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Filed pursuant to Rule 424(b)(3)
Registration No. 333-32123
PROSPECTUS
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2,900,000 SHARES
EXCITE, INC.
COMMON STOCK
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All of the shares of Common Stock of Excite, Inc. (the "Company")
offered hereby are being sold by Intuit Inc. ("Intuit"). The shares of Common
Stock offered hereby were issued to Intuit by the Company on June 25, 1997
pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement") dated as
of June 11, 1997 between the Company and Intuit. The Company will not receive
any proceeds from the sale of the shares of the Common Stock offered hereby.
Such shares are being offered on a continuous basis pursuant to Rule 415 under
the Securities Act of 1933, as amended (the "Act"), during up to four "permitted
windows" which can occur, subject to certain resale restrictions, during a
period which will commence on the date on which the Registration Statement of
which this Prospectus forms a part becomes effective and which will end on June
26, 1999 or such earlier time that all of the securities offered hereby either
(i) have been sold, (ii) may be sold within a three-month period under Rule 144
under the Act, or (iii) have ceased to be "Intuit Registrable Securities"
pursuant to a Registration Rights Agreement between the Company and Intuit. See
"Plan of Distribution."
The Common Stock of the Company is quoted on the Nasdaq National Market
("NNM") under the symbol "XCIT." On August 12, 1997, the closing price of the
Common Stock on the NNM was $17.00 per share. The shares of Common Stock offered
hereby represent approximately 19.0% of the Company's outstanding Common Stock
(based on shares outstanding at June 30, 1997).
Intuit directly, through agents designated from time to time, or
through broker-dealers or underwriters also to be designated, may sell the
shares of Common Stock offered hereby from time to time on terms to be
determined at the time of sale. To the extent required, the specific shares to
be sold, public offering price, the names of any such agent, broker-dealer, or
underwriter and any applicable commission or discount will be set forth in an
accompanying supplement to this Prospectus (a "Prospectus Supplement"). See
"Selling Shareholder" and "Plan of Distribution." Intuit reserves the sole right
to accept or reject, in whole or in part, any proposed purchase of the shares
offered hereby to be made in the manner set forth above.
The distribution of the Shares by Intuit may be effected from time to
time in one or more transactions in the over-the-counter market, in the Nasdaq
National Market, or in privately negotiated transactions at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, or at negotiated prices. Intuit and any underwriters, broker-dealers, or
agents that participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, as amended (the "Securities Act"), and any profit on the sale of the
Shares by them and any commissions, discounts, or concessions received by any
such underwriters, broker-dealers, or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. See "Plan of Distribution"
for indemnification arrangements between the Company and Intuit.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 6.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO THE UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC (1) DISCOUNT COMPANY SHAREHOLDER(1)
---------- -------- ------- --------------
<S> <C> <C> <C> <C>
PER SHARE........................ see text above none none see text above
TOTAL............................ see text above none none see text above
</TABLE>
- -----------
(1) THE SHARES OF COMMON STOCK OF THE COMPANY OFFERED HEREBY WILL BE SOLD FROM
TIME TO TIME AT THE THEN PREVAILING MARKET PRICES, AT PRICES RELATING TO
PREVAILING MARKET PRICES OR AT NEGOTIATED PRICES. THE COMPANY WILL PAY ALL
EXPENSES RELATING TO THE REGISTRATION OF THE SHARES OFFERED HEREBY,
ESTIMATED AT $50,000. SEE "PLAN OF DISTRIBUTION."
THE DATE OF THIS PROSPECTUS IS AUGUST 12, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a World Wide Web site (located at
http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding the Company. The Company's Common Stock is quoted
for trading on the NNM, and reports, proxy statements and other information
concerning the Company may be inspected at the offices of the National
Association of Securities Dealers, Inc., 9513 Key West Avenue, Rockville,
Maryland 20850.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to the Company and
the Common Stock offered hereby, reference is made to the Registration Statement
and the exhibits filed therewith or incorporated therein by reference.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or incorporated therein by
reference, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected, without
charge, at the offices of the Commission in Washington, D.C. and copies of all
or any part of the Registration Statement may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon the payment of the fees prescribed by
the Commission.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or any Selling Stockholder. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date hereof or that there has been no change in
the affairs of the Company since such date.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) The Company's annual report on Form 10-K, as amended by Form 10-K/A,
for the fiscal year ended December 31, 1996.
(b) The Company's quarterly report on Form 10-Q for the three months ended
March 31, 1997.
(c) The Company's current reports on Form 8-K filed with the Commission on
April 2, 1997 (as amended by the Form 8-K/A filed with the Commission
on May 9, 1997), June 19, 1997 and July 9, 1997.
(d) The Company's Proxy Statement for the Annual Meeting of Shareholders
filed with the Commission on April 29, 1997.
(e) All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act following the fiscal year ended
December 31, 1996 and prior to the termination of the offering
contemplated hereby.
(f) The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed with the Commission
under the Exchange Act, including any amendments or reports filed for
the purpose of updating such description.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Requests should be directed to Robert C. Hood,
Executive Vice President, Chief Administrative Officer and Chief Financial
Officer, Excite, Inc., 555 Broadway, Redwood City, California 94063; telephone
number (415) 568-6000.
THE COMPANY
The Company operates the Excite Network, which includes the Excite and
WebCrawler brands, and provides a gateway to the World Wide Web (the "Web") that
organizes, aggregates and delivers information to meet the needs of individual
consumers. Excite, formerly Architext Software, Inc., was formed in June 1994
and, from its inception to September 1995, its operating activities related
primarily to recruiting personnel, raising capital, purchasing operating assets,
providing custom product development and consulting, and developing services.
The Company first launched its Excite search and directory service in October
1995.
The Company has achieved only limited revenues to date, has incurred
significant operating losses since inception and as of June 30, 1997, the
Company had an accumulated deficit of approximately $66.9 million. The Company
has also experienced significant increases in operating losses on an annual and
quarterly basis since inception. Although the Company has experienced
significant revenue growth during 1996 and the first two quarters of 1997, there
can be no assurance that this growth rate will be sustained or that revenues
will continue to grow. There can also be no assurance that any revenue growth
that the Company experiences will be indicative of future operating results. In
addition, the Company has increased, and plans to increase further, its
operating expenses in order to increase its sales and
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marketing efforts, fund greater levels of product development and increase its
general and administrative costs to support the enlarged organization. To the
extent that revenues do not grow at anticipated rates or that increases in such
operating expenses precede or are not subsequently followed by commensurate
increases in revenues, or that the Company is unable to adjust operating expense
levels accordingly, the Company's business, results of operations and financial
condition will be materially and adversely affected. Given the level of planned
expenditures, the Company anticipates that it will continue to incur operating
losses through at least the end of 1997. As a result of the acquisition of the
assets relating to the Web Crawler search and retrieval service and other
acquisitions, operating results will be negatively affected by approximately
$10.1 million in amortization in 1997, and $1.1 million in amortization in 1998,
assuming no additional acquisitions and no significant adjustments to the
economic lives of the underlying intangible assets. The extent of the future
losses will be contingent on the amount of the growth in the Company's
advertising revenues which in turn depends on a variety of factors, including,
without limitation, the factors described under "Risk Factors" and elsewhere in
this Prospectus.
The principal executive offices of the Company are located at 555
Broadway, Redwood City, California 94063, and its telephone number is (415)
568-6000. In this Prospectus, the term "Excite" or the "Company" refers to
Excite, Inc., a California corporation and its subsidiaries, unless the context
otherwise requires.
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RISK FACTORS
In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
presented in this Prospectus.
EXTREMELY LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT AND ANTICIPATION OF
CONTINUED LOSSES
The Company was founded in June 1994 and commenced offering Excite
services in October 1995. The McKinley Group, Inc. ("McKinley"), which was
acquired by the Company in August 1996, originally began operations in December
1993 and generated only limited revenues prior to 1996. Accordingly, the Company
has an extremely limited operating history upon which an evaluation of the
Company and its current business can be based. The Company's business must be
considered in light of the risks, expenses and problems frequently encountered
by companies in their early stage of development, particularly companies in new
and rapidly evolving markets such as the Web and Web-based advertising markets.
Specifically, such risks include, without limitation, the failure of the Company
to maintain premier positions on certain high traffic Web access points such as
those maintained by America Online, Inc. ("AOL"), Microsoft and Netscape
Communications Corporation ("Netscape"), the failure of the Company to
anticipate and adapt to a developing market, the rejection of the Company's
services by Web consumers and/or advertisers, the inability of the Company to
maintain and increase the levels of traffic on its network (the "Excite
Network"), development of equal or superior services or products by competitors,
the failure of the market to adopt the Web as an advertising medium, reductions
in market prices for Web-based advertising, the inability of the Company to
effectively integrate the technology and operations of McKinley, AOL's
WebCrawler Web search and retrieval service with the Company acquired in March
1997 (the "WebCrawler Assets"), or any other subsequently acquired businesses or
technologies with its operations, the ability of the Company to enter into
strategic and other content relationships with third parties and the commercial
success of the services offered through such relationships, and the inability to
identify, attract, retain and motivate qualified personnel. There can be no
assurance that the Company will be successful in addressing such risks. The
Company has achieved only limited revenues to date and has incurred significant
operating losses since inception, and as of March 31, 1997, the Company had an
accumulated deficit of approximately $59.0 million. The Company has also
experienced significant increases in operating losses on an annual and quarterly
bases since inception. Although the Company has experienced significant revenue
growth during 1996 and in the first two quarters of 1997, there can be no
assurance that this growth rate will be sustained or that revenues will continue
to grow. There can also be no assurance that any revenue growth that the Company
experiences will be indicative of future operating results. In addition, the
Company has increased, and plans to increase further, its operating expenses in
order to increase its sales and marketing efforts, fund greater levels of
product development and increase its general and administrative costs to support
the enlarged organization. To the extent that revenues do not grow at
anticipated rates or that increases in such operating expenses precede or are
not subsequently followed by commensurate increases in revenues, or that the
Company is unable to adjust operating expense levels accordingly, the Company's
business, results of operations and financial condition will be materially and
adversely affected. Given the level of planned expenditures, the Company
anticipates that it will continue to incur operating losses through at least the
end of 1997. The extent of these losses will be contingent on the amount of
growth in the Company's advertising revenues which in turn depends on the
factors noted above. Although the Company does not anticipate that its operating
loss will continue to increase, there can be no assurance that operating losses
will not increase in the future or that the Company will ever achieve or sustain
profitability.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; UNPREDICTABILITY OF FUTURE REVENUES
As a result of the Company's extremely limited operating history, the
Company has no meaningful historical financial data upon which to base planned
operating expenses. Accordingly, the Company's
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expense levels are based in part on its expectations as to future advertising
revenues and to a large extent are fixed. There can be no assurance that the
Company will be able to accurately predict the levels of future advertising
revenues, particularly in light of the intense competition for the sale of
Web-based advertisements and the uncertainty as to the viability of the World
Wide Web (the "Web") as an advertising medium, and the failure to do so would
have a materially adverse effect on the Company's business, results of
operations and financial condition. In addition, the Company derives
substantially all of its revenues from the sale of advertising pursuant to
short-term advertising contracts. As a result, quarterly sales and operating
results are entirely dependent on advertising revenues received within the
quarter, which are difficult to forecast, and are also dependent on the
Company's ability to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. The cancellation or deferral of a small number of
existing advertising contracts, the termination of any longer-term sponsorship
agreements, or the failure to obtain new advertising contracts in any quarter
could materially and adversely affect the Company's business, results of
operations and financial condition for such quarter. Furthermore, the Company
derives advertising revenue based on the amount of traffic, or page views, on
the Excite Network. Accordingly, any significant shortfall of traffic on the
Excite Network in relation to the Company's expectations or the expectations of
existing or potential advertisers, would have an immediate material adverse
effect on the Company's business, results of operations and financial condition.
In addition, certain of the Company's short-term advertising contracts, as well
as its newer sponsorship agreements, require the Company to guarantee a minimum
number of impressions. In the event that these minimum impressions are not met,
the Company could be required to refund a portion of the fees from such
advertisers or the sponsorship agreements may be terminated. If the Company
fails to meet this guaranteed number of impressions, the ability of the Company
to sell advertising to new or existing advertisers could be adversely affected
or the Company would not receive the total amount of payments to be paid under
its sponsorship agreements. See "--Reliance on Advertising Revenues."
The Company's operating results have varied on a quarterly basis during
its limited operating history and the Company expects to experience significant
fluctuations in future quarterly operating results. Such fluctuations have been
and may in the future be caused by numerous factors, many of which are outside
the Company's control, including, without limitation, specific economic
conditions relating to the Internet and the Web, usage of the Web, demand for
advertising on the Excite Network as well as demand for Web-based advertising in
general, changes in advertising rates as a result of competition or otherwise,
seasonal trends in advertising sales, the advertising budgeting cycles of
advertisers, incurrence of charges in connection with the Company's distribution
relationships with Netscape, AOL and other Internet service providers ("ISPs")
and online service providers ("OSPs") or other third parties, the ability of the
Company to enter into other strategic and content relationships and the
acceptance of the services offered through such relationships by users of the
Excite Network or other Web consumers, demand for the Company's services,
incurrence of costs relating to acquisitions of businesses or technologies,
introduction or enhancement of services by the Company and its competitors,
market acceptance of new services, delays in the introduction of services or
enhancements by the Company or its competitors, changes in the Company's pricing
policies or those of its competitors, mix of types of advertisements sold, such
as the amount of targeted advertising sold as a percentage of total advertising
sold, or the number of sponsorship agreements entered into, capacity constraints
and dependencies on computer infrastructure and general economic conditions. In
order to promote and maintain awareness of the Company's brands, the Company has
in the past and may in the future significantly increase its advertising and/or
promotion budgets for a particular quarter which could materially and adversely
affect the Company's business, results of operations and financial condition for
such period. As a strategic response to a changing competitive environment, the
Company may elect from time to time to make certain other pricing, service or
marketing decisions or acquisitions that could have a material adverse effect on
the Company's business, results of operations and financial condition. As a
result, the Company believes that period-to-period comparisons of its results of
operations will not necessarily be meaningful and should not be relied upon as
an indication of future performance. Due to all of the foregoing factors, it is
likely that in some future quarter or quarters the Company's operating results
will be below the expectations of public market analysts and investors. In
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such event, the price of the Company's Common Stock would be materially and
adversely affected. See "--Volatility of Stock Price."
DEPENDENCE ON NETSCAPE AND AOL
In March 1997, the Company entered into new agreements with Netscape
which commenced in May 1997 whereby the Excite brand is one of four "Premier
Providers" and the Company's WebCrawler brand is one of several "Marquee
Providers" of search and navigation services accessible from Netscape's "Net
Search" page. Under the terms of these new agreements, the Company is obligated
to make minimum aggregate payments of $8.25 million in cash and advertising
services over the one year term of the agreements. If the Company were not able
to enter into replacement agreements with Netscape with respect to its "Premier
Provider" or "Marquee Provider" arrangements at the end of the term, the Excite
Network could lose a significant portion of its traffic, and as a result,
advertising revenues would be materially and adversely affected. In addition, if
any replacement agreements with Netscape are on materially worse terms than
those of the Company's current Premier Provider Agreement or Marquee Provider
Agreement, there would be a material adverse effect on the Company's business,
results of operations and financial condition.
The Company has also entered into a five-year distribution agreement
with AOL pursuant to which a co-branded version of the Excite search and
directory services is designated as the exclusive Web search and retrieval
service for AOL for at least a two year period. Pursuant to this agreement, the
Company and AOL share advertising revenues attributable to the co-branded
service hosted on AOL. After the expiration of this initial two year exclusivity
period, the parties can extend the exclusive arrangement only by mutual
agreement. If the exclusivity period does not extend beyond the initial two year
term, the co-branded service would become the "default" search and directory
service on AOL, however, AOL could enter into a strategic relationship with a
competitor of the Company or offer its own competing services. In such an event,
the amount of the Company's advertising revenues could be materially and
adversely affected. In addition, if the Company fails to satisfy certain
technical, product feature and editorial criteria during the term of the
agreement, if the Company and AOL fail to renew this agreement upon the
expiration of the five year term, or if any renewal is on materially worse terms
than the initial agreement with AOL, there could be a material adverse effect on
the Company's business, results of operations and financial condition. As a
result of its implementation of a flat-rate pricing program, there have been
numerous reports in the press and potential litigation regarding, among other
things, AOL's capacity to handle a large number of subscribers. There can be no
assurance that AOL will not experience a decline in the number of its
subscribers as a result of these reports or as a result of the problems
reported. The Company's operating results could be adversely affected if AOL,
for any reason, were to lose significant market share, experience a significant
decrease in the number of its subscribers, or experience a significant decrease
in the number of its subscribers utilizing AOL for their Web search and
retrieval needs. In addition, any decline in the number of AOL subscribers could
adversely affect the amount of traffic on the Excite Network. See
"--Acquisition Strategy; Integration of Past and Future Acquisitions."
RELIANCE ON ADVERTISING REVENUES
There is a lack of proven business models for companies like Excite
which rely substantially upon the sale of advertisements on the Web. The
Company's current business model, which evolves as the Web develops, is based on
deriving substantially all of its revenues from selling advertising space on its
network as consumers utilize the Company's services for their Web search and
retrieval needs. A majority of the Company's advertising customers purchase
advertisements on a short-term basis. There can be no assurance that current
advertisers will continue or increase the level of, or that potential new
advertisers will purchase, advertisements on the Excite Network. The Company's
ability to generate significant advertising revenues will depend, among other
things, on advertisers' acceptance of the Web
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as an effective and sustainable advertising medium, the development of a large
base of users of the Company's services possessing demographic characteristics
attractive to advertisers and the ability of the Company to develop and update
effective advertising delivery and measurement systems. The Company believes
that establishing and maintaining the Excite and WebCrawler brands is a critical
aspect of developing a large user base and that the importance of brand
recognition will increase as competition increases. In addition, there is
intense competition in the sale of advertising on the Web, resulting in a wide
range of rates quoted and a variety of pricing models offered by different
vendors for a variety of advertising services which makes it difficult to
project future levels of advertising revenues and rates. It is also difficult to
predict which pricing models will be adopted by the industry or advertisers. For
example, advertising rates based on the number of "click throughs" from the
Company's network to the advertiser's pages, instead of rates based solely on
the number of impressions, would materially adversely affect the Company's
revenues. Moreover, "filter" software programs that limit or remove advertising
from a Web user's desktop are available. Widespread adoption of such software by
users could have a material adverse effect upon the viability of advertising on
the Web. Accordingly, there can be no assurance that the Company will be
successful in generating significant future advertising revenues, and a failure
to do so would have a material adverse effect on the Company's business, results
of operations and financial condition. See "--Developing Market; Validation of
the Web as an Effective Advertising Medium," "--Intense Competition" and
"--Technological Change; Dependence on New and Enhanced Services; Risk of
Delays."
INTENSE COMPETITION
The market for Web advertising and Web search and retrieval services is
intensely competitive. The Company believes that the principal competitive
factors in these markets are name recognition, amount of user traffic, pricing,
performance, ease of use and functionality. The Company's primary competitors
are Web search and retrieval companies such as Yahoo!, Inc., Infoseek
Corporation and Lycos, Inc. and specific search and retrieval services and
products offered by other companies, including Digital Equipment Corporation's
Alta Vista, HotWired Venture's and Inktomi's HotBot, and OpenText. The Company
also competes indirectly with Web content broadcasting services, such as The
PointCast Network's PointCast, and with services from other database vendors,
such as Lexis/Nexis, Dialog and other companies that offer information search
and retrieval capabilities with their core database products. In the future, the
Company may encounter competition from ISPs, OSPs, Web site operators, providers
of Web browser software (such as Netscape or Microsoft) and other Internet
services and products that incorporate search and retrieval features into their
offerings, whether through internal development or by acquisition of one or more
of the Company's direct competitors.
In addition, the Company also competes with ISPs, OSPs, Web browsers
and other Web content providers for the sale of advertisements. The Company
believes that the number of companies relying on fees from Web-based advertising
has increased substantially during the past year. Accordingly, the Company may
face increased pricing pressure for the sale of advertisements on its network,
which would have a material adverse effect on the Company's business, results of
operations and financial condition. Companies offering advertising-supported
services on the Web have also begun to compete with other providers of Web
content and services for user traffic and the number of page views on their Web
sites. As a result, many providers of Web services have been entering into
distribution arrangements, co-branding arrangements, content arrangement and
other strategic partnering arrangements with ISPs, OSPs, Web browsers, operators
of high traffic Web sites and other businesses in an attempt to increase traffic
and page views, and thereby making their Web sites more attractive to Web
advertisers. To the extent that direct competitors or other Web site operators
are able to enter into successful strategic relationships, these competitors and
Web sites could experience increases in traffic and page views, which could have
the effect of making these Web sites appear more attractive to advertisers,
which could materially and adversely affect the amount of advertisements sold on
the Company's network and the
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Company's business, results of operations and financial condition would be
materially and adversely affected.
Many of the Company's existing competitors, as well as a number of
potential new competitors, have longer operating histories in the Web market,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. Such competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to potential
employees, distribution partners, advertisers and content providers. Further,
there can be no assurance that the Company's competitors will not develop Web
search and retrieval services that are equal or superior to those of the Company
or that achieve greater market acceptance than the Company's offerings in the
area of name recognition, performance, ease of use and functionality. There can
also be no assurance that ISPs, OSPs, Web browsers and other Web content
providers will not be perceived by advertisers as having more desirable Web
sites for placement of advertisements. In addition, a number of the Company's
current advertising customers and strategic partners also have established
collaborative relationships with certain of the Company's competitors and a
number of the Company's competitors have established collaborative relationships
with ISPs, OSPs and other Web content providers. Accordingly, there can be no
assurance that the Company will be able to retain a customer base of
advertisers, enter into new strategic or other content relationships, maintain
or increase traffic on its network, that competitors will not experience greater
growth in traffic than the Company as a result of such relationships, which
could have the effect of making their Web sites more attractive to advertisers
or that strategic partners will not sever or will elect to renew their
agreements with the Company. There can also be no assurance that the Company
will be able to compete successfully against its current or future competitors
or that competition will not have a material adverse effect on the Company's
business, results of operations and financial condition.
The Web, in general, and the Company, specifically, also must compete
with traditional advertising media such as print, radio and television for a
share of advertisers' total advertising budgets. To the extent that the Web is
not an effective advertising medium, advertisers may be reluctant to devote a
significant portion of their advertising budget to the Web. See "--Reliance on
Advertising Revenues" and "--Developing Market; Validation of the Web as an
Effective Advertising Medium."
ACQUISITION STRATEGY; INTEGRATION OF PAST AND FUTURE ACQUISITIONS
The Company has in the past and may, in the future, acquire businesses,
technologies, services, product lines, content databases, or access to content
databases that are complementary to the Company's business. In August 1996, the
Company completed the acquisition of McKinley and in March 1997, the Company
closed the acquisition of the WebCrawler Assets from AOL (the "Acquisition").
Acquisitions involve a number of special risks. For example, the
assimilation of McKinley's and the Company's operations required, among other
things, the integration of service offerings, coordination of the research and
development and sales and marketing efforts of the two companies, the assumption
by the Company of approximately $10.0 million in liabilities, the addition of
approximately 50 personnel and the distraction of the Company's management from
the day-to-day business of the Company. The Company could face similar
integration issues with respect to the Acquisition. There can also be no
assurance that a given acquisition, if consummated, would not have a material
adverse effect on the Company's business, results of operations and financial
condition.
DEVELOPING MARKET; VALIDATION OF THE WEB AS AN EFFECTIVE ADVERTISING MEDIUM
The market for the Company's services has recently begun to develop, is
rapidly evolving and is characterized by an increasing number of market entrants
who have introduced or developed services and
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products for use on the Web or who seek to derive significant revenues from the
sale of advertisements on the Web. As a result, the Company's mix of services
and advertising packages may undergo substantial changes as the Company reacts
to competitive and other developments in the overall Web market. The Company is
highly dependent upon the increased use of the Web for information, publication,
distribution and commerce. In particular, the Web is an unproven medium for
advertising supported services. Accordingly, the Company's future operating
results will depend substantially upon the increased use of the Web for
information, publication, distribution and commerce and the emergence of the Web
as an effective advertising medium. Many of the Company's advertisers have only
limited experience with the Web as an advertising medium, have not yet devoted a
significant portion of their advertising expenditures to Web-based advertising,
and may not find such advertising to be effective for promoting their products
and services relative to traditional print and broadcast media. For instance,
advertisers of consumer products have not yet engaged in significant advertising
on the Web and may not do so in the future. No standards have been widely
accepted for the measurement of the effectiveness of Web-based advertising, and
there can be no assurance that such standards will develop sufficiently to
support the Web as an effective advertising medium. Moreover, critical issues
concerning the commercial use of the Web (including security, reliability, cost,
ease of use, access, quality of service and acceptance of advertising) remain
unresolved and may impact the growth of Web use or the placement of
advertisements on the Web. If widespread commercial use of the Web does not
develop, or if the Web does not develop as an effective advertising medium, the
Company's business, results of operations and financial condition will be
materially and adversely affected. See "--Reliance on Advertising Revenues,"
"--Risk of Capacity Constraints; Dependence on Computer Infrastructure" and
"--Dependence on the Web Infrastructure."
TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW AND ENHANCED SERVICES; RISK OF DELAYS
The market in which the Company competes is characterized by rapidly
changing technology, evolving industry standards, frequent new service and
product announcements, introductions and enhancements and changing customer
demands. These market characteristics are exacerbated by the emerging nature of
the Web and the apparent need of companies from a multitude of industries to
offer Web-based products and services. Accordingly, the Company's future success
will depend on its ability to adapt to rapidly changing technologies, its
ability to adapt its services to evolving industry standards and its ability to
continually improve the performance, features and reliability of its network in
response to both evolving demands of the marketplace and competitive service and
product offerings. The failure of the Company to adapt to such changes and
evolution would have a materially adverse effect on the Company's business,
results of operations and financial condition.
Because the attractiveness of the Excite Network to advertisers is
based substantially upon the amount of traffic on the Excite Network, broad
acceptance of the Excite Network by consumers is critical to the Company's
future success. The Company's business model contemplates offering a variety of
Web-related services. Some of these services have been recently introduced or
announced, including its Channels-based service, Excite NewsTracker, Excite
Pal, Global Excite and electronic mail services. Failure of the Company to
successfully design, develop, test, introduce and market such new services or
the failure of the Company's recently introduced or announced services to
achieve market acceptance could result in reduced traffic on the Excite
Network. Furthermore, there can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful design,
development, testing, introduction or marketing of these services, or that its
new services and enhancements will adequately meet the requirements of the
marketplace and achieve any degree of significant market acceptance.
Furthermore, existing services or new releases by the Company, whether improved
versions of existing services or introductions of new services, may contain
undetected errors that require significant design modifications, resulting in a
loss of consumer confidence and consumer support. Delays in the commencement of
or errors contained in new services and enhancements may result in customer
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dissatisfaction and delay or loss of advertising revenue. If the Company is
unable, for technological or other reasons, to develop and introduce new
services or enhancements in a timely manner in accordance with its business
model or in response to changing market conditions or consumer requirements, or
if the recently introduced services or enhancements contain errors or do not
achieve a significant degree of market acceptance, the Company's business,
results of operations and financial condition would be materially and adversely
affected.
MANAGEMENT OF GROWTH
The rapid execution necessary for the Company to successfully offer
services and implement its business plan requires an effective planning and
management process. The Company's rapid growth has placed, and is expected to
continue to place, a significant strain on the Company's managerial, operational
and financial resources. As of June 30, 1997, the Company had grown to 209
employees from 77 employees at June 30, 1996. The Company expects that the
number of its employees will increase over the next 12 months. In addition, the
Company has recently hired, and expects to continue to hire, a number of new
executive officers. The Company's financial and management controls, reporting
systems and procedures are also very limited. Although the Company has
implemented controls, systems and procedures, it has limited experience with
such controls, systems and procedures. The Company still must improve its
financial and management controls, reporting systems and procedures and expand,
train and manage its work force. Further, the Company is required to manage
multiple relationships with various customers, strategic partners and other
third parties. These requirements will be exacerbated in the event of further
growth in the Company or in the number of its third-party relationships.
Although the Company believes that it has made adequate allowances for the costs
and risks associated with this expansion, there can be no assurance that the
Company's systems, procedures or controls will be adequate to support the
Company's operations or that Company management will be able to achieve the
rapid execution necessary to successfully offer its services and implement its
business plan. The Company's future operating results will also depend on its
ability to expand its sales and marketing organization and expand its support
organization commensurate with the growth of its business and the Web. If the
Company is unable to manage growth effectively, the Company's business, results
of operations and financial condition will be materially and adversely affected.
DEPENDENCE ON THIRD-PARTY RELATIONSHIPS
The Company is currently and will be in the future significantly
dependent on a number of third-party relationships to create traffic and provide
content on the Excite Network and to make it more attractive to advertisers and
consumers. These relationships include arrangements relating to the positioning
of the Excite Network on Web browsers such as those offered by Netscape and
Microsoft and agreements with ISPs and OSPs such as AOL and Microsoft. The
Company is also generally dependent on other Web site operators that provide
links to the Excite Network. Most of these arrangements do not require future
minimum commitments to use the Company's services, to provide access or links to
the Excite Network or to provide content to the Company, are not exclusive and
are short-term or may be terminated at the convenience of the other party.
Moreover, the Company does not have agreements with many Web site operators who
provide links to the Excite Network, and such Web site operators may terminate
such links at any time without notice to the Company. These third party
relationships also include arrangements for providing content on the Excite
Network, such as the Company's relationship with Intuit whereby Intuit will be
the exclusive provider and aggregator of financial content for the Excite
Network, and with Ticketmaster, which permits Excite users to have access to
Ticketmaster event listings. These relationships also include "sponsorship"
arrangements whereby such third parties are featured advertisers and are more
integrated with the Excite Network, such as the Company's relationship with
Amazon.com, Inc. whereby Amazon.com, Inc. will purchase advertising on and be
the exclusive bookseller for the Excite brand of services on the Excite Network.
There can be no assurance that such third parties regard their relationship with
the Company as important to their own respective businesses and operations, that
they will not reassess their commitment to the Excite Network at any time in the
future,
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that they will continue to advertise on the Excite Network or cross-promote any
of the Company's brands or that they will not develop their own competitive
services or products, either during their relationship with the Company or after
their relationship with the Company expires. Further, there can be no assurance
that the services of those companies that provide access or links to the Excite
Network will achieve market acceptance or commercial success. There can also be
no assurance that any of the content provided by such third parties will be
favorably received by users of the Excite Network or Web users in general.
Additionally, the Company has recently begun to enter into "sponsorship"
relationships, such as its relationship with Amazon.com, Inc. Under these
arrangements, the "sponsor" business will be obligated to make payments to the
Company to be featured on part of the Excite Network. In the event that such
sponsors do not experience minimum levels of traffic from the Excite Network,
the Company may have "make good" obligations or the sponsor may have the ability
to terminate its relationship with the Company. In such an event, the Company's
business, results of operations and financial condition could be materially and
adversely affected. There can also be no assurance that the Company will be able
to enter into additional "sponsorship" arrangements with other businesses or
that other businesses will not enter into such arrangements with the Company's
competitors. Accordingly, there can be no assurance that the Company's existing
or future relationships will result in sustained business partnerships,
successful service offerings, or the generation of significant traffic on the
Excite Network or significant revenues for the Company.
The Company believes that certain of its third-party relationships are
important to its ability to attract traffic and advertisers. The failure of one
or more of the third-party relationships which the Company regards as strategic
to achieve or maintain market acceptance or commercial success or the
termination of one or more of such strategic relationships could significantly
reduce traffic on the Excite Network, which would have a material adverse effect
on the Company's business, results of operations and financial condition. In
addition, the termination of, or the failure of the Company to renew, the
Company's position on a Web browser or its relationship with an ISP or OSP would
significantly reduce traffic on the Company's Web sites which would also have a
material adverse effect on the Company's business, results of operations and
financial condition. See "--Dependence on Netscape and AOL."
RISK OF CAPACITY CONSTRAINTS; DEPENDENCE ON COMPUTER INFRASTRUCTURE
The Company is dependent on its ability to generate a high volume of
traffic to the Excite Network. Accordingly, the performance of the Excite
Network is critical to the Company's reputation, its ability to attract
advertisers and to achieve market acceptance of the network. Any system failure
that causes interruptions in the availability or increases response time of the
Company's services could reduce user satisfaction and traffic to the Excite
Network and, if sustained or repeated, would reduce the attractiveness of the
Excite Network to advertisers and consumers. An increase in the volume of
searches conducted through the Excite Network could strain the capacity of the
software or hardware deployed by the Company, which could lead to slower
response time or system failures. In addition, as the amount of Web pages and
traffic increases, there can be no assurance that the Excite Network will be
able to scale proportionately. The Company is also dependent upon the
communications infrastructure of the Internet (i.e., Web browsers, ISPs, OSPs
and other Web site operators), all of which have experienced significant
outages in the past, for access to its network, and consumers have experienced
difficulties due to system failures unrelated to the Company's systems and
services. Additional difficulties could also materially and adversely affect
consumer and advertiser satisfaction. The Company is also dependent on hardware
suppliers for prompt delivery, installation and service of servers and other
equipment and services used to provide its services. In addition, in order to
improve performance, the Company may have to make substantial investments to
deploy one or more copies of its Web sites in order to mirror its online
resources. To the extent that the capacity restraints described above are not
effectively addressed by the Company, such constraints would have a material
adverse effect on the Company's business, results of operations and financial
condition.
Substantially all of the Company's communications hardware and certain
of its computer hardware operations are located at leased facilities in Redwood
City, California, an area susceptible to earthquakes. The Company has
experienced system failures or outages from time to time in the past, which have
disrupted the operation of the Excite Network. There can be no assurance that a
system failure at this location would not adversely affect the performance of
the Excite Network. These systems are vulnerable to damage from fire, floods,
earthquakes, power loss, telecommunications failures, break-ins and similar
events. The Company does not presently have a disaster recovery plan. Although
the Company carries property and business interruption insurance with low
coverage limits, its coverage may not be adequate to compensate the Company for
all losses that may occur. Despite the implementation of network security
measures by the Company, its servers are also vulnerable to
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<PAGE> 13
computer viruses, physical or electronic break-ins and similar disruptive
problems. Computer viruses, break-ins or other problems caused by third parties
could lead to interruptions, delays or cessations in service to users of the
Excite Network. The occurrence of any of these risks could have a material
adverse effect on the Company's business, results of operations and financial
condition.
DEPENDENCE ON THE WEB INFRASTRUCTURE
The success of the Excite Network will depend in large part upon the
development of a Web infrastructure, such as a reliable network backbone with
the necessary speed, data capacity and security, or timely development of
complementary products such as high speed modems, for providing reliable Web
access and services. Because global commerce and online exchange of information
on the Web and other similar open wide area networks are new and evolving, it is
difficult to predict with any assurance whether the Web will prove to be a
viable commercial marketplace. The Web has experienced, and is expected to
continue to experience, significant growth in the number of users and amount of
traffic. To the extent that the Web continues to experience increased numbers of
users, frequency of use or increased bandwidth requirements of users, there can
be no assurance that the Web infrastructure will continue to be able to support
the demands placed on it by this continued growth or that the performance or
reliability of the Web will not be adversely affected by this continued growth.
Furthermore, the Web has experienced a variety of outages and other delays as a
result of damage to portions of its infrastructure or otherwise, which outages
and delays could adversely affect the number of Web users utilizing the Excite
Network as well as the perceived performance of the Excite Network. In addition,
the Web could lose its viability due to delays in the development or adoption of
new standards and protocols (for example, the next-generation Internet Protocol)
to handle increased levels of activity or due to increased governmental
regulation. There can be no assurance that the infrastructure or complementary
products or services necessary to make the Web a viable commercial marketplace
will be developed, or, if they are developed, that the Web will become a viable
commercial marketplace for services such as those offered by the Company. If the
necessary infrastructure standards or protocols or complementary products,
services or facilities are not developed, or if the Web does not become a viable
commercial marketplace, the Company's business, results of operations and
financial condition will be materially and adversely affected. Even if such
infrastructure, standards or protocols or complementary products, services or
facilities are developed and the Web becomes a viable commercial marketplace,
there can be no assurance that the Company will not be required to incur
substantial expenditures in order to adapt its services to changing Web
technologies, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
INTERNATIONAL EXPANSION
While the Company believes that expansion of its services into
international markets is important to its growth and has recently entered into
an agreement with Netscape to provide the International Netscape Guide by Excite
for certain countries, the Company has limited experience in localization of its
products and in marketing and distributing its products internationally. There
can be no assurance that the Company will be successful in creating localized
versions of its products, that such products will be accepted by users and
advertisers, or that the resulting revenues generated will be adequate to offset
the expense of establishing and maintaining international operations. In
addition, operating in international markets exposes the Company to additional
risks such as, but not limited to, compliance with regulatory requirements and
changes in these requirements, export controls relating to technology, tariffs
and other trade barriers, protection of intellectual property rights,
difficulties in staffing and managing international operations, longer payment
cycles and other collection problems, political instability, fluctuations in
currency exchange rates and potentially adverse tax consequences. The occurrence
of any of these risks could have a material adverse effect on any international
operations established by the Company and, consequently, on the Company's
business, results of operations and financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any
government agency, other than regulations applicable to businesses generally,
and there are currently few laws or regulations directly applicable to access to
or commerce on the Web. However, due to the increasing popularity and use of the
Web, it is possible that a number of laws and regulations may be adopted with
respect to the Web, covering issues such as user privacy, pricing,
characteristics and quality of products and services. For example, although the
Communications Decency Act was held to be unconstitutional, there can be no
assurance that similar legislation will not be enacted in the future and it is
possible that such legislation could expose the Company to substantial
liability. Such legislation could also dampen the growth in use of the Web
generally and decrease the acceptance of the Web as a communications and
commercial medium, and could, thereby, have a material adverse effect on the
Company's business, results of operations and financial condition. Other
nations, including Germany, have taken actions to restrict the free flow of
material deemed to be objectionable on the Web. In addition, several
telecommunications carriers are seeking to have telecommunications over the Web
regulated by the Federal Communications Commission (the "FCC") in the same
manner as other telecommunications services. For example, America's Carriers
Telecommunications Association ("ACTA") has filed a petition with the FCC for
this purpose. In addition, because the growing popularity and use of the Web has
burdened the existing telecommunications infrastructure and many areas with high
Web use have begun to experience interruptions in phone service, local telephone
carriers, such as Pacific Bell, have petitioned the FCC to
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regulate ISPs and OSPs in a manner similar to long distance telephone carriers
and to impose access fees on the ISPs and OSPs. If either of these petitions is
granted, or the relief sought therein is otherwise granted, the costs of
communicating on the Web could increase substantially, potentially slowing the
growth in use of the Web. The adoption of any additional laws or regulations may
decrease the growth of the Web, which could in turn decrease the demand for the
Excite Network and increase the Company's cost of doing business or otherwise
have an adverse effect on the Company's business, results of operations and
financial condition. Moreover, the applicability to the Web of existing laws in
various jurisdictions governing issues such as property ownership, libel and
personal privacy is uncertain and will take years to resolve. Any such new
legislation or regulation or application or interpretation of existing laws
could have a material adverse effect on the Company's business, results of
operations and financial condition.
Due to the global nature of the Web, it is possible that, although
transmissions of the Excite Network originate in the State of California, the
governments of other states and foreign countries might attempt to regulate the
Company's transmissions or prosecute the Company for violations of their laws.
There can be no assurance that violations of local laws will not be alleged or
charged by state or foreign governments, that the Company might not
unintentionally violate such law or that such laws will not be modified, or new
laws enacted, in the future. Any of the foregoing developments could have a
material adverse effect on the Company's business, results of operations and
financial condition.
LIABILITY FOR INFORMATION RETRIEVED FROM THE WEB
Because materials may be downloaded through the services offered by the
Company and be subsequently distributed to others, there is a potential that
claims may be made against the Company for defamation, negligence, copyright or
trademark infringement or other theories based on the nature and content of such
materials. Such types of claims have been brought, and sometimes successfully
pressed, against OSPs and ISPs in the past. Although the Company carries general
liability insurance, the Company's insurance may not cover potential claims of
this type, or may not be adequate to indemnify the Company for all liability
that may be imposed. Any imposition of liability that is not covered by
insurance or is in excess of insurance coverage could have a material adverse
effect on the Company's business, results of operations and financial condition.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock is highly volatile and
is subject to wide fluctuations (for example, during the past six months, the
high and low closing prices of the Common Stock were $21.13 and $7.88,
respectively) in response to quarterly variations in operating results,
announcements of technological innovations or new services by the Company or its
competitors, changes in financial estimates by securities analysts, or other
events or factors. Upon the effectiveness of the Registration Statement of which
this Prospectus is a part there will be a significantly larger number of shares
available for public resale, which could exert downward pressure on the trading
price of the Common Stock. In addition, the stock market has experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many high technology companies and that
often have been unrelated to the operating performance of such companies. In the
past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
such a company. If brought, such litigation could result in substantial costs
and a diversion of management's attention and resources, which would have a
material adverse effect on the Company's business, results of operations and
financial condition. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock.
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USE OF PROCEEDS
The proceeds from the sale of the shares of Common Stock offered hereby
are solely for the account of Intuit. Accordingly, the Company will not receive
any of the proceeds from the sale of such shares of Common Stock by Intuit.
SELLING SHAREHOLDER
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
June 30, 1997 by Intuit. Intuit acquired beneficial ownership of the shares of
Common Stock offered hereby on June 25, 1997, pursuant to a Stock Purchase
Agreement dated as of June 11, 1997 between the Company and Intuit (the "Stock
Purchase Agreement"). Except as described below, Intuit has not had any
position, office or other material relationship with the Company within the past
three years. The following table assumes that Intuit sells all of the shares
held by it in this offering. The Company is unable to determine the exact number
of shares that will actually be sold.
Certain assignees of Intuit, if any, who acquire shares of Common Stock
of the Company from Intuit and satisfy certain conditions are entitled to the
same registration rights as Intuit. If any such assignee wishes to sell shares
hereunder, this Prospectus will be amended or supplemented to name such assignee
as a selling shareholder.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Offering Owned After Offering
----------------------- --------------------
Shares Being
Name Number Percent Offered Number Percent
- ---- ------ ------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
Intuit Inc. 2,900,000 19.0% 2,900,000 0 --
</TABLE>
The Company believes Intuit has sole voting and sole investment power
with respect to all shares beneficially owned by it.
On June 25, 1997, the Company sold 2,900,000 shares of its Common Stock
to Intuit pursuant to the Stock Purchase Agreement for an aggregate purchase
price of $39,150,000.00 (the "Intuit Purchase"). As a result of the Intuit
Purchase, the Company believes that Intuit became an affiliate of the Company.
In connection with the Intuit Purchase, Intuit agreed not to acquire more than
25% of the total voting securities of the Company (the "Standstill Percentage")
without the consent of the Company's Board of Directors. In the event that a
third party acquires a number of voting securities of the Company in excess of
the Standstill Percentage, the Standstill Percentage will be increased to the
percentage of the voting securities of the Company held by such third party. The
Company is also obligated to notify Intuit in the event that it enters into or
intends to enter into any bona fide discussions with any third party which will
result in the acquisition of or change in control with respect to the Company (a
"Change in Control Transaction").
Intuit's "standstill" obligations will terminate on the earlier to
occur of (i) December 11, 2000, or (ii) the termination of similar standstill
obligations of AOL to the Company. Intuit's standstill obligations will also
terminate (i) upon the making of a bona fide offer by any third party or group
(a "Third-Party Offer") of an intention to acquire voting securities of the
Company which, if successful, would result in such third party or group owning,
or having the right to acquire beneficial ownership of, more than 20% of the
Company's voting securities or (ii) upon the Company's intention to enter into a
Change in Control Transaction.
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Except as provided below, until December 12, 1998, Intuit may not,
without the prior written consent of the Company, dispose of any of the shares
offered hereby or any other securities of the Company owned by it. The Stock
Purchase Agreement also provides that, from to December 12, 1998 and until June
12, 2000, Intuit may not, on any trading day, without the prior written consent
of the Company, dispose of any Common Stockof the Company or any other
securities of the Company owned by it in an amount in excess of five percent of
the total trading volume for the five consecutive trading days ended on the date
immediately prior to the date of such sale (such trading volume to be determined
without taking into consideration any shares sold by Intuit). The foregoing
restrictions do not apply to any sales of such shares in (i) a private
transaction not effected on the Nasdaq National Market or any other stock
exchange or automated quotation system, or (ii) an underwritten public offering
of such shares. These restrictions on resale will be suspended in the event that
Intuit's "standstill" obligations will be suspended in the event of a Third
Party Offer or if the Company proposes to enter into a Change in Control
Transaction.
In connection with the Intuit Purchase, Intuit and the Company entered
into a Registration Rights Agreement dated as of June 25, 1997 (the
"Registration Rights Agreement") which provides, among other things, certain
registration rights with respect to the shares offered hereby and any shares of
the Company's Common Stock issued pursuant to the Right of First Refusal
Agreement described below.
The Company filed the registration statement of which this Prospectus
forms a part (the "Shelf Registration Statement") pursuant to the Registration
Rights Agreement. The Company is required to maintain the effectiveness of the
Shelf Registration Statement for a two year period (the "Initial Effectiveness
Period"). If, after the Initial Effectiveness Period, Intuit continues to hold
any shares of Common Stock of the Company to which the Shelf Registration
Statement relates, then the Company is required to file an additional Shelf
Registration Statement (the "Subsequent Shelf Registration Statement") and
maintain the effectiveness of the Subsequent Shelf Registration Statement for a
one year period (the "Subsequent Effectiveness Period").
If, after the Subsequent Effectiveness Period, any registration rights
with respect to any securities of the Company which were granted subsequent to
June 25, 1997 are still in effect, and Intuit still holds any of the shares
offered hereby or any securities issued pursuant to the Right of First Refusal
Agreement described below, the Company will be obligated to file an additional
Shelf Registration Statement (an "Additional Shelf Registration Statement") and
maintain the effectiveness of such Additional Shelf Registration Statement for
up to two years (the "Additional Effectiveness Period").
If securities of the Company having an aggregate purchase price in
excess of $250,000 are sold to Intuit pursuant to the Right of First Refusal
Agreement described below, during the Initial Effectiveness Period, the
Subsequent Effectiveness Period or the Additional Effectiveness Period, the
Company will be required to file an additional Shelf Registration Statement with
respect to such securities. The Company will be required to maintain the
effectiveness of such Shelf Registration Statement until no later than the
expiration of the Initial Effectiveness Period, the Subsequent Effectiveness
Period of the Additional Effectiveness Period, as applicable.
The shares of Common Stock covered by the Shelf Registration Statement
may be sold by Intuit or by its permitted transferees during one of four periods
of 30 consecutive calendar days each, which periods shall be separated by
intervals of at least 90 days and shall occur no more than four times during the
Initial Effectiveness Period and two times during the Additional Effectiveness
Period. See "Plan of Distribution."
Subject to certain limitations, Intuit may also require the Company to
file a registration statement under the Securities Act with respect to all or a
portion of the securities of the Company owned by it (a "Demand Registration").
Intuit may request only two such Demand Registrations. Intuit may request
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that the shares registered in a Demand Registration be offered by means of an
underwritten offering. In any such underwritten offering of the Company's
securities, the underwriters may reduce the number of shares to be included in
the Demand Registration, but shall not limit the shares to be included by Intuit
in such Demand Registration unless all other securities proposed to be sold by
persons or entities other than Intuit are first entirely excluded.
If the Company proposes to register any of its securities under the
Act, it must give prior notice to Intuit and permit Intuit, subject to certain
limitations, to include in such registration all or a portion of the securities
of the Company owned by it (a "Piggyback Registration"). If such registrations
relate to an underwritten public offering, the underwriters (if any) may reduce
the number of shares to be included in a Piggyback Registration, provided that
each of Intuit, AOL and certain other investors of the Company shall be subject
to such reduction only on a pro rata basis.
The Company is required to bear all expenses (other than underwriting
discounts and commissions) in connection with the Registration Rights Agreement.
The Registration Rights Agreement will terminate (a) if all of the
shares offered hereby have been registered and sold pursuant to registrations
effected pursuant to the Registration Rights Agreement or (b) at such time as
all of the shares offered hereby may be sold within a three month period under
Rule 144 promulgated under the Securities Act.
Pursuant to a Right of First Refusal Agreement dated as of June 25,
1997 between the Company and Intuit, which was entered into in connection with
the Intuit Purchase, Intuit was granted a right of first refusal to participate
in certain issuances of Company's securities. So long as Intuit holds at least
ten percent of the Company's outstanding Common Stock (including shares issuable
upon conversion of outstanding shares of preferred stock of the Company), in the
event that the Company proposes to issue any securities in a financing
transaction solely for cash consideration, Intuit is permitted to purchase all
or a portion of Intuit's "Pro Rata Share" (defined below) of such securities,
such that Intuit's Pro Rata Share equals up to nineteen percent immediately
after such issuance. The term "Pro Rata Share" means the ratio of (a) the number
of shares of the Company's Common Stock (on an as-converted to Common Stock
basis) owned by Intuit, to (b) a number of shares of Common Stock of the Company
equal to the sum of (i) the total number of shares of Common Stock of the
Company then outstanding plus (ii) the total number of shares of Common Stock of
the Company into which all then-outstanding shares of voting preferred stock of
the Company are then convertible.
In connection with the Intuit Purchase, the Company and Intuit entered
into a Nomination and Observer Agreement dated as of June 25, 1997, which
provides that, for so long as Intuit owns at least 10% of the Common Stock of
the Company (on an as-converted to Common Stock basis), it is entitled to
nominate one candidate (the "Intuit Designee") for election to the Company's
Board of Directors in connection with any shareholder solicitation or action
relating to the election of directors. In the event that Intuit wishes to
appoint an Intuit Designee to the Company's Board of Directors other than in
connection with a shareholder solicitation or an action relating to the election
of directors, the Company is obligated to appoint such Intuit Designee to its
Board of Directors. The Company is generally obligated to use its best efforts
to cause to be voted in favor of an Intuit Designee all shares for which the
Company's management or the Board of Directors holds proxies or otherwise are
entitled to vote, and to cause the Board of Directors to unanimously recommend
the Intuit Designee for election. If an Intuit Designee is not a member of the
Board of Directors, Intuit has certain rights to have a representative attend
all meetings and receive all communications of the Company directed to the Board
of Directors or the audit committee thereof in a non-voting observer capacity.
In connection with the Intuit Purchase the Company and Intuit entered
into a Joint Activities Agreement (the "Agreement"), dated as of June 25, 1997,
pursuant to which the Company and Intuit will
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create a new online financial channel. This channel will offer content and
services designed to help consumers organize and manage their finances, and will
feature financial news, stock quotes and transactional services. It is
anticipated that this new channel will be introduced during the summer of 1997.
The channel will be distributed throughout the Excite Network, as well as
through Intuit's Quicken Financial Network.
Under the Agreement, Intuit will become the exclusive provider and
aggregator of financial content on all the Company's services, and the Company
will become the exclusive search and navigation service featured on the U.S.
versions of Intuit's Quicken, QuickBooks and TurboTax products. The Company and
Intuit expect that revenue, if any, will be generated from a combination of
advertising and fees for enabling transactions for financial products and
services.
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PLAN OF DISTRIBUTION
In connection with the Stock Purchase Agreement, Intuit entered into a
Registration Rights Agreement with the Company. The Registration Statement of
which this Prospectus forms a part has been filed pursuant to the Registration
Rights Agreement. To the Company's knowledge, Intuit has not entered into any
agreement, arrangement or understanding with any particular broker or market
maker with respect to the shares offered hereby, nor does the Company know the
identity of the brokers or market makers that will participate in the offering.
The shares of Common Stock covered hereby may be offered and sold from
time to time by Intuit or by its permitted transferees during one of four
"Permitted Windows." A "Permitted Window" is a period of 30 consecutive calendar
days commencing upon receipt by Intuit of Excite's written confirmation to
Intuit in response to Intuit's written notice to the Company of its present
intention to sell under this Prospectus (a "Notice of Resale") that this
Prospectus may be used for resales. There must be a 90 day interval between any
two Permitted Windows. Under certain circumstances, the Company has the ability
to suspend the use of this Prospectus during any Permitted Window. Intuit will
act independently of the Company in making decisions with respect to the timing,
manner and size of each sale. Such sales may be made over the NNM or otherwise,
at then prevailing market prices, at prices related to prevailing market prices
or at negotiated prices. The shares may be sold by one or more of the following:
(a) a block trade in which the broker-dealer engaged by Intuit will attempt to
sell the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by the broker-dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (d) through agents; or (e) directly to one or more
purchasers. In addition, any securities covered by this Prospectus which qualify
for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this Prospectus. The Company has been advised by Intuit that they have not, as
of the date hereof, entered into any arrangement with a broker-dealer for the
sale of shares through a block trade, special offering, or secondary
distribution of a purchase by a broker-dealer. In effecting sales,
broker-dealers engaged by Intuit may arrange for other broker-dealers to
participate. Broker-dealers will receive commissions or discounts from Intuit in
amounts to be negotiated immediately prior to the sale.
In connection with distributions of the shares or otherwise, Intuit may
enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of the shares registered
hereunder in the course of hedging the positions they assume with Intuit. Intuit
may also sell shares short and redeliver the shares to close out such short
positions. Intuit may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the shares
registered hereunder, which the broker-dealer may resell or otherwise transfer
pursuant to this Prospectus. Intuit may also loan or pledge the shares
registered hereunder to a broker-dealer and the broker-dealer may sell the
shares so loaned or upon a default the broker-dealer may effect sales of the
pledged shares pursuant to this Prospectus.
Underwriters, broker-dealers or agents may receive compensation in the
form of commissions, discounts or concessions from Intuit in amounts to be
negotiated in connection with the sale. Such underwriters, broker-dealers or
agents and any other participating broker-dealers may be deemed to be
"underwriters" within the meaning of the Securities Act, in connection with such
sales and any such commission, discount or concession may be deemed to be
underwriting discounts or commissions under the Securities Act.
All fees and expenses incurred in connection with the preparation and
filing of the Registration Statement of which this Prospectus is a part and in
connection with each Permitted Window (excluding, in certain circumstances, fees
and expenses in connection with the commencement of a Permitted Window if the
request to commence the Permitted Window is subsequently withdrawn by Intuit)
will be
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borne by the Company. Commissions and discounts, if any, attributable to the
sales of the shares will be borne by Intuit. Intuit may agree to indemnify any
underwriter, broker-dealer or agent that participates in transactions involving
sales of the shares against certain liabilities, including liabilities arising
under the Securities Act. Under the Registration Rights Agreement, the Company
and Intuit have agreed to indemnify each other and certain other persons against
certain liabilities in connection with the offering of the shares, including
liabilities arising under the Securities Act.
Intuit has advised the Company that, during such time as they may be
engaged in a distribution of the shares of Common Stock included herein, they
will comply with the applicable provisions under Regulation M under the
Securities Exchange Act of 1934, as amended ("Regulation M") and, in connection
therewith, Intuit has agreed not to engage in any stabilization activity in
connection with any securities of the Company, to furnish copies of this
Prospectus to each broker-dealer through which the shares of Common Stock
included herein may be offered, and not to bid for or purchase any securities of
the Company or attempt to induce any person to purchase any securities of the
Company except as permitted under Regulation M. Intuit has also agreed to inform
the Company and broker-dealers through whom sales may be made hereunder when the
distribution of the shares is completed.
Rules 102 and 103 under Regulation M prohibit participants in a
distribution from bidding for or purchasing for an account in which the
participant has a beneficial interest, any of the securities that are the
subject of the distribution. Rule 104 under Regulation M governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
The registration statement of which this Prospectus is a part will
terminate on June 25, 1999, or such earlier time that all of the shares
registered under the registration statement of which this Prospectus forms a
part either (i) have been sold, (ii) may be sold within a three-month period
under Rule 144, or (iii) have ceased to be "Intuit Registrable Securities"
pursuant to the terms of the Registration Rights Agreement. There can be no
assurance that Intuit will sell any or all of the shares of Common Stock offered
hereby. Excite will be obligated to file a Subsegment Shelf Registration
Statement which will remain effective throughout the Subsequent Effectiveness
Period and may be required to file an Additional Shelf Registration Statement
which will remain effective for the Additional Effectiveness Period. See
"Selling Shareholders." It is currently anticipated that the Plan of
Distribution under the Subsequent Shelf Registration Statement and the
Additional Shelf Registration Statement will be substantially similar as
described herein.
Upon the occurrence of any of the following events, this Prospectus
will be amended to include additional disclosure before offers and sales of the
securities in question are made: (a) to the extent the securities are sold at a
fixed price or at a price other than the prevailing market price, such price
would be set forth in the Prospectus, (b) if the securities are sold in block
transactions and the purchaser acting in the capacity of an underwriter wishes
to resell, such arrangements would be described in the Prospectus, (c) if Intuit
sells to a broker-dealer acting in the capacity as an underwriter, such
broker-dealer will be identified in the Prospectus and (d) if the compensation
paid to broker-dealers is other than usual and customary discounts, concessions
or commissions, disclosure of the terms of the transaction would be included in
the Prospectus.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California 94306. Members of the firm of Fenwick & West LLP
own an aggregate of 17,506 shares of Common Stock of the Company.
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EXPERTS
The consolidated financial statements of Excite, Inc. incorporated by
reference in the annual report (Form 10-K, as amended by Form 10-K/A) of Excite,
Inc. for the year ended December 31, 1996, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. The report as to the years 1995 and 1994
is based in part on the report of Price Waterhouse LLP, independent accountants.
The financial statements referred to above are incorporated herein by reference
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of The McKinley Group, Inc. for the years
ended December 31, 1995 and 1994, not separately presented in Excite's Annual
Report on Form 10-K, as amended by Form 10-K/A, have been audited by Price
Waterhouse LLP, independent accountants, whose report thereon appears therein.
Such financial statements, to the extent they have been included in the
consolidated financial statements of Excite, Inc., have been so included in
reliance on their report given on the authority of said firm as experts in
auditing and accounting.
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================================================================================
EXCITE, INC.
2,900,000 Shares of
Common Stock
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PROSPECTUS
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================================================================================
