplan(3).......................................................    925,540         2.7 
Frank R. Kline(4).........................................................  1,648,460         4.8 
James Sha(5)..............................................................    192,306       *     
Tom Shao, Ph.D.(6)........................................................  1,191,690         3.5 
Kimball Small(7)..........................................................    676,666         2.0 
Sherman Tuan(8)...........................................................    846,540         2.4 
Fred A. Vierra(9).........................................................     18,750       *     
Stephen P. Belomy(10).....................................................    256,666       *     
David Rand(11)............................................................    446,934         1.3 
All directors and officers as a group (21 persons)(12)....................  8,235,328        22.0 

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

*   Each stockholder represents less than 1 percent.                            

(1) Includes 18,750 shares of common stock issuable pursuant to options         
   exercisable within 60 days of June 15, 1999. Mr. Burgelman is a director of
AboveNet.                                                               

(2) Includes all shares owned as community property with Pat Chen and all shares
owned by the Peter Cheng-Yu and Pat Te-Hui Living Trust. Mr. Chen is a  
director of AboveNet.                                                   

(3) Includes 723,850 shares of common stock issuable pursuant to options        
exercisable within 60 days of June 15, 1999 (all of which are currently 
vested). Excludes shares of common stock owned by Mr. Kaplan's adult    
  children. Mr. Kaplan is a director and an officer of AboveNet. In December
   1998, Mr. Kaplan bought 4,000 shares of AboveNet's common stock on the open
market. In connection with the follow-on common stock offering that was 
    completed in May 1999, Mr. Kaplan disgorged his profits on the sale of 4,000
    shares of common stock to AboveNet pursuant to Section 16(b) of the Exchange
Act of 1934, as amended.                                                

(4) Includes 1,618,460 shares held by Kline Hawkes California SBIC, L.P. and its
affiliates. Includes 30,000 shares of common stock issuable to Mr. Kline
pursuant to options exercisable within                                  

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 60 days of June 15, 1999. Mr. Kline, a director of AboveNet and a private
    equity manager of Kline Hawkes California L.P./Kline Hawkes California SBIC,
   L.P., disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest.                                                 

(5) Includes 192,306 shares held by Spring Creek Investments. Mr. Sha, a        
director of AboveNet, is a principal of Spring Creek Investments.       

(6) Includes 1,191,690 shares held by Techgains Corp. and Technology Associates 
    Management Co., Ltd. (collectively, "TAMC"). Mr. Shao is a Managing Director
    of TAMC. Mr. Shao, a director of AboveNet, disclaims beneficial ownership of
such shares except to the extent of his pecuniary interest therein.     

(7) Includes 166,666 shares of common stock issuable pursuant to options        
exercisable within 60 days of June 15, 1999. Includes all shares held in
  community property with Martha Small. Mr. Small is a director of AboveNet.

(8) Includes 520,500 shares of common stock issuable pursuant to options        
  exercisable within 60 days of June 15, 1999. Mr. Tuan is a director and an
officer of AboveNet.                                                    

(9) Includes 18,750 shares of common stock issuable pursuant to options         
exercisable within 60 days of June 15, 1999. Mr. Vierra is a director of
AboveNet.                                                               

(10) Includes 146,564 shares of common stock issuable pursuant to options       
exercisable within 60 days of June 15, 1999. Mr. Belomy is an officer of
AboveNet.                                                               

(11) Includes 442,500 shares of common stock issuable pursuant to options       
exercisable within 60 days of June 15, 1999. Mr. Rand is an officer of  
AboveNet.                                                               

(12) Includes 2,956,112 shares of common stock issuable pursuant to options     
   exercisable within 60 days of June 15, 1999. See also footnotes 3, 5 and 7.

DESCRIPTION OF MAGELLAN ACQUISITION, INC. 

Magellan Acquisition, Inc. is a wholly owned subsidiary of Metromedia   
organized under the laws of the State of Delaware. It was incorporated in June  
16, 1999 solely for use in the merger, and is engaged in no other business. Its 
executive offices are located at One Meadowlands Plaza, East Rutherford, New    
Jersey 07073.                                                                   

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LEGAL MATTERS 

  The validity of the shares of Metromedia class A common stock to be issued
pursuant to the terms of the merger agreement will be passed upon by Paul,      
Weiss, Rifkind, Wharton & Garrison.                                             

EXPERTS 

The consolidated financial statements of Metromedia Fiber Network, Inc. 
appearing in Metromedia Fiber Network, Inc.'s Annual Report (Form 10-K) for the 
year ended December 31, 1998, have been audited by Ernst & Young LLP,           
independent auditors, as set forth in their report thereon included therein and 
incorporated herein by reference. Such consolidated financial statements are    
incorporated herein by reference in reliance upon such report given on the      
authority of such firm as experts in accounting and auditing.                   

  AboveNet's financial statements as of June 30, 1997 and 1998 and March 31,
1999 and for the period from March 8, 1996 (inception) to June 30, 1996, each of
the years in the two-year period ended June 30, 1998 and for the nine months    
ended March 31, 1999 included in this document have been audited by Deloitte &  
Touche LLP, independent auditors, as stated in their report appearing herein,   
and have been so included in reliance upon the report of such firm given upon   
their authority as experts in accounting and auditing.                          

The Combined Statement of Assets to be Acquired and Liabilities to be   
Assumed of Palo Alto Internet Exchange as of December 26, 1998 and December 27, 
1997 and the related Combined Statement of Revenues and Direct Expenses for the 
period June 12, 1998 through December 26, 1998, the period December 28, 1997    
through June 11, 1998 and the fiscal year ended December 27, 1997 and December  
29, 1996, included in this document have been so included in reliance on the    
reports of PricewaterhouseCoopers LLP, independent accountants given on the     
authority of said firm as experts in auditing and accounting.                   

CHANGE IN ACCOUNTANTS 

In April 1998, AboveNet appointed Deloitte & Touche LLP to replace its  
former accountants as its principal accountants. There were no disagreements    
with its former accountants during the period from inception to April 30, 1998  
or during any subsequent interim period preceding their replacement on any      
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to the former
accountants' satisfaction, would have caused them to make reference to the      
subject matter of the disagreement in connection with their reports. AboveNet's 
former accountants issued an unqualified opinion on the financial statements as 
of and for the year ended June 30, 1997 and the period from inception to June   
30, 1997. AboveNet did not consult with Deloitte & Touche LLP on any accounting 
or financial reporting matters in the periods prior to their appointment. The   
change in accountants was approved by AboveNet's board of directors.            

SUBMISSION OF STOCKHOLDER PROPOSALS 

Due to the contemplated completion of the merger, AboveNet does not     
currently intend to hold a 1999 annual meeting of stockholders. If that meeting 
is held, any proposals of stockholders intended to be presented at the 1999     
annual meeting of stockholders must be delivered to the secretary of AboveNet at
its principal executive offices no more than 90 days before the meeting date and
not later than the close of business on the later to occur of the seventieth day
before the meeting or the tenth day after the day on which the meeting date is  
publicly announced. The written notice of the proposal must include the         
information required by AboveNet's bylaws.                                      

Any stockholder who wishes to present a proposal at the Metromedia 2000 
annual meeting of stockholders, and who wishes to have such proposal included in
Metromedia's proxy statement for that meeting, must deliver a copy of such      
proposal to Metromedia Fiber Network, Inc., One Meadowlands Plaza, East         
Rutherford, New Jersey 07073, Attention: Secretary, no later than December 10,  
1999. If, however the Metromedia 2000 annual meeting of stockholders is held on 
a date more than 30 days before or after the corresponding date of the 1999     
annual meeting of stockholders, any stockholder who wishes to have a proposal   
included in Metromedia's proxy statement for that meeting must deliver a copy of
the proposal to Metromedia a reasonable time before the proxy solicitation is   
made. Metromedia reserves the right to decline to include in its proxy statement
any stockholder's proposal, which does not comply with the rules of the         
Securities and Exchange Commission for inclusion in the proxy statement.        

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WHERE YOU CAN FIND MORE INFORMATION 

We each file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and 
copy any document that we file at the Securities and Exchange Commission's      
Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549 and also 
at the regional offices of the Securities and Exchange Commission located at 7  
World Trade Center, Suite 1300, New York, New York 10048 and the Citicorp Center
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please    
call 1-800-SEC-0330 for further information on the operation of the Public      
Reference Room. Reports, proxy statements and other information regarding       
issuers that file electronically with the Securities and Exchange Commission,   
including our filings, are also available to the public from the Securities and 
Exchange Commission's Web site at "http://www.sec.gov."                         

Metromedia has filed with the Securities and Exchange Commission a      
registration statement on Form S-4. This joint proxy statement/prospectus is a  
part of the registration statement and constitutes a prospectus of Metromedia   
for the Metromedia class A common stock to be issued to AboveNet stockholders in
the merger. As allowed by the Securities and Exchange Commission rules, this    
document does not contain all the information you can find in the registration  
statement or the exhibits to the registration statement.                        

   THE SECURITIES AND EXCHANGE COMMISSION ALLOWS METROMEDIA TO "INCORPORATE BY
REFERENCE" THE INFORMATION METROMEDIA FILES WITH THEM, WHICH MEANS THAT IT CAN  
DISCLOSE IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT METROMEDIA TO YOU   
THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT BY REFERRING YOU TO     
THOSE DOCUMENTS.                                                                

  The information incorporated by reference is considered to be part of this
document. Information that we file later with the Securities and Exchange       
Commission will automatically update and supersede this information. We         
incorporate by reference the documents listed below and any filing we will make 
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or  
15(d) of the Securities Exchange Act of 1934 following the date of this joint   
proxy statement/prospectus and prior to the date of the Metromedia special      
meeting or the AboveNet special meeting:                                        

METROMEDIA                                                              

1.  Annual Report on Form 10-K of Metromedia for the fiscal year ended  
December 31, 1998;                                                

    2.  Quarterly Report on Form 10-Q filed by Metromedia for the fiscal quarter
ended March 31, 1999;                                             

3.  Current Report on Form 8-K dated June 30, 1999; and                 

4.  The description of class A common stock contained in Metromedia's   
registration statement on Form 8-A.                               

YOU MAY REQUEST A COPY OF THESE FILINGS, AT NO COST, BY WRITING OR      
TELEPHONING US AT THE FOLLOWING ADDRESS:                                        

METROMEDIA FIBER NETWORK, INC.                                          
ONE NORTH LEXINGTON AVENUE                                              
WHITE PLAINS, NEW YORK 10601                                            
ATTENTION: SECRETARY                                                    

TELEPHONE REQUESTS MAY BE DIRECTED TO: (914) 421-6700                   

   IN ORDER TO ENSURE TIMELY DELIVERY OF THESE DOCUMENTS, YOU SHOULD MAKE YOUR
REQUEST BY AUGUST 27, 1999.                                                     

WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY       
REPRESENTATION ABOUT THE MERGER OR ABOUT US THAT DIFFERS FROM OR ADDS TO THE    
INFORMATION IN THIS DOCUMENT OR IN OUR DOCUMENTS OR THE DOCUMENTS THAT WE       
PUBLICLY FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. THEREFORE, IF ANYONE 
DOES GIVE YOU DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.   

 IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR
SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS   
DOCUMENT OR TO ASK FOR PROXIES, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO
DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY THIS DOCUMENT DOES NOT      
EXTEND TO YOU.                                                                  

    THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF ITS DATE UNLESS
THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.               

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ABOVENET COMMUNICATIONS INC.
INDEX TO FINANCIAL STATEMENTS 

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                                                                                                            PAGE   
                                                                                                            -----  
                                                                                                                   
Independent Auditors' Report...............................................................................     F-2
Balance Sheets as of June 30, 1997 and 1998 and March 31, 1999.............................................     F-3
Statements of Operations for the Period from March 8, 1996 (Inception) to June 30, 1996, the Years Ended           
  June 30, 1997 and 1998 and the Nine Months Ended March 31, 1998 (unaudited) and 1999.....................     F-4
Statements of Stockholders' Equity (Deficiency) for the Period from March 8, 1996 (Inception) to June 30,          
  1996, the Years Ended June 30, 1997 and 1998 and the Nine Months Ended March 31, 1999....................     F-5
Statements of Cash Flows for the Period from March 8, 1996 (Inception) to June 30, 1996, the Years Ended           
  June 30, 1997 and 1998 and the Nine Months Ended March 31, 1998 (unaudited) and 1999.....................     F-6
Notes to Financial Statements..............................................................................     F-7

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INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of                                   
AboveNet Communications Inc.:                                                   

  We have audited the accompanying balance sheets of AboveNet Communications
Inc. as of June 30, 1997 and 1998 and March 31, 1999 and the related statements 
of operations, stockholders' equity (deficiency) and cash flows for the period  
from March 8, 1996 (inception) to June 30, 1996, for each of the two years in   
the period ended June 30, 1998 and for the nine months ended March 31, 1999.    
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, such financial statements present fairly, in all material
respects, the financial position of AboveNet Communications Inc. as of June 30, 
1997, and 1998 and March 31, 1999 and the results of their operations and their 
cash flows for the period from March 8, 1996 (inception) to June 30, 1996, for  
each of the two years in the period ended June 30, 1998 and for the nine months 
ended March 31, 1999 in conformity with generally accepted accounting           
principles.                                                                     

DELOITTE & TOUCHE LLP                                                           

San Jose, California                                                            
April 22, 1999                                                                  
(May 5, 1999 as to Note 16).                                                    

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ABOVENET COMMUNICATIONS INC.

BALANCE SHEETS

                                                        [Enlarge/Download Table]

                                                                              JUNE 30,                           
                                                                     ---------------------------    MARCH 31,    
                                                                         1997          1998            1999      
                                                                     ------------  -------------  -------------- 
                                                                                                                 
ASSETS                                                                                                           
Current assets:                                                                                                  
  Cash and equivalents.............................................. $    331,100  $   8,141,200  $   44,947,700 
  Short-term investments............................................           --             --      11,744,200 
  Accounts receivable, net of reserve for doubtful accounts of                                                   
    $15,000, $60,000 and $477,100, respectively.....................       41,100        357,000       1,851,000 
  Prepaid expenses and other current assets.........................           --        269,600       1,301,200 
                                                                     ------------  -------------  -------------- 
      Total current assets..........................................      372,200      8,767,800      59,844,100 
Property and equipment, net.........................................      766,400      4,436,100      24,393,800 
Rights to use fiber optic capacity..................................           --             --       9,080,000 
Restricted cash.....................................................           --        300,000       1,220,000 
Deposits and other assets...........................................       32,700        189,400       1,644,800 
                                                                     ------------  -------------  -------------- 
      Total......................................................... $  1,171,300  $  13,693,300  $   96,182,700 
                                                                     ------------  -------------  -------------- 
                                                                     ------------  -------------  -------------- 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)                                                                
Current liabilities:                                                                                             
  Accounts Payable.................................................. $    312,000  $   2,301,300  $    8,521,000 
  Remaining obligation for rights to use fiber optic capacity.......           --             --         800,000 
  Accrued liabilities...............................................      109,700        619,900       1,315,800 
  Customer deposits.................................................       85,000        309,400         971,300 
  Advances..........................................................      739,900             --              -- 
  Current portion of long-term obligations..........................       71,500        476,000       3,511,200 
                                                                     ------------  -------------  -------------- 
      Total current liabilities.....................................    1,318,100      3,706,600      15,119,300 
                                                                     ------------  -------------  -------------- 
Convertible notes payable and advances..............................           --      8,000,000              -- 
                                                                     ------------  -------------  -------------- 
Other long-term obligations.........................................      115,500      1,325,300       9,972,500 
                                                                     ------------  -------------  -------------- 
Commitments and contingencies (Notes 3, 4 and 11) Stockholders'                                                  
  equity (deficiency):                                                                                           
  Preferred stock, $0.001 par value, 10,000,000 shares authorized;                                               
    shares issued and outstanding--none.............................           --             --              -- 
  Convertible preferred stock, $0.001 par value:                                                                 
    Series A; shares issued and outstanding--2,050,000, 2,050,000                                                
      and none, respectively........................................      410,000        410,000              -- 
    Series B; shares issued and outstanding--2,000,000, 3,263,792                                                
      and none, respectively........................................    1,200,000      2,323,100              -- 
    Series C; shares issued and outstanding--none, 4,006,000 and                                                 
      none respectively.............................................           --      3,873,400              -- 
    Series D; no shares issued and outstanding......................           --             --              -- 
    Series E; no shares issued and outstanding......................           --             --              -- 
  Common stock, $0.001 par value, 60,000,000 shares authorized;                                                  
    shares issued and outstanding--406,250, 728,696 and 27,331,980,                                              
    respectively....................................................        8,100         38,900      89,292,200 
  Common stock options..............................................           --      1,861,500       3,561,100 
  Deferred stock compensation.......................................           --       (540,100)        (57,500)
  Accumulated deficit...............................................   (1,880,400)    (7,305,400)    (21,704,900)
                                                                     ------------  -------------  -------------- 
      Total stockholders' equity (deficiency).......................     (262,300)       661,400      71,090,900 
                                                                     ------------  -------------  -------------- 
      Total......................................................... $  1,171,300  $  13,693,300  $   96,182,700 
                                                                     ------------  -------------  -------------- 
                                                                     ------------  -------------  -------------- 

See notes to financial statements.

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ABOVENET COMMUNICATIONS INC.

STATEMENT OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                                                          NINE MONTHS ENDED       
                                                                                              MARCH 31,           
                                       MARCH 8, 1996                                ----------------------------- 
                                        (INCEPTION)       YEAR ENDED JUNE 30,           1998                      
                                            TO        ----------------------------  -------------                 
                                       JUNE 30, 1996      1997           1998                           1999      
                                       -------------  -------------  -------------   (UNAUDITED)   -------------- 
                                                                                                                  
Revenues.............................   $    78,600   $     551,600  $   3,436,400  $   2,068,800  $    8,297,400 
Costs and expenses:                                                                                               
  Data communications and                                                                                         
    telecommunications...............            --         558,600      2,199,800      1,267,900       5,705,100 
  Network operations.................        19,400         416,700      1,571,800        856,400       3,720,600 
  Sales and marketing................        19,100         382,600      1,618,700        908,400       6,348,300 
  General and administrative.........        66,100         433,700      1,621,500        959,600       3,695,400 
  Depreciation and amortization......        51,600         132,700        475,500        299,400       2,005,100 
  Stock-based compensation expense...            --              --      1,276,400        509,000       1,282,800 
  Joint venture termination fee......            --         431,100             --             --              -- 
                                       -------------  -------------  -------------  -------------  -------------- 
      Total costs and expenses.......       156,200       2,355,400      8,763,700      4,800,700      22,757,300 
                                       -------------  -------------  -------------  -------------  -------------- 
Loss from operations.................       (77,600)     (1,803,800)    (5,327,300)    (2,731,900)    (14,459,900)
Interest expense.....................            --          (7,400)      (160,800)      (128,400)       (916,400)
Interest and other income............            --           8,400         63,100         31,300         976,800 
                                       -------------  -------------  -------------  -------------  -------------- 
Net loss.............................   $   (77,600)  $  (1,802,800) $  (5,425,000) $  (2,829,000) $  (14,399,500)
                                       -------------  -------------  -------------  -------------  -------------- 
                                       -------------  -------------  -------------  -------------  -------------- 
Basic and diluted loss per share.....   $     (0.31)  $       (4.58) $      (10.34) $       (5.92) $        (1.25)
                                       -------------  -------------  -------------  -------------  -------------- 
                                       -------------  -------------  -------------  -------------  -------------- 
Shares used in basic and diluted loss                                                                             
  per share..........................       250,000         393,236        524,608        477,620      11,484,816 
                                       -------------  -------------  -------------  -------------  -------------- 
                                       -------------  -------------  -------------  -------------  -------------- 

See notes to financial statements.

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ABOVENET COMMUNICATIONS INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) 

                                                        [Enlarge/Download Table]

                                                               PREFERRED STOCK          COMMON STOCK        COMMON      DEFERRED   
                                                           -----------------------  ---------------------    STOCK        STOCK    
                                                             SHARES      AMOUNT      SHARES      AMOUNT     OPTIONS   COMPENSATION 
                                                           ----------  -----------  ---------  ----------  ---------  -------------
                                                                                                                                   
Balances, March 8, 1996 (inception).......................         --  $        --         --  $       --  $      --   $        -- 
Issuance of common stock..................................         --           --    250,000       5,000         --            -- 
Net loss..................................................         --           --         --          --         --            -- 
                                                           ----------  -----------  ---------  ----------  ---------  -------------
Balances, June 30, 1996...................................         --           --    250,000       5,000         --            -- 
Issuance of common stock..................................         --           --    125,000       2,500         --            -- 
Issuance of Series A convertible preferred stock..........  2,050,000      410,000         --          --         --            -- 
Exercise of common stock options..........................         --           --     31,250         600         --            -- 
Issuance of Series B convertible preferred stock..........  1,000,000      600,000         --          --         --            -- 
Issuance of Series B convertible preferred stock in                                                                                
  conjunction with acquisition of DSK, Inc. (Note 10).....  1,000,000      600,000         --          --         --            -- 
Net loss..................................................         --           --         --          --         --            -- 
                                                           ----------  -----------  ---------  ----------  ---------  -------------
Balances, June 30, 1997...................................  4,050,000    1,610,000    406,250       8,100         --            -- 
Exercise of common stock options..........................         --           --    322,446      30,800         --            -- 
Issuance of warrants in connection with issuance of                                                                                
  debt....................................................         --      112,000         --          --     45,000            -- 
Issuance of Series B convertible preferred stock..........  1,263,792    1,011,100         --          --         --            -- 
Issuance of Series C convertible preferred stock..........  4,006,000    3,873,400         --          --         --            -- 
Compensatory stock arrangements...........................         --           --         --          --  1,816,500    (1,816,500)
Amortization of deferred stock compensation...............         --           --         --          --         --     1,276,400 
Net loss..................................................         --           --         --          --         --            -- 
                                                           ----------  -----------  ---------  ----------  ---------  -------------
Balances, June 30, 1998...................................  9,319,792    6,606,500    728,696      38,900  1,861,500      (540,100)
Issuance of Series D convertible preferred stock..........  4,230,756   10,771,000         --          --         --            -- 
Issuance of Series E convertible preferred stock..........    817,550    3,846,400         --          --         --            -- 
Exercise of Series B warrants.............................    209,400           --         --          --         --            -- 
Conversion of convertible preferred stock to common                                                                                
  stock................................................... (14,577,498) (21,223,900) 14,577,498 21,223,900        --            -- 
Issuance of common stock upon initial public offering.....         --           --  11,500,000 67,822,000         --            -- 
Exercise of common stock options and warrants.............         --           --    525,786     207,400         --            -- 
Issuance of warrants in connection with issuance of debt                                                                           
  and leases..............................................         --           --         --          --    899,400            -- 
Compensatory stock arrangements...........................         --           --         --          --    800,200      (800,200)
Amortization of deferred stock compensation...............         --           --         --          --         --     1,282,800 
Net loss..................................................         --           --         --          --         --            -- 
                                                           ----------  -----------  ---------  ----------  ---------  -------------
Balances, March 31, 1999..................................         --  $        --  27,331,980 $89,292,200 $3,561,100  $   (57,500)
                                                           ----------  -----------  ---------  ----------  ---------  -------------
                                                           ----------  -----------  ---------  ----------  ---------  -------------


                                                                         STOCKHOLDERS'                                             
                                                           ACCUMULATED      EQUITY                                                 
                                                             DEFICIT     (DEFICIENCY)                                              
                                                           ------------  ------------                                              
                                                                                                                                   
Balances, March 8, 1996 (inception).......................  $       --    $       --                                               
Issuance of common stock..................................          --         5,000                                               
Net loss..................................................     (77,600)      (77,600)                                              
                                                           ------------  ------------                                              
Balances, June 30, 1996...................................     (77,600)      (72,600)                                              
Issuance of common stock..................................          --         2,500                                               
Issuance of Series A convertible preferred stock..........          --       410,000                                               
Exercise of common stock options..........................          --           600                                               
Issuance of Series B convertible preferred stock..........          --        600,00                                               
Issuance of Series B convertible preferred stock in                                                                                
  conjunction with acquisition of DSK, Inc. (Note 10).....          --       600,000                                               
Net loss..................................................  (1,802,800)   (1,802,800)                                              
                                                           ------------  ------------                                              
Balances, June 30, 1997...................................  (1,880,400)     (262,300)                                              
Exercise of common stock options..........................          --        30,800                                               
Issuance of warrants in connection with issuance of                                                                                
  debt....................................................          --       157,000                                               
Issuance of Series B convertible preferred stock..........          --     1,011,100                                               
Issuance of Series C convertible preferred stock..........          --     3,873,400                                               
Compensatory stock arrangements...........................          --            --                                               
Amortization of deferred stock compensation...............          --     1,276,400                                               
Net loss..................................................  (5,425,000)   (5,425,000)                                              
                                                           ------------  ------------                                              
Balances, June 30, 1998...................................  (7,305,400)      661,400                                               
Issuance of Series D convertible preferred stock..........          --    10,771,000                                               
Issuance of Series E convertible preferred stock..........          --     3,846,400                                               
Exercise of Series B warrants.............................          --            --                                               
Conversion of convertible preferred stock to common                                                                                
  stock...................................................          --            --                                               
Issuance of common stock upon initial public offering.....          --    67,822,000                                               
Exercise of common stock options and warrants.............          --       207,400                                               
Issuance of warrants in connection with issuance of debt                                                                           
  and leases..............................................          --       899,400                                               
Compensatory stock arrangements...........................          --            --                                               
Amortization of deferred stock compensation...............          --     1,282,800                                               
Net loss.................................................. (14,399,500)  (14,399,500)                                              
                                                           ------------  ------------                                              
Balances, March 31, 1999.................................. ($21,704,900)  $71,090,900                                              
                                                           ------------  ------------                                              
                                                           ------------  ------------                                              

See notes to financial statements.

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ABOVENET COMMUNICATIONS INC.

STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                MARCH 8, 1996                          NINE MONTHS ENDED MARCH     
                                                 (INCEPTION)    YEAR ENDED JUNE 30,              31,               
                                                     TO        ----------------------  ------------------------    
                                                JUNE 30, 1996     1997        1998        1998         1999        
                                                -------------  ----------  ----------  -----------  -----------    
                                                                                                                   
                                                                                       (UNAUDITED)                 
Cash flows from operating activities:                                                                              
  Net loss....................................    $ (77,600)   $(1,802,800) $(5,425,000) ($2,829,000) $(14,399,500)
  Adjustments to reconcile net loss to net                                                                         
    cash used in operating activities:                                                                             
    Depreciation and amortization.............       51,600       132,700     475,500     299,400     2,005,100    
    Stock-based compensation expense..........           --            --   1,276,400     509,000     1,282,800    
    Noncash interest expense..................           --            --     133,200     112,000        84,300    
    Joint venture termination fee.............           --       431,100          --                              
    Changes in assets and liabilities:                                                                             
      Accounts receivable.....................      (12,000)      (29,100)   (315,900)   (196,300)   (1,494,000)   
      Prepaid expenses and other current                                                                           
        assets................................           --            --    (269,600)   (258,200)   (1,031,600)   
      Restricted cash.........................           --            --    (300,000)   (300,000)     (920,000)   
      Accounts payable........................       13,100       298,900   1,989,300     261,100     6,219,700    
      Accrued liabilities.....................           --       109,700     510,200     183,800       695,900    
      Customer deposits.......................           --        85,000     224,400     140,600       661,900    
      Deferred rent...........................           --        30,400      18,200      13,700       119,500    
                                                -------------  ----------  ----------  -----------  -----------    
        Net cash used in operating                                                                                 
          activities..........................      (24,900)     (744,100) (1,683,300) (2,063,900)   (6,775,900)   
Cash flows from investing activities:                                                                              
  Cash paid for rights to use fiber optic                                                                          
    capacity..................................           --            --          --          --    (8,280,000)   
  Purchase of property and equipment..........     (101,100)     (474,500) (3,666,000)   (659,200)  (20,858,700)   
  Increase in deposits and other assets.......           --       (32,700)   (111,700)   (173,900)     (640,300)   
                                                -------------  ----------  ----------  -----------  -----------    
        Net cash used in investing                                                                                 
          activities..........................     (101,100)     (507,200) (3,777,700)   (833,100)  (29,779,000)   
                                                -------------  ----------  ----------  -----------  -----------    
Cash flows from financing activities:                                                                              
  Purchase of short-term investments..........           --            --          --          --   (11,744,200)   
  Proceeds from notes payable and advances....      210,000       739,900  13,395,000   4,144,600    12,543,300    
  Debt repayments.............................           --            --     (70,000)         --    (1,823,500)   
  Capital lease repayments....................           --       (49,600)    (84,700)    (48,700)     (261,000)   
  Proceeds from issuance of common stock......        5,000         3,100      30,800      20,800    68,029,400    
  Proceeds from issuance of convertible                                                                            
    preferred stock...........................           --       800,000          --          --     6,617,400    
                                                -------------  ----------  ----------  -----------  -----------    
        Net cash provided by financing                                                                             
          activities..........................      215,000     1,493,400  13,271,100   4,116,700    73,361,400    
                                                -------------  ----------  ----------  -----------  -----------    
Net increase in cash and equivalents..........       89,000       242,100   7,810,100   1,219,700    36,806,500    
Cash and equivalents, beginning of period.....           --        89,000     331,100     331,100     8,141,200    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    
Cash and equivalents, end of period...........    $  89,000    $  331,100  $8,141,200   $1,550,800  $44,947,700    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    
Supplemental cash flow information--Cash paid                                                                      
  for interest................................    $      --    $    7,400  $   27,600   $  16,400   $   832,100    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    
Noncash investing and financing activities:                                                                        
  Remaining obligation for rights to use fiber                                                                     
    optic capacity............................    $      --    $       --  $       --   $      --   $   800,000    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    
  Acquisition of equipment under capital                                                                           
    lease.....................................    $      --    $  206,200  $  479,200   $      --   $ 1,104,100    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    
  Acquisition of leasehold improvements in                                                                         
    conjunction with DSK, Inc. acquisition....    $      --    $  168,900  $       --   $      --   $        --    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    
  Exchange of notes, advances, accrued                                                                             
    interest and warrants for convertible                                                                          
    preferred stock...........................    $      --    $  210,000  $4,884,500   $1,011,100  $ 8,000,000    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    
  Conversion of preferred stock into common                                                                        
    stock.....................................    $      --    $       --  $       --   $      --   $21,223,900    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    
  Issuance of warrants in connection with                                                                          
    issuance of debt and leases...............    $      --    $       --  $   45,000   $      --   $   899,400    
                                                -------------  ----------  ----------  -----------  -----------    
                                                -------------  ----------  ----------  -----------  -----------    

See notes to financial statements.

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AboveNet Communications Inc.
Notes to Financials 

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                  

 ORGANIZATION--AboveNet Communications Inc. (the "Company"), was formed on
March 8, 1996 (inception). The Company provides facilities-based, managed       
services for customer-owned Web servers and related equipment, known as         
co-location, and high performance Internet connectivity solutions for electronic
commerce and other business critical Internet operations.                       

    USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities 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.             

    CONCENTRATION OF CREDIT RISK--Financial instruments that potentially subject
the Company to concentration of credit risk consist of trade receivables.       
However, the Company's credit risk is mitigated by its credit evaluation process
and the reasonably short collection terms. The Company does not require         
collateral or other security to support accounts receivable and maintains       
reserves for potential credit losses.                                           

 CASH AND EQUIVALENTS--The Company considers all highly liquid investments
with an original maturity of ninety days or less to be cash equivalents.        

SHORT-TERM INVESTMENTS--Short term investments consist of treasury bills
with a maturity date greater than 90 days but less than twelve months. The      
Company's short-term investments are classified as available-for-sale. The      
investments are carried at cost, which approximated fair value at March 31,     
1999. Material unrealized gains or losses would be reported as a separate       
component of stockholders' equity. No investments were sold in the periods      
presented.                                                                      

PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.      
Depreciation is computed using the straight-line method over the estimated      
useful lives of three to five years. Leasehold improvements and assets acquired 
under capital lease are amortized over the shorter of the lease term or the     
useful lives of the improvement.                                                

RIGHTS TO USE FIBER OPTIC CAPACITY--Indefeasible rights to use (IRU)    
capacity on fiber optic cable systems are stated at cost. Amortization will be  
recognized over the shorter of the term of the IRU or its useful life when such 
capacity becomes available to the Company.                                      

  RESTRICTED CASH--Restricted cash consists of certificates of deposit which
are restricted from use pursuant to certain lease agreements.                   

   REVENUE RECOGNITION--Revenue consists primarily of service revenue which is
recognized in the period in which the services are provided. The services       
primarily include bandwidth and space requirement charges which are recognized  
monthly as well as installation fees which are recognized as revenue in the     
period of installation. Advance customer deposits received are deferred until   
the period in which the services are rendered.                                  

INCOME TAXES--Deferred tax liabilities are recognized for future taxable
amounts, and deferred tax assets are recognized for future deductions, net of a 
valuation allowance to reduce net deferred tax assets to amounts that are more  
likely than not to be realized.                                                 

STOCK-BASED COMPENSATION--The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting        
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to          
Employees."                                                                     

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)      
    IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF--The
Company evaluates its long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the        
carrying amount of such assets or intangibles may not be recoverable.           
Recoverability of assets to be held and used is measured by a comparison of the 
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be   
recognized is measured by the amount by which the carrying amount of the assets 
exceeds the fair value of the assets. Assets to be disposed of are reported at  
the lower of the carrying amount or fair value less costs to sell.              

    NET INCOME (LOSS) PER SHARE--Basic income (loss) per share excludes dilution
and is computed by dividing net income (loss) by the weighted-average number of 
common shares outstanding, less shares subject to repurchase by the Company, for
the period. Diluted income (loss) per share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were         
exercised or converted into common stock. Common share equivalents are excluded 
from the computation in loss periods as their effect would be antidilutive.     

  On May 7, 1999, the Company distributed a two-for-one stock split effected
as a stock dividend. All share or per share amounts in the financial statements 
have been adjusted to give effect to this stock split.                          

  UNAUDITED INTERIM FINANCIAL INFORMATION--The interim financial information
for the nine months ended March 31, 1998 is unaudited and has been prepared on  
the same basis as the audited financial statements. In the opinion of           
management, such unaudited information includes all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the       
interim information. Results for the nine months ended March 31, 1999 are not   
necessarily indicative of results to be expected for the year ending June 30,   
1999.                                                                           

 RECLASSIFICATIONS--Certain prior period amounts have been reclassified to
conform to the current period presentation. Such reclassifications had no effect
on stockholders' equity (deficiency) or net loss.                               

    RECENTLY ISSUED ACCOUNTING STANDARDS--In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income", which requires an enterprise to      
report, by major components and as a single total, the change in the Company's  
net assets during the period from nonowner sources. The Company adopted SFAS No.
130 in fiscal 1999. For all periods presented, comprehensive loss was equal to  
the Company's net loss.                                                         

    Additionally, in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information", which establishes annual and
interim reporting standards for an enterprise's business segments and related   
disclosures about the enterprise's products, services, geographic areas and     
major customers. The Company adopted this statement in fiscal 1999. The Company 
has determined that it operates in one reporting segment.                       

   In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP 98-1, "Accounting for the  
Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1    
provides guidance for an enterprise on accounting for the costs of computer     
software developed or obtained for internal use. SOP 98-1 is effective for the  
Company in fiscal 2000. The Company anticipates that accounting for transactions
under SOP 98-1 will not have a material impact on its financial position or     
results of operations.                                                          

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)      
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative  
Instruments and Hedging Activities," which defines derivatives, requires that   
all derivatives be carried at fair value, and provides for hedge accounting when
certain conditions are met. SFAS No. 133 is effective for the Company in fiscal 
2000.                                                                           

Although the Company has not fully assessed the implications of SFAS No.
133, the Company does not believe adoption of this statement will have a        
material impact on its financial position or results of operations.             

2. PROPERTY AND EQUIPMENT, NET                                                  

Property and equipment are comprised of the following:                  

                                                        [Enlarge/Download Table]

                                                                                 JUNE 30,                        
                                                                         ------------------------    MARCH 31,   
                                                                            1997         1998          1999      
                                                                         ----------  ------------  ------------- 
                                                                                                                 
Property and equipment, at cost:                                                                                 
  Telecommunication equipment........................................... $  774,300  $  2,295,300  $   7,615,100 
  Leasehold improvements (primarily co-location facilities).............    168,900       224,700     12,383,500 
  Office equipment......................................................      7,500       186,500        840,700 
  Construction in progress..............................................         --     2,389,400      5,893,700 
                                                                         ----------  ------------  ------------- 
      Total.............................................................    950,700     5,095,900     26,733,000 
Less accumulated depreciation and amortization..........................   (184,300)     (659,800)    (2,339,200)
                                                                         ----------  ------------  ------------- 
Property and equipment, net............................................. $  766,400  $  4,436,100  $  24,393,800 
                                                                         ----------  ------------  ------------- 
                                                                         ----------  ------------  ------------- 

Construction in progress primarily relates to costs incurred during the 
expansion of the Company's facilities.                                          

3. INDEFEASIBLE RIGHTS TO USE FIBER OPTIC CAPACITY                              

During fiscal 1999, the Company entered into a series of agreements     
providing for the acquisition of an indefeasible right to use capacity on a     
fiber optic cable system between the U.S. and the United Kingdom for $8.3       
million, $7.5 million of which has been paid as of March 31, 1999. The terms of 
these agreements are 25 years.                                                  

  In addition, in fiscal 1999, the Company entered into an agreement whereby
the Company committed to acquire an indefeasible right to use capacity on a     
fiber optic cable system between the U.S. and the Netherlands for $7.5 million. 
The agreement is conditioned upon the Company entering into another indefeasible
right to use capacity on a fiber optic cable system connecting certain European 
cities.                                                                         

In fiscal 1999, the Company entered into a series of agreements to lease
fiber optical cable systems between Washington D.C. and New York City. The      
leases will require annual payments of $630,000 for 20 years from the initiation
of the leases which, is anticipated to be in the fourth quarter of fiscal 1999. 
The leases will be accounted for as capital leases upon initiation of the lease.

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

4. JOINT VENTURES                                                               

   In March 1999, as part of its international expansion strategy, the Company
entered into agreements to form joint ventures in Austria, Germany, and the     
United Kingdom to provide managed co-location and Internet connectivity         
solutions for mission critical Internet operations. The Company invested a total
of $581,400 in March 1999, which is included in deposits and other assets at    
March 31, 1999. The Company is required to invest an additional $1.9 million in 
the quarter ending June 30, 1999, for up to a 50% ownership in each of these    
joint ventures. In addition, the Company has agreed to provide up to $2 million 
of additional financing to certain of these joint ventures, if required, and to 
arrange or provide for an additional $4.5 million contingent upon the joint     
ventures raising an equivalent amount from third parties. These joint ventures  
will be accounted for under the equity method of accounting.                    

5. CONVERTIBLE NOTES PAYABLE AND ADVANCES                                       

 In June 1997, the Company received $739,900 in cash advances from certain
individuals, including stockholders and employees. In July and August 1997, the 
Company received an additional $250,000 in cash advances. In August 1997, the   
advances were converted into notes payable of $989,900 and warrants to acquire  
989,906 shares of Series B convertible preferred stock at $1.00 per share. The  
notes generally bore an annual interest rate of 10%. The related warrants were  
valued at $112,000, or $0.12 per share, and were recorded as noncash interest   
expense in fiscal 1998.                                                         

   On December 31, 1997, the Company entered into exchange agreements with the
Note holders. Pursuant to the exchange agreements, the above notes, accrued     
interest of $21,200 and the related warrants were exchanged for (i) 1,263,792   
shares of Series B convertible preferred stock and (ii) warrants to acquire     
247,472 shares of Series B convertible preferred stock at $1.00 per share.      

 During fiscal 1998, the Company received $3,873,400 of cash advances from
certain potential investors. In May 1998, these advances were converted into    
4,006,000 shares of Series C convertible preferred stock.                       

    On June 30, 1998, in anticipation of the Company's pending sale of preferred
stock, the Company received $8 million in cash, of which $1 million represented 
a noninterest bearing cash advance and $7 million represented convertible notes 
payable. The notes bore interest at 6%, were due on July 15, 1998 and were      
convertible into Series D convertible preferred stock at $2.60 per share. On    
July 15, 1998, the convertible notes and advance were converted into Series D   
convertible preferred stock (see Note 8).                                       

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

6. OTHER LONG-TERM OBLIGATIONS                                                  

Long-term obligations consist of:                                       

                                                        [Enlarge/Download Table]

                                                                                 JUNE 30,                        
                                                                         ------------------------    MARCH 31,   
                                                                            1997         1998          1999      
                                                                         ----------  ------------  ------------- 
                                                                                                                 
Credit facility......................................................... $       --  $  1,201,600  $  11,921,400 
Capital lease facility..................................................    156,600       551,100      1,394,200 
Deferred rent...........................................................     30,400        48,600        168,100 
                                                                         ----------  ------------  ------------- 
      Total obligations.................................................    187,000     1,801,300     13,483,700 
Current portion of long-term obligations................................    (71,500)     (476,000)    (3,511,200)
                                                                         ----------  ------------  ------------- 
Long-term obligations................................................... $  115,500  $  1,325,300  $   9,972,500 
                                                                         ----------  ------------  ------------- 
                                                                         ----------  ------------  ------------- 

CREDIT FACILITY                                                                 

At March 31, 1999, the Company had a $15 million credit facility (the   
"Credit Facility"), $1.2 million of which is available for future borrowings.   
Proceeds from borrowings on the Credit Facility may be used solely for the      
purpose of acquiring network operating center equipment, office equipment and   
leasehold improvements. Borrowings outstanding under the Credit Facility are    
payable in 42 monthly installments, bear interest at rates ranging from 13.3% to
15.1% and are collateralized by the equipment and improvements purchased with   
the proceeds of the borrowing. The ability to borrow on the Credit Facility     
expires October 31, 1999. At March 31, 1999, the outstanding borrowings on the  
Credit Facility are due as follows: remainder of fiscal 1999, $719,500; fiscal  
2000, $3,146,100; fiscal 2001, $3,623,800; fiscal 2002, $3,836,400; and fiscal  
2003, $595,600.                                                                 

CAPITAL LEASE FACILITY                                                          

At March 31, 1999, the Company had $920,000 available on a $2.5 million 
facility under which the Company leases certain equipment under capital leases. 
Leases outstanding at March 31, 1999 expire on various dates through fiscal 2002
(see Note 11).                                                                  

LINE OF CREDIT                                                                  

 The Company has a revolving line of credit from a bank which provides for
borrowings up to $750,000 through May 1999. Borrowings under the line bear      
interest at the bank's prime rate (7.75% at March 31, 1999) plus 1% per annum   
and are collateralized by substantially all of the Company's assets. As of March
31, 1999, the Company had no borrowings outstanding on the line of credit. The  
line of credit agreement limits the Company's ability to pay cash dividends     
without the bank's consent and requires, among other things, that the Company   
satisfy certain financial covenants. As of March 31, 1999 the Company was in    
compliance with all covenants. In June 1998, the Company issued to the bank a   
warrant to purchase 2,500 shares of Series D preferred stock at $2.00 per share 
(See Note 8). The warrant had an estimated fair value of $1,900 or $0.76 per    
share.                                                                          

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

7. INCOME TAXES                                                                 

The Company's deferred income tax assets are comprised of the following:

                                                        [Enlarge/Download Table]

                                                                                 JUNE 30,                         
                                                                        --------------------------    MARCH 31,   
                                                                           1997          1998           1999      
                                                                        -----------  -------------  ------------- 
                                                                                                                  
Net deferred tax assets:                                                                                          
  Net operating loss carryforwards..................................... $   489,700  $   1,871,700  $   6,426,600 
  Stock compensation expense on nonqualified stock options.............          --        485,300        913,200 
  Accruals deductible in different periods.............................      54,000        114,700        824,800 
  Depreciation and amortization........................................     (14,000)       (65,200)      (156,600)
                                                                        -----------  -------------  ------------- 
                                                                            529,700      2,406,500      8,008,000 
Valuation allowance....................................................    (529,700)    (2,406,500)    (8,008,000)
                                                                        -----------  -------------  ------------- 
      Total............................................................ $        --  $          --  $          -- 
                                                                        -----------  -------------  ------------- 
                                                                        -----------  -------------  ------------- 

   The Company's effective rate differs from the federal statutory tax rate as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                                      MARCH 8, 1996        YEAR ENDED         NINE MONTHS  
                                                                       (INCEPTION)          JUNE 30,             ENDED     
                                                                       TO JUNE 30,    --------------------     MARCH 31,   
                                                                          1996          1997       1998          1999      
                                                                     ---------------  ---------  ---------  ---------------
                                                                                                                           
Federal statutory tax rate..........................................         35.0%         35.0%      35.0%         35.0%  
State taxes, net of federal benefit.................................          3.0           3.0        3.0           2.9   
Joint venture termination fee.......................................           --          (9.1)        --            --   
Other...............................................................        (25.4)         (0.1)      (0.3)         (0.1)  
Valuation allowance.................................................        (12.6)        (28.8)     (37.7)        (37.8)  
                                                                            -----     ---------  ---------         -----   
Effective tax rate..................................................           --%           --%        --%           --%  
                                                                            -----     ---------  ---------         -----   
                                                                            -----     ---------  ---------         -----   

The Company has no income tax provision due to its history of operating 
losses. Due to the uncertainty surrounding the realization of the benefits of   
its favorable tax attributes in future tax returns, the Company has fully       
reserved its net deferred tax assets as of June 30, 1997 and 1998 and March 31, 
1999.                                                                           

At March 31, 1999, the Company had net operating loss carryforwards of  
approximately $16.8 million for federal and $8.4 million for state income tax   
purposes. These carryforwards begin to expire in 2003 for state and 2010 for    
federal purposes. Additionally, Section 382 of the Internal Revenue Code and the
applicable California law impose annual limitations on the use of net operating 
loss carryforwards if there is a change in ownership, as defined, within any    
three-year period. The utilization of certain net operating loss carryforwards  
may be limited due to the Company's capital stock transactions.                 

8. STOCKHOLDERS' EQUITY (DEFICIENCY)                                            

STOCK SPLITS                                                                    

 During November 1998, the Company reincorporated in the State of Delaware
and effected a stock exchange of one share of common stock and preferred stock  
for every two and one-half shares of common stock and preferred stock,          
respectively, of its California predecessor entity. The Company also effected   
another reverse stock split during November 1998 whereby one share of common and

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

8. STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)                                
preferred stock was issued for every 1.6 shares of common stock and preferred   
stock. All share and per share amounts in these financial statements have been  
adjusted to give effect to these reverse stock splits.                          

  On May 7, 1999, the Company distributed a two-for-one stock split effected
as a stock dividend. All share or per share amounts in the financial statements 
have been adjusted to give effect to this stock split.                          

INITIAL PUBLIC OFFERING                                                         

   On December 10, 1998, the Company sold 10,000,000 shares of common stock in
an underwritten public offering and on December 30, 1998 sold an additional     
1,500,000 shares through the exercise of the underwriters' over-allotment option
for net proceeds of approximately $67,822,000.                                  

CONVERTIBLE PREFERRED STOCK AND WARRANTS                                        

   In fiscal 1997, the Company issued 2,050,000 shares of Series A convertible
preferred stock for cash of $200,000 and the conversion of advances of $210,000.
Also in fiscal 1997, the Company issued 1,000,000 shares of Series B convertible
preferred stock in connection with the acquisition of DSK, Inc. (see Note 10)   
and issued 1,000,000 shares of Series B convertible preferred stock for cash of 
$600,000. In fiscal 1998, the Company issued 1,263,792 shares of Series B       
convertible preferred stock and 4,006,000 shares of Series D convertible        
preferred stock upon conversions of notes, advances, and accrued interest of    
$1,011,100 and $3,873,400, respectively (see Note 5). During the nine months    
ended March 31, 1999, the Company issued 4,230,756 shares of Series D           
convertible preferred stock for cash of $2,771,000 (net of costs of $229,000)   
and the conversion of notes and advances of $8,000,000. During the same period, 
the Company issued 817,550 shares of Series E convertible preferred stock for   
cash of $3,846,400 (net of costs of $223,600).                                  

    As discussed in Note 5, pursuant to certain exchange agreements entered into
on December 31, 1997, the Company issued warrants to acquire 247,472 shares of  
Series B convertible preferred stock at $1.00 per share. Also, as discussed in  
Note 6, during fiscal 1998, the Company issued a warrant to purchase 2,500      
shares of Series D convertible preferred stock at an exercise price of $2.00 per
share.                                                                          

Simultaneously with the closing of the initial public offering, all     
14,368,098 shares of the Company's preferred stock were converted into common   
stock on a share for share basis. Additionally, all of the holders of warrants  
to purchase 247,472 shares of Series B convertible preferred stock exercised    
such warrants through a net issuance provision and were issued 209,400 shares of
common stock. Also in connection with the initial public offering, the warrant  
to acquire 2,500 shares of Series D convertible preferred stock was converted   
into a warrant to purchase an equivalent number of common shares at an exercise 
price of $2.00 per share.                                                       

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

8. STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)                                
COMMON STOCK RESERVED FOR FUTURE ISSUANCE                                       

  At March 31, 1999, the Company has reserved the following shares of common
stock for issuance in connection with:                                          

                                                                [Download Table]
                                                                            
Warrants issued and outstanding..................................    340,316
Options issued and outstanding...................................  4,042,358
Options available under stock option plans.......................  2,454,200
Shares available under 1998 Purchase Plan........................    312,500
                                                                   ---------
  Total..........................................................  7,149,374
                                                                   ---------
                                                                   ---------

COMMON STOCK SUBJECT TO REPURCHASE                                              

 Upon the exercise of certain unvested employee stock options, the Company
issued to the employees common stock which is subject to repurchase by the      
Company at the original exercise price of the stock option. This right lapses   
over the original four year vesting period. At March 31, 1999, 69,290 shares    
were subject to repurchase.                                                     

STOCK OPTION PLANS                                                              

    Under the Company's stock option plans (collectively, the "Plans) a total of
5,656,712 nonstatutory and incentive common stock options are authorized for    
issuance. Nonstatutory stock options may be granted to employees, outside       
directors and consultants, and incentive stock options may only be granted to   
employees. The Plans provide for the granting of incentive stock options at not 
less than 100% of the fair market value of the underlying stock at the grant    
date. Nonstatutory stock options may be granted at not less than 85% of the fair
market value of the underlying stock at the date of grant. Options granted to   
employees generally vest over four years and expire ten years from the date of  
the grant. In addition, upon change in control, all options granted under       
certain plans shall immediately vest.                                           

The plans provide that each nonemployee director who is elected to the  
Company's board of directors will automatically be granted a nonstatutory stock 
option to purchase 18,750 shares of common stock at an exercise price equal to  
the fair value of the common stock on the grant date. These grants vest ratably 
over three years. An additional option to purchase 6,250 shares of common stock 
will be granted to the nonemployee director each year thereafter with an        
exercise price equal to the fair market value of the common stock on that date. 
These grants vest after one year of service.                                    

EMPLOYEE STOCK PURCHASE PLAN                                                    

  On December 10, 1998, the Company adopted the 1998 Employee Stock Purchase
Plan (the "1998 Purchase Plan"). Under the 1998 Purchase Plan, eligible         
employees are allowed to have salary withholdings of up to 10% of their base    
compensation to purchase shares of common stock at a price equal to 85% of the  
lower of the market value of the stock at the beginning or end of defined       
purchase periods. The initial purchase period commenced on December 10, 1998.   
The Company has reserved 312,500 shares of common stock for issuance under this 
plan. As of March 31, 1999, no shares have been issued under the 1998 Purchase  
Plan.                                                                           

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

8. STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)                                
NONPLAN OPTION GRANT                                                            

    In connection with its hiring of the Company's President and Chief Operating
Officer in November 1997, the Company granted to this officer options to        
purchase 350,000 shares of common stock with an exercise price of $0.20 per     
share. The option was immediately exercisable with respect to 20% of the option 
shares with the balance exercisable in equal monthly installments over the next 
36 months of employment with the Company. However, vesting accelerated upon the 
closing of the Company's underwritten public offering. In addition, the option  
grant contained an antidilution clause which guaranteed that, prior to any      
underwritten initial public offering of the Company's common stock, the number  
of shares under the option grant would always be equal to 5% of its outstanding 
common stock on a fully diluted basis less 36,666 shares. As a result of various
sales of equity securities and option grants since the initial grant in November
1997, the officer was issued options to purchase an additional 638,850 shares of
common stock at an exercise price of $0.20 per share during the nine months     
ended March 31, 1999. In connection with this award, the Company recognized     
$362,100 and $1,087,200 in stock-based compensation expense during fiscal 1998  
and the nine months ended March 31, 1999, respectively.                         

OPTIONS AND WARRANTS GRANTED TO NONEMPLOYEES                                    

 The Company has granted options and warrants to nonemployees for services
performed and to be performed after the date of grant. In connection with these 
awards, the Company recognized $310,100 and $195,600 in stock-based compensation
expense during fiscal 1998 and the nine months ended March 31, 1999,            
respectively. At March 31, 1999, options to purchase 85,000 shares of common    
stock at an exercise price of $42.53 were unearned by certain nonemployees.     
These options vest over three years and have a term of three years. At March 31,
1999, all services relating to all other awards have been rendered and the      
related options and warrants were fully exercisable.                            

    In connection with the Company's formation of its European joint ventures in
March 1999, the Company agreed that it will grant options to purchase up to     
600,000 shares of common stock to employees of the joint ventures upon the joint
ventures meeting certain performance criteria of over the next four years. The  
exercise price for these options would be based on the fair market value of the 
Company's common stock at the date of grant.                                    

In connection with the Credit Facility (see Note 6), in fiscal 1998, the
Company issued warrants to purchase 45,000 shares of common stock at a          
weighted-average exercise price of $2.31 per share. The fair value of these     
warrants is being recognized as interest expense through June 30, 1999. During  
the nine months ended March 31, 1999, in connection with an amendment to the    
Credit Facility, the Company issued warrants to purchase 50,000 shares of common
stock which have a weighted-average exercise price of $5.10 per share and a term
of five years. The estimated fair value of these warrants of $335,300 is        
included in deposits and other assets at March 31, 1999 and is being amortized  
to interest expense over the repayment period.                                  

In connection with the signing of a new facility lease (See Note 11) in 
fiscal 1999, the Company issued the lessor a warrant to purchase 200,000 shares 
of its common stock at $5.00 per share. The estimated fair value of this warrant
of $609,100 is included in deposits and other assets at March 31, 1999 and will 
be amortized to expense over the lease period.                                  

 At June 30, 1998, warrants to purchase 64,686 shares of common stock at a
weighted-average exercise price of $2.10 per share were outstanding; such       
warrants expire in 2003. All of these warrants                                  

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

8. STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)                                
were issued during the year ended June 30, 1998 (none issued in fiscal 1996 or  
1997) and had an estimated weighted-average fair value of $1.23 per share at the
date of grant. During the nine months ended March 31, 1999, warrants to purchase
285,630 shares of common stock at a weighted-average exercise price of $4.97    
were issued and had an estimated weighted-average fair value of $3.27 per share 
at date of grant. At March 31, 1999 warrants to purchase 340,316 shares of      
common stock at a weighted-average exercise price of $4.53 per share were       
outstanding.                                                                    

OPTION REPRICING                                                                

    On December 1, 1998, the Company repriced 928,850 options previously granted
at $6.00 to $8.00 per share to fair value at that date of $5.00 per share.      

Stock option activity is summarized as follows:                         

                                                        [Enlarge/Download Table]

                                                                                         OUTSTANDING OPTIONS      
                                                                                    ------------------------------
                                                                                                                  
                                                                                      NUMBER     WEIGHTED AVERAGE 
                                                                                     OF SHARES    EXERCISE PRICE  
                                                                                    -----------  -----------------
Balance, March 8, 1996 (inception)................................................           --      $      --    
Granted...........................................................................    1,140,000           0.02    
                                                                                    -----------          -----    
Balance, June 30, 1996 (137,500 shares vested at a weighted average exercise price                                
  of $0.02 per share).............................................................    1,140,000           0.02    
Granted...........................................................................      450,000           0.07    
Exercised.........................................................................      (31,250)          0.02    
Canceled..........................................................................     (388,750)          0.02    
                                                                                    -----------          -----    
Balance, June 30, 1997 (219,374 shares vested at a weighted average exercise price                                
  of $0.02 per share).............................................................    1,170,000           0.03    
Granted...........................................................................    1,142,612           0.59    
Exercised.........................................................................     (322,446)          0.10    
Canceled..........................................................................      (32,334)          0.31    
                                                                                    -----------          -----    
Balance, June 30, 1998 (734,270 shares vested at a weighted average exercise price                                
  of $0.19 per share).............................................................    1,957,832           0.34    
Granted...........................................................................    3,690,350           6.99    
Exercised.........................................................................     (513,296)          0.37    
Canceled..........................................................................   (1,092,528)          6.10    
                                                                                    -----------          -----    
Balance, March 31, 1999...........................................................    4,042,358      $    4.85    
                                                                                    -----------          -----    
                                                                                    -----------          -----    

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AboveNet Communications Inc.
Notes to Financials (Continued) 

8. STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)                                

  The following table summarizes information as of March 31, 1999 concerning
currently outstanding and vested options:                                       

                                                        [Enlarge/Download Table]

                     OPTIONS OUTSTANDING                                              
                 ---------------------------                      OPTIONS VESTED      
                                WEIGHTED                     -------------------------
                                 AVERAGE        WEIGHTED                   WEIGHTED   
                                REMAINING        AVERAGE                    AVERAGE   
                 NUMBER OF     CONTRACTUAL      EXERCISE     NUMBER OF     EXERCISE   
EXERCISE PRICES    SHARES     LIFE (YEARS)        PRICE        SHARES        PRICE    
---------------  ----------  ---------------  -------------  ----------  -------------
                                                                                      
  $ 0.02-$ 0.60   1,892,828           8.5       $    0.17     1,588,882    $    0.19  
    2.00-  2.60     294,376           9.2            2.29           528         2.00  
    5.00-  6.50   1,390,854           9.7            5.17       249,608         5.06  
   12.25- 16.63     164,300           9.8           13.40            --           --  
       26.10        215,000           9.9           26.10        80,000        26.10  
       42.53         85,000          10.0           42.53            --           --  
                 ----------                                  ----------               
  $ 0.02-$42.53   4,042,358           9.1       $    4.85     1,919,018    $    1.91  
                 ----------                                  ----------               
                 ----------                                  ----------               

At March 31, 1999, 2,454,200 shares remained available for future grant.

ADDITIONAL STOCK PLAN INFORMATION                                               

  As discussed in Note 1, the Company accounts for its stock-based awards to
employees using the intrinsic value method in accordance with APB Opinion No.   
25, "Accounting for Stock Issued to Employees," and its related interpretations.

SFAS No. 123, "Accounting for Stock-Based Compensation," requires the   
disclosure of pro forma net income (loss) and net income (loss) per share had   
the Company adopted the fair value method since the Company's inception. Under  
SFAS No. 123, the fair value of stock-based awards to employees is calculated   
through the use of option pricing models, even though such models were developed
to estimate the fair value of freely tradable, fully transferable options       
without vesting restrictions, which significantly differ from the Company's     
stock option awards. These models also require subjective assumptions, including
future stock price volatility and expected time to exercise, which greatly      
affect the calculated values.                                                   

  The Company's calculations for employee grants were made using the minimum
value method for grants prior to September 8, 1998 and the fair value method for
grants after that date with the following weighted average assumptions: expected
life, one year following vesting; risk free interest rate of 6%; and no         
dividends during the expected term. In addition, volatility of 70% was used for 
grants valued under the fair value method. The Company's calculations are based 
on a multiple award valuation approach and forfeitures are recognized as they   
occur. If the computed values of the Company's stock-based awards to employees  
had been amortized to expense over the vesting period of the awards as specified
under SFAS No. 123, net loss would have been $78,000 ($0.31 per basic and       
diluted share), $1,803,800 ($4.59 per basic and diluted share), $5,111,000      
($9.75 per basic and diluted share), and $14,520,730 ($1.27 per basic and       
diluted share) for the period from inception to June 30, 1996, for the years    
ended June 30, 1997 and 1998, and for the nine months ended March 31, 1999,     
respectively.                                                                   

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

8. STOCKHOLDERS' EQUITY (DEFICIENCY) (CONTINUED)                                
   The number and estimated weighted-average value per option for employee and
nonemployee awards, granted are as follows:                                     

                                                        [Enlarge/Download Table]

                                                                        YEAR ENDED JUNE 30,                     
                                                        INCEPTION TO   ---------------------  NINE MONTHS ENDED 
                                                        JUNE 30, 1996    1997        1998       MARCH 31, 1999  
                                                        -------------  ---------  ----------  ------------------
                                                                                                                
Employee Options:                                                                                               
  Number of shares.....................................    1,102,500          --   1,003,250        3,592,850   
  Estimate weighted-average value......................        $0.01   $      --       $0.10             $2.74  
Nonemployee Options:                                                                                            
  Number of shares.....................................       37,500     450,000     139,362            97,400  
  Estimated weighted-average value.....................        $0.01   $    0.02       $0.08            $20.39  

9. NET LOSS PER SHARE                                                           

    The following is a reconciliation of the numerators and denominators used in
computing basic and diluted net loss per share.                                 

                                                        [Enlarge/Download Table]

                                         INCEPTION                                                               
                                            TO           YEAR ENDED JUNE 30,        NINE MONTHS ENDED MARCH 31,  
                                         JUNE 30,    ----------------------------  ----------------------------- 
                                           1996          1997           1998           1998            1999      
                                        -----------  -------------  -------------  -------------  -------------- 
                                                                                                                 
Net Loss (numerator), basic and                                                                                  
  diluted..............................  $ (77,600)  $  (1,802,800) $  (5,425,000) $  (2,829,000) $  (14,399,500)
                                        -----------  -------------  -------------  -------------  -------------- 
                                        -----------  -------------  -------------  -------------  -------------- 
Shares (denominator):                                                                                            
  Weighted average common shares                                                                                 
    outstanding........................    250,000         393,236        530,224        477,620      11,508,278 
  Weighted average common shares                                                                                 
    outstanding subject to                                                                                       
    repurchase.........................         --              --         (5,616)            --         (23,462)
                                        -----------  -------------  -------------  -------------  -------------- 
Shares used in computation, basic and                                                                            
  diluted..............................    250,000         393,236        524,608        477,620      11,484,816 
                                        -----------  -------------  -------------  -------------  -------------- 
Net loss per share, basic and                                                                                    
  diluted..............................  $   (0.31)  $       (4.58) $      (10.34) $       (5.92) $        (1.25)
                                        -----------  -------------  -------------  -------------  -------------- 
                                        -----------  -------------  -------------  -------------  -------------- 

For the above mentioned periods, the Company had securities outstanding 
which could potentially dilute basic net income per share in the future, but    
were excluded in the computation of diluted net loss per share in the periods   
presented, as their effect would have been antidilutive. At March 31, 1999,     
outstanding potentially dilutive securities consist of 69,290 outstanding shares
of common stock subject to repurchase, and options and warrants to purchase     
4,382,674 shares of common stock.                                               

10. JOINT VENTURE TERMINATION FEE                                               

In fiscal 1996, the Company entered into a joint venture agreement (the 
"Agreement") with DSK, Inc. ("DSK") to cooperatively market and develop the     
Company's services. The Company paid $33,700 to DSK during the year ended June  
30, 1997 related to the Agreement.                                              

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

10. JOINT VENTURE TERMINATION FEE (CONTINUED)                                   
  In April 1997, the Company terminated the Agreement and hired the majority
stockholders of DSK as either employees or consultants by issuing 1,000,000     
fully vested shares of the Series B preferred stock with a fair value of $0.60  
per share, or $600,000, for the outstanding shares of common stock of DSK. The  
Company recorded the transaction by allocating the value of the shares issued to
property and equipment (at DSK's net book value of $168,900, which approximated 
fair value), with the balance of $431,100 reflected as a joint venture          
termination fee.                                                                

 Additionally, in April 1997, the Company granted to certain of the former
owners of DSK options to purchase a total of 250,000 shares of its common stock 
at $0.06 per share for real estate consulting services to be performed. In June 
1998, the Company accelerated the vesting of all the DSK options awarded. In    
conjunction with this award, the Company recognized $604,200 of stock-based     
compensation expense during fiscal 1998.                                        

11. COMMITMENTS AND CONTINGENCIES                                               

LEASES                                                                          

The Company leases its facilities under noncancelable operating leases. 
These leases expire on various dates through fiscal 2002. Minimum future lease  
payments under noncancelable operating and capital leases as of March 31, 1999  
are summarized as follows:                                                      

                                                        [Enlarge/Download Table]

                                                                                     CAPITAL                     
FISCAL YEARS ENDING JUNE 30,                                                         LEASES      OPERATING LEASES
--------------------------------------------------------------------------------  -------------  ----------------
                                                                                                                 
Remainder of fiscal 1999........................................................   $   161,200    $      328,200 
2000............................................................................       650,500         2,167,500 
2001............................................................................       612,000         2,220,800 
2002............................................................................       262,500         2,271,300 
2003............................................................................            --         2,401,700 
2004............................................................................            --         2,449,800 
Thereafter......................................................................            --        16,195,000 
                                                                                  -------------  ----------------
Total minimum lease payments....................................................     1,686,200    $   28,034,300 
                                                                                  -------------  ----------------
                                                                                  -------------  ----------------
Less amount representing interest at rates ranging from 13.253% to 14.68%.......      (292,000)                  
                                                                                  -------------                  
Present value of minimum lease payments.........................................     1,394,200                   
Less current portion............................................................      (474,800)                  
                                                                                  -------------                  
Long term portion...............................................................   $   919,400                   
                                                                                  -------------                  
                                                                                  -------------                  

Rent expense under operating leases for the period from March 8, 1996   
(inception) to June 30, 1996, for the years ended June 30, 1997 and 1998 and for
the nine months ended March 31, 1999 was none, $61,500, $444,900, and $917,000, 
respectively.                                                                   

Effective in fiscal 2000, the Company has committed to lease additional 
facilities. The lease is for a minimum term of 20 years with annual rental      
payments increasing from approximately $3 million to $4 million over the lease  
term.                                                                           

See Note 3 regarding the Company's agreements to lease fiber optic cable
systems.                                                                        

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)                                   
PURCHASE COMMITMENTS                                                            

   The Company has entered into noncancelable commitments to purchase property
and equipment related to the expansion of its operations facilities. As of March
31, 1999, approximately $32 million was committed for purchases under these     
agreements through fiscal 2000.                                                 

TELECOMMUNICATIONS AND PEERING ARRANGEMENTS                                     

   The Company has guaranteed to pay certain monthly usage levels or fees with
various communications or interconnect providers. Minimum payments under these  
agreements at March 31, 1999 are approximately $950,000 for the remainder of    
fiscal 1999 $4,900,000 in fiscal 2000; $5,800,000 in fiscal 2001; $3,300,000 in 
fiscal 2002; $1,000,000 in fiscal 2003; and $1,000,000 in fiscal 2004.          

 The Company is a party to numerous peering agreements with other internet
providers to allow for the exchange of internet traffic. These agreements do not
have fee commitments and generally have a one year term with automatic renewals.
The Company does not record any revenue or expense associated with these        
non-cash transactions as such transactions do not represent the culmination of  
the earnings process and the fair value of such transactions are not reasonably 
determinable.                                                                   

LEGAL MATTERS                                                                   

  The Company is involved in various claims and legal actions arising out of
the normal course of business. Management does not expect that the outcome of   
these cases will have a material effect on the Company's financial position or  
results of operations.                                                          

12. RELATED PARTY TRANSACTIONS                                                  

 A member of the Board of Directors is the president of an entity which is
the co-manager of the Company's primary facilities. Rent expense in fiscal 1996,
1997 and 1998 and for the nine months ended March 31, 1999 for these facilities 
was none, $16,400, $265,200, and $736,200 respectively. The Company believes    
that its lease arrangements were on an arm's length basis.                      

  During the nine months ended March 31, 1999, the same entity was granted a
warrant to purchase 200,000 shares of common stock in connection with the       
signing of a new facility lease (see Note 8). The estimated fair value of the   
warrant is $609,100.                                                            

13. MAJOR CUSTOMERS                                                             

 Two customers accounted for 32% and 25% of revenues in fiscal 1996, while
another customer accounted for 12% and 14% of revenues in fiscal 1997 and 1998, 
respectively. For the nine months ended March 31, 1999, no one customer         
accounted for more than 10% of revenues.                                        

At June 30, 1997, four customers accounted for 13%, 13%, 11% and 10% of 
trade receivables. At June 30, 1998, two customers accounted for approximately  
22% and 13% of trade receivables. At March 31, 1999, one customer accounted for 
approximately 10% of trade receivables.                                         

14. GEOGRAPHIC DATA                                                             

During the nine months ended March 31, 1999, the Company generated      
approximately 14% of its revenues from customers domiciled in countries other   
than the United States, primarily in Asia. For the                              

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

14. GEOGRAPHIC DATA (CONTINUED)                                                 
period from March 8, 1996 (inception) to June 30, 1996 and the years ended June 
30, 1997 and 1998, substantially all of the Company's revenues were derived from
domestic customers.                                                             

15. 401(K) PLAN                                                                 

In May 1998, the Company began a 401(k) plan (the Plan) that covers all 
employees who meet the Plan's eligibility requirements of one year of employment
and attainment of age 21. Eligible employees can contribute up to 15% of their  
salary, subject to certain IRS limitations. The Company's contributions in      
fiscal 1998 and the nine months ended March 31, 1999 were zero and $103,500,    
respectively.                                                                   

16. SUBSEQUENT STOCK OFFERING                                                   

   On April 30, 1999, the Company sold 5,650,356 shares of its common stock in
an underwritten public offering at a price of $42.50 per share and on May 5,    
1999 sold an additional 1,200,000 shares through the exercise of the            
underwriters' overallotment option. Gross proceeds to the Company were          
approximately $291.1 million.                                                   

17. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT       

    In the quarter ending June 30, 1999, the Company entered into two leases for
additional facilities, with terms of 20 years and annual lease payments         
aggregating $1.2 million.                                                       

   On June 21, 1999, the Company consummated the acquisition of certain assets
and the assumption of certain liabilities of the Palo Alto Internet Exchange    
("PAIX"), a business within the Technology and Corporate Development and        
Operations Management Services business units of Compaq Computer Corporation    
("Compaq"). The total purchase price was $70.0 million in cash plus certain     
future ongoing services to be provided by the Company to Compaq, with a value   
currently estimated to be approximately $5.0 million. PAIX is a high-level      
switching and peering point for global and regional Internet service providers  
and content providers.                                                          

On June 23, 1999, the Company announced the proposed acquisition of the 
Company by Metromedia Fiber Network ("MFN"). If the acquisition is completed,   
AboveNet stockholders will receive 1.175 shares of MFN class A common stock for 
each AboveNet share they own. Completion of MFN's acquisition of the Company is 
subject to certain regulatory approvals and the approval of a majority of the   
outstanding shares of AboveNet common stock and a majority of the voting power  
of the holders of Metromedia common stock voting on the proposal.               

On June 29, 1999, the Company entered into an agreement to purchase     
approximately 9 acres of land in Fairfax County, Virginia, for $7,750,000 which 
is expected to close in fiscal 2000. The Company intends to open a facility on  
the site in fiscal 2001.                                                        

On June 29, 1999, an alleged stockholder of AboveNet filed a lawsuit,   
captioned KAUFMAN V. TUAN, ET AL., Del. Ch. C.A. No. 17259NC, in the Court of   
Chancery of the State of Delaware in and for New Castle County. The plaintiff,  
who purports to represent a class of all AboveNet stockholders, challenges the  
terms of the proposed merger between AboveNet and Metromedia. The complaint     
names, as defendants, AboveNet, the directors of AboveNet, and Metromedia (as an
aider and abettor). The complaint alleges generally that AboveNet's directors   
breached their fiduciary duties to stockholders of AboveNet, and seeks an       
injunction against the merger, or, in the alternative, rescission and the       

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ABOVENET COMMUNICATIONS INC.
NOTES TO FINANCIALS (CONTINUED) 

17. EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT       
(CONTINUED)                                                                     
recovery of unspecified damages, fees and expenses. AboveNet believes the       
lawsuit is without merit and intends to defend itself vigorously. The Company's 
and the individual director defendants' responses were filed on July 22, 1999.  
In connection with these responses, a motion to dismiss the complaint in its    
entirety and a motion to stay discovery pending the outcome of the motion to    
dismiss were filed by the Company and the individual directors of the Company on
July 22, 1999.                                                                  

Four other complaints, which are virtually identical to the complaint in
KAUFMAN V. TUAN, have also been filed in the Delaware Court of Chancery. None of
these four complaints has been served.                                          

In August 1999, the Company entered into an additional agreement for the
acquisition of an indefeasible right to use additional capacity on a fiber optic
cable system between the U.S. and the United Kingdom for a 25-year period. The  
agreement commits the Company to pay approximately $15.8 million in a series of 
installments through October 1999.                                              

    In July 1999, the Company agreed to enter into two additional joint ventures
in Germany, subject to the approval of the Board of Directors. Such approval was
obtained on July 27, 1999. The first joint venture will own real property in    
Frankfurt, Germany. In consideration of the Company making an equity            
contribution of approximately $2 million, it will own 45% and AboveNet Germany  
GmbH will own 5% of this joint venture. The second joint venture will lease the 
real property from the aforementioned joint venture. It will complete           
improvements to the property and will manage the property. This entity will     
lease managed co-location space to AboveNet GmbH and provide leased space to    
other third parties. The Company will own 87.42% of this venture in exchange for
equity contributions which will total approximately $23 million, of which       
approximately $8 million will be paid as an initial equity contribution, with   
the remainder to be contributed over the following 18 to 24 months.             

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PALO ALTO INTERNET EXCHANGE 
INDEX TO FINANCIAL STATEMENTS 

                                                        [Enlarge/Download Table]

                                                                                                               PAGE   
                                                                                                             ---------
                                                                                                                      
Independent Accountants' Reports...........................................................................       F-23
Combined Statements of Assets to be Acquired and Liabilities to be Assumed as of March 27, 1999                       
  (unaudited), December 26, 1998 and December 27, 1997.....................................................       F-25
Combined Statement of Revenues and Direct Expenses for the Quarters Ended March 27, 1999 and March 28, 1998           
  (unaudited), period from June 12, 1998 through December 26, 1998, period from December 28, 1997 through             
  June 11, 1998 and the Fiscal Years Ended December 27, 1997 and December 29, 1996.........................       F-26
Notes to Combined Statements of Assets to be Acquired and Liabilities to be Assumed and Combined Statements           
  of Revenues and Direct Expenses..........................................................................       F-27

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors of                                                    
Compaq Computer Corporation                                                     

    We have audited the accompanying Combined Statement of Assets to be Acquired
and Liabilities to be Assumed of Palo Alto Internet Exchange (the "Business") as
of December 26, 1998 and the related Combined Statement of Revenues and Direct  
Expenses for the period June 12, 1998 through December 26, 1998. These          
statements are the responsibility of the Business' and Compaq Computer          
Corporation's management. Our responsibility is to express an opinion on these  
statements based on our audit.                                                  

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

   The accompanying statements were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for        
inclusion in the Current Report on Form 8-K of AboveNet Communications Inc.) as 
described in Note 2 and are not intended to be a complete presentation of the   
Business' financial position or results of operations.                          

In our opinion, the statements referred to above present fairly, in all 
material respects, the assets to be acquired and liabilities to be assumed as of
December 26, 1998 and the revenues and direct expenses described in Note 2 of   
the Business for the period June 12, 1998 through December 26, 1998, in         
conformity with generally accepted accounting principles.                       

PRICEWATERHOUSECOOPERS LLP                                                      

Boston, Massachusetts                                                           
June 15, 1999                                                                   

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors of                                                    
Compaq Computer Corporation                                                     

    We have audited the accompanying Combined Statement of Assets to be Acquired
and Liabilities to be Assumed of Palo Alto Internet Exchange (the "Business") as
of December 27, 1997 and the related Combined Statement of Revenues and Direct  
Expenses for the period December 28, 1997 through June 11, 1998 and the fiscal  
years ended December 27, 1997 and December 29, 1996. These statements are the   
responsibility of the Business' and Compaq Computer Corporation's management.   
Our responsibility is to express an opinion on these 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 statements are free of material          
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the statements. An audit also includes assessing 
the accounting principles used and significant estimates made by management, as 
well as evaluating the overall presentation of the statements. We believe that  
our audits provide a reasonable basis for our opinion.                          

   The accompanying statements were prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for        
inclusion in the Current Report on Form 8-K of AboveNet Communications Inc.) as 
described in Note 2 and are not intended to be a complete presentation of the   
Business' financial position or results of operations.                          

In our opinion, the statements referred to above present fairly, in all 
material respects, the assets to be acquired and liabilities to be assumed as of
December 27, 1997 and the revenues and direct expenses described in Note 2 of   
the Business for the period December 28, 1997 through June 11, 1998 and the     
fiscal years ended December 27, 1997 and December 29, 1996, in conformity with  
generally accepted accounting principles.                                       

PRICEWATERHOUSECOOPERS LLP                                                      

Boston, Massachusetts                                                           
June 15, 1999                                                                   

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PALO ALTO INTERNET EXCHANGE 

COMBINED STATEMENT OF ASSETS TO BE ACQUIRED AND LIABILITIES TO BE ASSUMED 

(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                     MARCH 27,                              
                                                       1999      DECEMBER 26,  DECEMBER 27, 
                                                    (UNAUDITED)      1998          1997     
                                                    -----------  ------------  -------------
                                                                                            
ASSETS TO BE ACQUIRED:                                                                      
  Unbilled accounts receivable.....................  $     102    $       18     $      14  
  Prepaid expenses.................................         29             2             1  
  Property and equipment, net......................      3,405         3,088         2,750  
  Intangible assets, net...........................     32,863        33,756            --  
                                                    -----------  ------------       ------  
      Total assets to be acquired..................  $  36,399    $   36,864     $   2,765  
                                                    -----------  ------------       ------  
                                                    -----------  ------------       ------  
LIABILITIES TO BE ASSUMED:                                                                  
  Unearned service revenue.........................        166           200           106  
                                                    -----------  ------------       ------  
      Total liabilities to be assumed..............        166           200           106  
                                                    -----------  ------------       ------  
        Net assets to be acquired..................  $  36,233    $   36,664     $   2,659  
                                                    -----------  ------------       ------  
                                                    -----------  ------------       ------  

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

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PALO ALTO INTERNET EXCHANGE 

COMBINED STATEMENT OF REVENUES AND DIRECT EXPENSES

(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                         PERIOD FROM                                  
                                             QUARTER       QUARTER      JUNE 12, 1998     PERIOD FROM       FISCAL    
                                              ENDED         ENDED          THROUGH       DECEMBER 28,     YEAR ENDED  
                                            MARCH 27,     MARCH 26,     DECEMBER 26,     1997 THROUGH    DECEMBER 27, 
                                              1999          1998            1998         JUNE 11, 1998       1997     
                                           -----------  -------------  ---------------  ---------------  -------------
                                                                                                                      
                                                  (UNAUDITED)                                                         
Service revenues..........................  $   1,534     $     892       $   2,630        $   1,732       $   1,895  
                                           -----------       ------         -------           ------     -------------
Direct expenses:                                                                                                      
  Cost of revenues........................        616           817           1,548            1,440           2,579  
  Research and development................         --             4               9                8              54  
  Selling, general and administrative                                                                                 
    expenses..............................        131            83             191              242             700  
  Amortization of intangible assets.......        893            --           1,944               --              --  
                                           -----------       ------         -------           ------     -------------
      Total direct expenses...............      1,640           904           3,692            1,690           3,333  
                                           -----------       ------         -------           ------     -------------
        Excess (shortfall) of revenues                                                                                
          over direct expenses............  $    (106)    $     (12)      $  (1,062)       $      42       $  (1,438) 
                                           -----------       ------         -------           ------     -------------
                                           -----------       ------         -------           ------     -------------



                                              FISCAL                                                                  
                                            YEAR ENDED                                                                
                                           DECEMBER 29,                                                               
                                               1996                                                                   
                                           -------------                                                              
                                                                                                                      

Service revenues..........................   $     155                                                                
                                           -------------                                                              
Direct expenses:                                                                                                      
  Cost of revenues........................         537                                                                
  Research and development................         599                                                                
  Selling, general and administrative                                                                                 
    expenses..............................         121                                                                
  Amortization of intangible assets.......          --                                                                
                                           -------------                                                              
      Total direct expenses...............       1,257                                                                
                                           -------------                                                              
        Excess (shortfall) of revenues                                                                                
          over direct expenses............   $  (1,102)                                                               
                                           -------------                                                              
                                           -------------                                                              

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

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES 

(AMOUNTS IN THOUSANDS)

1. DESCRIPTION OF BUSINESS:                                                     

The Palo Alto Internet Exchange ("PAIX" or the "Business") is a business
within the Technology & Corporate Development and Operations Management Services
business units of Compaq Computer Corporation ("Compaq," formerly Digital       
Equipment Corporation, "Digital," collectively the "Company"). The Business is a
high-level switching and peering point for global and regional Internet Service 
Providers ("ISP") and content providers. The Business features a data center to 
provide global services to PAIX customers for transmission of data in           
high-volume over the worldwide Internet network. The Business utilizes a highly 
redundant fiber-based infrastructure owned by multiple data carriers, including 
the 30-mile fiber ring owned by the City of Palo Alto. The Business was started 
in 1993 as a research project within the Company and commenced meaningful       
operations during fiscal year 1996. The business is engaged primarily in        
providing Internet interconnectivity solutions and related services in support  
of mission critical Internet operations of its customers.                       

2. BASIS OF PRESENTATION:                                                       

    The accompanying Combined Statement of Assets to be Acquired and Liabilities
to be Assumed and Combined Statement of Revenues and Direct Expenses ("the      
financial statements") have been prepared for the purpose of complying with the 
rules and regulations of the Securities and Exchange Commission for inclusion in
the Current Report on Form 8-K of AboveNet Communications, Inc. ("AboveNet").   
The Combined Statement of Assets to be Acquired and Liabilities to be Assumed   
includes the Business' assets to be sold to and liabilities to be assumed by    
AboveNet, in accordance with the Asset Purchase Agreement dated May 21, 1999    
(the "Agreement"). Compaq and AboveNet also entered into certain service        
contracts and other arrangements that are described in the Agreement. These     
arrangements include, but are not limited to, access to the Internet, favorable 
pricing terms on such future services, and non-relocation and non-compete       
arrangements. The terms of such contracts and other arrangements range from one 
to 20 years. The assets to be acquired and liabilities to be assumed include    
unbilled accounts receivable, prepaid expenses, property and equipment,         
intangibles and unearned service revenue. The Combined Statement of Revenues and
Direct Expenses includes only those revenues and expenses directly related to   
the Business to be sold. The financial statements exclude any other activity and
related expense that are not directly attributable to the Business, such as     
corporate general and administrative costs, income taxes and interest expense.  

    The financial statements of the Business are derived from the historic books
and records of Digital through June 11, 1998. As a result of the acquisition of 
Digital by Compaq on June 11, 1998, the financial statements of the Business    
after the acquisition date are derived from the historic books and records of   
Compaq.                                                                         

As mentioned above, indirect costs allocated to the Business from the   
Company, such as certain corporate general and administrative costs, have been  
excluded from the financial statements on the basis that such costs are not     
direct costs of the Business. However, in determining the Business' direct      
expenses, certain allocations were made for expenses incurred by the Company, as
appropriate, that are directly attributed to the services provided to the       
Business. These allocations relate primarily to engineering support in          
connection with the delivery of services, facility and other occupancy costs,   
and other general and administrative functions performed directly on behalf and 
for the benefit of the                                                          

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED) 

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)                                           
Business. Costs for such services have been reflected in the financial          
statements on the basis of activity or utilization, estimated support provided  
to the Business, or other methods management believe to be reasonable.          

    Cost of revenues primarily consists of costs relating to facility rent, data
communications and telecommunication expenses, service delivery and engineering 
support personnel and depreciation expense.                                     

    The financial statements have been prepared in accordance with the Company's
accounting policies and generally accepted accounting principles. However, these
statements do not purport to represent the costs and expenses which may be      
incurred by an unaffiliated company to achieve similar results. In addition, the
financial statements do not purport to represent the financial position of the  
Business.                                                                       

FISCAL YEAR                                                                     

For purposes of these financial statements the fiscal year of PAIX is a 
fifty-two week period ending the Saturday nearest the last day of December.     

USE OF ESTIMATES                                                                

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

PROPERTY AND EQUIPMENT                                                          

 Building improvements, computer, telecommunications, and office equipment
and construction-in-progress are stated at cost less depreciation, which is     
computed using the straight-line method. Expenditures for improvements which    
substantially extend the useful life or increase the capacity of an asset are   
capitalized. Ordinary repairs and maintenance are expensed as incurred.         
Estimated useful lives for purposes of computing depreciation expense range from
two to 10 years.                                                                

INTANGIBLE ASSETS                                                               

  Intangible assets, which consist of goodwill and customer lists related to
the acquisition of Digital by Compaq, are amortized on a straight-line basis    
over 10 years.                                                                  

REVENUE                                                                         

 Service revenue relating to Internet and colocation service contracts are
recognized over the contract period the services are provided. The Business     
recognizes installation and certain other service fees as revenue on a per event
basis. Unearned service revenue represents the unearned portion of prepaid      
service from Internet and colocation service contracts with customers. Such     
amounts are amortized to revenue over the contract period, which ranges from one
year to three years. The                                                        

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED) 

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)                                           
Business provides for estimated future losses on Internet and colocation service
contracts, to the extent such losses are probable and estimable.                

RESEARCH AND DEVELOPMENT                                                        

    Research and development costs of the Business are charged to expense in the
period incurred.                                                                

LONG-LIVED ASSETS                                                               

    The Business reviews for the impairment of long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of an asset may   
not be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual        
disposition is less than its carrying amount.                                   

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS                          

The Business sells to customers primarily in the Internet and           
Telecommunications industries and customers are primarily located in the United 
States. The Company performs ongoing credit evaluations of its customers'       
financial condition and maintains adequate provisions for uncollectible amounts 
when necessary.                                                                 

For the periods in the fiscal year ended December 26, 1998, and for the 
years ended December 27, 1997 and December 29, 1996, PAIX generated more than   
10% of its total revenue from the following customers:                          

                                                        [Enlarge/Download Table]

                                                                          1998      1997      1996    
                                                                          -----     -----     -----   
                                                                                                      
UUNet....................................................................      12%       19%       35%
BBN\GTE Internetworking..................................................      --        --        14%
Epoch....................................................................      --        --        31%
Genuity..................................................................      --        --        11%

    As of December 26, 1998 and December 27, 1997, customers which comprised 10%
or more of accounts receivable were as follows:                                 

                                                        [Enlarge/Download Table]

                                                                                 1998      1997    
                                                                                 -----     -----   
                                                                                                   
UUNet...........................................................................      23%       25%
Epoch...........................................................................      --        20%

UNAUDITED INTERIM FINANCIAL INFORMATION                                         

   The interim financial information for the quarters ended March 27, 1999 and
March 26, 1998 is unaudited and has been prepared on the same basis as the      
audited financial statements. In the opinion of management, such unaudited      
information includes all adjustments (consisting only of normal recurring       
adjustments) necessary for a fair presentation of the interim information.      
Results for the                                                                 

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED) 

(AMOUNTS IN THOUSANDS)

2. BASIS OF PRESENTATION: (CONTINUED)                                           
three months ended March 27, 1999 are not necessarily indicative of results to  
be expected for the year ending December 31, 1999.                              

3. PROPERTY AND EQUIPMENT:                                                      

   Major classifications of property and equipment consisted of the following:

                                                        [Enlarge/Download Table]

                                                  ESTIMATED      DECEMBER 26,   DECEMBER 27, 
                                                USEFUL LIVES         1998           1997     
                                              -----------------  -------------  -------------
                                                                                             
Building improvements........................          10 years    $   2,479      $   2,450  
Computer equipment...........................         2-3 years           52             87  
Office equipment.............................          10 years            6             --  
Electrical and telecommunications                                                            
  equipment..................................           3 years          251            388  
Construction in progress.....................                --          521            112  
                                                                      ------         ------  
Less: accumulated depreciation...............                           (221)          (287) 
                                                                      ------         ------  
                                                                   $   3,088      $   2,750  
                                                                      ------         ------  
                                                                      ------         ------  

Depreciation expense was approximately $221, $184, $286 and $1 for the  
period June 12, 1998 through December 26, 1998, the period December 28, 1997    
through June 11, 1998, and the fiscal years ended December 27, 1997 and December
29, 1996, respectively.                                                         

4. INTANGIBLE ASSETS:                                                           

Intangible assets consisted of the following:                           

                                                        [Enlarge/Download Table]

                                                                      DECEMBER 26,  JUNE 11, 
                                                                          1998        1998   
                                                                      ------------  ---------
                                                                                             
Goodwill.............................................................  $   27,400   $  27,400
Customer lists.......................................................       8,300       8,300
Less: accumulated amortization.......................................      (1,944)         --
                                                                      ------------  ---------
                                                                       $   33,756   $  35,700
                                                                      ------------  ---------
                                                                      ------------  ---------

On June 11, 1998, Compaq consummated its acquisition of Digital and     
allocated its purchase price to the assets acquired and liabilities assumed     
based on Compaq's estimates of fair value. The fair value assigned to intangible
assets acquired was based on a valuation prepared by an independent third-party 
appraisal company and included goodwill and customer lists related to the       
Business.                                                                       

5. COMMITMENTS AND CONTINGENCIES:                                               

  The Company, on behalf of the Business, has entered into service contracts
with customers and telecommunications vendors to provide services.              

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PALO ALTO INTERNET EXCHANGE 

NOTES TO COMBINED STATEMENTS OF ASSETS TO BE ACQUIRED 
AND LIABILITIES TO BE ASSUMED AND 
COMBINED STATEMENTS OF REVENUES AND DIRECT EXPENSES (CONTINUED) 

(AMOUNTS IN THOUSANDS)

5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)                                   
  In some instances, the Company provides limited warranties to customers in
connection with Internet and colocation service contracts. To date, costs       
incurred in connection with such warranties have been immaterial.               

6. LEGAL MATTERS:                                                               

    The Company is involved in lawsuits, claims, investigations, and proceedings
which are being handled and defended in the ordinary course of business. There  
are no such matters pending that the Company and its General Counsel expect to  
be material in relation to the Business and no amounts have been accrued in the 
financial statements for such matters.                                          

7. RELATED PARTY TRANSACTIONS:                                                  

    As described in Note 2, the Company incurred expenses for services performed
directly on behalf and for the benefit of the Business. Costs for such services 
have been reflected in the accompanying Statement of Revenues and Direct        
Expenses on the basis of activity or utilization, estimated support provided to 
the Business, or other methods management believe to be reasonable. The cost of 
such services is presented as cost of revenue, research and development and     
general and administrative.                                                     

   The Business has no external borrowings and there has been no allocation of
the Company's consolidated borrowings and related interest expense in the       
financial statements.                                                           

 The Business recognized revenue from AboveNet of $66, $36, $22 and $0 for
the period June 12, 1998 through December 26, 1998, the period December 28, 1997
through June 11, 1998, and the fiscal years ended December 27, 1997 and December
29, 1996, respectively. Accounts receivable from AboveNet are $11 and $4 at     
December 26, 1998 and December 27, 1997, respectively.                          

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                                                                      APPENDIX A

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

AGREEMENT AND PLAN OF MERGER
AMONG 
ABOVENET COMMUNICATIONS INC., 
METROMEDIA FIBER NETWORK, INC.
AND 
MAGELLAN ACQUISITION, INC.
DATED AS OF JUNE 22, 1999 

--------------------------------------------------------------------------------
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RECITALS..................................................................................................       1

ARTICLE 1 THE MERGER......................................................................................       2
           Section 1.1     The Merger.....................................................................       2
           Section 1.2     Closing........................................................................       2
           Section 1.3     Effective Time.................................................................       2
           Section 1.4     The Certificate of Incorporation...............................................       3
           Section 1.5     The By-Laws....................................................................       3
           Section 1.6     Directors of Surviving Corporation.............................................       3
           Section 1.7     Officers of Surviving Corporation..............................................       3

ARTICLE 2 EFFECT OF THE MERGER ON CAPITAL STOCK;                                                                  
    EXCHANGE OF CERTIFICATES..............................................................................       3
           Section 2.1     Effect on Capital Stock........................................................       3
           Section 2.2     Exchange of Certificates for Shares............................................       4
           Section 2.3     Treatment of Company Stock Options and Company Warrants........................       8
           Section 2.4     No Appraisal Rights............................................................       9
           Section 2.5     Adjustments to Prevent Dilution................................................       9
           Section 2.6     Withholding Rights.............................................................       9

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................      10
           Section 3.1     Organization and Qualification; Subsidiaries...................................      10
           Section 3.2     Certificate of Incorporation and By-Laws.......................................      11
           Section 3.3     Capitalization.................................................................      11
           Section 3.4     Authority......................................................................      12
           Section 3.5     No Conflict....................................................................      13
           Section 3.6     Governmental Required Filings and Consents.....................................      14
           Section 3.7     Permits; Compliance with Law...................................................      14
           Section 3.8     Securities Exchange Commission (SEC) Filings; Financial Statements.............      15
           Section 3.9     Absence of Certain Changes or Events...........................................      16
           Section 3.10    Employee Benefit Plans.........................................................      17
           Section 3.11    Tax Matters....................................................................      19
           Section 3.12    No Defaults....................................................................      19
           Section 3.13    Litigation.....................................................................      19
           Section 3.14    Environmental Matters..........................................................      20
           Section 3.15    Intellectual Property..........................................................      22
           Section 3.16    Taxes..........................................................................      24
           Section 3.17    Non-Competition Agreements.....................................................      25
           Section 3.18    Certain Agreements.............................................................      25
           Section 3.19    Real Property..................................................................      25
           Section 3.20    Labor Matters..................................................................      26
           Section 3.21    Investment Company Act.........................................................      26
           Section 3.22    Opinion of Financial Advisor...................................................      27
           Section 3.23    Brokers........................................................................      27
           Section 3.24    Certain Statutes...............................................................      27
           Section 3.25    Information....................................................................      27
           Section 3.26    Vote Required..................................................................      28

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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND                                                        
    MERGER SUB............................................................................................      28
           Section 4.1     Organization and Qualification; Subsidiaries...................................      28
           Section 4.2     Certificate of Incorporation and By-Laws.......................................      29
           Section 4.3     Capitalization.................................................................      29
           Section 4.4     Authority......................................................................      30
           Section 4.5     No Conflict....................................................................      31
           Section 4.6     Governmental Required Filings and Consents.....................................      32
           Section 4.7     Permits; Compliance with Law...................................................      32
           Section 4.8     SEC Filings; Financial Statements..............................................      33
           Section 4.9     Absence of Certain Changes or Events...........................................      33
           Section 4.10    Employee Benefit Plans.........................................................      35
           Section 4.11    Tax Matters....................................................................      36
           Section 4.12    No Defaults....................................................................      36
           Section 4.13    Litigation.....................................................................      37
           Section 4.14    Environmental Matters..........................................................      37
           Section 4.15    Intellectual Property..........................................................      38
           Section 4.16    Taxes..........................................................................      39
           Section 4.17    Real Property..................................................................      40
           Section 4.18    Labor Matters..................................................................      40
           Section 4.19    Investment Company Act.........................................................      40
           Section 4.20    Opinion of Financial Advisor...................................................      40
           Section 4.21    Brokers........................................................................      41
           Section 4.22    Information....................................................................      41
           Section 4.23    Vote Required..................................................................      41
           Section 4.24    Interim Operations of Merger Sub...............................................      41

ARTICLE 5 COVENANTS.......................................................................................      42
           Section 5.1     Conduct of Business of the Company.............................................      42
           Section 5.2     Conduct of Business of the Parent Pending the Merger...........................      45
           Section 5.3     Other Actions..................................................................      46
           Section 5.4     Notification of Certain Matters................................................      46
           Section 5.5     Proxy Statement, Registration Statement........................................      46
           Section 5.6     Stockholders Meeting...........................................................      48
           Section 5.7     Access to Information; Confidentiality.........................................      49
           Section 5.8     No Solicitation................................................................      49
           Section 5.9     Affiliates.....................................................................      51
           Section 5.10    Directors' and Officers' Indemnification and Insurance.........................      52
           Section 5.11    Letters of Accountants.........................................................      53
           Section 5.12    Reasonable Best Efforts........................................................      53
           Section 5.13    Consents; Filings; Further Action..............................................      54
           Section 5.14    Plan of Reorganization.........................................................      55
           Section 5.15    Public Announcements...........................................................      55
           Section 5.16    Obligations of Merger Sub......................................................      55
           Section 5.17    Listings and De-Listings.......................................................      56
           Section 5.18    Expenses.......................................................................      56
           Section 5.19    Takeover Statutes..............................................................      56
           Section 5.20    Employee Benefits..............................................................      56
           Section 5.21    Form S-8.......................................................................      57
           Section 5.22    Board of Directors of the Parent...............................................      57
           Section 5.23    Employee Stock Purchase Plan...................................................      57

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ARTICLE 6 CONDITIONS......................................................................................      58
           Section 6.1     Conditions to Each Party's Obligation to Effect the Merger.....................      58
           Section 6.2     Conditions to Obligations of the Parent and Merger Sub.........................      59
           Section 6.3     Conditions to Obligation of the Company........................................      59

ARTICLE 7 TERMINATION.....................................................................................      60
           Section 7.1     Termination....................................................................      60
           Section 7.2     Effect of Termination..........................................................      62
           Section 7.3     Amendment......................................................................      62
           Section 7.4     Waiver.........................................................................      62
           Section 7.5     Expenses following Termination.................................................      62

ARTICLE 8 MISCELLANEOUS...................................................................................      64
           Section 8.1     Certain Definitions............................................................      64
           Section 8.2     Non-Survival of Representations, Warranties and Agreements.....................      65
           Section 8.3     Counterparts...................................................................      65
           Section 8.4     GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL..................................      65
           Section 8.5     Notices........................................................................      66
           Section 8.6     Entire Agreement...............................................................      67
           Section 8.7     No Third Party Beneficiaries...................................................      67
           Section 8.8     Obligations of the Parent and of the Company...................................      67
           Section 8.9     Severability...................................................................      68
           Section 8.10    Interpretation.................................................................      68
           Section 8.11    Assignment.....................................................................      68
           Section 8.12    Specific Performance...........................................................      68

EXHIBITS                                                                        

                                                                [Download Table]
                                               
Exhibit A   Form of Voting Agreement           

Exhibit B   Form of Option Agreement           

Exhibit C   Form of Parent Voting Agreement    

Exhibit D   Form of Affiliate Letter           

Exhibit                                        
E-1         Form of Parent Officer Certificate 

Exhibit                                        
E-2         Form of Company Officer Certificate

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INDEX OF DEFINED TERMS

                                                        [Enlarge/Download Table]

TERM                                                                              SECTION    
--------------------------------------------------------------------------------  ---------- 
                                                                                             
Acquisition Proposal............................................................  5.8(f)     
Affected Employees..............................................................  5.20(b)    
affiliate.......................................................................  8.1(a)     
Agreement.......................................................................  Title      
Benefit Plans...................................................................  3.10(a)    
Blue Sky Laws...................................................................  3.6        
business day....................................................................  8.1(b)     
Certificate.....................................................................  2.1(a)     
Certificate of Merger...........................................................  1.3        
Claims..........................................................................  3.13       
Closing.........................................................................  1.2        
Closing Date....................................................................  1.2        
COBRA...........................................................................  3.10(f)    
Code............................................................................  Recitals   
Company.........................................................................  Title      
Company Charter Documents.......................................................  3.2        
Company Common Stock............................................................  2.1(a)     
Company Disclosure Letter.......................................................  3.1(b)     
Company Financial Advisor.......................................................  3.22       
Company Governmental Consents...................................................  3.6        
Company Permits.................................................................  3.7        
Company Option Plans............................................................  3.3(a)     
Company Preferred Stock.........................................................  3.3(a)     
Company Required Consents.......................................................  3.5(b)     
Company Real Property Leases....................................................  3.19       
Company SEC Reports.............................................................  3.8(a)     
Company Share...................................................................  2.1(a)     
Company Shares..................................................................  2.1(a)     
Company Stock Options...........................................................  3.3(a)     
Company Stockholders Meeting....................................................  5.5(a)     
Company Subsidiaries............................................................  3.1(a)     
Company Warrants................................................................  3.3(a)     
Company Option Plans............................................................  3.3(b)     
Confidentiality Agreement.......................................................  5.7(b)     
Contracts.......................................................................  3.5(a)(iii)
control.........................................................................  8.1(a)     
controlled by...................................................................  8.1(a)     
controlling.....................................................................  8.1(a)     
Effective Time..................................................................  1.3        
Environment.....................................................................  3.14       
Environmental Claims............................................................  3.14       
ERISA...........................................................................  3.10(a)    
ERISA Affiliate.................................................................  3.10(a)    
Excess Parent Shares............................................................  2.2(d)(i)  
Exchange Act....................................................................  3.6        
Exchange Agent..................................................................  2.2(a)     
Exchange Ratio..................................................................  2.1(a)     

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TERM                                                                              SECTION     
--------------------------------------------------------------------------------  ----------  
                                                                                              
Exchange Trust..................................................................  2.2(d)(i)   
Excluded Company Shares.........................................................  2.1(a)      
Expenses........................................................................  7.5(a)      
GAAP............................................................................  3.8(b)      
GCL.............................................................................  Recitals    
Governmental Entity.............................................................  3.6         
group...........................................................................  8.1(d)      
Hazardous Substance.............................................................  3.14        
HSR Act.........................................................................  3.6         
including.......................................................................  8.1(c)      
Indemnified Parties.............................................................  5.10(a)     
Intellectual Property...........................................................  3.15(a)(ii) 
Investment Company Act..........................................................  3.21        
IP Licenses.....................................................................  3.15(a)(ii) 
IRS.............................................................................  3.10        
Law.............................................................................  3.5(a)(ii)  
Liens...........................................................................  3.3(c)      
Material Adverse Effect on the Company..........................................  3.1(a)      
Material Adverse Effect on the Parent...........................................  4.1(a)      
Maximum Amount..................................................................  5.10        
Merger..........................................................................  Recitals    
Merger Consideration............................................................  2.1(a)      
Merger Sub......................................................................  Title       
NASDAQ/NMS......................................................................  2.2(d)(ii)  
Option Agreement................................................................  Recitals    
Parent..........................................................................  Title       
Parent Charter Documents........................................................  4.2         
Parent Class B Common Stock.....................................................  4.3(a)      
Parent Common Stock.............................................................  2.1(a)      
Parent Disclosure Letter........................................................  4.1(b)      
Parent Expenses.................................................................  7.5(b)      
Parent Financial Advisor........................................................  4.20        
Parent Governmental Consents....................................................  4.6         
Parent Permits..................................................................  4.7         
Parent Preferred Stock..........................................................  4.3(a)      
Parent Real Property Leases.....................................................  4.17        
Parent SEC Reports..............................................................  4.8(a)      
Parent Stock Options and Warrants...............................................  4.3(a)      
Parent Subsidiaries.............................................................  4.1(a)      
Parent Voting Agreement.........................................................  5.6(b)      
Permits.........................................................................  3.14        
person..........................................................................  8.1(d)      
Plan Options....................................................................  3.3(a)      
Proposed Intellectual Property Agreements.......................................  3.15(a)(iii)
Proxy Materials.................................................................  5.5(a)      
Proxy Statement.................................................................  5.5(a)      
Qualifying Section 7.1(f) Termination...........................................  7.5(b)      
Registration Statement..........................................................  5.5(a)      
Registration Statement Effective Date...........................................  5.5(a)      

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TERM                                                                              SECTION    
--------------------------------------------------------------------------------  ---------- 
                                                                                             
Release.........................................................................  3.14       
Representatives.................................................................  5.7(a)     
Requisite Company Vote..........................................................  3.4(a)     
Requisite Parent Vote...........................................................  4.4        
Safety and Environmental Laws...................................................  3.14       
SEC.............................................................................  3.8        
Securities Act..................................................................  3.6        
Stockholders....................................................................  Recitals   
Software........................................................................  3.15(a)(ii)
Sub Common Stock................................................................  4.3(d)     
subsidiary......................................................................  8.1(e)     
subsidiaries....................................................................  8.1(e)     
Superior Proposal...............................................................  5.8(a)     
Surviving By-Laws...............................................................  1.5        
Surviving Charter...............................................................  1.4        
Surviving Corporation...........................................................  1.1        
Systems.........................................................................  3.15(g)    
Takeover Statute................................................................  3.24       
Taxes...........................................................................  3.16       
Technology......................................................................  3.15(a)(ii)
Terminating Company Breach......................................................  7.1(f)     
Terminating Parent Breach.......................................................  7.1(g)     
Termination Amount..............................................................  7.5(b)     
Third Party Options.............................................................  3.3(a)     
under common control with.......................................................  8.1(a)     
Voting Agreement................................................................  Recitals   
Year 2000 Compliant.............................................................  3.15(g)    

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AGREEMENT AND PLAN OF MERGER

  AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of June 22, 1999
among AboveNet Communications Inc., a Delaware corporation (the "COMPANY"),     
Metromedia Fiber Network, Inc., a Delaware corporation (the "PARENT"), and      
Magellan Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary
of the Parent ("MERGER SUB").                                                   

RECITALS

 WHEREAS, the respective boards of directors of each of the Parent, Merger
Sub and the Company have determined that it is advisable and in the best        
interests of their respective stockholders to combine the respective businesses 
of the Parent and the Company, and consequently have approved the merger of     
Merger Sub with and into the Company (the "MERGER") and approved and adopted the
Merger, in accordance with the General Corporation Law of the State of Delaware 
(the "GCL") and upon the terms and subject to the conditions set forth in this  
Agreement;                                                                      

WHEREAS, it is intended that, for U.S. federal income tax purposes, the 
Merger shall qualify as a reorganization under the provisions of section 368(a) 
of the Internal Revenue Code of 1986, as amended (the "CODE"), and the rules and
regulations promulgated under the Code and that this Agreement be, and is       
hereby, adopted as a plan of reorganization for purposes of section 368 of the  
Code;                                                                           

  WHEREAS, concurrently with the execution of this Agreement, as a condition
to the willingness of the Parent to enter into this Agreement, certain holders  
(the "STOCKHOLDERS") of Company Shares (as defined in Section 2.1(a)) are       
entering into the Voting Agreement with the Parent, a copy of which is attached 
to this Agreement as Exhibit A (the "VOTING AGREEMENT"), providing for, among   
other things, the agreement of the Shareholders to vote their respective Company
Shares in favor of approval and adoption of this Agreement and the Merger at the
Company Stockholders Meeting (as defined below);                                

  WHEREAS, concurrently with the execution of this Agreement, as a condition
to the willingness of the Parent to enter into this Agreement, the Company and  
the Parent are entering into an Option Agreement, a copy of which is attached to
this Agreement as Exhibit B (the "OPTION AGREEMENT"), providing for, among other
things, the grant of an option by the Company to the Parent to acquire up to    
19.9% of the Company Common Stock (as defined in Section 2.1(a)) on the terms   
and conditions specified in the Option Agreement;                               

    WHEREAS, certain terms used in this Agreement which are not capitalized have
the meanings specified in Section 8.1; and                                      

WHEREAS, the Company, the Parent and Merger Sub desire to make certain  
representations, warranties, covenants and agreements in connection with this   
Agreement.                                                                      

NOW, THEREFORE, in consideration of the premises, and of the            
representations, warranties, covenants and agreements contained in this         
Agreement, the parties agree as follows:                                        

ARTICLE 1 
THE MERGER

  SECTION 1.1  THE MERGER.  Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined below), Merger Sub   
shall be merged with and into the Company and the separate corporate existence  
of Merger Sub shall cease. The Company shall be the surviving corporation in the
Merger (sometimes referred to as the "SURVIVING CORPORATION") and shall continue
to be governed by the laws of the State of Delaware, and the separate corporate 
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected                                            

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by the Merger. The Merger shall have the effects set forth in Section 259 of the
GCL. Without limiting the generality of the foregoing, and subject thereto, at  
the Effective Time, all the properties, rights, privileges, powers and          
franchises of the Company and Merger Sub shall vest in the Surviving            
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.    

   SECTION 1.2  CLOSING.  The closing of the Merger (the "CLOSING") shall take
place (a) at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285      
Avenue of the Americas, New York, New York at 10:00 a.m. on the business day on 
which the last to be fulfilled or waived of the conditions set forth in Article 
6 (other than those conditions that by their nature are to be satisfied at the  
Closing, but subject to the fulfillment or waiver of those conditions) shall be 
satisfied or waived in accordance with this Agreement or (b) at such other place
and time and/or on such other date as the Company and the Parent may agree in   
writing (the "CLOSING DATE").                                                   

   SECTION 1.3  EFFECTIVE TIME.  As soon as practicable following the Closing,
the parties will cause a Certificate of Merger (the "CERTIFICATE OF MERGER") to 
be signed, acknowledged and delivered for filing with the Secretary of the State
of Delaware as provided in Section 251 of the GCL. The Merger shall become      
effective at the time when a Certificate of Merger has been duly filed with the 
Secretary of State of the State of Delaware or such other time as shall be      
agreed upon by the parties and set forth in the Certificate of Merger and in    
accordance with the GCL (the "EFFECTIVE TIME").                                 

SECTION 1.4  THE CERTIFICATE OF INCORPORATION.  The certificate of      
incorporation of Merger Sub in effect immediately prior to the Effective Time   
shall, from and after the Effective Time, be the certificate of incorporation of
the Surviving Corporation (the "SURVIVING CHARTER"), until duly amended as      
provided in the Surviving Charter or by applicable law.                         

SECTION 1.5  THE BY-LAWS.  The by-laws of Merger Sub in effect at the   
Effective Time shall, from and after the Effective Time, be the by-laws of the  
Surviving Corporation (the "SURVIVING BY-LAWS"), until duly amended as provided 
in the Surviving By-Laws or by applicable law.                                  

 SECTION 1.6  DIRECTORS OF SURVIVING CORPORATION.  The directors of Merger
Sub at the Effective Time shall, from and after the Effective Time, be the      
directors of the Surviving Corporation until their successors have been duly    
elected or appointed and qualified or until their earlier death, resignation or 
removal in accordance with the Surviving Charter and the Surviving By-Laws.     

    SECTION 1.7  OFFICERS OF SURVIVING CORPORATION.  The officers of the Company
shall, from and after the Effective Time, be the officers of the Surviving      
Corporation until their successors have been duly elected or appointed and      
qualified or until their earlier death, resignation or removal in accordance    
with the Surviving Charter and the Surviving By-Laws.                           

ARTICLE 2 
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES

    SECTION 2.1  EFFECT ON CAPITAL STOCK.  At the Effective Time, as a result of
the Merger and without any action on the part of the holder of any capital stock
of the Company:                                                                 

   (a)  MERGER CONSIDERATION.  Each share (each a "COMPANY SHARE" and together
the "COMPANY SHARES") of the common stock, par value $.001 per share, of the    
Company (the "COMPANY COMMON STOCK") issued and outstanding immediately prior to
the Effective Time (other than Company Shares that are owned by the Parent,     
Merger Sub or any other Parent Subsidiary or Company Shares that are owned by   
the Company or any Company Subsidiary and in each case not held on behalf of    
third parties (collectively, "EXCLUDED COMPANY SHARES")) shall be converted by  
virtue of the Merger and without any                                            

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action on the part of the holder thereof into the right to receive and become   
exchangeable for 1.175 (the "EXCHANGE RATIO") shares of Class A common stock,   
par value $.01 per share, of the Parent (the "PARENT COMMON STOCK").            

The Exchange Ratio shall be subject to adjustment as provided in Section
2.5. The shares of Parent Common Stock issuable pursuant to this Section 2.1(a),
together with cash in lieu of fractional shares of Parent Common Stock, if any, 
payable pursuant to Section 2.2(d) shall collectively be referred to as the     
"MERGER CONSIDERATION." At the Effective Time, all Company Shares shall no      
longer be outstanding, shall be canceled and retired and shall cease to exist,  
and each certificate (a "CERTIFICATE") formerly representing any Company Shares 
(other than Excluded Company Shares) shall thereafter represent only the right  
to receive the Merger Consideration and any distribution or dividend under      
Section 2.2(b).                                                                 

(b)  CANCELLATION OF SHARES.  Each Excluded Company Share issued and    
outstanding immediately prior to the Effective Time shall, by virtue of the     
Merger and without any action on the part of the holder of such Excluded Company
Share, no longer be outstanding, shall be canceled and retired without payment  
of any consideration therefor and shall cease to exist.                         

(c)  MERGER SUB.  At the Effective Time, each share of common stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately prior to 
the Effective Time shall be converted into one validly issued, fully paid and   
nonassessable share of common stock, par value $.01 per share, of the Surviving 
Corporation, and the Surviving Corporation shall be a wholly owned subsidiary of
the Parent.                                                                     

SECTION 2.2  EXCHANGE OF CERTIFICATES FOR SHARES.                       

(a)  EXCHANGE PROCEDURES.                                               

       (i)  Promptly after the Effective Time, the Surviving Corporation shall
  cause an exchange agent selected by the Parent and reasonably satisfactory
   to the Company (the "EXCHANGE AGENT") to mail to each holder of record of a
   Certificate (other than Certificates in respect of Excluded Company Shares)
   (A) a letter of transmittal specifying that delivery shall be effected, and
that risk of loss and title to the Certificates shall pass, only upon   
    delivery of the Certificates (or affidavits of loss in lieu of Certificates)
to the Exchange Agent, in a form and with other provisions reasonably   
acceptable to both the Parent and the Company, and (B) instructions for 
exchanging the Certificates for (1) certificates representing shares of 
Parent Common Stock, and (2) cash in lieu of fractional shares.         

    (ii)  Subject to Section 2.2(f), upon surrender of a Certificate for
    cancellation to the Exchange Agent together with such letter of transmittal,
  duly executed, the holder of that Certificate shall be entitled to receive
 in exchange (A) a certificate representing that number of whole shares of
Parent Common Stock that the holder is entitled to receive under this   
 Article 2, (B) a check in the amount (after giving effect to any required
  tax withholding) of any cash in lieu of fractional shares that such holder
  has the right to receive under the provisions of this Article 2, and (C) a
    check in the amount (after giving effect to any required tax withholding) of
any distributions or dividends that such holder has the right to receive
  under the provisions of Section 2.2(b), and the Certificate so surrendered
 shall immediately be canceled. No interest will be paid or accrued on any
amount payable upon due surrender of the Certificates.                  

        (iii)  In the event of a transfer of ownership of Company Shares that is
not registered in the transfer records of the Company, a certificate    
 representing the proper number of shares of Parent Common Stock, together
  with a check for any cash to be paid upon the surrender of the Certificate
   and any other dividends or distributions in respect of those shares, may be
    issued or paid to such a transferee if the Certificate formerly representing
  such Company Shares is presented to the Exchange Agent, accompanied by all
   documents required to evidence and effect the transfer and to evidence that
any applicable stock transfer taxes have been paid. If any              

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certificate for shares of Parent Common Stock is to be issued in a name 
    other than that in which the surrendered Certificate is registered, it shall
be a condition of such exchange that the person requesting such exchange
   shall pay any transfer or other taxes required by reason of the issuance of
   certificates for shares of Parent Common Stock in a name other than that of
   the registered holder of the surrendered Certificate, or shall establish to
 the reasonable satisfaction of the Parent or the Exchange Agent that such
tax has been paid or is not applicable.                                 

    (iv)  Until surrendered as contemplated by this Section 2.2(a), each
Certificate shall be deemed for all purposes other than the payment of  
    dividends or distributions at any time after the Effective Time to represent
only the right to receive the certificate representing shares of Parent 
Common Stock and cash in lieu of any fractional shares of Parent Common 
  Stock, as contemplated by this Section 2.2(a). All shares of Parent Common
 Stock, together with any cash paid under Section 2.2(b) or Section 2.2(d)
    issued upon the surrender for or exchange of Certificates in accordance with
the terms of this Agreement, shall be deemed to have been issued in full
satisfaction of all rights pertaining to the Company Shares formerly    
represented by such Certificates, subject, however, to the Surviving    
Corporation's obligation to pay any dividends or make any other         
   distributions with a record date prior to the Effective Time which may have
been declared or made by the Company on such Company Shares which remain
unpaid at the Effective Time.                                           

   (b)  DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.  Whenever a dividend
or other distribution is declared by the Parent in respect of Parent Common     
Stock and the record date for that dividend or other distribution is at or after
the Effective Time, that declaration shall include dividends or other           
distributions in respect of all shares of Parent Common Stock issuable under    
this Agreement. No dividends or other distributions in respect of the Parent    
Common Stock shall be paid to any holder of any unsurrendered Certificate until 
that Certificate is surrendered for exchange in accordance with this Article 2. 
Subject to the effect of applicable laws, following surrender of any such       
Certificate, there shall be issued or paid to the holder of the certificates    
representing whole shares of Parent Common Stock issued in exchange therefor,   
without interest, (i) at the time of such surrender, the dividends or other     
distributions with a record date at or after the Effective Time and a payment   
date on or prior to the date of issuance of such whole shares of Parent Common  
Stock and not previously paid, and (ii) at the appropriate payment date, the    
dividends or other distributions payable with respect to such whole shares of   
Parent Common Stock with a record date at or after the Effective Time but with a
payment date subsequent to surrender. For purposes of dividends or other        
distributions in respect of shares of Parent Common Stock, all shares of Parent 
Common Stock to be issued pursuant to the Merger shall be deemed issued and     
outstanding as of the Effective Time.                                           

(c)  NO FURTHER TRANSFERS.  After the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration 
of transfers on the records of the Company of the Company Shares that were      
outstanding immediately prior to the Effective Time.                            

(d)  FRACTIONAL SHARES.                                                 

      (i)  No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of         
  Certificates, and any such fractional share interests will not entitle its
   owner to vote, to receive dividends or to any other rights of a stockholder
  of the Parent. Notwithstanding any other provision of this Agreement, each
holder of Company Shares exchanged pursuant to the Merger who would     
otherwise have been entitled to receive a fraction of a share of Parent 
    Common Stock (after taking into account all Company Shares then held by such
holder) shall receive from the Exchange Agent, in accordance with the   
provisions of this Article 2, a cash payment in lieu of such fractional 
shares of Parent Common Stock, as applicable, representing such holder's
proportionate interest, if any, in the net proceeds from the sale by the
    Exchange Agent in one or more transactions (which sale transactions shall be
made at such times,                                                     

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 in such manner and on such terms as the Exchange Agent shall determine in
    its reasonable discretion) on behalf of all such holders of the aggregate of
the fractional shares of Parent Common Stock, as applicable, which would
otherwise have been issued (the "EXCESS PARENT SHARES"). Until the net  
proceeds of such sale or sales have been distributed to the holders of  
Certificates, the Exchange Agent will hold such proceeds in trust (the  
    "EXCHANGE TRUST") for the holders of Certificates. All commissions, transfer
   taxes and other out-of-pocket transaction costs, including the expenses and
    compensation of the Exchange Agent, incurred in connection with this sale of
    the Excess Parent Shares shall be paid by the Surviving Corporation. As soon
   as practicable after the determination of the amount of cash, if any, to be
  paid to holders of Certificates in lieu of any fractional shares of Parent
  Common Stock, the Exchange Agent shall make available such amounts to such
    holders of Certificates without interest. The Exchange Agent shall determine
the portion of such net proceeds to which each holder of Company Shares 
 shall be entitled, if any, by multiplying the amount of the aggregate net
proceeds by a fraction the numerator of which is the amount of the      
    fractional share interest to which such holder of Company Shares is entitled
   (after taking into account all Company Shares then held by such holder) and
the denominator of which is the aggregate amount of fractional share    
  interests to which all holders of Certificates representing Company Shares
are entitled.                                                           

      (ii)  Notwithstanding the provisions of subsection (i) of this Section
    2.2(d), the Parent may elect, at its option exercised prior to the Effective
 Time and in lieu of the issuance and sale of Excess Parent Shares and the
making of the payments contemplated in such subsection, to pay to the   
 Exchange Agent an amount in cash sufficient for the Exchange Agent to pay
each holder of Company Shares an amount in cash equal to the product    
obtained by multiplying (A) the fractional share interest to which such 
 holder would otherwise be entitled (after taking into account all Company
  Shares held at the Effective Time by such holder) by (B) the closing sales
price for a share of Parent Common Stock as quoted by The Nasdaq Stock  
Market's National Market ("NASDAQ/NMS") as reported in THE WALL STREET  
JOURNAL (national edition) (or if not reported thereby, any other       
 authoritative source) on the first business day immediately following the
   Effective Time and, in such case, the Exchange Fund, all references in this
   Agreement to the cash proceeds of the sale of the Excess Shares and similar
  references shall be deemed to mean and refer to the payments calculated as
set forth in this Section 2.2(d)(ii).                                   

   (e)  TERMINATION OF EXCHANGE PERIOD; UNCLAIMED STOCK.  Any shares of Parent
Common Stock and any portion of the Exchange Fund or of dividends or other      
distributions with respect to the Parent Common Stock deposited by the Parent   
with the Exchange Agent (including the proceeds of any investments of those     
funds) that remains unclaimed by the stockholders of the Company twelve months  
after the Effective Time shall be paid to the Parent. Any former stockholders of
the Company who have not theretofore complied with this Article 2 shall         
thereafter look only to the Parent for payment of their Merger Consideration and
any dividends and other distributions issuable or payable pursuant to Section   
2.1, Section 2.2(b) and 2.2(d) upon due surrender of their Certificates (or     
affidavits of loss in lieu of Certificates), in each case, without any interest.
Notwithstanding the foregoing, none of the Parent, the Surviving Corporation,   
the Exchange Agent or any other person shall be liable to any former holder of  
Company Shares for any amount properly delivered to a public official under     
applicable abandoned property, escheat or similar laws. If any Certificates     
shall not have been surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration in     
respect of such Certificate would otherwise escheat to or become the property of
any Governmental Entity), any amounts payable in respect of such Certificate    
shall, to the extent permitted by applicable law, become the property of the    
Surviving Corporation, free and clear of all claims or interests of any person  
previously entitled to those amounts.                                           

  (f)  LOST, STOLEN OR DESTROYED CERTIFICATES.  In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of   
that fact by the person claiming such Certificate                               

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to be lost, stolen or destroyed and the posting by such person of a bond in a   
reasonable amount in the form customarily required by the Parent as indemnity   
against any claim that may be made against it with respect to such Certificate, 
the Exchange Agent will issue in exchange for such lost, stolen or destroyed    
Certificate the shares of Parent Common Stock, any unpaid dividends or other    
distributions and any cash payment in lieu of a fractional share in respect of  
that Certificate issuable or payable under this Article 2 upon due surrender of 
and deliverable in respect of the Company Shares represented by such Certificate
under this Agreement, in each case, without interest.                           

SECTION 2.3  TREATMENT OF COMPANY STOCK OPTIONS AND COMPANY WARRANTS.   

   (a)  The Parent and the Company shall take such actions as are necessary to
provide that at the Effective Time each outstanding Company Stock Option (as    
defined in Section 3.3(a)) and Company Warrant (as defined in Section 3.3(a))   
shall be assumed by the Parent and adjusted in accordance with the terms thereof
and this Agreement to be exercisable to purchase shares of Parent Common Stock, 
as provided below. Following the Effective Time, each Company Stock Option and  
Company Warrant shall continue to have, and shall be subject to, the same terms 
and conditions set forth in the Company Option Plans (as defined in Section     
3.3(a)) or any other agreement pursuant to which such Company Stock Option or   
Company Warrant was subject immediately prior to the Effective Time, as the case
may be, except that (i) each such Company Stock Option and Company Warrant, as  
the case may be, shall be exercisable for that number of shares of Parent Common
Stock equal to the product of (x) the aggregate number of shares of Company     
Common Stock for which such Company Stock Option or Company Warrant, as the case
may be, was exercisable and (y) the Exchange Ratio, rounded, in the case of any 
Company Stock Options, other than an "incentive stock option" (within the       
meaning of section 422 of the Code), or Company Warrant, up, and, in the case of
any Company Stock Option that is an incentive stock option, down, to the nearest
whole share, if necessary, and (ii) the exercise price per share of such Company
Stock Option or Company Warrant shall be equal to the aggregate exercise prices 
of such Company Stock Option or Company Warrant immediately prior to the        
Effective Time divided by the number of shares of Parent Common Stock for which 
such Company Stock Option or Company Warrant shall be exercisable as determined 
in accordance with the preceding clause (i), rounded to the nearest cent, if    
necessary.                                                                      

  (b)  As soon as practicable following the Effective Time, the Parent shall
deliver to the holders of Company Stock Options and holders of Company Warrants 
appropriate notices setting forth such holders' rights after giving effect to   
the Merger and the provisions set forth above. At or prior to the Effective     
Time, the Company shall make such amendments and take such other actions, if    
any, to the Company Option Plans or such other agreement pursuant to which the  
Company Stock Options or Company Warrants were issued as shall be necessary to  
permit the assumption and adjustment referred to in this Section 2.3.           

    (c)  It is the intention of the parties that, to the extent that any Company
Stock Option constituted an incentive stock option immediately prior to the     
Effective Time, such option continue to qualify as an incentive stock option to 
the maximum extent permitted by section 422 of the Code, and that the assumption
of the Company Stock Options provided by this Section 2.3 satisfy the conditions
of section 424(a) of the Code. The Parent shall comply with the terms of the    
Company Option Plans and ensure, to the extent required by, and subject to the  
provisions of, such Company Option Plans, that the Company Stock Options that   
qualified as incentive stock options prior to the Effective Time continue to    
qualify as incentive stock options after the Effective Time.                    

(d)  The Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon 
exercise of Company Stock Options and Company Warrants at and after the         
Effective Time.                                                                 

  SECTION 2.4  NO APPRAISAL RIGHTS.  In accordance with Section 262(b)(1) of
the GCL, no appraisal rights shall be available to holders of Company Shares in 
connection with the Merger.                                                     

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 SECTION 2.5  ADJUSTMENTS TO PREVENT DILUTION.  In the event that prior to
the Effective Time there is a change in the number of Company Shares or shares  
of Parent Common Stock or securities or other instruments convertible or        
exchangeable into or exercisable for Company Shares or shares of Parent Common  
Stock issued and outstanding including as a result of a distribution,           
redemption, repurchase, reclassification, combination or exchange of shares,    
stock split (including a reverse stock split), stock dividend or distribution or
other similar transaction, the Exchange Ratio shall be equitably adjusted to    
eliminate the effects of that event.                                            

SECTION 2.6  WITHHOLDING RIGHTS.  Each of the Surviving Corporation and 
Parent shall be entitled to deduct and withhold from any amounts otherwise      
payable pursuant to this Agreement to any holder of a Certificate such amounts  
as it is required to deduct and withhold with respect to the making of such     
payment under the Code, or any provisions of Law (as defined in Section 3.5)    
related to applicable Taxes (as defined in Section 3.16). To the extent that    
amounts are so withheld by the Surviving Corporation or Parent, as the case may 
be, such withheld amounts shall be treated for purposes of this agreement as    
having been paid to the holder of a Certificate in respect to which such        
deduction and withholding was made by the Surviving Corporation or Parent, as   
the case may be.                                                                

ARTICLE 3 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

The Company represents and warrants to the Parent and Merger Sub that,  
except for inaccuracies in the representations and warranties resulting from    
compliance with the provisions of this Agreement and performance of the         
transactions contemplated hereby or inaccuracies resulting from actions or      
omissions permitted by the terms of Section 5.1 hereof:                         

SECTION 3.1  ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.              

  (a)  Each of the Company and each subsidiary of the Company (collectively,
the "COMPANY SUBSIDIARIES") has been duly organized and is validly existing and 
in good standing under the laws of the jurisdiction of its incorporation or     
organization, as the case may be, and has the requisite power and authority to  
own, lease and operate its properties and to carry on its business as it is now 
being conducted. Each of the Company and each Company Subsidiary is duly        
qualified or licensed to do business, and is in good standing, in each          
jurisdiction where the character of the properties owned, leased or operated by 
it or the nature of its business makes such qualification or licensing          
necessary, except for such failures to be so qualified or licensed and in good  
standing that, individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the Company.   
For purposes of this Agreement, "MATERIAL ADVERSE EFFECT ON THE COMPANY" means  
any change in or effect on the business, assets, properties, results of         
operations, or condition (financial or otherwise) of the Company or any Company 
Subsidiaries that is or could reasonably be expected to be materially adverse to
the Company and the Company Subsidiaries, taken as a whole, or that could       
reasonably be expected to materially impair the ability of the Company to       
perform its obligations under this Agreement or the Option Agreement or         
consummate the Merger and the other transactions contemplated hereby or thereby,
except for any change or effect (i) relating to the economy in general or (ii)  
relating to the industries in which the Company and the Company Subsidiaries    
operate.                                                                        

(b)  Section 3.1(b) of the Disclosure Letter delivered to the Parent and
Merger Sub by the Company at or prior to the execution of this Agreement (the   
"COMPANY DISCLOSURE LETTER") sets forth a complete and correct list of all of   
the Company Subsidiaries, including the jurisdiction of incorporation and the   
ownership or other interest therein of the Company or any Company Subsidiary.   
Except as set forth in Section 3.1(b) of the Company Disclosure Letter, neither 
the Company nor any Company Subsidiary holds any material interest in any person
other than the Company Subsidiaries so listed.                                  

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SECTION 3.2 CERTIFICATE OF INCORPORATION AND BY-LAWS.  The copies of the
Company's certificate of incorporation and by-laws, each as amended through the 
date of this Agreement (collectively, the "COMPANY CHARTER DOCUMENTS") that are 
incorporated by reference in, as exhibits to, the Company's quarterly report on 
Form 10-Q for the quarter ended March 31, 1999 are complete and correct copies  
of those documents. The Company has made available to Parent complete and       
correct copies of all organizational documents of each Company Subsidiary. The  
Company Charter Documents and all comparable organizational documents of the    
Company Subsidiaries are in full force and effect. Except as set forth in       
Section 3.2 of the Company Disclosure Letter, neither the Company nor any       
Company Subsidiary is in violation of any of the provisions of its              
organizational documents.                                                       

SECTION 3.3  CAPITALIZATION.                                            

   (a)  The authorized capital stock of the Company consists of (i) 60,000,000
shares of Company Common Stock and (ii) 5,000,000 shares of Preferred Stock, par
value $.001 per share (the "COMPANY PREFERRED STOCK"). As of June 15, 1999, (i) 
34,550,550 shares of Company Common Stock were issued and outstanding, all of   
which were validly issued and are fully paid, nonassessable and not subject to  
preemptive rights, (ii) no shares of Company Preferred Stock were issued or     
outstanding and (iii) (A) 5,095,351 shares of Company Common Stock were reserved
for issuance upon the exercise of outstanding stock options (the "PLAN OPTIONS")
granted pursuant to the Company's 1998 Stock Incentive Plan, 1997 Stock Plan and
1996 Stock Option Plan (the "COMPANY OPTION PLANS"), (B) 1,127,596 shares of    
Company Common Stock were reserved for issuance pursuant to options available   
for grant under the Company Option Plans, (C) 300,000 shares of Company Common  
Stock were reserved for issuance upon exercise of outstanding options listed in 
Section 3.3 of the Company Disclosure Letter (the "THIRD PARTY OPTIONS" and,    
together with the Plan Options, the "COMPANY STOCK OPTIONS"), (D) 333,004 shares
of Company Common Stock were reserved for issuance upon the exercise of         
outstanding warrants (the "COMPANY WARRANTS") and (E) 131,591 shares of Company 
Common Stock reserved for issuance under the Company's 1998 Employee Stock      
Purchase Plan (the "ESPP"). Section 3.3(a) of the Company Disclosure Letter sets
forth a complete and correct list as of June 15, 1999 of the holders of all     
Company Stock Options and Company Warrants, the number of shares subject to each
such option or warrant and the exercise price thereof. Except as set forth      
above, as of June 15, 1999, no shares of capital stock or other voting          
securities of the Company were issued, reserved for issuance or outstanding and 
since such date, no shares of capital stock or other voting securities or       
options in respect thereof have been issued except upon the exercise of the     
Company Stock Options or Company Warrants outstanding on June 15, 1999 and      
except pursuant to the ESPP as in effect on the date hereof.                    

   (b)  Except as set forth in Section 3.3(b) of the Company Disclosure Letter
and except for (i) outstanding Company Stock Options, (ii) outstanding Third    
Party Options, (iii) outstanding Company Warrants, and (iv) pursuant to the     
ESPP, there are no options, warrants, conversion rights, stock appreciation     
rights, redemption rights, repurchase rights or other rights, agreements,       
arrangements or commitments of any character to which the Company is a party or 
by which the Company is bound relating to the issued or unissued capital stock  
of the Company or any Company Subsidiary or obligating the Company or any       
Company Subsidiary to issue or sell any shares of capital stock of, or other    
equity interests in, the Company or any Company Subsidiary.                     

  (c)  All shares of Company Common Stock subject to issuance, upon issuance
prior to the Effective Time on the terms and conditions specified in the        
instruments under which they are issuable, will be duly authorized, validly     
issued, fully paid, nonassessable and will not be subject to preemptive rights. 
Except as set forth in Section 3.3(c) of the Company Disclosure Letter, there   
are no outstanding contractual obligations of the Company or any Company        
Subsidiary to repurchase, redeem or otherwise acquire any shares of Company     
Common Stock or any capital stock of any Company Subsidiary or to effect the    
registration of any shares of Company Common Stock or other Company securities  
under the Securities Act (as defined in Section 3.6). Each outstanding share of 
capital stock of each Company                                                   

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Subsidiary is duly authorized, validly issued, fully paid, nonassessable and not
subject to preemptive rights and each such share owned by the Company or a      
Company Subsidiary is free and clear of all security interests, liens, claims,  
pledges, options, rights of first refusal, limitations on the Company's or such 
other Company Subsidiary's voting rights, charges and other encumbrances of any 
nature whatsoever (collectively, "LIENS"), except for Liens under applicable    
Law. Except as set forth in Section 3.3 of the Company Disclosure Letter there  
are no outstanding material contractual obligations of the Company or any       
Company Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Company Subsidiary that is not 
wholly owned by the Company or in any other person.                             

SECTION 3.4  AUTHORITY.                                                 

   (a)  The Company has all necessary corporate power and authority to execute
and deliver this Agreement and the Option Agreement, to perform its obligations 
hereunder and thereunder and to consummate the Merger and the other transactions
contemplated hereby and thereby to be consummated by the Company. The execution 
and delivery of this Agreement and the Option Agreement by the Company and the  
consummation by the Company of such transactions have been duly and validly     
authorized by all necessary corporate action and no other corporate proceedings 
on the part of the Company are necessary to authorize this Agreement and the    
Option Agreement or to consummate such transactions, other than, with respect to
the Merger, the adoption of this Agreement by stockholders of the Company       
representing a majority of the Company Common Stock entitled to vote thereon    
(the "REQUISITE COMPANY VOTE"). This Agreement and the Option Agreement have    
been duly authorized and validly executed and delivered by the Company and,     
assuming the due authorization, execution and delivery by the other parties     
hereto, constitute legal, valid and binding obligations of the Company,         
enforceable against the Company in accordance with their respective terms,      
subject to bankruptcy, insolvency, reorganization, moratorium or other laws now 
or hereafter in effect relating to creditors' rights generally or to general    
principles of equity.                                                           

  (b)  The Board of Directors of the Company (i) has unanimously adopted the
plan of merger set forth in this Agreement and approved this Agreement and the  
other transactions contemplated by this Agreement and (ii) has declared that the
Merger and this Agreement and the other transactions contemplated by this       
Agreement are advisable and recommended that the stockholders of the Company    
adopt this Agreement.                                                           

SECTION 3.5  NO CONFLICT.                                               

  (a)  The execution and delivery of this Agreement and the Option Agreement
by the Company do not, and the performance of this Agreement and the Option     
Agreement by the Company will not:                                              

  (i)  conflict with or violate any provision of any Company Charter
Document or any equivalent organizational documents of any Company      
Subsidiary;                                                             

  (ii)  assuming effectuation of all filings and registrations with,
   termination or expiration of all applicable waiting periods imposed by, and
receipt of all consents, approvals, authorizations and permits of all   
    Governmental Entities indicated as required in Section 3.6 below, receipt of
    all Company Required Consents, and receipt of the approval of this Agreement
   by the stockholders of the Company as required by the GCL, conflict with or
  violate any foreign or domestic law, statute, ordinance, rule, regulation,
  order, judgment or decree ("LAW") applicable to the Company or any Company
  Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is or may be bound or affected, except for such conflicts or 
 violations which, individually or in the aggregate, have not resulted and
  could not reasonably be expected to result in a Material Adverse Effect on
the Company; or                                                         

(iii)  except as set forth in Section 3.5(a)(iii) of the Company
 Disclosure Letter, result in any breach of or constitute a default (or an
event which with or without notice or lapse of time or                  

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  both would become a default) under, or modification in a manner materially
   adverse to the Company and the Company Subsidiaries of any right or benefit
  under or give to others any right of termination, amendment, acceleration,
   repayment or repurchase, increased payments or cancellation of or result in
the creation of a Lien on any property or asset of the Company or any   
Company Subsidiary under any note, bond, mortgage, indenture, contract, 
    agreement, commitment, lease, license, permit, franchise or other instrument
or obligation (collectively, "CONTRACTS") to which the Company or any   
Company Subsidiary is a party or by which any of them or their assets or
properties is or may be bound or affected, except for such breaches,    
   defaults or other occurrences which, individually or in the aggregate, have
 not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Company.                                          

 (b)  Section 3.5(b) of the Company Disclosure Letter sets forth a correct
and complete list of all material Contracts to which the Company or any Company 
Subsidiaries are a party or by which they or their assets or properties is or   
may be bound or affected under which consents or waivers are required prior to  
consummation of the transactions contemplated by this Agreement and the Option  
Agreement (collectively, the "COMPANY REQUIRED CONSENTS").                      

   SECTION 3.6  GOVERNMENTAL REQUIRED FILINGS AND CONSENTS.  The execution and
delivery of this Agreement and the Option Agreement by the Company do not, and  
the performance of this Agreement and the Option Agreement by the Company will  
not, require any material consent, approval, authorization or permit of, or     
filing with or notification to, any domestic or foreign national, federal,      
state, provincial or local governmental, regulatory or administrative authority,
agency, commission, court, tribunal or arbitral body or self-regulated entity   
(each, a "GOVERNMENTAL ENTITY"), except (i) for those consents or approvals set 
forth in Section 3.6 of the Company Disclosure Letter (the "COMPANY GOVERNMENTAL
CONSENTS"), (ii) for applicable requirements of the Securities Exchange Act of  
1934, as amended (together with the rules and regulations promulgated           
thereunder, the "EXCHANGE ACT"), and the Securities Act of 1933, as amended     
(together with the rules and regulations promulgated thereunder, the "SECURITIES
ACT"), (iii) for applicable requirements of state securities or "blue sky" laws 
("BLUE SKY LAWS"), (iv) for the pre-merger notification requirements of the     
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules 
and regulations promulgated thereunder (the "HSR ACT"), (v) for approval of the 
listing of the additional shares of Company Common Stock by NASDAQ/NMS that may 
be issued pursuant to the Option Agreement and (vi) for the filing of the       
Certificate of Merger as required by the GCL.                                   

SECTION 3.7  PERMITS; COMPLIANCE WITH LAW.  Each of the Company and the 
Company Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,    
approvals and orders of any Governmental Entity necessary for the Company or any
Company Subsidiary to own, lease and operate its properties or to carry on its  
business as it is now being conducted (collectively, the "COMPANY PERMITS"),    
except where the failure to have, or the suspension or cancellation of, any of  
the Company Permits, individually or in the aggregate, has not resulted and     
could not reasonably be expected to result in a Material Adverse Effect on the  
Company, and, as of the date of this Agreement, no suspension or cancellation of
any of the Company Permits is pending or, to the knowledge of the Company,      
threatened, except where the failure to have, or the suspension or cancellation 
of, any of the Company Permits, individually or in the aggregate, has not       
resulted and could not reasonably be expected to result in a Material Adverse   
Effect on the Company. Neither the Company nor any Company Subsidiary is in     
conflict with, or in default or violation of, (i) any Law applicable to the     
Company or any Company Subsidiary or by which any property or asset of the      
Company or any Company Subsidiary is or may be bound or affected or (ii) any    
Company Permits, except in the case of clauses (i) and (ii) any such conflicts, 
defaults or violations which, individually or in the aggregate, have not        
resulted and could not reasonably be expected to result in a Material Adverse   
Effect on the Company.                                                          

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SECTION 3.8  SECURITIES EXCHANGE COMMISSION ("SEC") FILINGS; FINANCIAL  
STATEMENTS.                                                                     

  (a)  The Company has filed all forms, reports, registration statements and
other documents (including all exhibits, annexes, supplements and amendments to 
such documents) required to be filed by it under the Exchange Act and the       
Securities Act since September 10, 1998 (collectively, including any such       
documents filed subsequent to the date of this Agreement, the "COMPANY SEC      
REPORTS") and the Company has made available to the Parent each Company SEC     
Report filed with the SEC. The Company SEC Reports, including any financial     
statements or schedules included or incorporated by reference, (i) comply in all
material respects with the requirements of the Exchange Act or the Securities   
Act or both, as the case may be, applicable to those Company SEC Reports and    
(ii) did not at the time they were filed contain any untrue statement of a      
material fact or omit to state a material fact required to be stated or         
necessary in order to make the statements made in those Company SEC Reports, in 
the light of the circumstances under which they were made, not misleading. No   
Company Subsidiary is subject to the periodic reporting requirements of the     
Exchange Act or is otherwise required to file any documents with the SEC or any 
national securities exchange or quotation service or comparable Governmental    
Entity.                                                                         

(b)  Each of the consolidated financial statements included in or       
incorporated by reference into the Company SEC Reports (including the related   
notes and schedules) comply as to form in all material respects with the        
published rules and regulations of the SEC with respect thereto, have been      
prepared in accordance with generally accepted accounting principles ("GAAP")   
applied on a consistent basis throughout the periods involved (except as may be 
indicated in the notes thereto or, in the case of the unaudited interim         
financial statements, as permitted by Form 10-Q of the SEC) and fairly present  
in all material respects (subject, in the case of the unaudited interim         
financial statements, to normal, year-end audit adjustments) the consolidated   
financial position of the Company and its Subsidiaries as at the dates thereof  
and the consolidated results of their operations and cash flows for the periods 
then ended.                                                                     

    (c)  Except as and to the extent set forth on the consolidated balance sheet
of the Company and the consolidated Company Subsidiaries as of March 31, 1999   
including the related notes and except as set forth in Section 3.8(c) of the    
Company Disclosure Letter or in any Company SEC Report filed prior to the date  
hereof, neither the Company nor any Company Subsidiary has any liabilities or   
obligations of any nature (whether accrued, absolute, contingent or otherwise)  
that would be required to be reflected on a balance sheet or in the related     
notes prepared in accordance with GAAP, except for liabilities or obligations   
incurred since March 31, 1999 that, individually or in the aggregate, have not  
resulted and could not reasonably be expected to result in a Material Adverse   
Effect on the Company and except for liabilities or obligations under this      
Agreement and the transactions contemplated hereby.                             

  SECTION 3.9  ABSENCE OF CERTAIN CHANGES OR EVENTS.  Except as described in
Section 3.9 of the Company Disclosure Letter and except as set forth in any     
Company SEC Report filed prior to the date hereof, since March 31, 1999, the    
Company and the Company Subsidiaries have conducted their businesses in the     
ordinary course and in a manner consistent with past practice and, since such   
date, except as permitted by Section 5.1 of this Agreement with respect to      
clauses (c-i) below there has not been:                                         

(a)  any Material Adverse Effect on the Company;                        

(b)  any damage, destruction or other casualty loss with respect to any 
asset or property owned, leased or otherwise used by the Company or any Company 
Subsidiaries, whether or not covered by insurance, which damage, destruction or 
loss, individually or in the aggregate, has resulted or could reasonably be     
expected to result in a Material Adverse Effect on the Company;                 

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  (c)  any material change by the Company in its or any Company Subsidiary's
accounting methods, principles or practices, except as required by GAAP or by   
applicable Law;                                                                 

(d)  any declaration, setting aside or payment of any dividend or       
distribution in respect of Company Shares or any redemption, purchase or other  
acquisition of any of the Company's securities;                                 

 (e)  any increase in the compensation or benefits or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit 
sharing, stock option (including, the granting of stock options, stock          
appreciation rights, performance awards or restricted stock awards), stock      
purchase or other employee benefit plan, or any other increase in the           
compensation payable or to become payable to any executive officers of the      
Company or any Company Subsidiary, in each case except in the ordinary course of
business consistent with past practice or except as required by applicable Law; 

(f)  (i) any incurrence or assumption by the Company or any Company     
Subsidiary of any indebtedness for borrowed money or (ii) any guarantee,        
endorsement or other incurrence or assumption material liability (whether       
directly, contingently or otherwise) by the Company or any Company Subsidiary   
for the obligations of any other person (other than any wholly owned Company    
Subsidiary), in each case other than in the ordinary course of business         
consistent with past practice;                                                  

   (g)  any creation or assumption by the Company or any Company Subsidiary of
any Lien on any material asset of the Company or any Company Subsidiary, other  
than in the ordinary course of business, consistent with past practice;         

(h)  any making of any loan, advance or capital contribution to or      
investment in any person by the Company or any Company Subsidiary, other than in
the ordinary course of business, consistent with past practice; or              

   (i)  (i) any Contract entered into by the Company or any Company Subsidiary
relating to any material acquisition or disposition of any assets or business,  
or (ii) any modification, amendment, assignment or termination of or            
relinquishment by the Company or any Company Subsidiary of any rights under any 
other Contract (including any insurance policy naming it as a beneficiary or a  
loss payable payee) that does or could reasonably be expected to have,          
individually or in the aggregate, a Material Adverse Effect on the Company,     
other than transactions, commitments, contracts or agreements in the ordinary   
course of business consistent with past practice or those contemplated by this  
Agreement.                                                                      

SECTION 3.10  EMPLOYEE BENEFIT PLANS.                                   

    (a)  Except as set forth in Section 3.10(a) of the Company Disclosure Letter
and except as could not, individually or in the aggregate, has not and could not
reasonably be expected to have a Material Adverse Effect on the Company: (A)    
each pension, retirement, savings, disability, medical, dental, health, life,   
death benefit, group insurance, profit sharing, deferred compensation, stock    
option, bonus, incentive, severance pay, or other employee benefit plan, trust, 
arrangement, contract, commitment, agreement or policy (collectively, "BENEFIT  
PLANS") of the Company or any Company Subsidiary has been administered and is in
compliance with the terms of such plan and all applicable laws, rules and       
regulations, (B) no "reportable event" (as such term is used in section 4043 of 
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (other
than those events for which the 30 day notice has been waived pursuant to the   
regulations), "prohibited transaction" (as such term is used in section 406 of  
ERISA or section 4975 of the Code) or "accumulated funding deficiency" (as such 
term is used in section 412 or 4971 of the Code) has heretofore occurred with   
respect to any Company Benefit Plan or any Benefit Plan of its affiliates and   
any trade or business which is or within the past five years has been under     
common control or which is or within the past five years has been treated as a  
single employer with any of them under section 414(b), (c), (m) or (o) of the   
Code ("ERISA AFFILIATE") and (C) the Company Benefit Plans intended to qualify  
under section 401 of the                                                        

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Code are so qualified and the trusts maintained pursuant thereto are exempt from
federal income taxation under section 501 of the Code, and nothing has occurred 
with respect to the operation of the Company Benefit Plans which could cause the
loss of such qualification or exemption or the imposition of any liability,     
penalty or tax under ERISA or the Code and each Company Benefit Plan intended to
qualify under section 401(a) of the Code has received a favorable determination 
from the Internal Revenue Service (the "IRS") regarding its qualified status and
no notice has been received from the IRS with respect to the revocation of such 
qualification.                                                                  

   (b)  There is no litigation or administrative or other proceeding involving
any Company Benefit Plan nor has the Company or any Company Subsidiary received 
notice that any such proceeding is threatened, in each case where an adverse    
determination, individually or in the aggregate, has had or could reasonably be 
expected to have a Material Adverse Effect on the Company. Neither the Company  
nor any Company Subsidiary has incurred, nor, to the Company's knowledge, is    
reasonably likely to incur any withdrawal liability with respect to any         
"multiemployer plan" (within the meaning of section 3(37) of ERISA) that,       
individually or in the aggregate, has had or could reasonably be expected to    
have a Material Adverse Effect on the Company. The termination of, or withdrawal
from, any Company Benefit Plan or multiemployer plan to which the Company or any
Company Subsidiaries contributes, on or prior to the Closing Date, will not     
subject the Company or any Company Subsidiary to any liability under Title IV of
ERISA that, individually or in the aggregate, has had or could reasonably be    
expected to have a Material Adverse Effect on the Company.                      

(c)  True, correct and complete copies of the following documents, with 
respect to each of the Company Benefit Plans (other than a multiemployer plan), 
have been made available or delivered to Parent by the Company, to the extent   
applicable: (i) any plans, all amendments thereto and related trust documents,  
and amendments thereto; (ii) the most recent Forms 5500 and all schedules       
thereto and the most recent actuarial report, if any; (iii) the most recent IRS 
determination letter; (iv) summary plan descriptions; (v) written communications
to employees relating to the Company Benefit Plans; and (vi) written            
descriptions of all non-written agreements relating to the Company Benefit      
Plans.                                                                          

(d)  Except as set forth in Section 3.10(d) of the Company Disclosure   
Letter, none of the Company Benefit Plans provide for post-employment life or   
health insurance, benefits or coverage for any participant or any beneficiary of
a participant, except as may be required under the Consolidated Omnibus Budget  
Reconciliation Act of 1985, as amended ("COBRA") and at the expense of the      
participant or the participant's beneficiary. Except as set forth in Section    
3.10(d) of the Company Disclosure Letter and except as individually or in the   
aggregate do not have or could not reasonably be expected to have a Material    
Adverse Effect on the Company, each of the Company and any ERISA Affiliate which
maintains a "group health plan" within the meaning section 5000(b)(1) of the    
Code has complied with the notice and continuation requirements of section 4980B
of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder.                                                                     

(e)  Except as sect forth in Section 3.10(e) of the Company Disclosure  
Letter, neither the execution and delivery of this Agreement nor the            
consummation of the transactions contemplated hereby will (i) result in any     
payment becoming due to any employee (current, former or retired) of the        
Company, (ii) increase any benefits otherwise payable under any Company Benefit 
Plan or (iii) result in the acceleration of the time of payment or vesting of   
any such benefits under any such plan.                                          

    (f)  Except as set forth in Section 3.10(f) of the Company Disclosure Letter
or as disclosed in any Company SEC Report filed prior to the date hereof, there 
is no contract, plan or arrangement (written or otherwise) covering any employee
or former employee of the Company or any Subsidiary that, individually or       
collectively, could give rise to the payment of any amount that would not be    
deductible pursuant to the terms of section 280G of the Code and neither the    
Company nor any Company Subsidiary has made any payment that would not be       
deductible pursuant to the terms of section 162(m) of the Code.                 

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    SECTION 3.11  TAX MATTERS.  Neither the Company nor, to the knowledge of the
Company, any of its affiliates has taken or agreed to take any action, nor is   
the Company aware of any agreement, plan or other circumstance that would       
prevent the Merger from constituting a transaction qualifying as a              
reorganization under section 368(a) of the Code.                                

    SECTION 3.12  NO DEFAULTS.  Except as listed or described in Section 3.12 of
the Company Disclosure Letter and except as filed as an exhibit to any Company  
SEC Report filed prior to the date hereof, there is no Contract that is material
to the business, financial condition or results of operations of the Company and
the Company Subsidiaries taken as a whole. Neither the Company nor any Company  
Subsidiary is in violation of or in default under (nor does there exist any     
condition which with the passage of time or the giving of notice would cause    
such a violation of or default under) any Contract to which it is a party or by 
which it or any of its properties or assets is or may be bound or affected,     
except for violations or defaults that, individually or in the aggregate, have  
not resulted and could not reasonably be expected to result in a Material       
Adverse Effect on the Company.                                                  

SECTION 3.13  LITIGATION.  Except as described in Section 3.13 of the   
Company Disclosure Letter or in any Company SEC Reports filed prior to the date 
hereof, there is no suit, claim, action, or proceeding (collectively, "CLAIMS") 
pending or, to the knowledge of the Company, threatened against the Company or  
any Company Subsidiary before any Governmental Entity nor to the Company's      
knowledge are there any investigations or reviews by any Governmental Entity    
pending or threatened against, relating to or affecting the Company or any of   
the Company Subsidiaries, that, if adversely determined, individually or in the 
aggregate, has resulted or could reasonably be expected to result in a Material 
Adverse Effect on the Company. Neither the Company nor any Company Subsidiary is
subject to any outstanding order, writ, injunction or decree of any court or    
Governmental Entity which, individually or in the aggregate, has resulted or    
could reasonably be expected to result in a Material Adverse Effect on the      
Company.                                                                        

    SECTION 3.14  ENVIRONMENTAL MATTERS.  Except as disclosed on Section 3.14 of
the Company Disclosure Letter and except as could not reasonably be expected to 
have a Material Adverse Effect on the Company:                                  

(a)  Neither the Company nor any Company Subsidiary is or has been in   
violation of any applicable Safety and Environmental Law (as hereafter defined);

(b)  To the Company's knowledge, the Company and each Company Subsidiary
have all Company Permits required pursuant to Safety and Environmental Laws that
are material to the conduct of the business of the Company or any Company       
Subsidiary, all such Permits are in full force and effect, no action or         
proceeding to revoke, limit or modify any of such Permits is pending, and the   
Company and each Company Subsidiary is in compliance in all material respects   
with all terms and conditions thereof;                                          

(c)  Neither the Company nor any Company Subsidiary has received any    
Environmental Claim (as hereafter defined);                                     

 (d)  To the Company's knowledge, there is not now and has not been at any
time in the past a Release or threatened Release (as hereafter defined) of      
Hazardous Substances into the Environment for which the Company or any Company  
Subsidiary is directly or indirectly responsible; and                           

 (e)  To the Company's knowledge, there is not now and has not been at any
time in the past at, on or in any of the real properties owned, leased or       
operated by the Company or any Company Subsidiary, and, to the Company's        
knowledge, was not at, on or in any real property previously owned, leased or   
operated by the Company or any Company Subsidiary or any predecessor: (i) any   
generation, use, handling, Release, treatment, recycling, storage or disposal of
any Hazardous Substances, (ii) any underground storage tank, surface            
impoundment, lagoon or other containment facility (past or present)             

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for the temporary or permanent storage, treatment or disposal of Hazardous      
Substances, (iii) any asbestos-containing material in a condition requiring     
abatement, (iv) any Release or threatened Release, or any visible signs of      
Releases or threatened Releases, of a Hazardous Substance to the Environment in 
form or quantity requiring remedial action under Safety and Environmental Laws, 
or (v) any Hazardous Substances present at such property, excepting such        
quantities as are handled in all material respects in accordance with all       
applicable manufacturer's instructions and Safety and Environmental Laws and in 
proper storage containers, and as are necessary for the operations of the       
Company and the Company Subsidiaries.                                           

For purposes of this Agreement, the following terms have the following  
meanings:                                                                       

 (a)  "ENVIRONMENT" means navigable waters, waters of the contiguous zone,
ocean waters, natural resources, surface waters, ground water, drinking water   
supply, land surface, subsurface strata, ambient air, both inside and outside of
buildings and structures, man-made buildings and structures, and plant and      
animal life on earth.                                                           

  (b)  "ENVIRONMENTAL CLAIMS" means any written notification, whether direct
or indirect, pursuant to Safety and Environmental Laws or principles of common  
law relating to pollution, protection of the Environment or health and safety,  
that any of the current or past operations of any of the Parent, any Parent     
Subsidiary, or the Company, or any Company Subsidiary, as the case may be, have 
or may have violated any such Safety and Environmental Law or principles of     
common law.                                                                     

(c)  "HAZARDOUS SUBSTANCE" means any toxic waste, pollutant, hazardous  
substance, toxic substance, hazardous waste, special waste, industrial substance
or waste, petroleum or petroleum-derived substance or waste, radioactive        
substance or waste, or any constituent of any such substance or waste, or any   
other substance regulated under or defined by any Safety and Environmental Law. 

(d)  "RELEASE" means any release, spill, emission, leaking, pumping,    
injection, deposit, disposal, discharge, dispersal, leaching or migration into  
or through the indoor or outdoor Environment or into, through or out of any     
property, including the movement of Hazardous Substances through or in the air, 
soil, surface water, ground water or property.                                  

    (e)  "SAFETY AND ENVIRONMENTAL LAWS" means all federal, state and local laws
and orders relating to pollution, protection of the Environment, public or      
worker health and safety, or the emission, discharge, release or threatened     
release of pollutants, contaminants or industrial, toxic or hazardous substances
or wastes into the Environment or otherwise relating to the manufacture,        
processing, distribution, use, treatment, storage, disposal, transport or       
handling of pollutants, contaminants or industrial, toxic or hazardous          
substances or wastes, including, without limitation, the Comprehensive          
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601  
ET SEQ., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET  
SEQ., the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ., the     
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 ET SEQ., the Clean  
Air Act, 42 U.S.C. Section 7401 ET SEQ., the Federal Insecticide, Fungicide and 
Rodenticide Act, 7 U.S.C. Section 121 ET SEQ., the Occupational Safety and      
Health Act, 29 U.S.C. Section 651 ET SEQ., the Asbestos Hazard Emergency        
Response Act, 15 U.S.C. Section 2601 ET SEQ., the Safe Drinking Water Act, 42   
U.S.C. Section 300f ET SEQ., the Oil Pollution Act of 1990 and analogous state  
acts.                                                                           

SECTION 3.15  INTELLECTUAL PROPERTY.                                    

    (a)  (i)  Section 3.15(a)(i) of the Company Disclosure Letter sets forth all
material United States and foreign patents and patent applications, trademark   
and service mark registrations and applications, Internet domain name           
registrations and applications, and copyright registrations and applications    
owned by the Company, specifying as to each item, as applicable: (A) the        
jurisdictions in which the item is issued or registered or in which an          
application for issuance or registration has been filed; and (B) the issuance,  
registration or application numbers and dates.                                  

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     (ii)  Section 3.15(a)(ii) of the Company Disclosure Letter sets forth
all material licenses, sublicenses, and other agreements or permissions ("IP    
LICENSES") pursuant to which the Company is a licensor or licensee of or        
otherwise is authorized to use or practice under any third parties rights in any
Intellectual Property on an exclusive basis and any non-exclusive IP License    
that is not available to parties other than the Company or any Company          
Subsidiary on comparable commercial terms to which it is licensed to the        
Company. To the knowledge of the Company, all such IP Licenses are valid,       
enforceable and in full force and effect in accordance with their respective    
terms, subject to bankruptcy, insolvency, reorganization, moratorium or other   
laws now or hereafter in effect relating to creditors' rights generally or to   
general principles of equity. For purposes of this Agreement, "INTELLECTUAL     
PROPERTY" means all of the following as they exist in all jurisdictions         
throughout the world, in each case, to the extent owned by, licensed to, or     
otherwise used by the Company or the Parent: (A) patents, patent applications,  
and other patent rights (including any divisions, continuations,                
continuations-in-part, substitutions, or reissues thereof, whether or not       
patents are issued on any such applications and whether or not any such         
applications are modified, withdrawn, or resubmitted); (B) trademarks, service  
marks, trade dress, trade names, brand names, Internet domain names, designs,   
logos, or corporate names, whether registered or unregistered, and all          
registrations and applications for registration thereof; (C) copyrights,        
including all renewals and extensions, copyright registrations and applications 
for registration, and non-registered copyrights; (D) trade secrets, concepts,   
ideas, designs, research, processes, procedures, techniques, methods, know-how, 
data, mask works, discoveries, inventions, modifications, extensions,           
improvements, and other proprietary rights (whether or not patentable or subject
to copyright, mask work, or trade secret protection) (collectively,             
"TECHNOLOGY"); and (E) computer software programs, including all source code,   
object code, and documentation related thereto (the "SOFTWARE").                

 (b)  The Company owns, free and clear of all material Liens, or has valid
rights to use all Intellectual Property material to its or any Company          
Subsidiary's business and operations.                                           

   (c)  The Company has not been, during the three years preceding the date of
this Agreement, a party to any Claim, nor, to the knowledge of the Company, is  
any Claim threatened, that challenges the validity, enforceability, ownership,  
or right to use, sell, or license any Intellectual Property material to its or  
any Company Subsidiary's business and operations. To the knowledge of the       
Company, no third party is infringing in any material respect upon any          
Intellectual Property material to its or any Company Subsidiary's business and  
operations.                                                                     

  (d)  The Company has taken commercially reasonable actions to maintain and
protect each item of Intellectual Property that is owned or exclusively licensed
by the Company and is material to its or any Company Subsidiary's business and  
operations.                                                                     

 (e)  The Company has taken commercially reasonable precautions to protect
the secrecy, confidentiality, and value of its trade secrets and the proprietary
nature and value of the Technology material to its or any Company Subsidiary's  
business and operations.                                                        

(f)  All Software that is material to the Company or any Company        
Subsidiary's business and operations performs in all material respects the      
functions for which such Software is used by the Company or such Company        
Subsidiary.                                                                     

(g)  All Software, hardware, databases, and embedded control systems    
(collectively, the "SYSTEMS") used by the Company are Year 2000 Compliant and to
the Company's knowledge the Systems used by the Company's material suppliers and
facilities providers are Year 2000 Compliant, except in each case for failures  
to be Year 2000 Compliant that, individually or in the aggregate, have not      
resulted and could not reasonably be expected to result in a Material Adverse   
Effect on the Company. For purposes of this Agreement, "YEAR 2000 COMPLIANT"    
means that the Systems (i) accurately process date and time data (including     
calculating, comparing, and sequencing) from, into, and between the twentieth   
and twenty-first centuries, the years 1999 and 2000, and leap year              

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calculations and (ii) operate accurately with otherwise compatible software and 
hardware that use standard date format (4 digits) for representation of the     
year.                                                                           

  (h)  The Company is not, nor, as a result of the execution and delivery of
this Agreement or the performance of its obligations under this Agreement, will 
be, in material violation of any agreement relating to any Intellectual Property
material to its or any Company Subsidiary's business and operations. After the  
completion of the transactions contemplated by this Agreement, the Company will 
continue to own all right, title, and interest in and to or have a license to   
use all Intellectual Property (including all Software) material to its or any   
Company Subsidiary's business and operations on terms and conditions identical  
in all material respects, to those enjoyed by the Company immediately prior to  
such transactions.                                                              

SECTION 3.16  TAXES.  (a)  Except as set forth on Section 3.16(a) of the
Company Disclosure Letter or except as to any items that would not or could not 
reasonably be expected to have, individually or in the aggregate, a Material    
Adverse Effect on the Company, (i) the Company and each Company Subsidiary has  
timely filed (after giving effect to any extensions of the time to file which   
were obtained) prior to the date of this Agreement, and will file prior to the  
Effective Time, all tax returns required to be filed prior to the date of this  
Agreement and/or required to be filed prior to the Effective Time by any of     
them, and has paid (or the Company has paid on its behalf), or has or will set  
up an adequate reserve for the payment of, all federal, state, local, foreign   
and other taxes, together with interest and penalties thereon ("TAXES"),        
required to be paid prior to the date of the Agreement or the Effective Time, as
the case may be, and the most recent financial statements contained in the      
Company SEC Reports reflect an adequate reserve for all Taxes payable by the    
Company and the Company Subsidiaries accrued through the date of such financial 
statements and (ii) no deficiencies for any Taxes have been proposed, asserted  
or assessed against the Company or any Company Subsidiary other than those which
are being contested in good faith and by proper proceedings by the Company.     

(b)  The federal income tax returns of the Company and each Company     
Subsidiary and any affiliated, consolidated, combined or unitary group that     
includes the Company or any Company Subsidiary have not to date been examined by
the IRS.                                                                        

    (c)  Except as set forth on Section 3.16(c) of the Company Disclosure Letter
or except as has not or could not reasonably be expected to have a Material     
Adverse Effect on the Company, none of the Company, any Company Subsidiary, or  
to the Company's knowledge, any affiliated, consolidated, combined or unitary   
group of which the Company or any Company Subsidiary is now or ever was a       
member, has filed or entered into any election, consent or extension agreement  
that extends any applicable statute of limitations or the time within which a   
tax return must be filed which such statute of limitations has not expired or   
tax return has not been timely filed.                                           

    (d)  Except as set forth on Section 3.16(d) of the Company Disclosure Letter
or except as has not or could not reasonably be expected to have a Material     
Adverse Effect on the Company, (i) none of the Company, any Company Subsidiary  
or, to the Company's knowledge, any group of which the Company or any Company   
Subsidiary is now or ever was a member, is a party to any action or proceeding  
pending or, to the Company's knowledge, threatened by any governmental authority
for assessment or collection of Taxes, (ii) no unresolved claim for assessment  
or collection of Taxes has, to the Company's knowledge, been asserted and (iii) 
no audit or investigation of the Company or any Company Subsidiary by any       
governmental authority is pending or, to the Company's knowledge, threatened.   

 SECTION 3.17  NON-COMPETITION AGREEMENTS.  Except as set forth in Section
3.17 of the Company Disclosure Letter, neither the Company nor any Company      
Subsidiary is a party to any agreement which purports to restrict or prohibit in
any material respect the Company and the Company Subsidiaries collectively from,
directly or indirectly, engaging in any business that, assuming consummation of 
the Merger, could reasonably be expected to have a Material Adverse Effect on   
the Company. None of the                                                        

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Company's officers, directors or key employees is a party to any agreement      
which, by virtue of such person's relationship with the Company, restricts in   
any material respect the Company or any Company Subsidiary or affiliate of      
either of them from, directly or indirectly, engaging in any of the businesses  
described above.                                                                

 SECTION 3.18  CERTAIN AGREEMENTS.  Except as set forth in Section 3.18 of
the Company Disclosure Letter or as contemplated by Section 6.2(c), neither the 
Company nor any of the Company Subsidiaries is a party to any oral or written   
(i) agreement with any executive officer or other key employee of the Company or
Company Subsidiary the benefits of which are contingent, or the terms of which  
are materially altered, upon the occurrence of a transaction involving the      
Company of the nature contemplated by this Agreement or the Option Agreement, or
(ii) plan, including any stock option plan, stock appreciation right plan,      
restricted stock plan or stock purchase plan, any of the benefits of which will 
be increased, or the vesting of the benefits of which will be accelerated, by   
the occurrence of any of the transactions contemplated by this Agreement or the 
value of any of the benefits of which will be calculated on the basis of any of 
the transactions contemplated by this Agreement.                                

SECTION 3.19  REAL PROPERTY.  Except as set forth in Section 3.19 of the
Company Disclosure Letter, neither the Company nor any Company Subsidiary owns  
any fee interest in real estate. Except as described or set forth in any Company
SEC Report filed prior to the date hereof or as set forth in Section 3.19 of the
Company Disclosure Letter, the Company or any Company Subsidiary is not a party 
to any material leases, subleases and other agreement (the "COMPANY REAL        
PROPERTY LEASES") under which the Company or any Company Subsidiary uses or     
occupies or has the right to use or occupy, now or in the future, any real      
property. The Company has heretofore made available to the Parent true, correct 
and complete copies of all Company Real Property Leases (and all modifications, 
amendments and supplements thereto and all side letters to which the Company or 
any Company Subsidiary is a party affecting the obligations of any party        
thereunder). Assuming the due authorization, execution and delivery by the other
parties thereto, each Company Real Property Lease constitutes the valid and     
legally binding obligation of the Company or Company Subsidiary, enforceable in 
accordance with its terms, subject to bankruptcy, insolvency, reorganization,   
moratorium or other laws now or hereafter in effect relating to creditors'      
rights generally or to general principles of equity, and is in full force and   
effect. All material amounts payable by the Company and Company Subsidiary as   
tenants under each Company Real Property Lease are current, no termination event
or condition or uncured default of a material nature on the part of the Company 
or any such Company Subsidiary exists under any Company Real Property Lease.    
Each of the Company and Company Subsidiary has a valid leasehold interest in    
each parcel of real property leased by it free and clear of all Liens, except   
(i) Taxes and general and special assessments not in default and payable without
penalty and interest, (ii) Liens under applicable Law and (iii) other Liens     
which do not materially interfere with the Company's or any Company subsidiary's
use and enjoyment of such real property or materially detract from or diminish  
the value thereof.                                                              

   SECTION 3.20  LABOR MATTERS.  (a) Except as contemplated by Section 6.2(c),
Section 3.20 of the Company Disclosure Letter sets forth a list of all          
employment agreements currently in effect providing for annual base salary in   
excess of $200,000 or which extend for more than one year after the Effective   
Time and any labor or collective bargaining agreements to which the Company or  
any Company Subsidiary is a party. The Company has heretofore made available to 
Parent true and complete copies of the employment agreements listed on Section  
3.20 of the Company Disclosure Letter, together with all amendments,            
modifications, supplements and side letters affecting the duties, rights and    
obligations of any party thereunder.                                            

    (b)  Neither the Company nor any Company Subsidiaries are the subject of any
suit, action or proceeding which is pending or, to the knowledge of the Company,
threatened, asserting that the Company or any Company Subsidiaries have         
committed an unfair labor practice (within the meaning of                       

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the National Labor Relations Act or applicable state statues) or seeking to     
compel the Company or any Company Subsidiaries to bargain with any labor        
organization as to wages and conditions of employment, in any such case, that is
reasonably expected to result in a material liability of the Company and the    
Company Subsidiaries. No strike or other labor dispute involving the Company or 
any Company Subsidiaries is pending or, to the knowledge of the Company,        
threatened, and, to the knowledge of the Company, there is no activity involving
any employees of the Company or any Company Subsidiaries seeking to certify a   
collective bargaining unit or engaging in any other organizational activity,    
except for such dispute or activity which has not had or could not reasonably be
expected to have a Material Adverse Effect on the Company.                      

  SECTION 3.21  INVESTMENT COMPANY ACT.  Each of the Company and the Company
Subsidiaries either (i) is not an "investment company," or a company            
"controlled" by, or an "affiliated company" with respect to, an "investment     
company," within the meaning of the Investment Company Act of 1940, as amended  
(the "INVESTMENT COMPANY ACT") or (ii) satisfies all conditions for an exemption
from the Investment Company Act, and, accordingly, neither the Company nor any  
of the Company is required to be registered under the Investment Company Act.   

 SECTION 3.22  OPINION OF FINANCIAL ADVISOR.  CIBC World Markets Corp. and
Volpe Brown Whelan & Company, LLC (together the "COMPANY FINANCIAL ADVISOR")    
have each delivered to the Board of Directors of the Company its written opinion
to the effect that, as of the date of this Agreement, the Exchange Ratio is fair
to the Company's stockholders from a financial point of view, accompanied by an 
authorization to include a copy of that opinion in the Proxy Materials (as      
defined in Section 5.5(a)). The Company has delivered or will, promptly after   
receipt of such written opinions, deliver a signed copy of that written opinion 
to the Parent.                                                                  

  SECTION 3.23  BROKERS.  Except as set forth in Section 3.23 of the Company
Disclosure Letter, no broker, finder or investment banker other than the Company
Financial Advisor is entitled to any brokerage, finder's or other fee or        
commission in connection with the Merger or the other transactions contemplated 
by this Agreement or the Option Agreement based upon arrangements made by or on 
behalf of the Company. Prior to the date of this Agreement, the Company has made
available to the Parent a complete and correct copy of all agreements between   
the Company and the Company Financial Advisor under which the Company Financial 
Advisor would be entitled to any payment relating to the Merger or any other    
transactions hereunder.                                                         

  SECTION 3.24  CERTAIN STATUTES.  The Board of Directors of the Company has
taken or will take all appropriate and necessary actions to ensure that the     
restrictions on business combinations in Section 203 of the GCL will not have   
any effect on the Merger or the other transactions contemplated by this         
Agreement, the Voting Agreement or the Option Agreement. No "fair price,"       
"moratorium," "control share acquisition" or other similar state or federal     
anti-takeover statute or regulation (each a "TAKEOVER STATUTE") is, as of the   
date of this Agreement, applicable to the Merger or any other transactions      
contemplated by this Agreement.                                                 

 SECTION 3.25  INFORMATION.  None of the information to be supplied by the
Company for inclusion or incorporation by reference in the Proxy Statement (as  
defined in Section 5.5(a)) or the Registration Statement (as defined in Section 
5.5(a)) (except to the extent revised or superseded by amendment or supplement) 
will, in the case of the Registration Statement, at the time it becomes         
effective and at the Effective Time, contain any untrue statement of a material 
fact or omit to state any material fact required to be stated in the            
Registration Statement or necessary to make the statements in that Registration 
Statement not misleading, or, in the case of the Proxy Statement or any         
amendments or supplements of the Proxy Statement, at the time of the mailing of 
the Proxy Statement and any amendments or supplements of the Proxy Statement and
at the time of the Company Stockholders Meeting, contain any untrue statement of
a material fact or omit to state any material fact required to be stated in that
Proxy Statement or necessary in order to make the statements in that Proxy      

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Statement, in light of the circumstances under which they are made, not         
misleading. The Proxy Statement (except for those portions of the Proxy         
Statement that relate to Parent or subsidiaries or affiliates of the Parent)    
will comply as to form in all material respects with the provisions of the      
Exchange Act. Notwithstanding anything else herein to the contrary, no          
representation or warranty is made hereunder by the Company with respect to     
statements made or incorporated by reference in the Proxy Statement or          
Registration Statement based on information supplied by the Parent for inclusion
or incorporation by reference therein.                                          

    SECTION 3.26  VOTE REQUIRED.  The Requisite Company Vote is the only vote of
the holders of any class or series of the Company's capital stock necessary     
(under the Company Charter Documents, the GCL, other applicable Law or          
otherwise) to approve this Agreement, the Option Agreement, the Merger or the   
other transactions contemplated by this Agreement or the Option Agreement.      

ARTICLE 4 
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB

Each of the Parent and Merger Sub represents and warrants to the Company
that, except for inaccuracies in the representations and warranties resulting   
from compliance with the provisions of this Agreement and performance of the    
transactions contemplated hereby or inaccuracies resulting from actions or      
omissions permitted by Section 5.2:                                             

SECTION 4.1  ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.              

    (a)  Each of the Parent, Merger Sub, and each other subsidiary of the Parent
(collectively, the "PARENT SUBSIDIARIES") has been duly organized and is validly
existing and in good standing under the laws of its jurisdiction of its         
incorporation or organization, as the case may be, and has the requisite power  
and authority to own, lease and operate its properties and to carry on its      
business as it is now being conducted. Each of the Parent, Merger Sub and each  
other Parent Subsidiary is duly qualified or licensed to do business, and is in 
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification 
or licensing necessary, except for such failures to be so qualified or licensed 
and in good standing that, individually or in the aggregate, have not resulted  
and could not reasonably be expected to result in a Material Adverse Effect on  
the Parent. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT ON THE     
PARENT" means any change in or effect on the business, assets, properties,      
results of operations or condition (financial or otherwise) of the Parent or any
Parent Subsidiaries that is or could reasonably be expected to be materially    
adverse to the Parent and the Parent Subsidiaries, taken as a whole, or that    
could reasonably be expected to materially impair the ability of the Parent or  
Merger Sub to perform its obligations under this Agreement or the Option        
Agreement or to consummate transactions contemplated hereby or thereby, except  
for any change or effect (i) relating to the economy in general or (ii) relating
to the industries in which the Parent and the Parent Subsidiaries operate.      

    (b)  Section 4.1(b) of the Disclosure Letter delivered to the Company by the
Parent and Merger Sub at or prior to the execution of this agreement (the       
"PARENT DISCLOSURE LETTER") sets forth a complete and correct list of all of the
Parent Subsidiaries, including the jurisdiction of incorporation and the        
ownership or other interest therein of the Parent or any Parent Subsidiary.     
Except as set forth in Section 4.1(b) of the Parent Disclosure Letter, neither  
the Parent nor any Parent Subsidiary holds any material interest in any other   
person other than the Parent Subsidiaries so listed.                            

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 SECTION 4.2  CERTIFICATE OF INCORPORATION AND BY-LAWS.  The copies of the
Parent's certificate of incorporation and by-laws, each as amended through the  
date of this Agreement (collectively, the "PARENT CHARTER DOCUMENTS") that are  
incorporated by reference in, as exhibits to, the Parent's annual report on Form
10-K for the year ended December 31, 1998 are complete and correct copies of    
those documents. The Parent has made available to the Company complete and      
correct copies of all organizational documents of each Parent Subsidiary. The   
Parent Charter Documents and all comparable organizational documents of the     
Parent Subsidiaries are in full force and effect. Neither the Parent nor any    
Parent Subsidiary is in violation of any of the provisions of its organizational
documents.                                                                      

SECTION 4.3  CAPITALIZATION.                                            

(a)  The authorized capital stock of the Parent consists of (i)         
2,404,031,240 shares of Parent Common Stock, (ii) 522,254,782 shares of Class B 
Common Stock, par value $.01 per share (the "PARENT CLASS B COMMON STOCK"), and 
(iii) 20,000,000 shares of Preferred Stock, par value $.01 per share ("PARENT   
PREFERRED STOCK"). As of May 31, 1999, (A) 155,652,276 shares of Parent Common  
Stock were issued and outstanding, all of which were validly issued and are     
fully paid, nonassessable and not subject to preemptive rights, (B) 33,769,272  
shares of Parent Class B Common Stock were issued and outstanding, all of which 
were validly issued and are fully paid, nonassessable and not subject to        
preemptive rights, (C) no shares of Parent Preferred Stock were outstanding, (D)
43,176,158 shares of Parent Common Stock were reserved for issuance upon        
exercise of outstanding stock options and warrants to acquire shares of Parent  
Common Stock ("PARENT STOCK OPTIONS AND WARRANTS") and (E) 33,769,272 shares of 
Parent Common Stock were reserved for issuance upon conversion of outstanding   
shares of Parent Class B Common Stock. Except as set forth above, as of May 31, 
1999, no shares of capital stock or other voting securities of the parent were  
issued, reserved for issuance or outstanding and since such date, no shares of  
capital stock or other voting securities or options in respect thereof have been
issued except upon the exercise of the Parent Stock Options and Warrants        
outstanding on May 31, 1999 or in the ordinary course of business.              

   (b)  Except for (i) outstanding Parent Stock Options and Warrants, and (ii)
outstanding shares of Parent Class B Common Stock, there are no options,        
warrants, conversion rights, stock appreciation rights, redemption rights,      
repurchase rights or other rights, agreements, arrangements or commitments of   
any character to which the Parent is a party or by which the Parent is bound    
relating to the issued or unissued capital stock of the Parent or any Parent    
Subsidiary or obligating the Parent or any Parent Subsidiary to issue or sell   
any shares of capital stock of, or other equity interests in, the Parent or any 
Parent Subsidiary.                                                              

  (c)  There are no outstanding contractual obligations of the Parent or any
Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of      
Parent Common Stock or any capital stock of any Parent Subsidiary. Each         
outstanding share of capital stock of each Parent Subsidiary is duly authorized,
validly issued, fully paid, nonassessable and not subject to preemptive rights  
and each such share owned by the Parent or a Parent Subsidiary is free and clear
of all Liens except for Liens under applicable Law. Except as set forth in      
Section 4.3(c) of the Parent Disclosure Letter, there are no material           
outstanding contractual obligations of the Parent or any Parent Subsidiary to   
provide funds to, or make any investment (in the form of a loan, capital        
contribution or otherwise) in, any Parent Subsidiary that is not wholly owned by
the Parent or in any other person.                                              

   (d)  The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $.01 per share ("SUB COMMON STOCK"). All of the issued  
and outstanding shares of Sub Common Stock are (A) owned by the Parent or       
another Parent Subsidiary wholly owned by the Parent and (B) duly authorized,   
validly issued, fully paid and nonassessable.                                   

SECTION 4.4  AUTHORITY.  (a)  Each of the Parent and Merger Sub has all 
necessary corporate power and authority to execute and deliver this Agreement   
and the Option Agreement, to perform its                                        

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obligations hereunder and thereunder and to consummate the transactions         
contemplated hereby or thereby to be consummated by it. The execution and       
delivery of this Agreement and the Option Agreement by each of the Parent and   
Merger Sub and the consummation by each of the Parent and Merger Sub of such    
transactions have been duly and validly authorized by all necessary corporate   
action and no other corporate proceedings on the part of the Parent or Merger   
Sub are necessary to authorize this Agreement or to consummate such             
transactions, other than with respect to the Merger, the approval of the        
issuance of the shares of Parent Common Stock in the Merger by a majority of    
holders of Parent Common Stock and Parent Class B Common Stock, voting as a     
single class, that are present in person or by proxy at a duly called meeting of
Parent stockholders (the "REQUISITE PARENT VOTE"). This Agreement and the Option
Agreement have been duly authorized and validly executed and delivered by each  
of the Parent and Merger Sub and, assuming the due authorization, execution and 
delivery by the other parties hereto, constitute the legal, valid and binding   
obligation of each of the Parent and Merger Sub, enforceable against each of the
Parent and Merger Sub in accordance with their respective terms, subject to     
bankruptcy, insolvency, reorganization, moratorium or other laws now or         
hereafter in effect relating to creditors' rights generally or to general       
principles of equity.                                                           

(b)  Each of the Board of Directors of the Parent and Merger Sub (i) has
unanimously adopted the plan of merger set forth in this Agreement and approved 
this Agreement and the other transactions contemplated by this Agreement        
(including the issuance of the shares of Parent Common Stock in connection with 
the Merger) and (ii) has declared that the Merger and this Agreement and the    
other transactions contemplated by this Agreement are advisable and recommended 
that the stockholders of the Parent approve the issuance of the shares of Parent
Common Stock in the Merger.                                                     

    SECTION 4.5  NO CONFLICT.  (a)  The execution and delivery of this Agreement
and the Option Agreement by the Parent and Merger Sub do not, and the           
performance of this Agreement and the Option Agreement by each of the Parent and
Merger Sub will not:                                                            

 (i)  conflict with or violate any provision of any Parent Charter
Document or any equivalent organizational documents of any Parent       
Subsidiary;                                                             

 (ii)  assuming effectuation of all filings and registrations with
   termination or expiration of all applicable waiting periods imposed by, and
receipt of all consents, approvals, authorizations and permits of all   
    Governmental Entities indicated as required in Section 4.6 below, receipt of
 all consents required under any Contracts, and receipt of the approval of
the issuance of the shares of Parent Common Stock in the Merger by the  
stockholders of the Parent as required by NASDAQ/ NMS, conflict with or 
violate any material foreign or domestic Law applicable to the Parent,  
   Merger Sub or any other Parent Subsidiary or by which any property or asset
of the Parent or any Parent Subsidiary is or may be bound or affected,  
except for such conflicts or violations which, individually or in the   
   aggregate, have not resulted and could not reasonably be expected to result
in a Material Adverse Effect on the Parent; or                          

     (iii)  except as set forth in Section 4.5(b) of the Parent Disclosure
  Letter, result in any breach of or constitute a default (or an event which
with or without notice or lapse of time or both would become a default) 
   under, or modification in a manner materially adverse to the Parent and the
    Parent Subsidiaries of any material right or benefit under or give to others
   any right of termination, amendment, acceleration, repayment or repurchase,
  increased payments or cancellation of, or result in the creation of a lien
   or other encumbrance on any property or asset of the Parent, Merger Sub, or
   any other Parent Subsidiary under, any Contract to which the Parent, Merger
Sub or any other Parent Subsidiary is a party or by which any of them or
 their assets or Properties is or may be bound or affected, except for any
  such breaches, defaults or other occurrences which, individually or in the
   aggregate, have not resulted and could not reasonably be expected to result
in a Material Adverse Effect on the Parent;                             

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    (b)  Section 4.5(b) of the Parent Disclosure Letter sets forth a correct and
complete list of all material Contracts to which Parent or any Parent           
Subsidiaries are a party or by which they or their assets or properties is or   
may be bound or affected under which consents or waivers are required prior to  
consummation of the transactions contemplated by this Agreement and the Option  
Agreement.                                                                      

   SECTION 4.6  GOVERNMENTAL REQUIRED FILINGS AND CONSENTS.  The execution and
delivery of this Agreement and the Option Agreement by the Parent and Merger Sub
do not, and the performance of this Agreement and the Option Agreement by the   
Parent and Merger Sub will not, require any material consent, approval,         
authorization or permit of, or filing with or notification to, any Government   
Entity except for (i) those consents or approvals set forth in Section 4.6 of   
the Parent Disclosure Letter (the "PARENT GOVERNMENTAL CONSENTS"), (ii)         
applicable requirements of the Exchange Act and the Securities Act, (iii)       
applicable requirements of Blue Sky Laws, (iv) the rules and regulations of the 
NASDAQ/NMS, (v) the pre-merger notification requirements of the HSR Act, and    
(vi) the filing of the Certificate of Merger as required by the GCL.            

SECTION 4.7  PERMITS; COMPLIANCE WITH LAW.  Each of the Parent and the  
Parent Subsidiaries is in possession of all franchises, grants, authorizations, 
licenses, permits, easements, variances, exceptions, consents, certificates,    
approvals and orders of any Governmental Entity necessary for the Parent or any 
Parent Subsidiary to own, lease and operate its properties or to carry on its   
business as it is now being conducted (collectively, the "PARENT PERMITS"),     
except where the failure to have, or the suspension or cancellation of, any of  
the Parent Permits, individually or in the aggregate, has not resulted and could
not reasonably be expected to result in a Material Adverse Effect on the Parent,
and, as of the date of this Agreement, no suspension or cancellation of any of  
the Parent Permits is pending or, to the knowledge of the Parent, threatened,   
except where the failure to have, or the suspension or cancellation of, any of  
the Parent Permits, individually or in the aggregate, has not resulted and could
not reasonably be expected to result in a Material Adverse Effect on the Parent.
Neither the Parent nor any Parent Subsidiary is in conflict with or in default  
or violation of (i) any Law applicable to the Parent or any Parent Subsidiary or
by which any property or asset of the Parent or any Parent Subsidiary is or may 
be bound or affected or (ii) any Parent Permits, except in the case of clauses  
(i) and (ii) any such conflicts, defaults or violations which, individually or  
in the aggregate, have not resulted and could not reasonably be expected to     
result in a Material Adverse Effect on the Parent.                              

SECTION 4.8  SEC FILINGS; FINANCIAL STATEMENTS.                         

 (a)  The Parent has filed all forms, reports, registration statements and
other documents (including all exhibits, annexes, supplements and amendments to 
such documents) required to be filed by it under the Exchange Act and the       
Securities Act since September 1, 1997 through the date of this Agreement       
(collectively, including any such documents filed subsequent to the date of this
Agreement, the "PARENT SEC REPORTS") and the Parent has made available to the   
Company each Parent SEC Report. The Parent SEC Reports, including any financial 
statements or schedules included or incorporated by reference, (i) comply in all
material respects with the requirements of the Exchange Act or the Securities   
Act or both, as the case may be, applicable to those Parent SEC Reports and (ii)
did not at the time they were filed contain any untrue statement of a material  
fact or omit to state a material fact required to be stated or necessary in     
order to make the statements made in those Parent SEC reports, in the light of  
the circumstances under which they were made, not misleading. No Parent         
Subsidiary is subject to the periodic reporting requirements of the Exchange Act
or is otherwise required to file any documents with the SEC or any national     
securities exchange or quotation service or comparable Governmental Entity.     

(b)  Each of the consolidated financial statements included in or       
incorporated by reference into the Parent SEC Reports (including the related    
notes and schedules) comply as to form in all material respects with the        
published rules and regulations of the SEC with respect thereto, have been      
prepared in accordance with GAAP applied on a consistent basis throughout the   
periods involved (except as may                                                 

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be indicated in the notes thereto or, in the case of the unaudited interim      
financial statements, as permitted by Form 10-Q of the SEC) and fairly present  
in all material respects (subject, in the case of the unaudited interim         
financial statements, to normal, year-end audit adjustments) the consolidated   
financial position of the Company and its Subsidiaries as at the dates thereof  
and the consolidated results of their operations and cash flows for the periods 
then ended.                                                                     

    (c)  Except as and to the extent set forth on the consolidated balance sheet
of the Parent and the consolidated Parent Subsidiaries as of March 31, 1999,    
including the related notes and except as set forth in the Parent SEC Reports   
filed prior to the date hereof, neither the Parent nor any Parent Subsidiary has
any liabilities or obligations of any nature (whether accrued, absolute,        
contingent or otherwise) that would be required to be reflected on a balance    
sheet or in the related notes prepared in accordance with GAAP, except for      
liabilities or obligations incurred since March 31, 1999 that, individually or  
in the aggregate, have not resulted and could not reasonably be expected to     
result in a Material Adverse Effect on the Parent and except for liabilities or 
obligations under this Agreement and the transactions contemplated hereby.      

  SECTION 4.9  ABSENCE OF CERTAIN CHANGES OR EVENTS.  Except as set forth in
any Parent SEC Report filed prior to the date hereof, since March 31, 1999 and, 
in the case of clauses (c)-(i) only through and including the date hereof, the  
Parent and the Parent Subsidiaries have conducted their businesses in the       
ordinary course and in a manner consistent with past practice and, since such   
date, there has not been:                                                       

(a)  any Material Adverse Effect on the Parent;                         

(b)  any damage, destruction or other casualty loss with respect to any 
asset or property owned, leased or otherwise used by the Parent or any Parent   
Subsidiaries, whether or not covered by insurance, which damage, destruction or 
loss, individually or in the aggregate, has resulted or could reasonably be     
expected to result in a Material Adverse Effect on the Parent;                  

(c)  any material change by the Parent in its or any Parent Subsidiary's
accounting methods, principles or practices except as required by GAAP or by    
applicable Law;                                                                 

(d)  any declaration, setting aside or payment of any dividend or       
distribution in respect of Parent Common Stock or any redemption, purchase or   
other acquisition of any of the Parent's securities; or                         

 (e)  any increase in the compensation or benefits or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit 
sharing, stock option (including, the granting of stock options, stock          
appreciation rights, performance awards or restricted stock awards), stock      
purchase or other employee benefit plan, or any other increase in the           
compensation payable or to become payable to any executive officers of the      
Parent or any Parent Subsidiary, in each case, except in the ordinary course of 
business consistent with past practice or except as required by applicable Law; 

    (f)  (i) any incurrence or assumption by the Parent or any Parent Subsidiary
of any indebtedness for borrowed money or (ii) any guarantee, endorsement or    
other incurrence or assumption material liability(whether directly, contingently
or otherwise) by the Parent or any Parent Subsidiary for the obligations of any 
other person (other than any wholly owned Parent Subsidiary) in each case, other
than in the ordinary course of business consistent with past practice;          

 (g)  any creation or assumption by the Parent or any Parent Subsidiary of
any Lien on any material asset of the Parent or any Parent Subsidiary, other    
than in the ordinary course of business, consistent with past practice;         

(h)  any making of any loan, advance or capital contribution to or      
investment in any person by the Parent or any Parent Subsidiary, other than in  
the ordinary course of business, consistent with past practice; or              

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 (i)  (i) any Contract entered into by the Parent or any Parent Subsidiary
relating to any material acquisition or disposition of any assets or business,  
or (ii) any modification, amendment, assignment or termination of or            
relinquishment by the Parent or any Parent Subsidiary of any rights under any   
other Contract (including any insurance policy naming it as a beneficiary or a  
loss payable payee) that does or could reasonably be expected to have,          
individually or in the aggregate, a Parent Material Adverse Effect on the       
Parent, other than transactions, commitments, contracts or agreements in the    
ordinary course of business consistent with past practice or those contemplated 
by this Agreement.                                                              

SECTION 4.10  EMPLOYEE BENEFIT PLANS.                                   

   (a)  Except as set forth in Section 4.10(a) of the Parent Disclosure Letter
and except as, individually or in the aggregate, has not and could not          
reasonably be expected to have a Material Adverse Effect on the Parent: (A) each
Benefit Plan of the Parent or any Parent Subsidiary has been administered and is
in compliance with the terms of such plan and all applicable laws, rules and    
regulations, (B) no "reportable event" (as such term is used in section 4043 of 
ERISA) (other than those events for which the 30 day notice has been waived     
pursuant to the regulations), "prohibited transaction" (as such term is used in 
section 406 of ERISA or section 4975 of the Code) or "accumulated funding       
deficiency" (as such term is used in section 412 or 4971 of the Code) has       
heretofore occurred with respect to any Parent Benefit Plan or any Benefit Plan 
of any of its ERISA Affiliates and (C) the Parent Benefit Plans intended to     
qualify under section 401 of the Code are so qualified and the trusts maintained
pursuant thereto are exempt from federal income taxation under section 501 of   
the Code, and nothing has occurred with respect to the operation of the Parent  
Benefit Plans which could cause the loss of such qualification or exemption or  
the imposition of any liability, penalty or tax under ERISA or the Code and each
Parent Benefit Plan intended to qualify under Section 401(a) of the Code has    
received a favorable determination from the IRS regarding its qualified status  
and no notice has been received from the IRS with respect to the revocation of  
such qualification.                                                             

   (b)  There is no litigation or administrative or other proceeding involving
any Parent Benefit Plan nor has the Parent or any Parent Subsidiary received    
notice that any such proceeding is threatened, in each case where an adverse    
determination, individually or in the aggregate, has had or could reasonably be 
expected to have a Material Adverse Effect on the Parent. Neither the Parent nor
any Parent Subsidiary has incurred, nor, to the Parent's knowledge, is          
reasonably likely to incur any withdrawal liability with respect to any         
"multiemployer plan" (within the meaning of section 3(37) of ERISA) that,       
individually or in the aggregate, has had or could reasonably be expected to    
have a Material Adverse Effect on the Parent. The termination of, or withdrawal 
from, any Parent Benefit Plan or multiemployer plan to which the Parent or any  
Parent Subsidiaries contributes, on or prior to the Closing Date, will not      
subject the Parent or any Parent Subsidiary to any liability under Title IV of  
ERISA that, individually or in the aggregate, has had or could reasonably be    
expected to have a Material Adverse Effect on the Parent.                       

(c)  True, correct and complete copies of the following documents, with 
respect to each of the Parent Benefit Plans (other than a multiemployer plan),  
have been made available or delivered to the Company by Parent, to the extent   
applicable: (i) any plans, all amendments thereto and related trust documents,  
and amendments thereto; (ii) the most recent Forms 5500 and all schedules       
thereto and the most recent actuarial report, if any; (iii) the most recent IRS 
determination letter; (iv) summary plans descriptions; (v) written              
communications to employees relating to the Parent Benefit Plans; and (vi)      
written descriptions of all non-written agreements relating to the Parent       
Benefit Plans.                                                                  

 (d)  None of the Parent Benefit Plans provide for post-employment life or
health insurance, benefits or coverage for any participant or any beneficiary of
a participant, except as may be required under COBRA and at the expense of the  
participant or the participant's beneficiary. Except as individually or in the  
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Adverse Affect on the Parent, each of the Parent and any ERISA Affiliate which  
maintains a "group health plan" within the meaning section 5000(b)(1) of the    
Code has complied with the notice and continuation requirements of section 4980B
of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder.                                                                     

(e)  Except as disclosed in Parent SEC Reports filed prior to the date  
hereof, there is no contract, plan or arrangement (written or otherwise)        
covering any employee or former employee of the Parent or any Parent Subsidiary 
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to the terms of section 280G of the Code  
and neither the Parent nor any Parent Subsidiary has made any payment that would
not be deductible pursuant to the terms of section 162(m) of the Code.          

 SECTION 4.11  TAX MATTERS.  Neither the Parent nor Merger Sub, nor to the
knowledge of the Parent, any of Parent's affiliates has taken or agreed to take 
any action, nor is the Parent aware of any agreement, plan or other             
circumstance, that would prevent the Merger from constituting a transaction     
qualifying as a reorganization under section 368(a) of the Code.                

   SECTION 4.12  NO DEFAULTS.  Neither the Parent nor any Parent Subsidiary is
in violation of or in default under (nor does there exist any condition which   
with the passage of time or the giving of notice would cause such a violation of
or default under) any Contract to which it is a party or by which it or any of  
its properties or assets is or may be bound or affected, except for violations  
or defaults that, individually or in the aggregate, have not resulted and could 
not reasonably be expected to result in a Material Adverse Effect on the Parent.

SECTION 4.13  LITIGATION.  Except as described in any Parent SEC Report 
filed prior to the date hereof, there is no Claim pending or, to the knowledge  
of the Parent, threatened against the Parent or any Parent Subsidiary before any
Governmental Entity nor to the Parent's knowledge are there any investigations  
or reviews by any Governmental Entity pending or, threatened against, relating  
to or affecting the Parent or any of the Parent Subsidiaries, that, individually
or in the aggregate, has resulted or could reasonably be expected to result in a
Material Adverse Effect on the Parent. Neither the Parent nor any Parent        
Subsidiary is subject to any outstanding order, writ, injunction or decree of   
any court of Governmental Entity which, individually or in the aggregate, has   
resulted or could reasonably be expected to result in a Material Adverse Effect 
on the Parent.                                                                  

SECTION 4.14  ENVIRONMENTAL MATTERS.  Except as could not reasonably be 
expected to have a Material Adverse Effect on the Parent:                       

(a)  Neither the Parent nor any Parent Subsidiary is or has been in     
violation of any applicable Safety and Environmental Law;                       

  (b)  To the Parent's knowledge, the Parent and each Parent Subsidiary have
all Permits required pursuant to Safety and Environmental Laws that are material
to the conduct of the business of the Parent or any Parent Subsidiary, all such 
Permits are in full force and effect, no action or proceeding to revoke, limit  
or modify any of such Permits is pending, and the Parent and each Parent        
Subsidiary is in compliance in all material respects with all terms and         
conditions thereof;                                                             

(c)  Neither the Parent nor any Parent Subsidiary has received, any     
Environmental Claim;                                                            

(d)  To the Parent's knowledge, there is not now and has not been at any
time in the past a Release or threatened Release of Hazardous Substances into   
the Environment for which the Parent or any Parent Subsidiary is directly or    
indirectly responsible; and                                                     

(e)  To the Parent's knowledge, there is not now and has not been at any
time in the past at, on or in any of the real properties owned, leased or       
operated by the Parent or any Parent Subsidiary, and, to the Parent's knowledge,
was not at, on or in any real property previously owned, leased or operated     

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by the Parent or any Parent Subsidiary or any predecessor: (i) any generation,  
use, handling, Release, treatment, recycling, storage or disposal of any        
Hazardous Substances, (ii) any underground storage tank, surface impoundment,   
lagoon or other containment facility (past or present) for the temporary or     
permanent storage, treatment or disposal of Hazardous Substances, (iii) any     
asbestos-containing material in a condition requiring abatement, (iv) any       
Release or threatened Release, or any visible signs of Releases or threatened   
Releases, of a Hazardous Substance to the Environment in form or quantity       
requiring remedial action under Safety and Environmental Laws, or (v) any       
Hazardous Substances present at such property, excepting such quantities as are 
handled in all material respects in accordance with all applicable              
manufacturer's instructions and Safety and Environmental Laws and in proper     
storage containers, and as are necessary for the operations of the Parent and   
the Parent Subsidiaries.                                                        

SECTION 4.15  INTELLECTUAL PROPERTY.                                    

(a)  The Parent owns, free and clear of all material Liens, or has valid
rights to use all Intellectual Property material to its or any Parent           
Subsidiary's business and operations. To the knowledge of the Parent, all       
material licenses, sublicenses and other agreements or permissions pursuant to  
which the Parent is a licensor or licensee of or otherwise is authorized to use 
or practice under any third party's rights in any Intellectual Property on an   
exclusive basis and any such non-exclusive license, sublicense, agreement or    
permission that is not available to parties other than the Parent or any Parent 
Subsidiary on comparable commercial terms to which it is licensed to the Parent,
are valid, enforceable and in full force and effect in accordance with their    
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium 
or other laws now or hereafter in effect relating to creditors' rights generally
or to general principles of equity.                                             

  (b)  The Parent has not been, during the three years preceding the date of
this Agreement, a party to any Claim, nor, to the knowledge of the Company, is  
any Claim threatened, that challenges the validity, enforceability, ownership,  
or right to use, sell, or license any Intellectual Property material to its or  
any Parent Subsidiary's business and operations. To the knowledge of the Parent,
no third party is infringing in any material respect upon any Intellectual      
Property material to its or any Parent Subsidiary's business and operations.    

 (c)  The Parent has taken all commercially reasonable actions to maintain
and protect each item of Intellectual Property that is owned or exclusively     
licensed by the Parent and is material to its or any Parent Subsidiary's        
business and operations.                                                        

    (d)  The Parent has taken commercially reasonable precautions to protect the
secrecy, confidentiality, and value of its trade secrets and the proprietary    
nature and value of the Technology material to its and any Parent Subsidiary's  
business and operations.                                                        

   (e)  All Software that is material to the Parent or any Parent Subsidiary's
business and operations, performs in all material respects the functions for    
which such Software is used by the Parent or such Parent Subsidiary.            

(f)  All Systems used by the Parent are Year 2000 Compliant and to the  
Parent's knowledge the systems used by the Parent's material suppliers and      
facilities providers are Year 2000 Compliant, except in each case for failures  
to be Year 2000 Compliant that, individually or in the aggregate, have not      
resulted and could not reasonably be expected to result in a Material Adverse   
Effect on the Parent.                                                           

(g)  The Parent is not in violation of any agreement relating to any    
Intellectual Property, except for violations that, individually or in the       
aggregate, have not resulted and could not reasonably be expected to result in a
Material Adverse Effect on the Parent.                                          

 SECTION 4.16  TAXES.  (a)  Except as to any items that would not or could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Parent, (i) the Parent and each Parent Subsidiary has     
timely filed (after giving effect to any extensions of the time to              

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file which were obtained) prior to the date of this Agreement, and will file    
prior to the Effective Time, all tax returns required to be filed prior to the  
date of this Agreement and/or required to be filed prior to the Effective Time  
by any of them, and has paid (or the Parent has paid on its behalf), or has or  
will set up an adequate reserve for the payment of, all Taxes required to be    
paid prior to the date of the Agreement or the Effective Time, as the case may  
be, and the most recent financial statements contained in the Parent SEC Reports
reflect an adequate reserve for all Taxes payable by the Parent and the Parent  
Subsidiaries accrued through the date of such financial statements and (ii) no  
deficiencies for any Taxes have been proposed, asserted or assessed against the 
Parent or any Parent Subsidiary other than those which are being contested in   
good faith and by proper proceedings by the Parent.                             

    (b)  The federal income tax returns of the Parent and each Parent Subsidiary
and any affiliated, consolidated, combined or unitary group that includes the   
Parent or any Parent Subsidiary have either been examined by and settled with   
the IRS, or the statute of limitations with respect to such years has expired,  
for all taxable years through 1994.                                             

(c)  Except as has not or could not reasonably be expected to have a    
Material Adverse Effect on the Parent, none of the Parent, any Parent           
Subsidiary, or to the Parent's knowledge, any affiliated, consolidated, combined
or unitary group of which the Parent or any Parent Subsidiary is now or ever was
a member, has filed or entered into any election, consent or extension agreement
that extends any applicable statute of limitations or the time within which a   
tax return must be filed which such statute of limitations has not expired or   
tax return has not been timely filed.                                           

(d)  Except as has not or could not reasonably be expected to have a    
Material Adverse Effect on the Parent, (i) none of the Parent, any Parent       
Subsidiary or, to the Parent's knowledge, any group of which the Parent or any  
Parent Subsidiary is now or ever was a member, is a party to any action or      
proceeding pending or, to the Parent's knowledge, threatened by any governmental
authority for assessment or collection of Taxes, (ii) no unresolved claim for   
assessment or collection of Taxes has, to the Parent's knowledge, been asserted,
and (iii) no audit or investigation of the Parent or any Parent Subsidiary by   
any governmental authority is pending or, to the Parent's knowledge, threatened.

  SECTION 4.17  REAL PROPERTY.  Neither the Parent nor any Parent Subsidiary
owns any fee interest in real estate. Assuming the due authorization, execution 
and delivery by the other parties thereto, each material lease, sublease or     
other agreement (the "PARENT REAL PROPERTY LEASES") under which the Parent or   
any Parent Subsidiary occupies or has the right to use or occupy now or in the  
future any real property constitutes the valid and legally binding obligation of
the Parent or Parent Subsidiary, enforceable in accordance with its terms,      
subject to bankruptcy, insolvency, reorganization, moratorium or other laws now 
or hereafter in effect relating to creditors' rights generally or to general    
principles of equity, and is in full force and effect. All material amounts     
payable by the Parent and Parent Subsidiary as tenants under each Parent Real   
Property Lease are current, no termination event or condition or uncured default
of a material nature on the part of the Parent or any such Parent Subsidiary    
exists under any Parent Real Property Lease. Each of the Parent and Parent      
Subsidiary has a valid leasehold interest in each parcel of real property leased
by it free and clear of all Liens, except (i) Taxes and general and special     
assessments not in default and payable without penalty and interest, and (ii)   
Liens under applicable Law, and (iii) other Liens which do not materially       
interfere with the Parent's or any Parent subsidiary's use and enjoyment of such
real property or materially detract from or diminish the value thereof.         

    SECTION 4.18  LABOR MATTERS.  Neither the Parent nor any Parent Subsidiaries
are the subject of any suit, action or proceeding which is pending or, to the   
knowledge of the Parent, threatened, asserting that the Parent or any Parent    
Subsidiaries have committed an unfair labor practice (within the meaning of the 
National Labor Relations Act or applicable state statues) or seeking to compel  
the Parent or any Parent Subsidiaries to bargain with any labor organization as 
to wages and conditions of                                                      

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employment, in any such case, that is reasonably expected to result in a        
material liability of the Parent and the Parent Subsidiaries. No strike or other
labor dispute involving the Parent or any Parent Subsidiaries is pending or, to 
the knowledge of the Parent, threatened, and, to the knowledge of the Parent,   
there is no activity involving any employees of the Parent or any Parent        
Subsidiaries seeking to certify a collective bargaining unit or engaging in any 
other organizational activity, except for such dispute or activity which has not
had or could not reasonably be expected to have a Material Adverse Effect on the
Parent.                                                                         

SECTION 4.19  INVESTMENT COMPANY ACT.  Each of Parent and each Parent   
Subsidiary either (i) is not an "investment company," or a company "controlled" 
by, or an "affiliated company" with respect to, an "investment company," within 
the meaning of the Investment Company Act or (ii) satisfies all conditions for  
an exemption from the Investment Company Act, and, accordingly, neither the     
Parent nor any Parent Subsidiary is required to be registered under the         
Investment Company Act.                                                         

   SECTION 4.20  OPINION OF FINANCIAL ADVISOR.  Salomon Smith Barney Inc. (the
"PARENT FINANCIAL ADVISOR") has delivered to the Board of Directors of the      
Parent its oral opinion to the effect that, as of the date of this Agreement,   
the Exchange Ratio is fair to the Parent from a financial point of view, which  
opinion was or will promptly after the date of this Agreement be confirmed in   
writing and accompanied by an authorization to include a copy of such opinion in
the Proxy Materials. The Parent has delivered or will, promptly after receipt of
that written opinion, deliver a signed copy of that written opinion to the      
Company.                                                                        

 SECTION 4.21  BROKERS.  No broker, finder or investment banker other than
the Parent Financial Advisor is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the other transactions           
contemplated hereby based upon arrangements made by or on behalf of the Parent  
or Merger Sub. The Parent has heretofore made available to the Company a        
complete and correct copy of all agreements between the Parent and the Parent   
Financial Advisor pursuant to which the Parent Financial Advisor would be       
entitled to any payment relating to the Merger or such other transactions       
hereunder.                                                                      

SECTION 4.22  INFORMATION  None of the information to be supplied by the
Parent or Merger Sub for inclusion or incorporation by reference in the         
Registration Statement or the Proxy Statement will, in the case of the          
Registration Statement (except to the extent revised or superseded by amendment 
or supplement), at the time it becomes effective and at the Effective Time,     
contain any untrue statement of a material fact or omit to state any material   
fact required to be stated in that Registration Statement, or necessary to make 
the statements in the Registration Statement not misleading, or, in the case of 
the Proxy Statement or any amendments thereof or supplements thereto, at the    
time of the mailing of the Proxy Statement and any amendments or supplements    
thereto and at the time of the Parent Stockholders Meeting, contain any untrue  
statement of a material fact or omit to state any material fact required to be  
stated in that Proxy Statement or necessary in order to make the statements in  
that Proxy Statement, in light of the circumstances under which they are made,  
not misleading. The Proxy Statement (except for such portions thereof that      
relate to the Company or the Company Subsidiaries or affiliates of the Company) 
and the Registration Statement will comply as to form in all material respects  
with the provisions of the Exchange Act and the Securities Act, respectively.   
Notwithstanding anything else herein to the contrary, no representation or      
warranty is made hereunder by the Parent with respect to statements made or     
incorporated by reference in the Proxy Statement or the Registration Statement  
based on information supplied by the Company for inclusion or incorporation by  
reference therein.                                                              

  SECTION 4.23  VOTE REQUIRED  The Requisite Parent Vote is the only vote of
the holders of any class or series of the Parent's capital stock necessary      
(under the Parent Charter Documents, the GCL, other applicable Law or otherwise)
to approve this Agreement, the Option Agreement, the Merger or the other        
transactions contemplated by this Agreement or the Option Agreement.            

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    SECTION 4.24  INTERIM OPERATIONS OF MERGER SUB  Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement  
and has not engaged in and will not engage in any business activities or        
conducted any operations other than in connection with the transactions         
contemplated by this Agreement.                                                 

ARTICLE 5 
COVENANTS 

   SECTION 5.1  CONDUCT OF BUSINESS OF THE COMPANY.  Except as contemplated by
this Agreement or disclosed in Section 5.1 of the Company Disclosure Letter or  
with the prior written consent of the Parent, during the period from the date of
this Agreement to the Effective Time, the Company will, and will cause each of  
the Company Subsidiaries to, conduct its operations and business in the ordinary
course of business consistent with past practice and, to the extent consistent  
therewith, use all reasonable best efforts to preserve intact its business      
organization's goodwill, keep available the services of its officers and key    
employees, and preserve the goodwill and business relationships with material   
suppliers, facilities providers, customers and others having business           
relationships with it, with the intent that such goodwill and ongoing business  
relationships shall be unimpaired in all material respects at the Effective     
Time. Without limiting the generality of the foregoing, and except as otherwise 
contemplated by this Agreement or disclosed in Section 5.1 of the Company       
Disclosure Letter, prior to the Effective Time, the Company will not, and will  
not permit any Company Subsidiary to, without the prior written consent of the  
Parent (which consent will not be unreasonably withheld, conditioned or         
delayed):                                                                       

(a)  except to the extent required by law, adopt any amendment to the   
Company Charter Documents or the comparable organizational documents of any     
Company Subsidiary;                                                             

 (b)  except for issuances of capital stock of Company Subsidiaries to the
Company or a wholly owned Company Subsidiary, issue, reissue or sell, or        
authorize the issuance, reissuance or sale of (i) additional shares of capital  
stock of any class, or securities convertible or exchangeable into capital stock
of any class, or any rights, warrants or options to acquire any convertible or  
exchangeable securities or capital stock, other than the issue of Company       
Shares, in accordance with the terms of the instruments governing such issuance 
on the date hereof, pursuant to the exercise of Company Stock Options or Company
Warrants outstanding on the date hereof or pursuant to the ESPP, or (ii) any    
other securities in respect of, in lieu of, or in substitution for, Company     
Shares outstanding on the date hereof;                                          

  (c)  declare, set aside or pay any dividend or other distribution (whether
in cash, securities or property or any combination thereof) in respect of any   
class or series of its capital stock other than between the Company and any     
wholly owned Company Subsidiary;                                                

   (d)  split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem or purchase or otherwise acquire, any shares of   
its capital stock, or any of its other securities, except for repurchase of     
shares in connection with the termination of the employment relationship with   
any employee pursuant to agreements in effect on the date hereof and listed in  
Section 3.18 of the Company Disclosure Schedule;                                

  (e)  except for (i) increases in salary, wages and benefits of officers or
employees of the Company or the Company Subsidiaries in the ordinary course of  
business and in accordance with past practice, (ii) increases in salary, wages  
and benefits granted to officers and employees of the Company or the Company    
Subsidiaries in conjunction with new hires, promotions or other changes in job  
status in the ordinary course of business and consistent with past practices, or
(iii) payment of bonuses to officers and employees in the ordinary course of    
business (including with respect to the Company's fiscal year ended June 30,    
1999) not to exceed the amounts specified in Section 5.1 of the Company         
Disclosure Letter, increase the compensation or fringe benefits payable or to   
become payable to its directors,                                                

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officers or employees (whether from the Company or any Company Subsidiaries), or
pay any benefit not required by any existing plan or arrangement (including the 
granting of stock options, stock appreciation rights, shares of restricted stock
or performance units) or grant any severance or termination pay to (except      
pursuant to existing agreements, plans or policies), or enter into any          
employment or severance agreement with, any director, officer or other employee 
of the Company or any Company Subsidiaries or establish, adopt, enter into, or  
amend any collective bargaining, bonus, profit sharing, thrift, compensation,   
stock option, restricted stock, pension, retirement, savings, welfare, deferred 
compensation, employment, termination, severance or other employee benefit plan,
agreement, trust, fund, policy or arrangement for the benefit or welfare of any 
directors, officers or current or former employees, except in each case to the  
extent required by applicable Law;                                              

 (f)  acquire, sell, lease, license, transfer, mortgage, pledge, encumber,
grant or dispose of (whether by merger, consolidation, purchase, sale or        
otherwise) any material property or assets, including capital stock of Company  
Subsidiaries (other than the acquisition and sale of inventory or the           
disposition of used or excess equipment or the purchase of raw materials,       
supplies and equipment, in each case in the ordinary course of business         
consistent with past practice), or enter into any material commitment or        
transaction outside the ordinary course of business, other than transactions    
between a wholly owned Company Subsidiary and the Company or another wholly     
owned Company Subsidiary;                                                       

(g)  (i) incur, assume or prepay any indebtedness or incur or assume any
short-term indebtedness, in each case, in an amount in excess of the amounts    
specified in Section 5.1 of the Company Disclosure Letter (including, in either 
case, by issuance of debt securities), except that the Company and the Company  
Subsidiaries may incur, assume or prepay indebtedness in the ordinary course of 
business consistent with past practice under existing lines of credit or        
existing or additional equipment financing arrangements in the amounts specified
in Section 5.1 of the Company Disclosure Letter, (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or    
otherwise) for the obligations of any other person except in the ordinary course
of business, or (iii) make any loans, advances or capital contributions to, or  
investments in, any other person except in the ordinary course of business and  
except for loans, advances, capital contributions or investments between any    
wholly owned Company Subsidiary and the Company or another wholly owned Company 
Subsidiary or between the Company and any other entity in which the Company has 
an equity interest pursuant to the terms of the governing instruments or other  
agreements relating to such entities as in effect on the date hereof;           

 (h)  terminate, cancel or request any material change in, or agree to any
material change in any Contract which is material to the Company and the Company
Subsidiaries taken as a whole, or enter into any Contract which would be        
material to the Company and the Company Subsidiaries taken as a whole, in either
case other than in the ordinary course of business consistent with past practice
or enter into any joint venture agreement, partnership agreement or similar     
arrangement; or make or authorize any capital expenditure, other than capital   
expenditures that are not, in the aggregate, for any fiscal year, in excess of  
the capital expenditures provided for in the Company's budget for the Company   
and the Company Subsidiaries taken as a whole for such fiscal year (a copy of   
which budget has been provided to the Parent) and are in the amounts set forth  
in Section 5.1 of the Company Disclosure Letter;                                

  (i)  adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the   
Company or any Company Subsidiaries (other than the Merger);                    

   (j)  alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure or ownership of any Company           
Subsidiary;                                                                     

(k)  enter into any agreement or arrangement that materially limits or  
otherwise materially restricts the Company or any Company Subsidiary or any     
successor thereto, or that would, after the                                     

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Effective Time, limit or restrict the Surviving Corporation and its affiliates  
(including Parent) or any successor thereto, from engaging or competing in any  
line of business or in any geographic area, other than in the ordinary course of
business consistent with past practices;                                        

(l)  take any action with respect to accounting policies or procedures, 
other than actions in the ordinary course of business and consistent with past  
practice or as required pursuant to applicable Law or GAAP;                     

(m)  waive, release, assign, settle or compromise any material rights,  
claims or litigation;                                                           

 (n)  make any material Tax election (unless required by applicable Law or
made in the ordinary course of business consistent with past practice) or settle
or compromise any material federal, state, local or foreign income Tax          
liability; or                                                                   

(o)  authorize or enter into any formal or informal written or other    
agreement or otherwise make any commitment to do any of the foregoing.          

    SECTION 5.2  CONDUCT OF BUSINESS OF THE PARENT PENDING THE MERGER.  Prior to
the Effective Time, without the prior written consent of the Company (which will
not be unreasonably withheld, conditioned or delayed), the Parent will not, and 
will cause each Parent Subsidiary not to:                                       

(a)  except to the extent required by Law, amend its certificate of     
incorporation or by-laws in any manner that would be adverse to the holders of  
Parent Common Stock;                                                            

   (b)  purchase, redeem or otherwise acquire or retire, or offer to purchase,
redeem or otherwise acquire or retire, any shares of its capital stock (other   
than any shares of capital stock of any Parent Subsidiary), except for other    
transactions between the Parent and its wholly owned Subsidiaries;              

(c)  declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its       
capital stock, other than dividends or distributions by Parent Subsidiaries;    

(d)  make any sale, transfer, disposition or acquisition of assets or   
businesses that would cause a material delay in the completion of the           
transactions contemplated by this Agreement or could reasonably be expected to  
have a Material Adverse Effect on the Parent;                                   

(e)  adopt a plan of complete or partial liquidation, dissolution,      
restructuring, recapitalization or other reorganization of the Parent;          

(f)  except for issuances of capital stock of Parent Subsidiaries to the
Parent or a wholly owned Parent Subsidiary, issue, reissue or sell, or authorize
the issuance, reissuance or sale of (x) additional shares of capital stock of   
any class, or securities convertible or exchangeable into capital stock of any  
class, or any rights, warrants or options to acquire any convertible or         
exchangeable securities or capital stock, other than the issue of shares of     
Parent Common Stock, in accordance with the terms of the instruments governing  
such issuance on the date hereof, pursuant to the exercise of Parent Options and
Warrants outstanding on the date hereof or granted after the date hereof in     
accordance with the terms of this Agreement, and other than issuances of options
to acquire shares of Parent Common Stock in the ordinary course of business and 
consistent with past practice, or (y) any other securities in respect of, in    
lieu of, or in substitution for, shares of Parent Common Stock outstanding on   
the date hereof; or                                                             

(g)  authorize or enter into any formal or informal written or other    
agreement or otherwise make any commitment to do any of the foregoing.          

  SECTION 5.3  OTHER ACTIONS.  During the period from the date hereof to the
Effective Time, the Company and the Parent shall not, and shall not permit any  
of their respective subsidiaries to, voluntarily take any action that would, or 
that could reasonably be expected to, result in any of the conditions to the    
Merger set forth in Article 6 hereof not being satisfied.                       

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 SECTION 5.4  NOTIFICATION OF CERTAIN MATTERS.  The Parent and the Company
shall promptly notify each other of (a) the occurrence or non-occurrence of any 
fact or event which could reasonably be expected (i) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any       
material respect at any time from the date hereof to the Effective Time, (ii) to
cause any material covenant, condition or agreement hereunder not to be complied
with or satisfied in all material respects or (iii) to result in, in the case of
Parent, a Material Adverse Effect on the Parent; and, in the case of the        
Company, a Material Adverse Effect on the Company, (b) any failure of the       
Company or the Parent, as the case may be, to comply with or satisfy any        
covenant, condition or agreement to be complied with or satisfied by it         
hereunder in any material respect; PROVIDED, HOWEVER, that no such notification 
shall affect the representations or warranties of any party or the conditions to
the obligations of any party hereunder, (c) any notice or other material        
communications from any Governmental Entity in connection with the transactions 
contemplated by this Agreement and (d) the commencement of any suit, action or  
proceeding that seeks to prevent or seek damages in respect of, or otherwise    
relates to, the consummation of the transactions contemplated by this Agreement.

SECTION 5.5  PROXY STATEMENT, REGISTRATION STATEMENT.                   

  (a)  As promptly as practicable after the execution of this Agreement, the
Parent and the Company shall jointly prepare and file with the SEC a single     
document that will constitute (i) the proxy statement of the Company relating to
the special meeting of the Company's stockholders (the "COMPANY STOCKHOLDERS    
MEETING") to be held to consider approval and adoption of this Agreement and the
Merger and the special meeting of the Parent's stockholders (the "PARENT        
STOCKHOLDERS MEETING") to be held to consider approval of the issuance of the   
shares of Parent Common Stock in the Merger and (ii) the registration statement 
on Form S-4 of the Parent (together with all amendments thereto, the            
"REGISTRATION STATEMENT"), in connection with the registration under the        
Securities Act of the Parent Common Stock to be issued to the stockholders of   
the Company in connection with the Merger and the prospectus included in the    
Registration Statement (such single document, together with any amendments      
thereof or supplements thereto, the "PROXY STATEMENT"). The Parent and the      
Company each shall use its reasonable best efforts to cause the Registration    
Statement to become effective as promptly as practicable, and, prior to the     
effective date of the Registration Statement (the "REGISTRATION STATEMENT       
EFFECTIVE DATE"), the Parent shall take all or any action required under any    
applicable Law in connection with the issuance of Parent Common Stock pursuant  
to the Merger. The Parent or the Company, as the case may be, shall furnish all 
information concerning the Parent or the Company as the other party may         
reasonably request in connection with such actions and the preparation of the   
Proxy Statement and the Registration Statement. As promptly as practicable after
the Registration Statement Effective Date, the proxy statements and prospectus  
included in the Proxy Statement (collectively, the "PROXY MATERIALS") will be   
mailed to the stockholders of the Company and of the Parent. The Parent and the 
Company shall cause the Proxy Statement to comply as to form and substance in   
all material respects with the applicable requirements of (i) the Exchange Act, 
including Sections 14(a) and 14(d) thereof and the respective regulations       
promulgated thereunder, (ii) the Securities Act, (iii) the rules and regulations
of the NASDAQ/NMS and (iv) the GCL.                                             

(b)  Subject to Section 5.8 with respect to the Company's Board of      
Directors, the Proxy Statement shall include the unanimous and unconditional    
recommendation of the Board of Directors of the Company to the stockholders of  
the Company that they vote in favor of the adoption of this Agreement and the   
Merger and the unanimous and unconditional recommendation of the Board of       
Directors of the Parent to the stockholders of the Parent that they vote, as    
required by NASDAQ/ NMS, in favor of the issuance of the shares of Parent Common
Stock in the Merger. In addition, the Proxy Statement and the Proxy Materials   
will include a copy of the written opinions of the Company Financial Advisor    
referred to in Section 3.22 and the Parent Financial Advisor referred to in     
Section 4.20.                                                                   

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   (c)  No amendment or supplement to the Proxy Statement will be made without
the approval of each of the Parent and the Company, which approval shall not be 
unreasonably withheld, delayed or conditioned.                                  

 (d)  If at any time prior to the Effective Time any event or circumstance
relating to the Company or any Company Subsidiary, or their respective officers 
or directors, should be discovered by the Company that should be set forth in an
amendment or a supplement to the Proxy Statement or the Registration Statement  
so that any of such documents would not include any misstatement of a material  
fact or omit to state any material fact necessary to make the statements therein
in light of the circumstances under which they were made, not misleading, the   
Company shall promptly inform the Parent. All documents that the Company is     
responsible for filing with the SEC in connection with the transactions         
contemplated hereby will comply as to form and substance in all material        
respects with the applicable requirements of the GCL, the Securities Act and the
Exchange Act.                                                                   

   (e)  If, at any time prior to the Effective Time, any event or circumstance
relating to the Parent or any Parent Subsidiary, or their respective officers or
directors, should be discovered by the Parent that should be set forth in an    
amendment or a supplement to the Proxy Statement or the Registration Statement  
so that any of such documents would not include any misstatement of a material  
fact or omit to state any material fact necessary to make the statements therein
in light of the circumstances under which they were made, not misleading, the   
Parent shall promptly inform the Company. All documents that the Parent is      
responsible for filing in connection with the transactions contemplated by this 
Agreement will comply as to form and substance in all material aspects with the 
applicable requirements of the GCL, the Securities Act and the Exchange Act.    

    SECTION 5.6  STOCKHOLDERS MEETING.  (a)  The Company shall call and hold the
Company Stockholders Meeting as promptly as practicable after the Registration  
Statement Effective Date for the purpose of voting upon the adoption of this    
Agreement and the Parent and the Company will cooperate with each other to cause
the Company Stockholders Meeting to be held as soon as practicable following the
mailing of the Proxy Materials to the stockholders of the Company. The Company  
shall use its reasonable best efforts (through its agents or otherwise) to      
solicit from its stockholders proxies in favor of the adoption of this          
Agreement, and shall take all other action necessary or advisable to secure the 
Requisite Company Vote, except to the extent that the Board of Directors of the 
Company determines in good faith that doing so would cause the Board of         
Directors of the Company to breach its fiduciary duties to the Company's        
stockholders under applicable Law after consultation with its outside legal     
counsel (who may be the Company's regularly engaged independent legal counsel). 

(b)  The Parent shall call and hold the Parent Stockholders Meeting as  
promptly as practicable after the Registration Statement Effective Date for the 
purpose of voting upon the issuance of the shares of Parent Common Stock in the 
Merger and the Parent and the Company will cooperate with each other to cause   
the Parent Stockholders Meeting to be held as soon as practicable following the 
mailing of the Proxy Materials to the stockholders of the Parent. The Parent    
shall use its reasonable best efforts (through its agents or otherwise) to      
solicit from its stockholders proxies in favor of the issuance of the shares of 
Parent Common Stock in the Merger, and shall take all other action necessary to 
secure the Requisite Parent Vote. Attached hereto as Exhibit C is a copy of the 
Voting Agreement dated the date hereof between certain holders of Parent Class B
Common Stock and the Company (the "PARENT VOTING AGREEMENT"), providing for,    
among other things, the agreement of such holders of Parent Class B Common Stock
to vote their shares in favor of issuance of the shares of Parent Common Stock  
in the Merger at the Parent Stockholders Meeting. Parent represents and warrants
to the Company that as of the date hereof, the affirmative vote in person or    
proxy by the holders of Parent Class B Common Stock that are a party to the     
Parent Voting Agreement is sufficient to satisfy the Requisite Parent Vote.     

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SECTION 5.7  ACCESS TO INFORMATION; CONFIDENTIALITY.                    

(a)  Except as required under any confidentiality agreement or similar  
agreement or arrangement to which the Parent or the Company or any of their     
respective subsidiaries is a party or under applicable Law or the regulations or
requirements of any securities exchange or quotation service or other self      
regulatory organization with whose rules the parties are required to comply,    
from the date of this Agreement to the Effective Time, the Parent and the       
Company shall (and shall cause their respective subsidiaries to): (i) provide to
the other (and its officers, directors, employees, accountants, consultants,    
legal counsel, financial advisors, investment bankers, agents and other         
representatives (collectively, "REPRESENTATIVES")) access at reasonable times   
upon prior notice to the officers, employees, agents, properties, offices and   
other facilities of the other and its subsidiaries and to the books and records 
thereof; and (ii) furnish promptly such information concerning the business,    
properties, Contracts, assets, liabilities, personnel and other aspects of the  
other party and its subsidiaries as the other party or its Representatives may  
reasonably request. No investigation conducted under this Section 5.7 shall     
affect or be deemed to modify any representation or warranty made in this       
Agreement.                                                                      

(b)  The parties shall comply with, and shall cause their respective    
Representatives to comply with, all of their respective obligations under the   
Confidentiality Agreement dated as of May 6, 1999 (the "CONFIDENTIALITY         
AGREEMENT"), between the Parent and the Company with respect to the information 
disclosed under this Section 5.7.                                               

SECTION 5.8  NO SOLICITATION.                                           

(a)  From the date hereof until the termination hereof and except as    
expressly permitted by the following provisions of this Section 5.8, the Company
will not, nor will it permit any Company Subsidiary to, nor will it authorize or
permit any officer, director or employee of the Company or any Company          
Subsidiary and each investment banker, attorney, accountant or other advisor or 
representative of, the Company or any Company Subsidiary to, directly or        
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions or     
negotiations regarding, or furnish to any person any information with respect   
to, or take any other action to facilitate, an Acquisition Proposal or any      
inquiries or the making of any proposal that constitutes, or may reasonably be  
expected to lead to, an Acquisition Proposal; PROVIDED, HOWEVER, that subject to
compliance by the Company with the provisions of Section 5.8(b), the Company's  
Board of Directors may furnish information to, or enter into discussions or     
negotiations with, any person that makes an unsolicited bona fide written       
Acquisition Proposal if, and only to the extent that (A) the Company's Board of 
Directors, after consultation with its outside legal counsel, determines in good
faith that such action is legally advisable for the Company's Board of Directors
to comply with its fiduciary duties to the Company's stockholders under         
applicable Law, (B) such Acquisition Proposal is not subject to any financing   
contingencies or is, in the good faith judgment of the Company's Board of       
Directors after consultation with a nationally recognized financial advisor,    
reasonably capable of being financed, (C) the Company's Board of Directors      
determines in good faith that such Acquisition Proposal, based upon such matters
as it deems relevant including after consultation with a nationally recognized  
financial advisor, would, if consummated, result in a transaction more favorable
to the Company's stockholders from a financial point of view than the Merger    
(any such more favorable Acquisition Proposal being referred to herein as a     
"SUPERIOR PROPOSAL"), and (D) prior to taking such action, the Company (x)      
provides reasonable notice to Parent to the effect that it is taking such action
and (y) receives from such person an executed confidentiality agreement in      
reasonably customary form.                                                      

    (b)  Prior to providing any information to or entering into discussions with
any person in connection with an Acquisition Proposal by a person as set forth  
in Section 5.8(a), the Company shall notify Parent orally and in writing of any 
Acquisition Proposal (including, without limitation, the                        

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material terms and conditions thereof and the identity of the person making it) 
or any inquiries indicating that any person is considering making or wishes to  
make an Acquisition Proposal, as promptly as practicable (but in no case later  
than 24 hours) after its receipt thereof, and shall provide Parent with a copy  
of any written Acquisition Proposal or amendments or supplements thereto, and   
shall thereafter inform Parent on a prompt basis of (x) the status of any       
discussions or negotiations with any such third party, and any material changes 
to the terms and conditions of such Acquisition Proposal, and shall promptly    
give Parent a copy of any information delivered to such person which has not    
previously been reviewed by Parent and (y) any request by any person for        
nonpublic information relating to its or any Company Subsidiaries' properties,  
books or records.                                                               

(c)  Immediately after the execution and delivery of this Agreement, the
Company will, and will cause its subsidiaries and affiliates, and their         
respective officers, directors, employees, investment bankers, attorneys,       
accountants and other agents to, cease and terminate any existing activities,   
discussions or negotiations with any parties conducted heretofore with respect  
to any possible Acquisition Proposal. The Company agrees that it will take the  
necessary steps to promptly inform the individuals or entities referred to in   
the first sentence of Section 5.8(a) of the obligations undertaken in this      
Section 5.8.                                                                    

(d)  The Company's Board of Directors will not withdraw or modify, or   
propose to withdraw or modify, in a manner adverse to Parent, its approval or   
recommendation of this Agreement or the Merger except in connection with a      
Superior Proposal; PROVIDED, THAT, neither the Company nor the Board of         
Directors of the Company may in such instance terminate this Agreement but      
instead the Company, at the option of and as directed by the Parent (in addition
to the rights of Parent as set forth in Section 7.1(d)), shall, notwithstanding 
such withdrawal or modification of the recommendation or approval of this       
Agreement or the Merger by the Company's Board of Directors and/or the          
recommendation by the Company's Board of Directors that the Company's           
stockholders reject this Agreement or the Merger at the Company Stockholder     
Meeting, submit approval of this Agreement and the Merger as promptly as        
practicable to a vote of the holders of Company Shares at the Company           
Stockholders Meeting as contemplated by this Agreement, it being understood and 
agreed that, Parent, Company and Merger Sub elect that this Agreement to be     
governed by the second sentence of Section 251(c) of the GCL. If the Parent     
exercises its option under this Section 5.8(d) to require the Company to submit 
this Agreement to its stockholders for approval, the Parent shall no longer be  
entitled to terminate this Agreement under Section 7.1(d) hereof; PROVIDED, that
the foregoing shall not limit the Parent's right to (i) terminate this Agreement
under Section 7.1(e)(i) if notwithstanding the exercise of the option by the    
Parent to require the Company to submit this Agreement to the Company's         
stockholders for approval, this Agreement and the Merger fails to obtain the    
Requisite Company Vote at the Company's Stockholders Meeting and (ii) receive   
the amounts that are otherwise payable upon a termination of this Agreement     
pursuant to Section 7.1(e)(i) as provided in Section 7.5(b).                    

  (e)  Nothing contained in this Section 5.8 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule       
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith reasonable judgment of the         
Company's Board of Directors, after consultation with outside legal counsel,    
that failure to so disclose would be inconsistent with its obligations under    
applicable law.                                                                 

(f)  For purposes of this Agreement, "ACQUISITION PROPOSAL" means an    
inquiry, offer or proposal regarding any of the following (other than the       
Transactions contemplated by this Agreement) involving the Company or any       
Company Subsidiary: (i) any merger, consolidation, share exchange,              
recapitalization, business combination or other similar transaction; (ii) any   
sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or
substantially all the assets of the Company and the Company Subsidiaries, taken 
as a whole, in a single transaction or series of related transactions; (iii) any
tender offer or exchange offer for fifteen percent (15%) or more of the         
outstanding shares of                                                           

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Company Common Stock or the filing of a registration statement under the        
Securities Act in connection therewith; or (iv) any public announcement of a    
proposal or plan to do any of the foregoing or any agreement to engage in any of
the foregoing.                                                                  

    SECTION 5.9  AFFILIATES.  Concurrently with the execution of this Agreement,
the Company is delivering to Parent a letter identifying all persons who, to the
knowledge of the Company, is an "affiliate" of the Company under Rule 145 under 
the Securities Act. The Company shall use its reasonable best efforts to deliver
to Parent prior to the Effective Time, copies of letter agreements, each in the 
form of Exhibit D hereto, executed by each such Person so identified as an      
"affiliate" of the Company.                                                     

SECTION 5.10  DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.   

 (a)  The Parent agrees that all rights to indemnification now existing in
favor of any current or former employee, agent, director or officer of the      
Company and the Company Subsidiaries (the "INDEMNIFIED PARTIES") as provided in 
their respective charters or by-laws, in an agreement between an Indemnified    
Party and the Company or one of the Company Subsidiaries, or otherwise in effect
on the date hereof shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time; PROVIDED
that in the event any claim or claims are asserted or made within such six-year 
period, all rights to indemnification in respect of any such claim or claims    
shall continue until final disposition of any and all such claims. The Parent   
also agrees to indemnify all Indemnified Parties to the fullest extent permitted
by applicable law with respect to all acts and omissions arising out of such    
individuals' services as officers, directors, employees or agents of the Company
or any of the Company Subsidiaries or as trustees or fiduciaries of any plan for
the benefit of employees, or otherwise on behalf of, the Company or any of the  
Company Subsidiaries, occurring prior to the Effective Time including the       
transactions contemplated by this Agreement. Without limiting of the foregoing, 
in the event any such Indemnified Party is or becomes involved in any capacity  
in any action, proceeding or investigation in connection with any matter,       
including the transactions contemplated by this Agreement, occurring prior to,  
and including, the Effective Time, the Parent will pay as incurred such         
Indemnified Party's legal and other expenses (including the cost of any         
investigation and preparation) incurred in connection therewith.                

   (b)  The Parent agrees to cause to be maintained in effect by the Surviving
Corporation for not less than six years from the Effective Time the current     
policies of the directors' and officers' liability insurance maintained by the  
Company; PROVIDED that the Surviving Corporation may substitute therefor        
policies of at least the same coverage containing terms and conditions which are
no less advantageous and provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the       
Effective Time; and PROVIDED, FURTHER, that the Surviving Corporation shall not 
be required to pay an annual premium in excess of 200% of the aggregate         
annualized premiums paid by the Company in 1999 (which the Company represents is
approximately $400,000 for 1999) (the "MAXIMUM AMOUNT") if the Surviving        
Corporation is unable to obtain the insurance required by this Section 5.10(b)  
it shall obtain as much comparable insurance as possible for an annual premium  
equal to such Maximum Amount; provided, further, that the Company may, prior to 
the Effective Time, purchase director's and officer's liability insurance tail  
coverage in an amount not in excess of the principal amount of such insurance on
the date hereof which would satisfy Parent's obligations as set forth in this   
Section 5.10(b), so long as the total premium for such tail coverage would not  
exceed $1,000,000.                                                              

    (c)  In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with merges into any other person and is not the       
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets 
to any person, then, and in each such case, the Parent shall cause proper       
provision to be made so that the                                                

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successors and assigns of the Surviving Corporation assume the obligations set  
forth in this Section 5.10.                                                     

SECTION 5.11  LETTERS OF ACCOUNTANTS.                                   

(a)  The Company shall use its reasonable best efforts to cause to be   
delivered to the Parent "comfort" letters of Deloitte & Touche LLP, the         
Company's independent public accountants, dated and delivered on the            
Registration Statement Effective Date and as of the Effective Time, and         
addressed to the Parent in form and substance reasonably satisfactory to the    
Parent and reasonably customary in scope and substance for letters delivered by 
independent public accountants in connection with transactions contemplated     
hereby.                                                                         

(b)  The Parent shall use its reasonable best efforts to cause to be    
delivered to the Company "comfort" letters of Ernst & Young LLP, the Parent's   
independent public accountants, dated and delivered the Registration Statement  
Effective Date and as of the Effective Time, and addressed to the Company, in   
form and substance reasonably satisfactory to the Company and reasonably        
customary in scope and substance for letters delivered by independent public    
accountants in connection with transactions contemplated hereby.                

   SECTION 5.12  REASONABLE BEST EFFORTS.  Subject to the terms and conditions
provided in this Agreement and to applicable legal requirements, each of the    
parties hereto agrees to use its reasonable best efforts, in the case of the    
Company consistent with the fiduciary duties of the Company's Board of          
Directors, to take, or cause to be taken, all action, and to do, or cause to be 
done, and to assist and cooperate with the other parties hereto in doing, as    
promptly as practicable, all things necessary, proper or advisable under        
applicable laws and regulations to ensure that the conditions set forth in      
Article 6 are satisfied and to consummate and make effective the transactions   
contemplated by this Agreement. If at any time after the Effective Time any     
further action is necessary or desirable to carry out the purposes of this      
Agreement, including the execution of additional instruments, the proper        
officers and directors of each party to this Agreement shall take all such      
necessary action in the case of the Company, consistent with the fiduciary      
duties of the Company's Board of Directors.                                     

SECTION 5.13  CONSENTS; FILINGS; FURTHER ACTION.                        

(a)  Upon the terms and subject to the conditions hereof, each of the   
parties hereto shall use its reasonable best efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things          
necessary, proper or advisable under applicable Law or otherwise to consummate  
and make effective the Merger and the other transactions contemplated hereby,   
(ii) obtain from Governmental Entities any Company Governmental Consents and    
Parent Governmental Consents and any other consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by the      
Parent or the Company or any of their subsidiaries in connection with the       
authorization, execution and delivery of this Agreement and the consummation of 
the Merger and the other transactions contemplated hereby, (iii) make all       
necessary filings, and thereafter make any other submissions either required or 
reasonably deemed appropriate by each of the parties, with respect to this      
Agreement and the Merger and the other transactions contemplated hereby required
under (A) the Securities Act, the Exchange Act and any other applicable federal 
or Blue Sky Laws, (B) the HSR Act and any applicable other foreign antitrust,   
anti-monopoly or similar Laws, (C) the GCL, (D) any other applicable Law and (E)
the rules and regulations of NASDAQ/NMS. The parties hereto shall cooperate and 
consult with each other in connection with the making of all such filings,      
including by providing copies of all such documents to the nonfiling party and  
its advisors prior to filing. No party to this Agreement shall consent to any   
voluntary extension of any statutory deadline or waiting period or to any       
voluntary delay of the consummation of the Merger and the other transactions    
contemplated hereby at the behest of any Governmental Entity without the consent
and agreement of the other parties to this Agreement, which consent shall not be
unreasonably withheld or delayed.                                               

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  (b)  Without limiting the generality of Section 5.13(a), each party hereto
shall promptly inform the others of any material communication from the Federal 
Trade Commission, the Department of Justice or any other domestic or foreign    
government or governmental or multinational authority regarding any of the      
transactions contemplated by this Agreement. If any party or any affiliate      
thereof receives a request for additional information or documentary material   
from any such government or authority with respect to the transactions          
contemplated by this Agreement, then such party will endeavor in good faith to  
make, or cause to be made, as soon as reasonably practicable and after          
consultation with the other party, an appropriate response in compliance with   
such request. The Parent will advise the Company promptly in respect of any     
understandings, undertakings or agreements (oral or written) which the Parent   
proposes to make or enter into with the Federal Trade Commission, the Department
of Justice or any other domestic or foreign government or governmental or       
multinational authority in connection with the transactions contemplated by this
Agreement. In furtherance and not in limitation of the foregoing, the Parent    
shall use its reasonable best efforts to resolve such objections, if any, as may
be asserted with respect to the transactions contemplated by this Agreement     
under any antitrust, competition or trade regulatory laws, rules or regulations 
of any domestic or foreign government or governmental authority or any          
multinational authority. Notwithstanding the foregoing, nothing in this Section 
5.13 shall require, or be construed to require, the Parent or the Company, in   
connection with the receipt of any regulatory approval, to proffer to, or agree 
to (A) sell or hold separate and agree to sell, divest or to discontinue to or  
limit, before or after the Effective Time, any assets, businesses, or interest  
in any assets or businesses of the Parent, the Company or any of their          
respective affiliates (or to the consent to any sale, or agreement to sell, or  
discontinuance or limitation by the Parent or the Company, as the case may be,  
of any of its assets or businesses) or (B) agree to any conditions relating to, 
or changes or restriction in, the operations of any such asset or businesses    
which, in either case of (A) or (B), could reasonably be expected to result in a
Material Adverse Effect on the Parent or a Material Adverse Effect on the       
Company or to materially and adversely impact the economic or business benefits 
to such party of the transactions contemplated by this Agreement.               

SECTION 5.14  PLAN OF REORGANIZATION.  This Agreement is intended to    
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)  
of the income tax regulations promulgated under the Code. From and after the    
date of this Agreement and until the Effective Time, each party hereto shall use
its reasonable best efforts (i) to cause the Merger to qualify, and will not,   
without the prior written consent of the parties hereto, knowingly take any     
actions or cause any actions to be taken, or knowingly fail to take any action  
or fail to cause any action to be taken, which could prevent the Merger from    
qualifying, as a reorganization under the provisions of section 368(a) of the   
Code, and (ii) to obtain (in the case of the Company) or to cause to obtain (in 
the case of the Parent and Merger Sub) the opinion of counsel referred to in    
Section 6.3(c) below, including the execution of the letters of representations 
referred to therein. Following the Effective Time, and consistent with any such 
consent, none of the Surviving Corporation, the Parent or any of their          
affiliates shall knowingly take any action or cause any action to be taken, or  
knowingly fail to take any action or fail to cause any action to be taken, which
would cause the Merger to fail to so qualify as a reorganization under section  
368(a) of the Code.                                                             

 SECTION 5.15  PUBLIC ANNOUNCEMENTS.  The initial press release concerning
the Merger shall be a joint press release and, thereafter, the Parent and Merger
Sub and the Company shall consult with each other before issuing, and provide   
each other the opportunity to review, comment upon and concur with, any press   
release or other public statements with respect to this Agreement or any of the 
transactions contemplated hereby and shall not issue any such press release or  
make any such public statement prior to such consultation, except to the extent 
required by applicable Law or the requirements of NASDAQ/NMS, in which case the 
issuing party shall use its reasonable best efforts to consult with the other   
parties before issuing any such release or making any such public statement.    

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   SECTION 5.16  OBLIGATIONS OF MERGER SUB.  The Parent shall take all actions
necessary to cause Merger Sub to perform its obligations under this Agreement   
and to consummate the Merger on the terms and subject to the conditions set     
forth in this Agreement.                                                        

    SECTION 5.17  LISTINGS AND DE-LISTINGS.  The Parent shall use its reasonable
best efforts to cause the shares of Parent Common Stock to be issued in the     
Merger to be approved for quotation on NASDAQ/NMS, subject to official notice of
issuance, prior to the Effective Time. The parties shall use their reasonable   
best efforts to cause the Surviving Corporation to cause the Company Common     
Stock to be de-listed from NASDAQ/NMS and de-registered under the Exchange Act  
as soon as practicable following the Effective Time.                            

SECTION 5.18  EXPENSES.  Except as otherwise provided in Section 7.5(b),
whether or not the Merger is consummated, all Expenses incurred in connection   
with this Agreement and the Merger and the other transactions contemplated      
hereby shall be paid by the party incurring such Expense, except that Expenses  
incurred in connection with the filing fee for the Proxy Statement and          
Registration Statement and printing and mailing the Proxy Materials shall be    
shared equally by the Parent and the Company and the expenses of the "comfort"  
letters referred to in Section 5.11 shall be paid or reimbursed by the Parent.  

  SECTION 5.19  TAKEOVER STATUTES.  If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated hereby, each of 
the Parent and the Company and its board of directors shall grant such approvals
and take such actions as are necessary so that such transactions may be         
consummated as promptly as practicable on the terms contemplated by this        
Agreement and otherwise act to eliminate or minimize the effects of such statute
or regulation on such transactions.                                             

SECTION 5.20  EMPLOYEE BENEFITS.                                        

(a)  From and after the Effective Time, the Parent shall, except as may 
otherwise be required by applicable Law, cause the Surviving Corporation to     
honor in accordance with their terms all benefits and obligations under the     
Company Benefit Plans, each as in effect on the date of this Agreement (or as   
amended as contemplated hereby or with the prior written consent of the Parent).

    (b)  For a period of one year following the Effective Time, the Parent shall
provide to individuals who are employed by the Company and its Subsidiaries as  
of the Effective Time ("AFFECTED EMPLOYEES"), employee benefits which, in the   
aggregate, are substantially equivalent to the benefits provided pursuant to the
Company's or any Company Subsidiaries' employee benefit plans, programs and     
policies immediately prior to the Effective Time.                               

   (c)  Except to the extent necessary to prevent the duplication of benefits,
the Parent will, or will cause the Surviving Corporation to, give Affected      
Employees full credit for purposes of eligibility, vesting, benefit accrual and 
determination of the level of benefits under any employee benefit plans or      
arrangements maintained by the Parent or any Parent Subsidiary for such Affected
Employees' service with the Company or any Company Subsidiary to the same extent
recognized by the Company immediately prior to the Effective Time.              

 (d)  The Parent will, or will cause the Surviving Corporation to, use its
reasonable best efforts to (i) waive all limitations as to preexisting          
conditions, exclusions and waiting periods with respect to participation and    
coverage requirements applicable to the Affected Employees under any welfare    
benefit plans that such employees may be eligible to participate in after the   
Effective Time, other than limitations or waiting periods that are already in   
effect with respect to such employees and that have not been satisfied as of the
Effective Time under any welfare plan maintained for the Affected Employees     
immediately prior to the Effective Time, and (ii) provide each Affected Employee
with credit for any co-payments and deductibles paid prior to the Effective Time
in satisfying any applicable                                                    

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deductible or out-of-pocket requirements under any welfare plans that such      
employees are eligible to participate in after the Effective Time.              

   SECTION 5.21  FORM S-8.  No later than the Effective Time, the Parent shall
file with the Commission a registration statement on an appropriate form or a   
post-effective amendment to a previously filed registration statement under the 
Securities Act, with respect to the Parent Common Stock issuable in respect of  
Company Stock Options and Company Warrants, and shall use its reasonable best   
efforts to maintain the current status of the prospectus contained therein, as  
well as comply with any applicable state securities or "blue sky" laws, for as  
long as such options or other stock based awards remain outstanding.            

SECTION 5.22  BOARD OF DIRECTORS OF THE PARENT.  The Parent agrees that 
concurrently with the Effective Time, the Parent shall take such action as may  
be necessary to enable Mr. Sherman Tuan and Mr. David Rand to be appointed to   
the Board of Directors of the Parent.                                           

  SECTION 5.23  EMPLOYEE STOCK PURCHASE PLAN.  As of the Effective Time, the
ESPP shall be terminated. The rights of participants in the ESPP with respect to
any Offering Period or Accumulation Period (as defined in the ESPP) then        
underway under the ESPP shall be determined by treating the last business day   
prior to the Effective Time as the last day of such Offering Period and         
Accumulation Period and by making such other PRO RATA adjustments as may be     
necessary to reflect the reduced Offering Period and Accumulation Period but    
otherwise treating such Offering Period and Accumulation Period as a fully      
effective and completed Offering Period and Accumulation Period for all purposes
of the ESPP. Prior to the Effective Time, the Company shall take all actions    
(including, if appropriate, amending the terms of the ESPP) that are necessary  
to give effect to the transactions contemplated by this Sections 5.23.          

ARTICLE 6 
CONDITIONS

    SECTION 6.1  CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the      
satisfaction or waiver at or prior to the Closing Date of each of the following 
conditions:                                                                     

   (a)  STOCKHOLDER APPROVAL.  This Agreement shall have been duly approved by
the Requisite Company Vote and the issuance of shares of Parent Common Stock in 
the Merger shall have been duly approved by the Requisite Parent Vote.          

  (b)  LISTING.  The shares of Parent Common Stock issuable to the Company's
stockholders pursuant to this Agreement shall have been authorized for quotation
on NASDAQ/NMS upon official notice of issuance.                                 

(c)  GOVERNMENTAL CONSENTS.  The waiting period applicable to the       
consummation of the Merger under the HSR Act shall have expired or been         
terminated and other than the filing provided for in Section 1.3, all material  
notices, reports and other filings required to be made prior to the Effective   
Time by the Company or the Parent or any of their respective subsidiaries with, 
and all material consents, registrations, approvals, permits and authorizations 
required to be obtained prior to the Effective Time by, the Company or the      
Parent or any of their respective subsidiaries from, any Governmental Entity in 
connection with the execution and delivery of this Agreement and the            
consummation of the Merger and the other transactions contemplated hereby       
(including, without limitation, all Company Governmental Consents and Parent    
Governmental Consents) shall have been made or obtained (as the case may be)    
upon terms and conditions that could not reasonably be expected to result in    
Material Adverse Effect on the Parent or a Material Adverse Effect on the       

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Company; PROVIDED, that each of the parties shall have used its reasonable best 
efforts to so make or obtain.                                                   

(d)  ORDERS, INJUNCTIONS.  No Law, order, injunction or decree that     
prohibits, restrains, enjoins or otherwise prohibits (whether temporarily,      
preliminarily or permanently) consummation of the Merger shall have been        
enacted, issued, promulgated, enforced or entered by any court or Governmental  
Entity of competent jurisdiction and there shall not be pending any suit, action
or proceeding by any Governmental Entity which seeks to restrain, enjoin or     
otherwise prohibit (whether temporarily, preliminarily or permanently)          
consummation of the Merger; PROVIDED, that each of the parties shall have used  
its reasonable best efforts to prevent any such enactment, issuance,            
promulgation, enforcement or entry and to appeal as promptly as practicable any 
such Law, order injunction or decree.                                           

  (e)  REGISTRATION STATEMENT.  The Registration Statement shall have become
effective under the Securities Act. No stop order suspending the effectiveness  
of such registration statements shall have been issued, and no proceedings for  
that purpose shall have been initiated or be threatened by the SEC.             

 SECTION 6.2  CONDITIONS TO OBLIGATIONS OF THE PARENT AND MERGER SUB.  The
obligations of each of the Parent and Merger Sub to effect the Merger and       
consummate the other transactions contemplated hereby to be consummated on the  
Closing Date are also subject to the satisfaction or waiver by the Parent at or 
prior to the Effective Time of the following conditions:                        

   (a)  REPRESENTATIONS AND WARRANTIES.  The representations and warranties of
the Company set forth in this Agreement that are qualified as to materiality    
shall be true and correct, and the representations and warranties of the Company
set forth in this Agreement that are not so qualified shall be true and correct 
in all material respects, in each case as of the date of this Agreement and as  
of the Closing Date, as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to      
another date, and the Parent shall have received a certificate (which           
certificate may be qualified by knowledge to the same extent as the             
representations and warranties of the Company contained in this Agreement are so
qualified) signed on behalf of the Company by an executive officer of the       
Company to such effect.                                                         

(b)  PERFORMANCE OF OBLIGATIONS OF THE COMPANY.  The Company shall have 
performed or complied with in all material respects all obligations required to 
be performed by it under this Agreement at or prior to the Closing Date, and the
Parent shall have received a certificate signed on behalf of the Company by an  
executive officer of the Company to such effect.                                

   (c)  EMPLOYMENT AGREEMENTS.  The employment agreements entered into between
the Company and each of Mr. Sherman Tuan and Mr. David Rand, as amended and     
restated on the date hereof, shall be in full force and effect on the Closing   
Date and neither Mr. Tuan nor Mr. Rand shall have died, become permanently      
incapacitated or otherwise have refused to perform services under such          
employment agreements in violation of such agreements or be in material breach  
of such employment agreements.                                                  

    SECTION 6.3  CONDITIONS TO OBLIGATION OF THE COMPANY.  The obligation of the
Company to effect the Merger and consummate the other transactions contemplated 
hereby to be consummated on the Closing Date is also subject to the satisfaction
or waiver by the Company at or prior to the Effective Time of the following     
conditions:                                                                     

   (a)  REPRESENTATIONS AND WARRANTIES.  The representations and warranties of
each of the Parent and Merger Sub set forth in this Agreement that are qualified
as to materiality shall be true and correct, and the representations and        
warranties of the Parent and Merger Sub set forth in this Agreement that are not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date, as though made on and 
as of the Closing Date,                                                         

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except to the extent the representation or warranty is expressly limited by its 
terms to another date, and the Company shall have received a certificate (which 
certificate may be qualified by knowledge to the same extent as the             
representations and warranties of each of the Parent and Merger Sub contained in
this Agreement are so qualified) signed on behalf of each of the Parent and     
Merger Sub by an executive officer of the Parent to such effect.                

  (b)  PERFORMANCE OF OBLIGATIONS OF THE PARENT AND MERGER SUB.  Each of the
Parent and Merger Sub shall have performed or complied with in all material     
respects all obligations required to be performed by it under this Agreement at 
or prior to the Closing Date, and the Company shall have received a certificate 
signed on behalf of the Parent and Merger Sub by an executive officer of the    
Parent to such effect.                                                          

  (c)  TAX OPINION.  The Company shall have received the opinion of Skadden,
Arps, Slate, Meagher & Flom LLP, counsel to the Company, dated the Closing Date,
to the effect that the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of section 368(a) of the Code and that each 
party hereto will be treated as a "party to the reorganization" within the      
meaning of section 368(b) of the Code. The issuance of such opinion shall be    
conditioned upon the receipt by such counsel of customary representation letters
from each of the Parent, Merger Sub and the Company substantially in the forms  
of those contained in the Parent officer's certificate and the Company's        
officer's certificate attached hereto as Exhibit E-1 and Exhibit E-2,           
respectively.                                                                   

ARTICLE 7 
TERMINATION 

  SECTION 7.1  TERMINATION.  This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any   
requisite approval and adoption of this Agreement, as follows:                  

    (a)  by mutual written consent of the Parent and the Company duly authorized
by their respective boards of directors;                                        

 (b)  by either the Parent or the Company, if the Effective Time shall not
have occurred on or before December 31, 1999; PROVIDED, HOWEVER, that the right 
to terminate this Agreement under this Section 7.1(b) shall not be available to 
the party whose failure to fulfill any obligation under this Agreement shall    
have been the cause of, or resulted in, the failure of the Effective Time to    
occur on or before such date;                                                   

   (c)  by either the Parent or the Company, if any order injunction or decree
preventing the consummation of the Merger shall have been entered by any court  
of competent jurisdiction or Governmental Entity and shall have become final and
nonappealable;                                                                  

   (d)  by the Parent, if (i) the Board of Directors of the Company withdraws,
modifies or changes its approval or recommendation of this Agreement in a manner
adverse to the Parent or shall have resolved to do so, (ii) the Board of        
Directors of the Company shall have recommended to the stockholders of the      
Company an Acquisition Proposal or shall have resolved to do so or the Company  
shall have entered into an agreement with respect to a Superior Proposal, or    
(iii) a tender offer or exchange offer for more than 35% of the outstanding     
shares of capital stock of the Company is commenced and the Board of Directors  
of the Company fails to recommend against acceptance of such tender offer or    
exchange offer by its stockholders (including by taking no position with respect
to the acceptance of such tender offer or exchange offer by its stockholders);  

(e)  by the Parent or the Company, (i) if this Agreement and the Merger 
shall fail to receive the requisite vote for adoption at the Company            
Stockholders Meeting or any adjournment or postponement thereof, or (ii) if the 
issuance of shares of Parent Common Stock in the Merger shall fail to receive   
the                                                                             

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requisite vote for adoption at the Parent Stockholders Meeting or an adjournment
or postponement thereof;                                                        

   (f)  by the Parent, upon a breach of any material representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in   
either case such that the conditions set forth in either of Section 6.2(a) or   
6.2(b) would not be satisfied (a "TERMINATING COMPANY BREACH"); PROVIDED,       
HOWEVER, that, if such Terminating Company Breach is curable by the Company     
through the exercise of its reasonable best efforts prior to December 31, 1999  
and for so long as the Company continues to exercise such reasonable best       
efforts, the Parent may not terminate this Agreement under this Section 7.1(f)  
if such Terminating Company Breach has been cured prior to December 31, 1999;   

  (g)  by the Company, upon breach of any material representation, warranty,
covenant or agreement on the part of the Parent set forth in this Agreement, or 
if any representation or warranty of the Parent shall have become untrue, in    
either case such that the conditions set forth in either of Section 6.3(a) or   
6.3(b) would not be satisfied (a "TERMINATING PARENT BREACH"); PROVIDED,        
HOWEVER, that, if such Terminating Parent Breach is curable by the Parent       
through its reasonable best efforts prior to December 31, 1999 and for so long  
as the Parent continues to exercise such reasonable best efforts, the Company   
may not terminate this Agreement under this Section 7.1(g) if such Terminating  
Parent Breach has been cured prior to December 31, 1999.                        

  SECTION 7.2  EFFECT OF TERMINATION.  Except as provided in Section 8.2, in
the event of termination of this Agreement pursuant to Section 7.1, this        
Agreement shall forthwith become void, there shall be no liability under this   
Agreement on the part of the Parent, Merger Sub or the Company or any of their  
respective Representatives, and all rights and obligations of each party hereto 
shall cease, subject to the remedies of the parties set forth in Sections 7.5(b)
and (c); PROVIDED, HOWEVER, that nothing in this Agreement shall relieve any    
party from liability for the wilful and material breach of any of its           
representations and warranties or any of its covenants or agreements set forth  
in this Agreement.                                                              

  SECTION 7.3  AMENDMENT.  This Agreement may be amended by the agreement of
each of the parties hereto by action taken by or on behalf of their respective  
Boards of Directors at any time prior to the Effective Time; PROVIDED that,     
after the approval of this Agreement by the stockholders of the Company, no     
amendment may be made that would reduce the amount or change the type of        
consideration into which each Company Share shall be converted upon consummation
of the Merger and no amendment may be made that is not permitted under          
applicable Law, in each case, without further approval by the stockholders of   
the Company. This Agreement may not be amended except by an instrument in       
writing signed by each of the parties hereto.                                   

SECTION 7.4  WAIVER.  At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other   
act of any other party hereto, (b) waive any inaccuracy in the representations  
and warranties contained in this Agreement or in any document delivered pursuant
hereto, and (c) subject to the proviso of Section 7.3, waive compliance by the  
other party with any agreement or condition contained in this Agreement. Any    
waiver of a condition set forth in Section 6.1, or any determination that such a
condition has been satisfied, will be effective only if made in writing by each 
of the Company and the Parent and, unless otherwise specified in such writing,  
shall thereafter operate as a waiver (or satisfaction) of such conditions for   
any and all purposes of this Agreement. Any such extension or waiver shall be   
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.                                                               

SECTION 7.5  EXPENSES FOLLOWING TERMINATION.                            

(a)  Except as set forth in this Section 7.5, all Expenses incurred in  
connection with this Agreement and the transactions contemplated hereby shall be
paid in accordance with the provisions of Section 5.18. For purposes of this    
Agreement, "EXPENSES" consist of all out-of-pocket expenses                     

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(including, all fees and expenses of counsel, accountants, investment bankers,  
experts and consultants to a party hereto and its affiliates) incurred by a     
party or on its behalf in connection with or related to the authorization,      
preparation, negotiation, execution and performance of this Agreement, the      
preparation, printing, filing and mailing of the Proxy Statement and/or the     
Proxy Materials (as the case may be), the solicitation of stockholder approvals 
and all other matters related to the closing of the transactions contemplated   
hereby.                                                                         

(b)  If this Agreement is terminated pursuant to Section 7.1(d), Section
7.1(e)(i) or Section 7.1(f) solely as a result of any wilful and material breach
by the Company or any Company Subsidiary of any material representation,        
warranty, covenant or agreement set forth in this Agreement (a "QUALIFYING      
SECTION 7.1(F) TERMINATION"), then the Company shall (x) on the date specified  
in the proviso to this Section 7.5(b) in the case of a termination of this      
Agreement pursuant to Section 7.1(e)(i) or as a result of a Qualifying Section  
7.1(f) Termination, or (y) simultaneously with a termination of this Agreement  
by the Parent pursuant to Section 7.1(d), pay to the Parent (by wire transfer of
immediately available funds to an account designated by the Parent) a           
termination fee of $50,000,000 (the "TERMINATION AMOUNT") plus the reimbursement
of all of the Parent's actual and documented out-of-pocket expenses (including  
all investment banking, legal, accounting and other similar expenses) up to a   
maximum reimbursable amount of $5,000,000 (the "PARENT EXPENSES"); PROVIDED,    
HOWEVER, that the Company shall not be obligated to pay such fee to the Parent  
if this Agreement is terminated pursuant to Section 7.1(e) or as a result of a  
Qualifying Section 7.1(f) Termination unless and until (i) at the time of the   
Company Stockholder Meeting in the case of termination pursuant to Section      
7.1(e) or on the date the Parent terminates this Agreement pursuant to Section  
7.1(f) as a result of a Qualifying Section 7.1(f) Termination, the Company has  
received a bona fide alternative Acquisition Proposal or a third party has made 
or publicly announced its intention to make a bona fide Acquisition Proposal,   
and (ii) within twelve months after the termination of this Agreement, the      
Company enters into a definitive agreement providing for an alternative         
Acquisition Proposal with any third party or an alternative Acquisition Proposal
is consummated with any third party (for the purposes of this proviso the term  
"Acquisition Proposal" shall have the meaning assigned to such term in Section  
5.8 except that the references to "15%" in the definition of "Acquisition       
Proposal" in Section 5.8(f) shall be deemed to be references to "50%" and       
"Acquisition Proposal" shall only be deemed to refer to a transaction involving 
the Company, or with respect to assets (including the shares of any Subsidiary),
the Company and the Company Subsidiaries, taken as a whole, and not any Company 
Subsidiaries alone), in which event the Termination Amount plus the Parent      
Expenses shall be paid promptly (and in any event within two (2) days of receipt
by Company of a written notice from Parent) following the earlier of the        
execution of such definitive agreement providing for an such alternative        
Acquisition Proposal or the consummation of such an alternative Acquisition     
Proposal, as the case may be.                                                   

   (c)  The Company acknowledges that the agreements contained in this Section
7.5 are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, the Parent would not enter into this Agreement; 
accordingly, if the Company fails to pay promptly the Termination Amount and/or 
the Parent Expenses, and, in order to obtain such payment, the Parent commences 
a suit which results in a judgment against the Company for the Termination      
Amount and/or the Parent Expenses, the Company shall pay to Parent its          
reasonable costs and expenses in connection with such suit, together with       
interest on the amount of the Termination Amount at the prime rate of Chase Bank
in effect on the date such payment was required to be made.                     

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ARTICLE 8 
MISCELLANEOUS 

SECTION 8.1  CERTAIN DEFINITIONS.  For purposes of this Agreement:      

   (a)  The term "AFFILIATE," as applied to any person, means any other person
directly or indirectly controlling, controlled by, or under common control with,
that person. For the purposes of this definition, "CONTROL" (including, with    
correlative meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), as applied to any person, means the possession, directly or     
indirectly, of the power to direct or cause the direction of the management and 
policies of that person, whether through the ownership of voting securities, by 
contract or otherwise.                                                          

    (b)  The term "BUSINESS DAY" means any day, other than Saturday, Sunday or a
federal holiday, and shall consist of the time period from 12:01 a.m. through   
12:00 midnight Eastern time. In computing any time period under this Agreement, 
the date of the event which begins the running of such time period shall be     
included EXCEPT that if such event occurs on other than a business day such     
period shall begin to run on and shall include the first business day           
thereafter.                                                                     

(c)  The term "INCLUDING" means, unless the context clearly requires    
otherwise, including but not limited to the things or matters named or listed   
after that term.                                                                

   (d)  The term "PERSON" shall include individuals, corporations, limited and
general partnerships, trusts, limited liability companies, associations, joint  
ventures, Governmental Entities and other entities and groups (which term shall 
include a "GROUP" as such term is defined in Section 13(d)(3) of the Exchange   
Act).                                                                           

(e)  The term "SUBSIDIARY" or "SUBSIDIARIES" means, with respect to the 
Parent, the Company or any other person, any entity of which the Parent, the    
Company or such other person, as the case may be (either alone or through or    
together with any other subsidiary), owns, directly or indirectly, stock or     
other equity interests the holders of which are generally entitled to more than 
50% of the vote for the election of the board of directors or other governing   
body of such corporation or other legal entity.                                 

SECTION 8.2  NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND            
AGREEMENTS.  The representations, warranties and agreements in this Agreement   
and in any instrument delivered under this Agreement shall terminate at the     
Effective Time or upon the termination of this Agreement under Section 7.1, as  
the case may be, except that the agreements set forth in Articles 1 and 2 and   
Sections 5.10, 5.12 (last sentence), 5.14, 5.17, 5.18, 5.20 and 5.21 and this   
Article 8 shall survive the Effective Time, and those set forth in Sections     
5.7(b), 5.16, 5.18, 7.2 and 7.5 and this Article 8 shall survive termination of 
this Agreement. Each party agrees that, except for the representations and      
warranties contained in this Agreement, the Company Disclosure Letter and the   
Parent Disclosure Letter, no party to this Agreement has made any other         
representations and warranties, and each party disclaims any other              
representations and warranties, made by itself or any of its officers,          
directors, employees, agents, financial and legal advisors or other             
Representatives with respect to the execution and delivery of this Agreement or 
the transactions contemplated by this Agreement, or with respect to its business
or otherwise, notwithstanding the delivery or disclosure to any other party or  
any party's representatives of any documentation or other information with      
respect to any one or more of the foregoing.                                    

   SECTION 8.3  COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,  
and all such counterparts shall together constitute the same agreement.         

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SECTION 8.4  GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.             

   (a)  THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL
BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE 
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES. The parties 
irrevocably submit to the jurisdiction of the courts of the State of Delaware   
solely in respect of the interpretation and enforcement of the provisions of    
this Agreement and of the documents referred to in this Agreement, and in       
respect of the transactions contemplated by this Agreement and by those         
documents, and hereby waive, and agree not to assert, as a defense in any       
action, suit or proceeding for the interpretation or enforcement of this        
Agreement or of any such document, that it is not subject to this Agreement or  
that such action, suit or proceeding may not be brought or is not maintainable  
in said courts or that the venue thereof may not be appropriate or that this    
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or 
proceeding shall be heard and determined in such a court. The parties hereby    
consent to and grant any such court jurisdiction over the person of such parties
and over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner     
provided in Section 8.5 or in such other manner as may be permitted by law,     
shall be valid and sufficient service thereof.                                  

    (b)  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND 
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY     
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION       
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE     
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND           
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY   
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY 
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH 
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED  
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND     
CERTIFICATIONS IN THIS SECTION 8.4.                                             

    SECTION 8.5  NOTICES.  Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered 
personally, sent by reputable overnight courier, sent by registered or certified
mail, postage prepaid, or by facsimile:                                         

IF TO THE PARENT OR MERGER SUB:                           
Metromedia Fiber Network, Inc.                            
One North Lexington Avenue                                
White Plains, NY 10601                                    
Attention: Howard Finkelstein                             
Fax: (914) 421-6777                                       

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WITH COPIES TO:                                           
Metromedia Fiber Network, Inc.                            
c/o Metromedia Company                                    
One Meadowlands Plaza                                     
East Rutherford, NJ 07073                                 
Attention: Arnold L. Wadler, Esq.                         
Fax: (201) 531-2803                                       

AND                                                       
Paul, Weiss, Rifkind, Wharton & Garrison                  
1285 Avenue of the Americas                               
New York, New York 10019-6064                             
Attention: Douglas A. Cifu, Esq.                          
Fax: (212) 757-3990                                       

IF TO THE COMPANY:                                        
AboveNet Communications Inc.                              
50 W. San Fernando Street, #1010                          
San Jose, CA 95113                                        
Attention: Sherman Tuan                                   
Fax: (408) 367-6688                                       

WITH COPIES TO:                                           
Skadden, Arps, Slate, Meagher & Flom LLP                  
300 South Grand Avenue                                    
Los Angeles, California 90071                             
Attention: Nicholas P. Saggese, Esq.                      
Fax: (213) 687-7804                                       

or to such other persons or addresses as may be designated in writing by the    
party to receive such notice as provided above.                                 

  SECTION 8.6  ENTIRE AGREEMENT.  This Agreement (including any exhibits and
annexes to this Agreement other than Exhibit D hereto), the Company Disclosure  
Letter and the Parent Disclosure Letter constitute the entire agreement and     
supersede all other prior agreements, understandings, representations and       
warranties, both written and oral, among the parties, with respect to the       
subject matter of this Agreement; PROVIDED, THAT, the Confidentiality Agreement 
shall remain in full force and effect until the earlier of the Effective Time,  
at which time it will terminate, or its termination in accordance with its      
terms.                                                                          

SECTION 8.7  NO THIRD PARTY BENEFICIARIES.  Except for the provisions of
Section 5.10, this Agreement is not intended to confer upon any person other    
than the parties to this Agreement any rights or remedies under this Agreement. 

 SECTION 8.8  OBLIGATIONS OF THE PARENT AND OF THE COMPANY.  Whenever this
Agreement requires a Parent Subsidiary to take any action, that requirement     
shall be deemed to include an undertaking on the part of the Parent to cause    
that Parent Subsidiary to take that action. Whenever this Agreement requires a  
Company Subsidiary to take any action, that requirement shall be deemed to      
include an undertaking on the part of the Company to cause that Company         
Subsidiary to take that action and, after the Effective Time, on the part of the
Surviving Corporation to cause that Company Subsidiary to take that action.     

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    SECTION 8.9  SEVERABILITY.  The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not     
affect the validity or enforceability or the other provisions of this Agreement.
If any provision of this Agreement, or the application of that provision to any 
person or any circumstance, is invalid or unenforceable, (a) a suitable and     
equitable provision shall be substituted for that provision in order to carry   
out, so far as may be valid and enforceable, the intent and purpose of the      
invalid or unenforceable provision and (b) the remainder of this Agreement and  
the application of the provision to other persons or circumstances shall not be 
affected by such invalidity or unenforceability, nor shall such invalidity or   
unenforceability affect the validity or enforceability of the provision, or the 
application of that provision, in any other jurisdiction.                       

 SECTION 8.10  INTERPRETATION.  The table of contents and headings in this
Agreement are for convenience of reference only, do not constitute part of this 
Agreement and shall not be deemed to limit or otherwise affect any of the       
provisions of this Agreement. Where a reference in this Agreement is made to a  
section, exhibit or annex, that reference shall be to a section of or exhibit or
annex to this Agreement unless otherwise indicated.                             

SECTION 8.11  ASSIGNMENT.  This Agreement shall not be assignable by    
operation of law or otherwise, except that the Parent may designate, by written 
notice to the Company, another Parent Subsidiary that is wholly owned directly  
or indirectly by the Parent to be merged with and into the Company in lieu of   
Merger Sub, in which event all references in this Agreement to Merger Sub shall 
be deemed references to such other Parent Subsidiary, and in that case, all     
representations and warranties made in this Agreement with respect to Merger Sub
as of the date of this Agreement shall be deemed representations and warranties 
made with respect to such other Parent Subsidiary as of the date of such        
designation.                                                                    

SECTION 8.12  SPECIFIC PERFORMANCE.  The parties to this Agreement agree
that irreparable damage would occur in the event that any of the provisions of  
this Agreement were not performed in accordance with their specific terms or    
were otherwise reached. It is accordingly agreed that the parties shall be      
entitled to an injunction or injunctions to prevent breaches of this Agreement  
and to enforce specifically the terms and provisions of this Agreement in any   
court of the United States or any state having jurisdiction, this being in      
addition to any other remedy to which they are entitled at law or in equity.    

  IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties to this Agreement as of the date    
first written above.                                                            

                                                                [Download Table]
                                              
ABOVENET COMMUNICATIONS INC.                  

By:  /s/ SHERMAN TUAN                         
     -----------------------------------------
     Name: Sherman Tuan                       
     Title:  Chief Executive Officer and      
     Chairman                                 

METROMEDIA FIBER NETWORK, INC.                

By:  /s/ HOWARD FINKELSTEIN                   
     -----------------------------------------
     Name: Howard Finkelstein                 
     Title:  President                        

MAGELLAN ACQUISITION, INC.                    

By:  /s/ HOWARD FINKELSTEIN                   
     -----------------------------------------
     Name: Howard Finkelstein                 
     Title:  President                        

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                                                                      APPENDIX B

OPTION AGREEMENT

 THIS OPTION AGREEMENT (the "OPTION AGREEMENT") is entered into as of June
22, 1999, by and between AboveNet Communications Inc., a Delaware corporation   
(the "COMPANY"), and Metromedia Fiber Network, Inc., a Delaware corporation (the
"GRANTEE").                                                                     

RECITALS

    WHEREAS, the Grantee, Magellan Acquisition, Inc., a Delaware corporation and
a wholly owned subsidiary of the Grantee ("MERGER SUB"), and the Company are    
entering into an Agreement and Plan of Merger dated as of the date hereof (as   
amended from time to time, the "MERGER AGREEMENT"), which provides (subject to  
the conditions set forth therein) for the merger of Merger Sub with and into the
Company with the Company as the surviving corporation (the "MERGER"); and       

   WHEREAS, as a condition to the willingness of the Grantee to enter into the
Merger Agreement, the Grantee has required that the Company enter into, and in  
order to induce the Grantee to enter into the Merger Agreement, the Company     
desires to enter into, this Option Agreement;                                   

    NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements contained in this Option Agreement, the    
parties to this Option Agreement, intending to be legally bound, agree as       
follows:                                                                        

1.  CERTAIN DEFINITIONS.  Capitalized terms used but not defined in this
Option Agreement shall have the meanings ascribed to such terms in the Merger   
Agreement.                                                                      

2.  GRANT OF OPTION.  Subject to the terms of this Option Agreement, the
Company hereby grants to the Grantee an irrevocable option (the "OPTION") to    
purchase, out of the authorized but unissued shares of Company Common Stock     
6,875,560, shares of Company Common Stock (as adjusted as set forth herein, the 
"OPTION SHARES") as of the first date, if any, upon which an Exercise Event (as 
defined in Section 4(b) of this Option Agreement) occurs, at a price per Option 
Share equal to $49.9375 per share (as adjusted as set forth herein, the         
"EXERCISE PRICE"). The number of shares of Company Common Stock that may be     
received upon exercise of the Option and the Exercise Price are subject to      
adjustment as set forth herein.                                                 

3.  TERM.  The Option shall terminate on the earliest of:               

(a)  the Effective Time of the Merger as contemplated by the Merger     
Agreement;                                                                      

   (b)  the termination of the Merger Agreement other than under circumstances
which constitute (or upon satisfaction of the conditions to payment of the      
Termination Amount set forth in the proviso of Section 7.5(b) of the Merger     
Agreement would constitute) an Exercise Event under this Agreement; or          

(c)  the occurrence of the date which is twelve (12) months after       
termination of the Merger Agreement under circumstances which constitute, or    
which, if the conditions to payment of the Termination Amount set forth in the  
proviso of Section 7.5(b) of the Merger Agreement were satisfied, would         
constitute an Exercise Event under this Agreement (the expiration date of the   
Option is referred to herein as the "TERMINATION DATE"); PROVIDED, HOWEVER, that
with respect to clause (c) of this sentence, if the Option cannot be exercised  
on such first anniversary by reason of any applicable law, regulation, order,   
judgment, decree or other legal impediment, then the Termination Date shall be  
extended until the date 10 days after the date on which such impediment is      
removed. The rights and obligations set forth in Sections 9 and 10 of this      
Option Agreement shall not terminate on the Termination Date, but shall extend  
to such time as is provided in those Sections.                                  

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4.  EXERCISE OF OPTION.                                                 

  (a)  The Grantee may exercise the Option, in whole or in part, at any time
and from time to time on or before the Termination Date following the occurrence
of an Exercise Event. Notwithstanding the occurrence of the Termination Date,   
the Grantee shall be entitled to purchase those Option Shares with respect to   
which it has exercised the Option in accordance with the terms hereof prior to  
the Termination Date.                                                           

 (b)  As used herein, an "EXERCISE EVENT" shall mean the occurrence of any
event as a result of which the Merger Agreement has terminated and Grantee is   
entitled to receive the Termination Amount pursuant to Section 7.5(b) of the    
Merger Agreement.                                                               

   (c)  In the event the Grantee wishes to exercise the Option with respect to
any Option Shares, the Grantee shall send to the Company a written notice (the  
date of which being herein referred to as the "NOTICE DATE") specifying: (i) the
number of Option Shares that the Grantee will purchase; (ii) the place in New   
York, New York at which such Option Shares are to be purchased; and (iii) the   
date on which such Option Shares are to be purchased, which shall not be earlier
than three business days nor later than 20 business days after the Notice Date. 
The closing of the purchase of such Option Shares (the "CLOSING") shall take    
place at the place specified in such written notice and on the date specified in
such written notice (the "CLOSING DATE"); PROVIDED, HOWEVER, that: (i) if such  
purchase cannot be consummated by reason of any applicable law, regulation,     
order, judgment, decree or other legal impediment, the Closing Date may be      
extended by the Grantee to a date not more than 10 days after the date on which 
such impediment is removed; and (ii) if prior notification to or approval of any
governmental authority is required (or if any waiting period must expire or be  
terminated) in connection with such purchase, the Grantee shall promptly cause  
to be filed the required notice or application for approval and shall           
expeditiously process the same (and the Company shall cooperate with the Grantee
in the filing of any such notice or application required to be filed by the     
Grantee and the obtaining of any such approval required to be obtained by the   
Grantee), and the Closing Date may be extended by the Grantee to a date not more
than 10 days after the date on which any required notification has been made,   
approval has been obtained or waiting period has expired or been terminated.    

  (d)  Notwithstanding Section 4(c) of this Option Agreement, so long as the
Company shall have complied in all material respects with all of its obligations
under this Option Agreement, no Closing Date shall be more than 6 months after  
the related Notice Date, and, if the Closing Date shall not have occurred within
6 months after the related Notice Date, the exercise of the Option effected on  
the Notice Date shall be deemed to have expired.                                

  (e)  Notwithstanding anything else herein to the contrary, any exercise of
the Option and any purchase of Option Shares shall be subject to (x) compliance 
with applicable laws and regulations, which may, among other things, prohibit   
the purchase of all or a portion of the Option Shares without first obtaining or
making certain consents, approvals, orders, notifications or authorizations, and
(y) the absence of any preliminary or permanent injunction or other order by any
court of competent jurisdiction prohibiting or otherwise restraining such       
exercise or purchase.                                                           

5.  PAYMENT AND DELIVERY OF CERTIFICATES.                               

(a)  On each Closing Date, the Grantee shall pay to the Company by wire 
transfer in immediately available funds to a bank account designated by the     
Company an amount equal to the Exercise Price multiplied by the number of Option
Shares to be purchased on such Closing Date.                                    

(b)  At each Closing, simultaneously with the delivery of immediately   
available funds as provided in Section 5(a) of this Option Agreement, the       
Company shall deliver to the Grantee or its designee a certificate or           
certificates representing the Option Shares to be purchased at such Closing,    
which Option Shares shall be duly authorized, validly issued, fully paid and    
nonassessable and free and clear of all                                         

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liens, security interests, charges or other encumbrances (collectively, the     
"ENCUMBRANCES") other than Encumbrances under applicable law.                   

  (c)  Certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend (in addition to any legend required under    
applicable state securities laws) that shall read substantially as follows:     

       THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY 
APPLICABLE STATE LAW GOVERNING THE OFFER OR SALE OF SECURITIES. NO
       TRANSFER OR OTHER DISPOSITION OF THESE SHARES MAY BE MADE EXCEPT PURSUANT
       TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH OTHER STATE
  LAWS OR PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER THE ACT, SUCH
    OTHER STATE LAWS AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.

     IN ADDITION, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
       IS SUBJECT TO RESTRICTIONS ARISING UNDER THE TERMS OF AN OPTION AGREEMENT
     DATED AS OF JUNE 22, 1999. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO
       THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE COMPANY OF A WRITTEN
REQUEST THEREFOR.                                                 

A new certificate or certificates evidencing the same number of shares of       
Company Common Stock will be issued to the Grantee in lieu of the certificate   
bearing the above legend, and such new certificate shall not bear the first     
paragraph of such legend, insofar as it applies to the Securities Act, if the   
Grantee shall have delivered to the Company a copy of a letter from the Staff of
the SEC, or an opinion of counsel in form and substance reasonably satisfactory 
to the Company and its counsel, to the effect that such legend is not required  
for purposes of the Securities Act.                                             

6.  ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.                     

(a)  In the event of any change in the Company Common Stock issued and  
outstanding by reason of a distribution, reclassification stock dividend,       
split-up (including a reverse stock split), combination, recapitalization,      
exchange of shares or similar transaction, the type and number of shares or     
securities subject to the Option, and the Exercise Price therefor, shall be     
adjusted appropriately, and proper provision shall be made in the agreements    
governing such transaction so that the Grantee shall receive upon exercise of   
the Option the same class and number of outstanding shares or other securities  
or property that Grantee would have received upon exercise of the Option if the 
Option had been exercised immediately prior to such event or the record date    
therefor, as applicable. Without limiting the parties' relative rights and      
obligations under the Merger Agreement, if any additional shares of Company     
Common Stock are issued after the date of this Option Agreement (other than     
pursuant to an event described in the first sentence of this Section 6(a)), the 
number of shares of Company Common Stock then remaining subject to the Option   
shall be adjusted so that, after such issuance of additional shares, such number
of shares then remaining subject to the Option, together with any shares        
theretofore issued pursuant to the Option, equals 19.9% of the number of shares 
of Company Common Stock then issued and outstanding.                            

    (b)  Without limiting the parties' relative rights and obligations under the
Merger Agreement, if the Company shall enter into an agreement (i) to           
consolidate, exchange, shares or merge with any person (as defined in the Merger
Agreement), other than the Grantee or one of the Grantee's subsidiaries, and, in
the case of a merger, shall not be the continuing or surviving corporation, (ii)
to permit any person, other than the Grantee or one of the Grantee's            
subsidiaries, to merge into the Company and the Company shall be the continuing 
or surviving corporation, but, in connection with                               

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such merger, the then outstanding shares of Company Common Stock shall be       
changed into or exchanged for stock or other securities of the Company or any   
other person or cash or any other property, or the shares of Company Common     
Stock outstanding immediately before such merger shall after such merger        
represent less than 50% of the common shares and common share equivalents of the
Company outstanding immediately after the merger, or (iii) to sell, lease or    
otherwise transfer all or substantially all of its assets to any Person, other  
than the Grantee or one of the Grantee's subsidiaries, then, and in each such   
case, proper provision shall be made in the agreement governing such            
transactions so that the Option shall, upon the consummation of any such        
transaction and upon the terms and conditions set forth herein, become          
exercisable for the stock, securities, cash or other property that would have   
been received by the Grantee upon exercise of the Option if the Grantee had     
exercised this Option immediately prior to such transaction or the record date  
for determining the stockholders entitled to participate therein, as            
appropriate.                                                                    

  (c)  The provisions of Sections 7, 9 and 10 of this Option Agreement shall
apply with appropriate adjustments to any securities for which the Option       
becomes exercisable pursuant to this Section 6.                                 

7.  REPURCHASE OPTIONS.                                                 

   (a)  At any time on or prior to the Termination Date, at the request of the
Grantee made at any time after the first Exercise Event and ending on the first 
anniversary thereof (the "PUT PERIOD"), the Company (or any successor thereto)  
shall repurchase from the Grantee that portion of the Option that then remains  
unexercised. The date on which the Grantee exercises its rights under this      
Section 7 is referred to as the "GRANTEE REQUEST DATE." Such repurchase shall be
at an aggregate price (the "REPURCHASE CONSIDERATION") equal to the excess, if  
any, of (x) the Applicable Price for each share of Company Common Stock that    
remains subject to the Option over (y) the Exercise Price (subject to adjustment
pursuant to Section 6 of this Option Agreement), multiplied by the number of    
Option Shares as to which the Option has not been exercised, except that in no  
event shall the Company be required to pay to the Grantee pursuant to this      
Section 7(a) an amount exceeding the product of (x) $1.00 and (y) such number of
shares of Company Common Stock that remain subject to the Option.               

  (b)  If the Grantee exercises its rights under this Section 7, the Company
shall, within five business days after the Grantee Request Date, pay the        
Repurchase Consideration to the Grantee by wire transfer in immediately         
available funds, and the Grantee shall surrender to the Company the Option.     

    (c)  For purposes of this Option Agreement, the "APPLICABLE PRICE" means the
average closing sales price per share of Company Common Stock as quoted on      
NASDAQ/NMS (or if Company Common Stock is not quoted on NASDAQ/NMS, the average 
closing sales price per share as quoted on any other market comprising a part of
NASDAQ/NMS or, if the shares of Company Common Stock are not quoted thereon, on 
the principal trading market (as defined in Regulation M under the Exchange Act)
on which such shares are traded as reported by The Wall Street Journal          
(Northeast edition) or, if not reported thereby, any other authoritative source)
during the 20 trading days preceding the Grantee Request Date.                  

  (d)  Notwithstanding anything else herein to the contrary, any exercise by
the Grantee of its rights under this Section 7 and any compliance by the Company
with its repurchase obligations hereunder shall be subject to (x) compliance    
with applicable laws and regulations, which may, among other things, prohibit   
such exercise or such repurchase of all or a portion of the Option without first
obtaining or making certain consents, approvals, orders, notifications or       
authorizations, and (y) the absence of any preliminary or permanent injunction  
or other order by any court of competent jurisdiction prohibiting or otherwise  
restraining such exercise or repurchase.                                        

   (e)  In the event that the Grantee notifies the Company of its intention to
exercise the Option pursuant to Section 4 hereof, the Company may require the   
Grantee, upon the delivery to Grantee of                                        

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written notice during the period beginning on the Notice Date and ending one day
prior to the applicable Closing Date, to sell to the Company the Option Shares  
acquired by the Grantee pursuant to such exercise of the Option at a purchase   
price per share for such sale equal to the Exercise Price plus $1.00. The       
closing of any repurchase of Option Shares pursuant to this Section 7(e) shall  
take place immediately following the consummation of the sale of the Option     
Shares to the Grantee on the applicable Closing Date at the time and location   
agreed upon for such Closing Date.                                              

8.  REPRESENTATIONS AND WARRANTIES.                                     

(a)  The Company hereby represents and warrants to the Grantee that the 
Company has taken all necessary action to authorize and reserve for issuance and
subject to applicable law to permit it to issue, and at all times from the date 
of this Option Agreement through the Termination Date will have reserved for    
issuance upon exercise of the Option, a sufficient number of authorized shares  
of Company Common Stock for issuance upon exercise of the Option, each of which,
upon issuance pursuant to this Option Agreement and when paid for as provided   
herein, will be validly issued, fully paid and nonassessable, and shall be      
delivered free and clear of all Encumbrances other than Encumbrances under      
applicable law.                                                                 

(b)  The Grantee hereby represents and warrants to the Company that the 
Grantee is acquiring the Option and it will acquire the Option Shares issuable  
upon the exercise thereof for its own account and not with a view to the        
distribution or resale thereof in any manner not in accordance with applicable  
law.                                                                            

Neither the Option nor any of the Option Shares will be offered sold,   
pledged, or otherwise transferred except in compliance with, or pursuant to an  
exemption from, the registration requirements of the Securities Act, and in     
compliance with the terms of this Option Agreement.                             

9.  REGISTRATION RIGHTS.                                                

(a)  The Company shall, if requested by the Grantee at any time and from
time to time within two years of the first exercise of the Option (the          
"REGISTRATION PERIOD"), as expeditiously as reasonably practicable, prepare,    
file and cause to be made effective up to two registration statements under the 
Securities Act in order to permit the offering, sale and delivery or other      
disposition of any or all shares of Company Common Stock or other securities, as
appropriate, that have been acquired by or are issuable to the Grantee upon     
exercise of the Option pursuant to a bona fide firm commitment underwritten     
public offering in which the Grantee and the underwriters shall effect as wide a
distribution of such shares as is reasonably practicable and the Company shall  
use all reasonable commercial efforts to qualify such shares or other securities
under any applicable state securities or "blue sky" laws (except that the       
Company shall not be required to qualify to do business in, or consent to       
general service of process in, any jurisdiction by reason of this provision);   
PROVIDED, HOWEVER, that any such registration request must relate to a number of
shares of Company Common Stock equal to at least 25% of the total Option Shares 
and that any rights to require registration hereunder shall terminate with      
respect to any Shares that may be sold pursuant to rule 144(k) under the        
Securities Act. Without the Grantee's prior written consent, no other securities
may be included in any such registration. The Company shall use all reasonable  
commercial efforts to cause each such registration statement to become          
effective, to obtain all consents or waivers of other parties that are required 
therefor and to keep such registration effective for such period not in excess  
of 120 days from the day such registration statement first becomes effective as 
may be as reasonably necessary to effect such sale or other disposition. The    
obligations of the Company hereunder to file a registration statement and to    
maintain its effectiveness may be suspended for one or more periods of time not 
exceeding 90 days in the aggregate if the Board of Directors of the Company     
shall have determined in good faith that the filing of such registration or the 
maintenance of its effectiveness would require disclosure of nonpublic          
information that would be materially detrimental to the Company, or the Company 
is required under the Securities Act to include audited financial statements for
any period in such registration statement                                       

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and such financial statements are not yet available for inclusion in such       
registration statement, or the Company determines, in its reasonable judgment,  
that such registration would interfere in any material respect with any         
financing, acquisition or other material transaction involving the Company. For 
purposes of determining whether two requests have been made under this Section  
9, only requests relating to a registration statement that has become effective 
under the Securities Act and pursuant to which the Grantee has disposed of at   
least 50% of the shares covered thereby in the manner contemplated therein shall
be counted.                                                                     

    (b)  All fees and expenses associated with the preparation and filing of any
such registration statement pursuant to this Section 9 and any sale covered     
thereby (including any fees related to blue sky qualifications and filing fees  
in respect of the National Association of Securities Dealers, Inc.)             
("REGISTRATION EXPENSES"), shall be for the account of the Company except for   
underwriting discounts or commissions or brokers' fees in respect to shares to  
be sold by the Grantee and the fees and expenses of Grantee's counsel; PROVIDED,
HOWEVER, that the Company shall not be required to pay for any Registration     
Expenses with respect to such registration if the registration request is       
subsequently withdrawn at the request of the Grantee unless the Grantee agrees  
to forfeit its right to request one registration; AND PROVIDED FURTHER that, if 
at the time of such withdrawal the Grantee has learned of a material adverse    
change in the results of operations, condition (financial or other), business or
prospects of the Company from that known to the Grantee at the time of its      
request and has withdrawn the request with reasonable promptness following      
disclosure by the Company of such material adverse change, then the Grantee     
shall not be required to pay any of such expenses and shall retain all remaining
rights to request registration.                                                 

(c)  All of the Grantee's rights under this Section 9 are subject to the
condition that the Grantee shall provide all information reasonably requested by
the Company for inclusion in any registration statement to be filed hereunder.  
If during the Registration Period the Company shall propose to register under   
the Securities Act the offering, sale and delivery or other disposition of      
Company Common Stock for cash for its own account or for the account of any     
other stockholder of the Company pursuant to a firm underwriting, it shall, in  
addition to the Company's other obligations under this Section 9, allow the     
Grantee the right to participate in such registration provided that the Grantee 
participates in the underwriting; PROVIDED, HOWEVER, that, if the managing      
underwriter of such offering advises the Company in writing that in its opinion 
the number of shares of Company Common Stock or other securities, as            
appropriate, requested to be included in such registration exceeds the number   
that can be sold in such offering, the Company shall include in such            
registration, to the extent of the number of shares which the Company is so     
advised can be sold in (or during the time of) such offering, first, all        
securities proposed to be sold by the Company for its own account, or, in the   
case of a secondary offering made pursuant to demand registration rights granted
to any person other than the Company, all shares intended to be included therein
by such person; second all securities, if any, proposed by the Company to be    
sold for the account of certain holders of shares of Company Common Stock       
pursuant to the exercise of their piggyback registration rights under agreements
or other arrangements in effect on the date hereof; third, all shares or        
securities requested to be included in such registration by Grantee under this  
Agreement; and fourth, all securities of the Company to be sold for the account 
of any other person. In connection with any offering, sale and delivery or other
disposition of Company Common Stock pursuant to a registration statement        
effected pursuant to this Section 9, the Company and the Grantee shall provide  
each other and each underwriter of the offering with customary representations, 
warranties and covenants, including covenants of indemnification and            
contribution.                                                                   

10.  PROFIT LIMITATION.  Notwithstanding any provision to the contrary  
contained in this Option Agreement or the Merger Agreement, the Grantee may not 
exercise its rights pursuant to this Option Agreement or Section 7.5(b) of the  
Merger Agreement in a manner that would result in a cash payment to the Grantee 
of an aggregate amount under this Option Agreement (the "Option Buyout          

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Amount") and under Section 7.5(b) of the Merger Agreement of more than the sum  
of (a) the aggregate Exercise Price paid by the Grantee for any Option Shares as
to which the Option has theretofore been exercised, plus (b) $50,000,000. To the
extent that any amount is paid by the Company to the Grantee pursuant to this   
Option Agreement or Section 7.5(b) of the Merger Agreement, the Termination     
Amount payable pursuant to Section 7.5(b) of the Merger Agreement or the Option 
Buyout Amount shall be reduced appropriately so that the aggregate amount       
payable by the Company under this Option Agreement and Section 7.5(b) of the    
Merger Agreement (exclusive of Parent Expenses) shall not exceed such sum.      

11.  LISTING.  If at the time of the occurrence of an Exercise Event the
Company Common Stock is (or any other securities subject to the Option are) then
listed on NASDAQ/NMS or on any other market or exchange, the Company, upon the  
occurrence of an Exercise Event, shall promptly file an application to list on  
NASDAQ/NMS and if not then listed on NASDAQ/NMS on such other market or exchange
the shares of the Company Common Stock or other securities then subject to the  
Option, and shall use all reasonable efforts to cause such listing application  
to be approved as promptly as practicable.                                      

12.  REPLACEMENT OF AGREEMENT.  Upon receipt by the Company of evidence 
reasonably satisfactory to it of the loss, theft, destruction or mutilation of  
this Option Agreement, and (in the case of loss, theft or destruction) of       
reasonably satisfactory indemnification, and upon surrender and cancellation of 
this Option Agreement, if mutilated, the Company will execute and deliver a new 
Option Agreement of like tenor and date.                                        

13.  TRANSFERS.                                                         

The Option Shares may not be sold, assigned, transferred or otherwise   
disposed of except pursuant to (i) Section 7(e) hereof, (ii) in an underwritten 
offering pursuant to Section 8 hereof, or (iii) to any purchaser or transferee  
who would not, to the knowledge of the Grantee, after due inquiry, immediately  
following such sale, assignment, transfer or disposal beneficially own more than
4.9% of the then-outstanding voting power of the Company, except that the       
Grantee shall be permitted to sell any Option Shares if such sale is made       
pursuant to a tender or exchange offer that has been approved or recommended by 
a majority of the members of the Company's board of directors (which majority   
shall include a majority of directors who were directors on the date hereof).   

14.  MISCELLANEOUS.                                                     

(a)  EXTENSION; WAIVER.  At any time prior to the Termination Date, the 
parties hereto may (i) extend the time for the performance of any of the        
obligations or other acts of the other parties hereto, or (ii) waive compliance 
with any of the agreements or conditions contained herein. Any agreement on the 
part of any party to any such extension or waiver shall be valid only if set    
forth in an instrument in writing signed on behalf of such party. Except as     
provided in this Option Agreement, no action taken pursuant to this Option      
Agreement shall be deemed to constitute a waiver by the party taking such action
of compliance with any covenants or agreements contained in this Option         
Agreement. The waiver by any party hereto of a breach of any provision hereunder
shall not operate or be construed as a waiver of any prior or subsequent breach 
of the same or any other provision hereunder.                                   

(b)  AMENDMENT AND MODIFICATION.  Subject to applicable law, this Option
Agreement may be amended, modified and supplemented, or provisions hereof       
waived, in writing by the parties hereto in any and all respects before the     
Termination Date, by action taken by the respective Boards of Directors of the  
Company or the Grantee or by the respective officers authorized by such Boards  
of Directors. This Option Agreement may not be amended except by an instrument  
in writing signed on behalf of each of the parties hereto.                      

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 (c)  FURTHER ACTIONS.  Each of the parties hereto agrees that, subject to
its legal obligations, it will use its reasonable efforts to do all things      
reasonably necessary to consummate the transactions contemplated hereby.        

(d)  NON-EXCLUSIVITY.  The rights and remedies of the Grantee under this
Option Agreement are not exclusive of or limited by any other rights or remedies
which it may have, whether at law, in equity, by contract or otherwise, all of  
which shall be cumulative (and not alternative). Without limiting the generality
of the foregoing, the rights, remedies, obligations and liabilities of each of  
the Grantee and the Company under this Option Agreement, are in addition to     
their respective rights, remedies, obligations and liabilities under common law 
requirements and under all applicable statutes, rules and regulations. The      
covenants and obligations of the Company set forth in this Option Agreement     
shall be construed as independent of any other agreement or arrangement between 
the Company, on the one hand, and the Grantee, on the other. The existence of   
any claim or cause of action by the Company against the Grantee shall not       
constitute a defense to the enforcement of any of such covenants or obligations 
against the Company.                                                            

  (e)  COUNTERPARTS.  This Option Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,  
and all such counterparts shall together constitute the same agreement.         

(f)  GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.                     

   (i)  THIS OPTION AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
  RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE
   WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW
    PRINCIPLES. The parties irrevocably submit to the jurisdiction of the courts
of the State of Delaware solely in respect of the interpretation and    
   enforcement of the provisions of this Option Agreement and of the documents
referred to in this Option Agreement, and in respect of the transactions
contemplated by this Option Agreement and by those documents, and hereby
waive, and agree not to assert, as a defense in any action, suit or     
    proceeding for the interpretation or enforcement of this Option Agreement or
of any such document, that it is not subject to this Option Agreement or
that such action, suit or proceeding may not be brought or is not       
    maintainable in said courts or that the venue thereof may not be appropriate
    or that this Option Agreement or any such document may not be enforced in or
by such courts, and the parties hereto irrevocably agree that all claims
  with respect to such action or proceeding shall be heard and determined in
such a court. The parties hereby consent to and grant any such court    
   jurisdiction over the person of such parties and over the subject matter of
    such dispute and agree that mailing of process or other papers in connection
  with any such action or proceeding in the manner provided in Section 14(g)
or in such other manner as may be permitted by law, shall be valid and  
sufficient service thereof.                                             

       (ii)  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS OPTION AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND  
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND  
  UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
   RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
 TO THIS OPTION AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS OPTION
    AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR      
    OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
 TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER,                             

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  (iii) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS OPTION AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS   
SECTION 14(f).                                                          

   (g)  NOTICES.  Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally, sent by reputable overnight courier, sent by registered or certified
mail, postage prepaid, or by facsimile. 

IF TO THE GRANTEE:                                        
Metromedia Fiber Network, Inc.                            
1 North Lexington Avenue                                  
White Plains, NY 10601                                    
Attention: Howard Finkelstein                             
Fax: (914) 421-6777                                       

WITH COPIES TO:                                           
Metromedia Company                                        
One Meadowlands Plaza                                     
East Rutherford, NJ 07073-2137                            
Attention: Arnold L. Wadler, Esq.                         
Fax: (201) 531-2803                                       

Paul, Weiss, Rifkind, Wharton & Garrison                  
1285 Avenue of the Americas                               
New York, New York 10019-6064                             
Attention: Douglas A. Cifu, Esq.                          
Fax: (212) 757-3990                                       

IF TO THE COMPANY:                                        
AboveNet Communications Inc.                              
50 W. San Fernando Street, Suite #1010                    
San Jose, CA 95113                                        
Attention: Sherman Tuan                                   
Fax: (408) 367-6800                                       

WITH COPIES TO:                                           
Skadden, Arps, Slate, Meagher & Flom LLP                  
300 South Grand Avenue                                    
Los Angeles, California 90071                             
Attention: Nicholas P. Saggese, Esq.                      
Fax: 213-687-7804                                         

or to such other persons or addresses as may be designated in writing by the    
party to receive such notice as provided above.                                 

(h)  ENTIRE AGREEMENT.  This Option Agreement, the Merger Agreement     
(including the documents and instruments attached thereto as exhibits or        
schedules or delivered in connection therewith other than Exhibit D), the       
Confidentiality Agreement and the other documents referred to herein or         
delivered pursuant hereto collectively constitute the entire agreement and      
supersede all other prior agreements, understandings, representations and       
warranties, both written and oral, among the parties, with respect to the       
subject matter of this Option Agreement.                                        

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    (i)  NO THIRD PARTY BENEFICIARIES.  This Option Agreement is not intended to
confer upon any person other than the parties to this Option Agreement any      
rights or remedies under this Option Agreement.                                 

   (j)  SEVERABILITY.  The provisions of this Option Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not     
affect the validity or enforceability or the other provisions of this Option    
Agreement. If any provision of this Option Agreement, or the application of that
provision to any person or any circumstance, is invalid or unenforceable, (i) a 
suitable and equitable provision shall be substituted for that provision in     
order to carry out, so far as may be valid and enforceable, the intent and      
purpose of the invalid or unenforceable provision and (ii) the remainder of this
Option Agreement and the application of the provision to other persons or       
circumstances shall not be affect by such invalidity or unenforceability, nor   
shall such invalidity or unenforceability affect the validity or enforceability 
of the provision, or the application of that provision, in any other            
jurisdiction.                                                                   

(k)  INTERPRETATION.  The headings in this Option Agreement are for     
convenience of reference only, do not constitute part of this Option Agreement  
and shall not be deemed to limit or otherwise affect any of the provisions of   
this Option Agreement. Where a reference in this Option Agreement is made to a  
Section, that reference shall be to a section of this Option Agreement unless   
otherwise indicated. Wherever the words "include," "includes" or "including" are
used in this Option Agreement, they shall be deemed to be followed by the words 
"without limitation."                                                           

(l)  ASSIGNMENT.  This Option Agreement and the Option shall not be     
assignable or delegated in whole or in part by operation of law or otherwise.   
Any assignment, transfer or delegation shall be null and void.                  

   (m)  SPECIFIC PERFORMANCE.  The parties to this Option Agreement agree that
irreparable damage would occur in the event that any of the provisions of this  
Option Agreement were nor performed in accordance with their specific terms or  
were otherwise reached. It is accordingly agreed that the parties shall be      
entitled to an injunction or injunctions to prevent breaches of this Option     
Agreement and to enforce specifically the terms and provisions of this Option   
Agreement in any court of the United States or any state court in each case in  
the State of Delaware, this being in addition to any other remedy to which they 
are entitled at law or in equity.                                               

IN WITNESS WHEREOF, the Company and the Grantee have caused this Option 
Agreement to be signed by their respective officers thereupon duly authorized,  
all as of the day and year first written above.                                 

                                                                [Download Table]
                                              
ABOVENET COMMUNICATIONS INC.                  

By:  /s/ SHERMAN TUAN                         
     -----------------------------------------
     Name: Sherman Tuan                       
     Title:  Chief Executive Officer and      
     Chairman                                 

METROMEDIA FIBER NETWORK, INC.                

By:  /s/ HOWARD FINKELSTEIN                   
     -----------------------------------------
     Name: Howard Finkelstein                 
     Title:  President                        

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                                                                      APPENDIX C

[LETTERHEAD OF SALOMON SMITH BARNEY INC.] 

June 22, 1999                                                                   

Board of Directors                                                              
Metromedia Fiber Network, Inc.                                                  
One North Lexington Avenue                                                      
White Plains, New York 10601                                                    

Members of the Board:                                                           

    You have requested our opinion as to the fairness, from a financial point of
view, to Metromedia Fiber Network, Inc. ("MFN") of the Exchange Ratio (defined  
below) provided for in the Agreement and Plan of Merger, dated as of June 22,   
1999 (the "Merger Agreement"), by and among AboveNet Communications Inc.        
("AboveNet"), MFN and Magellan Acquisition, Inc., a wholly owned subsidiary of  
MFN ("Merger Sub"). As more fully described in the Merger Agreement, (i) Merger 
Sub will be merged with and into AboveNet (the "Merger") and (ii) each          
outstanding share of the common stock, par value $0.001 per share, of AboveNet  
(the "AboveNet Common Stock") will be converted into the right to receive 1.175 
(the "Exchange Ratio") shares of the Class A common stock, par value $0.01 per  
share, of MFN (the "MFN Common Stock").                                         

In arriving at our opinion, we reviewed the Merger Agreement and certain
related documents, and held discussions with certain senior officers, directors 
and other representatives and advisors of MFN and certain senior officers and   
other representatives and advisors of AboveNet concerning the businesses,       
operations and prospects of MFN and AboveNet. We examined certain publicly      
available business and financial information relating to MFN and AboveNet as    
well as publicly available financial forecasts for MFN and AboveNet and other   
information and data for MFN and AboveNet which were provided to or otherwise   
discussed with us by the respective managements of MFN and AboveNet, including  
information relating to certain strategic implications and operational benefits 
anticipated to result from the Merger. We reviewed the financial terms of the   
Merger as set forth in the Merger Agreement in relation to, among other things: 
current and historical market prices and trading volumes of MFN Common Stock and
AboveNet Common Stock; the historical and projected earnings and other operating
data of MFN and AboveNet; and the capitalization and financial condition of MFN 
and AboveNet. We considered, to the extent publicly available, the financial    
terms of other transactions recently effected which we considered relevant in   
evaluating the Merger and analyzed certain financial, stock market and other    
publicly available information relating to the businesses of other companies    
whose operations we considered relevant in evaluating those of MFN and AboveNet.
We also evaluated the potential pro forma financial impact of the Merger on MFN.
In addition to the foregoing, we conducted such other analyses and examinations 
and considered such other financial, economic and market criteria as we deemed  
appropriate in arriving at our opinion.                                         

 In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other     
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to publicly available financial forecasts for
MFN and AboveNet reviewed by or discussed with us, we have been advised by the  
management of MFN that such forecasts reflect reasonable estimates and judgments
as to the future financial performance of MFN and AboveNet. With respect to     
other information and data provided to or otherwise reviewed by or discussed    
with us, including information relating to the strategic implications and       
operational benefits anticipated to result from the Merger, we have been advised
by the managements of MFN and AboveNet that such information and data were      
reasonably prepared on bases reflecting the best currently available estimates  
and judgments of the managements of MFN and AboveNet as to the matters covered  
thereby. We have assumed, with your consent, that the Merger will               

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Board of Directors                                                              
Metromedia Fiber Network, Inc.                                                  
June 22, 1999                                                                   
Page 2                                                                          

be treated as a tax-free reorganization for federal income tax purposes. We are 
not expressing any opinion as to what the value of the MFN Common Stock actually
will be when issued to AboveNet stockholders pursuant to the Merger or the price
at which the MFN Common Stock will trade subsequent to the Merger. We have not  
made or been provided with an independent evaluation or appraisal of the assets 
or liabilities (contingent or otherwise) of MFN or AboveNet nor have we made any
physical inspection of the properties or assets of MFN or AboveNet. We express  
no view as to, and our opinion does not address, the relative merits of the     
Merger as compared to any alternative business strategies that might exist for  
MFN or the effect of any other transaction in which MFN might engage. Our       
opinion is necessarily based upon information available to us, and financial,   
stock market and other conditions and circumstances existing and disclosed to   
us, as of the date hereof.                                                      

Salomon Smith Barney Inc. has been engaged to render financial advisory 
services to MFN in connection with the Merger and will receive a fee for such   
services, a significant portion of which is contingent upon consummation of the 
Merger. We have in the past provided investment banking services to MFN         
unrelated to the proposed Merger, for which services we have received           
compensation. In the ordinary course of our business, we and our affiliates may 
actively trade or hold the securities of MFN and AboveNet for our own account or
for the account of our customers and, accordingly, may at any time hold a long  
or short position in such securities. In addition, we and our affiliates        
(including Citigroup Inc. and its affiliates) may maintain relationships with   
MFN, AboveNet and their respective affiliates.                                  

   Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of MFN in its evaluation of the proposed  
Merger, and our opinion is not intended to be and does not constitute a         
recommendation to any stockholder as to how such stockholder should vote on any 
matter relating to the proposed Merger.                                         

Based upon and subject to the foregoing, our experience as investment   
bankers, our work as described above and other factors we deemed relevant, we   
are of the opinion that, as of the date hereof, the Exchange Ratio is fair, from
a financial point of view, to MFN.                                              

Very truly yours,                                                               

/s/ Salomon Smith Barney Inc.                                                   
SALOMON SMITH BARNEY INC.                                                       

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                                                                      APPENDIX D

                                                                   June 22, 1999

PERSONAL AND CONFIDENTIAL                                                       

Board of Directors                                                              
AboveNet Communications Inc.                                                    
50 West San Fernando Street, #1010                                              
San Jose, California 95113                                                      

Gentlemen:                                                                      

  You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion (the "Fairness Opinion") to the Board of Directors as to the    
fairness to AboveNet Communications Inc. ("AboveNet"), from a financial point of
view, of the consideration to be paid by Metromedia Fiber Network, Inc.         
("Metromedia") to the stockholders of AboveNet in connection with the           
acquisition of AboveNet by Metromedia pursuant to a merger of a wholly-owned    
subsidiary of Metromedia with and into AboveNet (the "Merger"), as provided in  
the Agreement and Plan of Merger (the "Merger Agreement") by and among AboveNet,
Magellan Acquisition, Inc. (a wholly-owned subsidiary of Metromedia), and       
Metromedia. The consideration for the Merger consists of shares of Class A      
Common Stock of Metromedia at an exchange ratio of 1.175 shares of Metromedia   
Class A Common Stock for each share of AboveNet Common Stock.                   

In arriving at our Fairness Opinion, we:                                

(a) reviewed the draft of the Merger Agreement dated June 22, 1999;     

(b) reviewed the audited financial statements of AboveNet for the fiscal
years ended June 30, 1997 and 1998, and the unaudited financial   
       statements of AboveNet for the nine months ended March 31, 1998 and 1999;

  (c) reviewed the audited financial statements of Metromedia for the fiscal
years ended December 31, 1997 and 1998 and the unaudited financial
    statements of Metromedia for the three months ended March 31, 1998 and
1999;                                                             

 (d) reviewed financial projections for AboveNet, prepared and supplied by
     AboveNet's management, for the periods ending June 30, 1999, 2000, 2001
and 2002;                                                         

 (e) reviewed financial projections for Metromedia, derived from published
    research reports, for the periods ending December 31, 1999, 2000, 2001
and 2002;                                                         

   (f) held discussions with senior management of AboveNet and Metromedia with
     respect to the business and prospects for future growth of AboveNet and
Metromedia;                                                       

(f) reviewed and analyzed certain publicly available financial data for 
certain companies we deemed comparable to AboveNet;               

(g) performed discounted cash flow analyses of AboveNet using certain   
   assumptions of future performance provided to us by the management of
AboveNet and Metromedia;                                          

  (h) reviewed and analyzed certain publicly available financial information
for transactions that we deemed comparable to the Merger;         

(i) reviewed public information concerning AboveNet and Metromedia; and 

   (j) performed such other analyses and reviewed such other information as we
deemed appropriate.                                               

In rendering our Fairness Opinion we relied upon and assumed, without   
independent verification or investigation, the accuracy and completeness of all 
of the financial and other information provided                                 

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to us by AboveNet and Metromedia and their respective employees, representatives
and affiliates. With respect to forecasts of future financial condition and     
operating results of AboveNet provided to us, we assumed at the direction of    
AboveNet's management, without independent verification or investigation, that  
such forecasts were reasonably prepared on bases reflecting the best available  
information, estimates and judgment of AboveNet's management. With respect to   
forecasts of future financial condition and operating results of Metromedia, we 
have assumed, without independent verification or investigation, that the       
published research reports from which such forecasts were taken reflect the best
available information and estimates of the persons publishing such reports. We  
have neither made nor obtained any independent evaluations or appraisals of the 
assets or the liabilities of AboveNet or Metromedia or their affiliated         
entities. We are not expressing any opinion as to the underlying valuation,     
future performance or long term viability of Metromedia or the AboveNet         
operations following the Merger, or the price at which Metromedia Class A Common
Stock will trade subsequent to the Merger. We have assumed that the Merger will 
be completed in accordance with the terms of the Merger Agreement. Our opinion  
is necessarily based on the information available to us and general economic,   
financial and stock market conditions and circumstances as they exist and can be
evaluated by us on the date hereof. It should be understood that, although      
subsequent developments may affect this opinion, we do not have any obligation  
to update, revise or reaffirm the opinion.                                      

As part of our investment banking business, we are regularly engaged in 
valuations of businesses and securities in connection with acquisitions and     
mergers, underwritings, secondary distributions of securities, private          
placements and valuations for other purposes.                                   

    We have acted as financial advisor to AboveNet in connection with the Merger
and to the Board of Directors of AboveNet in rendering this opinion and will    
receive a fee for our services. CIBC World Markets has performed investment     
banking and other services for AboveNet in the past and has been compensated for
such services. CIBC World Markets may in the future provide investment banking  
or other financial advisory services to AboveNet or Metromedia.                 

In the ordinary course of business, CIBC World Markets acts as a market 
maker and broker in publicly traded securities of AboveNet and receives         
customary compensation in connection therewith, and also provides research      
coverage for AboveNet. In the ordinary course of its business, CIBC World       
Markets and its affiliates may also actively trade securities of AboveNet and   
Metromedia for their own account and for the accounts of customers and,         
accordingly, may at any time hold a long or short position in such securities.  

  Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the merger consideration to be paid by Metromedia to the           
stockholders of AboveNet pursuant to the Merger Agreement is fair to the        
stockholders of AboveNet from a financial point of view. This Fairness Opinion  
is for the exclusive use of the Board of Directors of AboveNet. Neither this    
Fairness Opinion nor the services provided by CIBC World Markets in connection  
herewith may be publicly disclosed or referred to in any manner by AboveNet     
without the prior written approval by CIBC World Markets. CIBC World Markets    
consents to the inclusion of this opinion in its entirety and any reference to  
this opinion, subject to the approval by CIBC World Markets of references to it 
or this opinion therein, in any prospectus, proxy statement or                  
solicitation/recommendation statement, as the case may be, filed by AboveNet or 
Metromedia in connection with the Merger.                                       

                 Very Truly Yours,

                            /s/ CIBC World Markets Corp.
  ------------------------------------------------------------------------------

                        CIBC World Markets Corp.

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                                                                      APPENDIX E

VOLPE BROWN WHELAN & COMPANY, LLC 
INVESTMENT BANKERS
One Maritime Plaza, San Francisco, CA 94111 
(415) 274-4400 FAX (415) 986-6754 

PRIVATE AND CONFIDENTIAL                                                        

June 22, 1999                                                                   

The Board of Directors                                                          
AboveNet Communications, Inc.                                                   
50 West San Fernando Street, #1010                                              
San Jose, CA 95113                                                              

Members of the Board:                                                           

 You have requested our opinion (the "Opinion") as to the fairness, from a
financial point of view to the stockholders of AboveNet Communications, Inc.    
("AboveNet"), of the consideration to be received by such stockholders pursuant 
to the Agreement and Plan of Merger (the "Agreement") dated as of June 22, 1999,
by and among AboveNet, Metromedia Fiber Network, Inc. ("Metromedia") and a      
subsidiary of Metromedia established for purposes of the transaction ("Merger   
Sub"). Pursuant to the Agreement, Merger Sub will be merged with and into       
AboveNet (the "Merger"), which shall be the surviving corporation, and the      
separate existence of Merger Sub shall cease.                                   

The Agreement provides, among other things, that each share of AboveNet 
common stock ("AboveNet Common Stock") will be converted into the right to      
receive 1.175 shares (the "Exchange Ratio") of Metromedia Class A common stock  
("Metromedia Common Stock"). It is our understanding that the parties intend    
that the transaction will be accounted for as a purchase transaction for        
financial reporting purposes. It is also our understanding that the parties     
intend that the transaction generally will constitute a nontaxable              
reorganization for United States federal income tax purposes.                   

  For the purposes of formulating this Opinion, we have, among other things:

(i)   reviewed the Agreement;                                           

(ii)   held discussions with management of AboveNet and Metromedia      
    concerning their respective businesses, past and current operations,
        financial condition and future prospects as standalone concerns and as a
combined enterprise;                                            

 (iii)   reviewed certain AboveNet and Metromedia financial statements and
        other relevant financial and operating data prepared by the AboveNet and
Metromedia management teams respectively;                       

  (iv)   reviewed the historical stock trading patterns of both AboveNet and
Metromedia and analyzed implied historical exchange ratios;     

 (v)   reviewed the premium of the per share consideration, in relation to
        selected merger and acquisition transactions that we deemed relevant and
comparable to the Merger;                                       

(vi)   reviewed the valuation of selected publicly traded companies we  
deemed comparable and relevant to AboveNet and Metromedia;      

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  (vii)   reviewed, to the extent publicly available, the financial terms of
      selected merger and acquisition transactions that we deemed comparable
and relevant to the Merger;                                     

(viii)  performed a valuation based upon AboveNet's and Metromedia's    
      relative contribution to pro forma combined revenue and cash earnings;

   (ix)   performed a discounted cash flow analyses of AboveNet and Metromedia
as standalone entities;                                         

(x)   performed a pro forma financial impact analysis of the combined   
  entity, based upon information established from publicly available
    sources and discussions with AboveNet and Metromedia management; and

  (xi)   performed such other studies, analyses and inquiries and considered
such other information as we deemed relevant.                   

Volpe Brown Whelan & Company, LLC ("VBW&Co."), is relying upon the      
information provided to us by AboveNet and Metromedia for the purposes of       
rendering this Opinion. VBW&Co. expresses no opinion and has made no            
investigation with respect to the validity, accuracy or completeness of the     
information provided to us, including financial, accounting, legal, tax,        
operating and other information, and does not warrant as to the accuracy of any 
such information. Actual results that AboveNet or Metromedia might achieve in   
the future as standalone entities or as a combined company may vary materially  
from those used in VBW&Co.'s analysis.                                          

 We were not asked to, and we did not conduct a market survey to determine
the interest of other potential acquirors in AboveNet. We are expressing no     
opinion as to the relative merits of the Merger as compared to any alternative  
business strategies that might exist for AboveNet or the effect of any other    
transaction in which AboveNet might engage. VBW&Co. has, furthermore, not made  
any independent appraisals or valuations of any assets of AboveNet or           
Metromedia, nor has VBW&Co. been furnished with any such appraisals or          
valuations. While VBW&Co. believes that its review, as described herein, is an  
adequate basis for this Opinion it has expressed, this Opinion is necessarily   
based upon market, economic and other conditions that exist and can only be     
evaluated as of the date of this Opinion.                                       

  VBW&Co. has assumed that the Merger will be consummated in accordance with
the terms of the Agreement without waiver of any of the conditions to the       
parties' obligations thereunder, that there will be no material changes to such 
the Agreement and that the ratio of shares of Metromedia Common Stock to be     
received for each share of AboveNet Common Stock will be 1.175.                 

This Opinion addresses only the consideration to be received by the     
stockholders of AboveNet and does not address the relative merits of the Merger,
AboveNet's decision to proceed with the Merger, the effect of the Merger, or any
other aspect of the Merger.                                                     

The preparation of a fairness opinion involves various judgments as to  
appropriate and relevant quantitative and qualitative methods of financial      
analysis and the application of those methods to the particular circumstances   
and, therefore, such an opinion is not readily susceptible to summary           
description. Accordingly, we believe our analysis and the factors utilized in   
such analyses must be considered as a whole and that considering any portion of 
such analyses or factors, without considering all analyses and factors could    
create a misleading or incomplete view of the process underlying this Opinion.  
In our analyses, we made numerous assumptions with respect to industry          
performance, general business and other conditions and matters, many of which   
are beyond AboveNet's or Metromedia's control and are not susceptible to        
accurate prediction. Several analytical methodologies were employed and no one  
method of analysis should be regarded as critical to the overall conclusion     
reached by VBW&Co. Each analytical technique has inherent strengths and         
weaknesses, and the nature of the available information may further affect the  
value of particular techniques. The conclusion                                  

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reached by VBW&Co. is based on all analyses and factors taken as a whole and    
also on application of VBW&Co's own experience and judgement. This conclusion   
may involve significant elements of subjective judgement and qualitative        
analysis. VBW&Co. therefore gives no opinion as to the value or merit standing  
alone of any one or more parts of the analysis it performed. Any estimates      
contained in these analyses are not necessarily indicative of actual values or  
predicative of future results or values, which may be significantly more or less
favorable than those suggested by these analyses. Accordingly, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the    
prices at which these businesses actually may be sold in the future, and these  
estimates are inherently subject to uncertainty.                                

  As a customary part of its investment banking business, VBW&Co. engages in
the valuation of businesses and their securities in connection with mergers and 
acquisitions, negotiated underwritings, secondary distributions of securities,  
private placements and valuations for corporate and other purposes. We have     
acted as financial advisor to the Board of Directors of AboveNet in connection  
with the transaction described above, and will receive a fee for our services, a
portion of which is contingent upon consummation of the Merger. We have also    
acted as co-managing underwriter of public offerings of the AboveNet Common     
Stock and have received fees for services provided to AboveNet. VBW&Co.         
regularly publishes research reports regarding the Internet infrastructure      
industry, and on AboveNet. In addition, in the ordinary course of our business, 
VBW&Co. and its affiliates may actively trade the equity securities of AboveNet 
or Metromedia for their own account and for the accounts of customers and,      
accordingly, may at any time hold a long or short position in such securities.  

 No opinion is expressed herein as to the future trading price or range of
prices of any securities of Metromedia issued prior to or in conjunction with   
the Merger. The consideration to be received by AboveNet stockholders is based  
on a fixed exchange ratio and, accordingly, the market value of such            
consideration may vary. This Opinion does not constitute a recommendation as to 
the Board of Directors' decision on whether to support the Merger and recommend 
it to AboveNet's stockholders and does not constitute a recommendation to       
stockholders as to whether to vote in favor of the Merger. This Opinion and     
related materials have been prepared for the use and benefit of the Board of    
Directors of AboveNet. VBW&Co. assumes no obligation to update, revise or       
reaffirm this Opinion. We hereby consent to the inclusion of this letter in the 
Registration Statement on Form S-4 and in the joint proxy statement to be sent  
to the stockholders of AboveNet and Metromedia, and to reference to our firm    
name therein. In giving such consent, we do not thereby admit that we come      
within the category of persons whose consent is required under Section 7 of the 
Securities Act of 1933, as amended, or the rules and regulations adopted by the 
Securities and Exchange Commission thereunder, nor do we admit that we are      
experts with respect to any part of such Registration Statement within the      
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission          
thereunder.                                                                     

   Based upon and subject to the foregoing limitations and restrictions, it is
our opinion that, as of the date hereof, the consideration to be received by the
stockholders of AboveNet pursuant to the Agreement is fair, from a financial    
point of view, to the stockholders of AboveNet.                                 

                                                                [Download Table]
                                            
Very truly yours,                           

/s/ VOLPE BROWN WHELAN & COMPANY, LLC       
--------------------------------------------
VOLPE BROWN WHELAN & COMPANY, LLC           
By: /s/ James R. Freney                     
Date: June 22, 1999                         

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 APPENDIX - PROXY CARD
 PROXY

METROMEDIA FIBER NETWORK, INC.

 One North Lexington
White Plains, NY 10601

 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
  SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 8, 1999, 9:00 a.m.

The undersigned hereby appoints Gerard Benedetto, Dennis E. Codlin and
Arnold L. Wadler, and each of them as proxies, each with the power to appoint   
his substitute, and hereby authorizes them to represent and to vote, as         
designated below, all of the shares of Class A Common Stock of Metromedia       
Fiber Network, Inc. held of record by the undersigned on July 14, 1999 at the   
Special Meeting of Shareholders to be held on September 8, 1999, or any         
adjournment or postponement thereof.                                            

The Board of Directors recommends a vote "FOR" each of the listed proposals.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
 USING THE ENCLOSED ENVELOPE

 (continued on reverse side)

--------------------------------------------------------------------------------
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                                                         Please mark
                                                           your votes as
                                                          indicated in
                                                              this example /X/

              FOR     WITHHOLD
1.   The approval of the issuance      /  /       /  /                          
of shares of class A common                                           
stock in connection with the                                          
merger agreement among                                                
Metromedia, AboveNet                                                  
Communications Inc., and a                                            
subsidiary of Metromedia Fiber                                        
Network, Inc.                                                         

             THIS PROXY WHEN PROPERLY EXECUTED WILL VOTE IN THE MANNER
         DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
                DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE APPROVAL
          OF AUTHORIZATION OF SHARES OF CLASS A COMMON STOCK. IN
             THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
       SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY ADJOURNMENT THEREOF. 

Signature(s)_____________________________ Dated _________________________, 1999 

IMPORTANT: Please sign exactly as name appears on this card. Each joint owner   
should sign. Executors, administrator trustees, etc. should give full title.    

--------------------------------------------------------------------------------
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APPENDIX - PROXY CARD 
 PROXY

ABOVENET COMMUNICATIONS INC.

50 W. San Fernando Street, #1010
San Jose, CA 95113

 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
    MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 8, 1999, 9:00 a.m.

  The undersigned hereby appoints Sherman Tuan and David Rand, and each of
them as proxies, each with the power to appoint his substitute, and hereby      
authorizes them to represent and to vote, as designated below, all of the shares
of the Common Stock of AboveNet Communications Inc. held of record by the       
undersigned on July 14, 1999 at the Special Meeting of Stockholders to be held  
on September 8, 1999, or any adjournment or postponement thereof.               

The Board of Directors recommends a vote "FOR" proposal 1.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED 
ENVELOPE TO ABOVENET COMMUNICATIONS INC. 50 W. SAN FERNANDO STREET, #1010,
SAN JOSE, CA 95113    
ATTENTION:  

 (continued on reverse side)
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                                                  Please mark your
                                                         votes as indicated  /X/
                                                 in this example

                                FOR   WITHHOLD   ABSTAIN
1.   Adoption and approval of the merger    / /     / /        / /              
agreement among Metromedia Fiber                                      
Network, Inc., AboveNet                                               
Communications Inc., and Magellan                                     
Acquisition, Inc., a subsidiary of                                    
Metromedia Fiber Network, Inc. and                                    
the proposed merger of AboveNet                                       
with Magellan so that AboveNet                                        
would become a wholly owned                                           
subsidary of Metromedia.                                              

                                            THIS PROXY WHEN PROPERLY
                                             EXECUTED WILL VOTE IN THE
                                                 MANNER DIRECTED HEREIN BY THE
                                                  UNDERSIGNED STOCKHOLDER. IF NO
                                                 DIRECTION IS MADE, THIS PROXY
                                         WILL BE VOTED FOR THE
                                                ADOPTION AND APPROVAL OF THE
                                            MERGER AGREEMENT AND THE
                                                MERGER. IN THEIR DISCRETION,
                                                 THE PROXIES ARE AUTHORIZED TO
                                                 VOTE UPON SUCH OTHER BUSINESS
                                               AS MAY PROPERLY COME BEFORE
                                              THE SPECIAL MEETING OR ANY
                                               ADJOURNMENT OR POSTPONEMENT
                            THEREOF.

Signature(s)                                                 Dated      ,1999   
    ------------------------------------------             -----
IMPORTANT: Please sign exactly as name appears on this card. Each joint owner   
           should sign. Executors, administrator trustees, etc. should give full
title.                                                    

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