<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------------
EXCITE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 7379 77-0378215
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
----------------------
1091 N. SHORELINE BOULEVARD
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 943-1200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
ROBERT C. HOOD
EXECUTIVE VICE PRESIDENT, CHIEF ADMINISTRATIVE OFFICER AND CHIEF FINANCIAL
OFFICER
EXCITE, INC.
1091 N. SHORELINE BOULEVARD
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 943-1200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------------
COPIES TO:
<TABLE>
<S> <C>
MARK C. STEVENS, ESQ. ROBERT V. GUNDERSON, JR., ESQ.
JEFFREY R. VETTER, ESQ. BROOKS STOUGH, ESQ.
CAROL MARTIN, ESQ. SHANNON SOQUI, ESQ.
MONA CHANDRA, ESQ. RICHARD R. HESP, ESQ.
FENWICK & WEST LLP GUNDERSON DETTMER STOUGH
TWO PALO ALTO SQUARE VILLENEUVE FRANKLIN & HACHIGIAN, LLP
PALO ALTO, CALIFORNIA 94306 155 CONSTITUTION DRIVE
(415) 494-0600 MENLO PARK, CALIFORNIA 94025
(415) 321-2400
</TABLE>
----------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value...... 2,645,000 $15.375 $40,666,875 $12,323.30
===========================================================================================================
</TABLE>
(1) Includes 345,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(c) solely for the purposes of calculating the
registration fee and based on the average of the high and low sales prices
of the Common Stock on the Nasdaq National Market on February 27, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 3, 1997
LOGO
2,300,000 SHARES
COMMON STOCK
All of the 2,300,000 shares of Common Stock offered hereby are being sold
by Excite, Inc. ("Excite" or the "Company"). On February 28, 1997 the last sale
price of the Company's Common Stock, as reported on the Nasdaq National Market,
was $15.88 per share. See "Price Range of Common Stock." The Company's Common
Stock is traded on the Nasdaq National Market under the symbol "XCIT."
----------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Share............................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(2)................................ $ $ $
=================================================================================================
</TABLE>
(1) Before deducting expenses payable by the Company, estimated at $525,000.
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 345,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ ,
respectively.
----------------------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of Robertson, Stephens & Company LLC ("Robertson, Stephens &
Company"), San Francisco, California, on or about , 1997.
ROBERTSON, STEPHENS & COMPANY MERRILL LYNCH & CO.
The date of this Prospectus is , 1997
<PAGE> 3
[PICTURES]
INFORMATION CONTAINED ON THE COMPANY'S WEB SITES SHALL NOT BE DEEMED TO
CONSTITUTE A PART OF THIS PROSPECTUS.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 4
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................................ 4
Risk Factors........................................................................... 7
Use of Proceeds........................................................................ 19
Dividend Policy........................................................................ 19
Price Range of Common Stock............................................................ 19
Capitalization......................................................................... 20
Selected Consolidated Financial Data................................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 22
Business............................................................................... 30
Management............................................................................. 43
Certain Transactions................................................................... 51
Principal Shareholders................................................................. 55
Description of Capital Stock........................................................... 57
Shares Eligible for Future Sale........................................................ 60
Underwriting........................................................................... 61
Legal Matters.......................................................................... 63
Experts................................................................................ 63
Additional Information................................................................. 63
Index to Consolidated Financial Statements............................................. F-1
</TABLE>
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 Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be
obtained form the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed rates. In
addition, the Commission maintains a World Wide Web site that contains reports,
proxy statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site is
http://www.sec.gov. The Company's Common Stock is quoted for trading on the
Nasdaq National Market and reports, proxy statements and other information
concerning the Company may also be inspected at the offices of The Nasdaq Stock
Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Excite, Excite Search, Excite Reviews, the Excite logo, Excite City.Net,
City.Net, Excite Direct, ExciteSeeing Tours and the Magellan Internet Guide are
service marks of the Company. All other trademarks, service marks or trade names
referred to in this Prospectus are the property of their respective owners.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M PROMULGATED UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
3
<PAGE> 5
SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," and the consolidated financial statements
and notes thereto, appearing elsewhere in this Prospectus.
Except as otherwise noted, all information in this Prospectus assumes (i)
consummation of the acquisition by the Company of certain assets relating to
American Online, Inc.'s ("AOL") WebCrawler search and retrieval service (the
"WebCrawler Assets") as of December 1, 1996, (ii) the issuance to AOL of an
aggregate of 2,630,330 shares of Preferred Stock in connection with the
acquisition of the WebCrawler Assets and the entering into of a distribution
agreement, including 680,330 shares issued in exchange for an equivalent number
of shares of Common Stock held by AOL, (iii) the amendment of a warrant to
purchase 650,000 shares of Common Stock beneficially owned by AOL to become
exercisable into an equivalent number of shares of Preferred Stock in connection
with such acquisition and distribution agreement, and (iv) no exercise of the
Underwriters' over-allotment option. Unless the context otherwise requires, the
term "Company" or "Excite" refers to Excite, Inc. and its subsidiaries.
THE COMPANY
The Excite Network, which includes the Excite and WebCrawler brands,
provides a gateway to the World Wide Web (the "Web") that organizes, aggregates
and delivers information to meet the needs of individual consumers. Designed to
help consumers make sense of the Web, the Excite Network contains a suite of
specialized information services which combine proprietary search technology,
editorial Web reviews, aggregated content from third parties, bulletin boards
and chat and personalization capabilities. The Company's goal is to be the Web's
leading branded media network with the largest consumer reach, thereby providing
an efficient means of advertising on the Web. To this end, the Excite Network
serves as a home base where consumers can gather, interact and return to during
each Web experience. For the most recent month reported, December 1996, PC
Meter, an independent Web tracking service, estimated that the Excite Network
was used by 45% of online households at least once during this month, which was
more than any other service reported by PC Meter. For the month of January 1997,
the Company had an average of approximately 13.0 million page views per day
(including page views attributable the WebCrawler Assets).
By offering a network of complementary services, the Company seeks to
increase the amount of time consumers spend using the Excite Network. Services
on the Excite Network include Excite Search and WebCrawler Search, which help
consumers search a database index of Web content to find relevant information;
Excite Reviews and WebCrawler Select, which contain professionally-authored
reviews of Web sites; Excite City.Net, a travel and destination guide providing
information on over 4,300 cities and regions worldwide; Excite Live!, a
personalized information service which delivers stock quotes, sports scores,
news and other content to consumers based on their personal profile; Excite
NewsTracker, a personalized news clipping service which scans over 300
newspapers and magazines; ExciteSeeing Tours, a Web-based "how-to" guide; Excite
Talk!, a Web community environment which includes bulletin boards and chat where
consumers can discuss topics of mutual interest; and Excite Reference, an online
reference service which provides consumers with an interface into multiple
information services such as yellow pages, white pages, email finders, people
finders, maps and shareware.
A key element of the Company's strategy is to build traffic by increasing
the number of entry points to the Excite Network. The Company believes that
frequent consumer exposure to its network of services and brands will lead to
increased levels of consumer loyalty and retention. To this end, the Company has
established premier positions on Web sites operated by Microsoft and Netscape,
both of which must be extended beyond March 31, 1997, and has entered into an
exclusive distribution agreement with AOL, the leading online service provider.
There also exist hundreds of thousands of hypertext links from across the Web
pointing to the Excite Network, and the Company has established a number of
hardware distribution relationships with companies such as Apple, Sega and Web
TV. In addition to distribution arrangements, the Company seeks to
4
<PAGE> 6
increase consumer awareness of both its Excite brand and WebCrawler brand, which
it has agreed to purchase, through advertising and marketing campaigns. The
Company launched a national brand building campaign centered around the Jimi
Hendrix song "Are You Experienced?" and incurred expenses of $5.0 million for
this campaign during the fourth quarter of 1996.
The Excite Network's heavy consumer traffic, specialized information
services, targeting technology and direct sales organization offer advertisers
an efficient method of advertising on the Web. The Company believes that it has
the strongest Web advertising sales organization, consisting of 32
professionals, who educate, guide and advise advertisers on optimizing their Web
advertising purchases. Based on the PC Meter data for December 1996, a single
monthly advertising buy on the Excite Network gives advertisers the potential to
reach nearly half of all home-based Web consumers. Excite's specialized services
and targeting technology also enable advertisers to target the mass audience of
Web consumers or tailor an advertising strategy for specific affinity groups or
for consumers possessing certain demographic traits or requesting information
relevant to certain advertisers. The Company has also developed proprietary
tools to measure the effectiveness of and provide meaningful feedback with
respect to advertisements on the Excite Network.
The Company's address is 1091 N. Shoreline Boulevard, Mountain View,
California 94043, and its telephone number is (415) 943-1200.
5
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered............................. 2,300,000 shares
Securities to be outstanding after the
Offering....................................... 13,804,417 shares of Common Stock(1),
2,630,330 shares of Preferred Stock
(convertible into Common Stock on a
one-for-one basis)(2)
Use of Proceeds.................................. For general corporate purposes, including
working capital, which may include
strategic acquisitions of complementary
products, businesses and technologies.
See "Use of Proceeds."
Nasdaq National Market symbol.................... XCIT
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994(3) 1995 1996
------- ------- --------
<S> <C> <C> <C>
Statements of Operations Data:
Total revenues............................................... $ 293 $ 953 $ 14,757
Gross profit................................................. 205 725 10,608
Operating loss............................................... (646) (6,390) (44,118)
Net loss..................................................... $ (650) $(6,435) $(43,117)
Net loss per share........................................... $ (0.06) $ (0.58) $ (3.65)
Shares used in computing net loss per share(4)............... 10,576 11,070 11,818
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(5)
------- --------------
<S> <C> <C>
Balance Sheet Data:
Working capital..................................................... $ 8,124 $ 42,297
Total assets........................................................ 47,698 81,871
Long-term obligations............................................... 3,985 3,985
Total shareholders' equity.......................................... 25,097 59,270
</TABLE>
- ---------------
(1) Based on shares of Common Stock outstanding as of January 31, 1997. Excludes
(i) 3,695,556 shares of Common Stock issuable upon the exercise of options
outstanding as of January 31, 1997 (which number includes options to
purchase 886,473 shares of Common Stock granted subject to shareholder
approval) at a weighted average exercise price of $4.60 per share, (ii) an
aggregate of 282,504 shares of Common Stock reserved for future grants or
sale under the Company's 1996 Directors Stock Option Plan and 1996 Employee
Stock Purchase Plan, (iii) an additional 2,368,527 shares of Common Stock
reserved for future grants or sale under the 1996 Plan, subject to
shareholder approval, and (iv) 9,451 shares of Common Stock issuable upon
the exercise of warrants to purchase Common Stock. Assumes exchange of
680,330 shares of Common Stock beneficially owned by AOL into an equivalent
number of shares of Preferred Stock after exercise of an exchange right
granted in connection with the acquisition of the WebCrawler Assets and
entering into a distribution agreement.
(2) Includes (i) 1,950,000 shares of Preferred Stock that will be issued to AOL
upon acquiring the WebCrawler Assets and (ii) 680,330 shares of Preferred
Stock that will be issued to AOL after exercise of an exchange right upon
such acquisition and entering into a distribution agreement. Excludes
650,000 shares of Preferred Stock issuable upon exercise of a warrant with
an exercise price of $8.00 per share beneficially owned by AOL (after
amending the warrant so that it is exercisable into Preferred Stock rather
than Common Stock) upon such acquisition and entering into such distribution
agreement (the "AOL Warrant"). See "Certain Transactions" and "Description
of Capital Stock."
(3) The year ended December 31, 1994 includes the results of operations from
Inception to December 31, 1994. Inception date is June 9, 1994 for Excite
and December 7, 1993 for McKinley. The operating results from December 7,
1993 through December 31, 1993 of The McKinley Group, Inc. ("McKinley"),
which was acquired by the Company in August 1996, were insignificant.
(4) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of shares used in computing net loss per share.
(5) Adjusted to reflect the closing of the sale of the 2,300,000 shares of
Common Stock offered hereby at an assumed public offering price of $15.88
per share, and the application of the estimated net proceeds therefrom. See
"Use of Proceeds" and "Capitalization."
6
<PAGE> 8
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus. In addition to the other information in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing the Common Stock offered by 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. 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 AOL,
Microsoft and 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 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, the WebCrawler Assets or any other subsequently acquired
businesses or technologies with its operations, 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, has incurred significant operating
losses since inception and as of December 31, 1996, the Company had an
accumulated deficit of approximately $50.2 million. Although the Company has
experienced significant revenue growth during 1996, 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 significantly 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 Company is unable to adjust to 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, there can be no assurance that the Company will ever achieve or
sustain profitability. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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 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 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
7
<PAGE> 9
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 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 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. 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. See "-- Reliance on
Advertising Revenues" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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, 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, 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 such
event, the price of the Company's Common Stock would be materially and adversely
affected. See "-- Volatility of Stock Price" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON NETSCAPE AND AOL
Under its Premier Provider Agreements with Netscape, the Company's services
are designated as two of five "Premier Providers" of search and navigation
services accessible from the "Net Search" button from the Netscape home page.
The Company believes that a substantial portion of its aggregate user traffic is
currently attributable to Netscape. The Company believes that it will continue
to be substantially dependent on its relationship with Netscape for a
significant percentage of its traffic. These agreements provide that the
"Premier Provider" status will be maintained until March 31, 1997, in exchange
for which the Company was required to make payments totaling $10.0 million in
cash and advertising services over the term of the agreements. See Note 12 to
Notes to Consolidated Financial Statements. The Company is currently negotiating
with Netscape to renew these "Premier Provider" Agreements. If the Company were
not able to enter into replacement agreements with Netscape with respect to one
or both of such "Premier Provider"
8
<PAGE> 10
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 such replacement agreements
with Netscape are on materially worse terms than those of the Company's current
Premier Provider Agreements, 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 the Company's Excite search and directory services are
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 Excite services 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 Excite services
would become the "default" search and directory services 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 traffic on the
Excite Network could be materially and adversely affected. In addition, if the
Company fails to satisfy certain technical, product fixture 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. In addition, any decline in the number of AOL subscribers
could adversely affect the amount of traffic on the Excite Network. See
"-- Acquisition Strategy; Pending WebCrawler Acquisition; Integration of Past
and Future Acquisitions," "Business -- Strategic Alliances" and "Certain
Transactions."
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 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 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," "-- Technological Change; Dependence on New and Enhanced Services;
Risk of Delays," "Business -- Industry Background" and "-- Advertising and
Sales."
9
<PAGE> 11
ACQUISITION STRATEGY; PENDING WEBCRAWLER ACQUISITION; 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 November 1996, the Company
entered into an agreement with AOL to acquire the WebCrawler Assets (the
"Acquisition"). Although the consummation of the Acquisition, which is subject
to certain conditions, is expected to occur on March 31, 1997 there can be no
assurance that the Acquisition will be consummated.
Among the conditions that must fulfilled in order to consummate the
Acquisition are (i) expiration or termination of the waiting period applicable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and (ii) satisfaction or waiver of a variety of other customary
conditions. There can be no assurance that these and all other such conditions
will be satisfied or waived, and therefore, there can be no assurance that the
conditions to closing the Acquisition will be consummated. In addition, the
review of the Acquisition pursuant to the HSR Act may substantially delay the
Company's ability to consummate the Acquisition. There can be no assurance that
a challenge to the Acquisition on antitrust grounds will not be made, or if such
a challenge is made, that the Company will prevail or would not be required to
terminate the Acquisition divest certain assets, license certain proprietary
technology or accept certain conditions in order to consummate the Acquisition.
In the event the Acquisition is not consummated, the descriptions of events
contained in this Prospectus may differ materially from those which actually
transpire. Among other things, the Company's Acquisition is reflected in the
Company's financial statements as occurring on December 1, 1996. Failure to
consummate the Acquisition may result in employee uncertainty, potentially
resulting in the loss of employees or the reduction in their productivity, or
uncertainty in the marketplace, which could have a material adverse effect on
the Company's business, results of operations and financial condition.
Although the Company believes that its previous acquisitions were in the
best interests of the Company and its shareholders, 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. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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 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
10
<PAGE> 12
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 Web Infrastructure."
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 Infoseek Corporation, Lycos,
Inc., and Yahoo!, 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.
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 databases 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, 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
11
<PAGE> 13
their advertising budget to the Web. See "-- Reliance on Advertising Revenues,"
"-- Developing Market; Validation of the Web as an Effective Advertising Medium"
and "Business -- Competition."
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, including its
Excite Live!, Excite NewsTracker, ExciteSeeing Tours and Excite Reference
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 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
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 December 31, 1996, the Company had grown to 202
employees from 38 employees at March 1, 1996. As a result of the acquisition of
McKinley by the Company in August 1996, the Company added approximately 50
employees. The Company expects that the number of its employees will
significantly 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
12
<PAGE> 14
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. See "Management" and "Business -- Employees."
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 and also
include arrangements for providing content for certain services offered by the
Company. 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. In addition,
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, 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. Accordingly, there
can be no assurance that the Company's existing 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" and
"Business -- Strategic Alliances."
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 Web browsers,
ISPs, OSPs and other Web site operators, which have
13
<PAGE> 15
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 San Jose,
Mountain View and Sausalito, California and the Company intends to relocate all
of its hardware operations to Redwood City, California during the first half of
1997. All of these areas are 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 these locations 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 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. See
"Business -- Facilities."
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.
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. See
"Business -- Industry Background."
14
<PAGE> 16
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, the Company may be subject to the
provisions of the recently enacted Communications Decency Act (the "CDA").
Although the constitutionality of the CDA, the manner in which the CDA will be
interpreted and enforced and its effect on the Company's operations cannot be
determined, it is possible that the CDA could expose the Company to substantial
liability. The CDA 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 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 are 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.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance of
its executive officers and other key employees, most of whom have worked
together for only a short period of time. Given the Company's early stage of
development, the Company is dependent on its ability to retain and motivate high
15
<PAGE> 17
quality personnel, especially its management and engineering and development
teams. The Company does not have "key person" life insurance policies on any of
its employees. The loss of the services of any of its other executive officers
or key employees could have a material adverse effect on the business, results
of operations or financial condition of the Company. The Company's future
success also depends on its continuing ability to identify, hire, train and
retain other highly qualified technical and managerial personnel. Competition
for such personnel is intense, particularly in Northern California, and there
can be no assurance that the Company will be able to identify, attract,
assimilate or retain other highly qualified technical and managerial personnel
in the future and the failure to do so could have a material adverse effect on
the Company's business, results of operations and financial condition. See
"Business -- Employees" and "Management."
PROPRIETARY TECHNOLOGY; POTENTIAL LITIGATION
The Company regards its technology as proprietary and attempts to protect
it with copyrights, trademarks, trade secret laws, restrictions on disclosure
and transferring title and other methods, and has been issued a patent with
respect to certain aspects of its searching and indexing technology. The Company
is also in the process of preparing three patent applications with respect to
other aspects of its technology. There can be no assurance that the patent that
has been issued or that any patents that may issue from these pending
applications will be sufficiently broad to protect the Company's technology. In
addition, there can be no assurance that any patents that have been issued or
that may be issued will not be challenged, invalidated or circumvented, or that
any rights granted thereunder would provide proprietary protection to the
Company. Failure of any patents to provide protection of the Company's
technology may make it easier for the Company's competitors to offer technology
equivalent to or superior to the Company's technology. The Company also
generally enters into confidentiality or license agreements with its employees
and consultants, and generally controls access to and distribution of its
documentation and other proprietary information. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use the
Company's services or technology without authorization, or to develop similar
technology independently. In addition, effective copyright, trademark and trade
secret protection may be unavailable or limited in certain foreign countries,
and the global nature of the Web makes it virtually impossible to control the
ultimate destination of the Company's products. Policing unauthorized use of the
Company's technology is difficult. There can be no assurance that the steps
taken by the Company will prevent misappropriation or infringement of its
technology. In addition, litigation may be necessary in the future to enforce
the Company's intellectual property rights, to protect the Company's trade
secrets or to determine the validity and scope of the proprietary rights of
others. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
results of operations and financial condition.
Many parties are actively developing search, indexing and related Web
technologies at the present time. The Company believes that they will take steps
to protect these technologies, including seeking patent protection. As a result,
the Company believes that disputes regarding the ownership of such technologies
are likely to arise in the future.
From time to time, the Company has received, and may receive in the future,
notice of claims of infringement of other parties' proprietary rights, including
claims for infringement resulting from the downloading of materials by the
service operated by the Company. Although the Company investigates claims and
responds as it deems appropriate, there can be no assurance that infringement or
invalidity claims (or claims for indemnification resulting from infringement
claims) will not be asserted or prosecuted against the Company or that any
assertions or prosecutions will not materially and adversely affect the
Company's business, results of operations and financial condition. Irrespective
of the validity or the successful assertion of such claims, the Company would
incur significant costs and diversion of resources with respect to the defense
thereof which could have a material adverse effect on the Company's business,
results of operations and financial condition. If any claims or actions were
asserted against the Company, the Company might seek to obtain a license under a
third party's intellectual property rights. There can be no assurance, however,
that under such circumstances a license would be available on commercially
reasonable terms, or at all. See "-- Liability for Information Retrieved from
the Web."
16
<PAGE> 18
The Company currently owns and also licenses from third parties certain of
its technologies. As it continues to introduce new services that incorporate new
technologies, it anticipates that it may be required to license additional
technology from others. There can be no assurance that these third-party
technology licenses will be available to the Company on commercially reasonable
terms, if at all. The inability of the Company to obtain any of these technology
licenses could result in delays or reductions in the introduction of new
services or could materially and adversely affect the performance of its
services until equivalent technology could be identified, licensed and
integrated. Any such delays or reductions in the introduction of services or
adverse impact on service quality could materially and adversely affect the
Company's business, results of operations and financial condition. See
"Business -- Licenses and Intellectual Property."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company currently anticipates that the net proceeds of this offering,
together with available funds will be sufficient to meet its anticipated needs
for working capital, capital expenditures and business expansion for at least
the next 12 months. Thereafter, the Company may need to raise additional funds.
The Company may need to raise additional funds sooner in order to fund more
rapid expansion, to develop new or enhanced services or products, to respond to
competitive pressures or to acquire complementary products, businesses or
technologies. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of the shareholders of the
Company will be reduced, shareholders may experience additional dilution and
such securities may have rights, preferences or privileges senior to those of
the holders of the Company's Common Stock. There can be no assurance that
additional financing will be available on terms favorable to the Company, or at
all. If adequate funds are not available or are not available on acceptable
terms, the Company may not be able to fund its expansion, take advantage of
unanticipated acquisition opportunities, develop or enhance services or products
or respond to competitive pressures. Such inability could have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND AOL
Upon completion of this offering, the present directors and executive
officers of the Company and their respective affiliates will, in the aggregate,
beneficially own approximately 54.5% of the outstanding Common Stock. As a
result, these shareholders will possess voting control over the Company, giving
them the ability, among other things, to elect at least a majority of the
Company's Board of Directors (or the entire Board of Directors when and if
cumulative voting is eliminated) and approve significant corporate transactions.
In addition, upon completion of this offering AOL will beneficially own 19.2% of
the outstanding Common Stock and, so long as it holds at least an aggregate of
1,640,165 shares of Series E Preferred Stock, will be able to elect one member
to the Company's Board of Directors. Such control or share ownership may also
have the effect of delaying or preventing a change in control of the Company,
impede a merger, consolidation, takeover or other business combination involving
the Company or discourage a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company. See "Principal
Shareholders."
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 four months, the high
and low closing prices of the Common Stock were $21.13 and $5.50, 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. 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. See "Price Range of Common Stock."
17
<PAGE> 19
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the
Company's Common Stock. The number of shares of Common Stock available for sale
in the public market is limited by restrictions under the Securities Act of
1933, as amended (the "Securities Act"), and lock-up agreements under which the
holders of such shares have agreed not to sell or otherwise dispose of any of
their shares for a period of 90 days after the date of this Prospectus without
the prior written consent of Robertson, Stephens & Company LLC. However,
Robertson, Stephens & Company LLC may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to the
lock-up agreements. Upon completion of this offering, the Company will have
outstanding approximately 13,804,417 shares of Common Stock and 2,630,330 shares
of Series E Preferred Stock which is convertible into Common Stock on a
one-for-one basis (assuming no exercise of options or warrants). Of such shares,
the 2,300,000 shares offered hereby (other than those purchased by affiliates of
the Company) and 3,030,318 other outstanding shares of Common Stock will be
freely tradable, and the remaining 11,104,429 shares (which include the shares
of Common Stock issuable upon conversion of the Preferred Stock issuable to AOL
and exclude shares of Preferred Stock subject to the AOL Warrant and Common
Stock issuable upon exercise of options and warrants) will be restricted shares
("Restricted Shares") under the Securities Act. Upon the completion of this
offering, 40,865 Restricted Shares that are not subject to lock-up agreements
will be eligible for sale in the public market pursuant to Rule 144 or Rule 701
promulgated under the Securities Act. Immediately following the expiration of
the lock-up agreements, approximately 8,038,100 Restricted Shares will become
eligible for sale (subject, in some instances, to certain repurchase rights of
the Company) in the public market, subject to the provisions of Rule 701 and/or
Rule 144 including certain volume limitations and other resale restrictions. As
of January 31, 1997, options to purchase a total of approximately 3,695,556
shares were outstanding (which number includes options to purchase 886,473
shares of Common Stock which were granted subject to shareholder approval), of
which approximately 242,765 shares issuable upon the exercise of stock options
will be eligible for sale in the public market immediately or, in some cases,
upon the expiration of lock-up agreements. Furthermore, the Company's Board of
Directors has approved an increase, subject to shareholder approval, in the
number of shares of Common Stock reserved for issuance under the 1996 Plan by
3,255,000 shares (and has granted, subject to such shareholder approval, options
to purchase 886,473 shares of Common Stock). The Company intends to register the
additional shares covered by the 1996 Plan under the Securities Act after this
offering. Upon expiration of the lock-up agreements referred to above, holders
of 9,205,283 shares of Common Stock (including shares of Common Stock issuable
upon conversion of Preferred Stock and upon conversion of Preferred Stock
issuable upon exercise of the AOL Warrant) will have certain rights to require
the Company to register those shares of Common Stock for offer and sale to the
public. If such holders, by exercising their registration rights, cause a large
number of shares to be registered and sold in the public market, such sales
could have a material adverse effect on the market price for the Company's
Common Stock. See "Description of Capital Stock -- Registration Rights," "Shares
Eligible for Future Sale" and "Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of the Common Stock offered hereby will incur immediate and
substantial dilution of approximately $12.45 in the net tangible book value per
share of Common Stock. To the extent outstanding options and warrants to
purchase Common Stock or Preferred Stock are exercised, there will be further
dilution.
18
<PAGE> 20
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,300,000 shares of
Common Stock offered hereby are estimated to be $34.2 million ($39.4 million if
the Underwriters' over-allotment option is exercised in full), after deducting
underwriting discounts and commissions and estimated offering expenses. The
Company expects to use the net proceeds for general corporate purposes,
including working capital. Furthermore, from time to time the Company expects to
evaluate the acquisition of products, businesses and technologies that
complement the Company's business or the Company may enter into distribution
agreements for which a portion of the net proceeds may be used. Currently,
however, the Company does not have any understandings, commitments or agreements
with respect to any such acquisitions or distribution agreements. Pending use of
the net proceeds for the above purposes, the Company intends to invest such
funds in investment-grade, short-term and medium-term, interest-bearing
securities. See "Risk Factors -- Acquisition Strategy; Pending WebCrawler
Acquisition; Integration of Past and Future Acquisitions."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that it will retain all future earnings
for use in its business and does not anticipate paying any cash dividends in the
foreseeable future.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "XCIT." Public trading of the Common Stock commenced on April 4,
1996.
The following table sets forth, for the period indicated, the high and low
closing prices per share for the Company's Common Stock, all as reported by the
Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Second Quarter (from April 4, 1996)...................................... $20.00 $ 8.25
Third Quarter............................................................ $ 8.38 $ 5.13
Fourth Quarter........................................................... $15.25 $ 5.50
YEAR ENDED DECEMBER 31, 1997
First Quarter (through February 28, 1997)................................ $21.13 $ 8.75
</TABLE>
On February 28, 1997, the last reported sale price of the Common Stock on
the Nasdaq National Market was $15 7/8 per share. On February 28, 1997, there
were approximately 200 holders of record of the Company's Common Stock, although
the Company believes that there is a larger number of beneficial owners of its
Common Stock.
19
<PAGE> 21
CAPITALIZATION
The following table sets forth, as of December 31, 1996, (i) the actual
capitalization of the Company and (ii) such capitalization as adjusted to give
effect to the sale of the 2,300,000 shares of Common Stock offered hereby at an
assumed public offering price of $15.88 per share (after deducting underwriting
discounts and commissions and estimated offering expenses) and the application
of the net proceeds therefrom.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------
ACTUAL AS ADJUSTED
----------- ------------
(In thousands)
<S> <C> <C>
Long-term obligations............................................ $ 3,985 $ 3,985
Shareholders' equity:
Preferred Stock, no par value; 4,000,000 shares authorized,
1,950,000 shares issuable, actual; 2,630,330 shares issued
and outstanding as adjusted(1).............................. 15,816 22,816 (2)
Common Stock, no par value; 25,000,000 shares authorized,
12,108,354 shares issued and outstanding, actual; 25,000,000
shares authorized, 13,728,024 shares issued and outstanding,
as adjusted(3).............................................. 59,999 87,172
Deferred compensation.......................................... (388) (388)
Unrealized loss on available-for-sale investments.............. (128) (128)
Accumulated deficit............................................ (50,202) (50,202)
----------- ------------
Total shareholders' equity................................ 25,097 59,270
----------- ------------
Total capitalization................................... $ 29,082 $ 63,255
========== ===========
</TABLE>
- ---------------
(1) Does not include 650,000 shares of Series E-3 Preferred Stock issuable upon
the exercise of the AOL Warrant which will be amended in connection with the
Acquisition of the WebCrawler Assets and a distribution arrangement.
(2) Assumes conversion of 680,330 shares of Common Stock beneficially owned by
AOL into an equivalent number of shares of Preferred Stock after exercise of
an exchange right granted in connection with the Acquisition and entering
into a distribution agreement. See "Certain Transactions."
(3) Excludes (i) 3,695,556 shares of Common Stock issuable upon the exercise of
stock options outstanding as of January 1, 1997 (which number includes
options to purchase 886,473 shares of Common Stock granted subject to
shareholder approval), of which options to purchase 249,590 shares were
exercisable under the Company's 1995 Equity Incentive Plan, the 1996 Plan
and the 1996 Directors Stock Option Plan at a weighted average exercise
price of $4.60 per share, (ii) 282,504 shares of Common Stock not subject to
outstanding options and reserved for issuance under the 1996 Directors Stock
Option Plan and 1996 Employee Stock Purchase Plan, (iii) an additional
2,368,527 shares of Common Stock reserved for future grants under the 1996
Plan, subject to shareholder approval, (iv) 9,451 shares of Common Stock
issuable upon the exercise of warrants to purchase Common Stock, (v)
2,630,330 shares of Common Stock issuable upon conversion of Preferred Stock
to be issued to AOL in connection with the Acquisition and entering into a
distribution agreement and (vi) 650,000 shares of Common Stock issuable upon
conversion of Preferred Stock issuable upon exercise of the AOL Warrant. See
"Management-- Employee Benefit Plans," "-- Director Compensation," "Certain
Transactions," "Description of Capital Stock" and Notes 7 and 8 of Notes to
Consolidated Financial Statements.
20
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus. During 1996, Excite acquired
McKinley in a transaction accounted for as a pooling of interests. All financial
information has been restated to reflect the combined operations of Excite and
McKinley. The statements of operations data for each of the years in the three
year period ended December 31, 1996 and the balance sheet data at December 31,
1995 and 1996, are derived from, and are qualified by reference to, the audited
consolidated financial statements of the Company included elsewhere in this
Prospectus and should be read in conjunction with those financial statements and
notes thereto. The balance sheet data at December 31, 1994 are derived from
unaudited financial statements of the Company not included in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994(1) 1995 1996(2)
------- ------- --------
(In thousands, except per share
data)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Advertising revenues................................... $ 57 $ 145 $ 14,030
Contract and other revenues............................ 236 808 727
-------- --------
---
--------
Total revenues................................. 293 953
14,757
Cost of revenues......................................... 88 228
4,149
-------- --------
---
--------
Gross profit............................................. 205 725
10,608
Operating expenses:
Product development.................................... 415 2,810 8,030
Sales and marketing.................................... 37 1,648 21,103
Distribution license fees(3)........................... -- -- 11,878
General and administrative............................. 399 2,326 7,081
Charge for purchased in-process technology............. -- 331 3,500
Other merger and acquisition related costs, including
amortization of goodwill and other purchased
intangibles......................................... -- -- 3,134
-------- --------
---
--------
Total operating expenses....................... 851 7,115
54,726
-------- --------
---
--------
Operating loss........................................... (646) (6,390)
(44,118)
Interest income (expense) and other...................... (4) (45)
1,001
-------- --------
---
--------
Net loss................................................. $ (650) $(6,435)
$(43,117)
======== ===========
========
Net loss per share....................................... $ (0.06) $ (0.58)
$ (3.65)
======== ===========
========
Shares used in computing net loss per share(4)........... 10,576 11,070
11,818
======== ===========
========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1994 1995 1996
------- ------- --------
(In thousands)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........ $ 12 $ 1,118 $ 20,834
Working capital (deficit)................................ (442) (878) 8,124
Total assets............................................. 157 3,801 47,698
Long-term obligations.................................... 100 995 3,985
Redeemable convertible preferred stock................... -- 3,847 --
Total shareholders' equity (net capital deficiency)...... (542) (4,034) 25,097
</TABLE>
- ---------------
(1) The year ended December 31, 1994 includes the results of operations from
Inception to December 31, 1994. Inception date is June 9, 1994 for Excite
and December 7, 1993 for McKinley. The operating results for McKinley from
December 7, 1993 through December 31, 1993 were insignificant.
(2) During the fourth quarter of 1996, the Company entered into an agreement to
acquire the WebCrawler Assets from AOL. See "Risk Factors -- Acquisition
Strategy; Pending WebCrawler Acquisition; Integration of Past and Future
Acquisitions," "Certain Transactions" and Note 3 of Notes to Consolidated
Financial Statements for a discussion of this acquisition and associated
costs.
(3) During the second quarter of 1996, the Company entered into two distribution
license agreements with Netscape. See Note 12 of Notes to Consolidated
Financial Statements for a discussion of these agreements and associated
costs.
(4) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of shares used in computing net loss per share.
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
Prospectus. The following discussion also should be read in conjunction with the
Consolidated Financial Statements and notes thereto included elsewhere in this
Prospectus.
OVERVIEW
The Company operates the Excite Network, which includes the Excite and
WebCrawler brands, and provides a gateway to 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.
On August 30, 1996, the Company acquired McKinley, a private company and
creator of the Magellan On-Line Guide. The transaction was effected through the
issuance of 850,000 shares of the Company's Common Stock and was accounted for
as a pooling of interests. In connection with the transaction, the Company
incurred approximately $2.2 million in merger related expenses, including $1.0
million for legal and other professional consulting fees, $901,000 for personnel
severance and outplacement expenses and $345,000 for termination of contracts
and discontinuation of duplicate operations and facilities. McKinley has
experienced operating losses since inception. Because the acquisition has been
accounted for as a pooling of interests, all financial information for dates and
periods prior to the merger has been restated to reflect the combined operations
of the Company and McKinley. See "Risk Factors -- Acquisition Strategy; Pending
WebCrawler Acquisition; Integration of Past and Future Acquisitions."
On November 25, 1996, the Company announced an expansion of its previous
agreement with AOL to become the exclusive Web search and directory service on
AOL and to acquire the WebCrawler Assets for an aggregate of 1,950,000 shares of
the Company's Preferred Stock. The acquisition, which is expected to be
consummated on or after March 31, 1997 (the "Closing"), was recorded for
accounting purposes as of December 1, 1996. The transaction was accounted for as
an acquisition of rights to developed and purchased in-process technology and
distribution rights. Of the total purchase price, $3.5 million was allocated to
purchased in-process technology and the remaining excess purchase price of
approximately $12.6 million was allocated to trademarks, distribution rights,
bookmarks, trade names, goodwill and other. The amount of the purchase price
allocated to purchased in-process technology was charged to the Company's
operations as of December 1, 1996. The identified intangible assets and goodwill
are being amortized over periods ranging from four months to three years.
In connection with the Acquisition, the Company and AOL have agreed that
the Company will be the exclusive provider of Web search and directory services
to AOL's customers for a minimum of two years. The Company will receive a share
of revenues generated on the AOL search and directory site as royalties, and AOL
will incur all hosting, advertising and selling expenses. Upon Closing, AOL will
pay to the Company a percentage of AOL's advertising revenues with respect to
the sales of advertising derived from the WebCrawler Assets for the period
between December 1, 1996 and the Closing, less ordinary and customary reserves,
and the Company will reimburse AOL for expenses relating to the WebCrawler
Assets. Revenues recorded and derived from the WebCrawler Assets during the
period from December 1, 1996 through December 31, 1996 were immaterial. See
"Certain Transactions."
The Company expects to derive substantially all of its revenue for the
foreseeable future from selling advertising space on the Excite Network as
consumers use its services for their search and retrieval needs. The Company's
advertising revenues are derived principally from short-term advertising
contracts in which the Company guarantees a minimum number of impressions (a
view of an advertisement by a consumer) for a fixed fee. Advertising revenues
are recognized ratably over the term of the contract. To the extent minimum
22
<PAGE> 24
guaranteed impression levels are not met, the Company defers recognition of the
corresponding revenues until guaranteed levels are achieved. At December 31,
1996, the Company had deferred revenues of $1.8 million.
Revenues from the sale of certain advertising space are shared with third
parties pursuant to the terms of certain agreements. To date, amounts allocable
to third parties have not been significant. Contract and other revenues during
the years ended December 31, 1994 and 1995 consisted primarily of contract
revenues earned under agreements to modify the Company's Web directory
technology and fees for the licensing of Web directory content and technology.
Contract revenues are recognized as the work is performed using the percentage
of completion method. License revenues are recognized at the time of delivery,
provided that no significant obligations remain and collection of the resulting
receivable is considered probable. See "Risk Factors -- 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 operating results in the future. In addition, because of the
rapidly changing nature of its business and its extremely limited operating
history, the Company believes that period-to-period comparisons of its financial
results are not necessarily meaningful and should not be relied upon as an
indication of future performance. See "Risk Factors -- Extremely Limited
Operating History; Accumulated Deficit and Anticipation of Continued Losses" and
"-- Potential Fluctuations in Quarterly Results; Unpredictability of Future
Revenues."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain items from the Company's Consolidated
Statement of Operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Advertising revenues................................................ 19% 15% 95%
Contract and other revenues......................................... 81 85 5
--- --- ---
Total revenues.............................................. 100 100 100
--- --- ---
Cost of revenues...................................................... 30 24 28
--- --- ---
Gross profit.......................................................... 70 76 72
Operating expenses:
Product development................................................. 141 295 54
Sales and marketing................................................. 13 173 143
Distribution license fees........................................... -- -- 81
General and administrative.......................................... 136 244 48
Charge for purchased in-process technology.......................... -- 35 24
Other merger and acquisition related costs, including amortization
of goodwill and other purchased intangibles...................... -- -- 21
--- --- ---
Total operating expenses.................................... 290 747 371
--- --- ---
Operating loss........................................................ (220) (671) (299)
Interest income (expense) and other................................... (1) (4) 7
--- --- ---
Net loss.............................................................. (221)% (675)% (292)%
=== === ===
</TABLE>
Revenues
In October 1995, the Company began selling advertising space on its
network. Accordingly, there were no significant advertising revenues for 1994 or
1995. Prior to October 1995, revenues consisted primarily of revenues derived
from custom product development, licensing of the McKinley database, royalties
from sales of the McKinley Internet Yellow Pages and consulting fees, which are
not expected to be significant sources of revenues in future periods. Total
revenues increased from $293,000 for 1994 to $953,000 for 1995, and to $14.8
million for 1996. The increase in 1995 was due to the introduction of the
Company's services in October
23
<PAGE> 25
1995 and the increase in 1996 was due primarily to increased sales of
advertisements on the Company's Web sites, increased capacity resulting from the
merger with McKinley as well as the creation and increased size of the Company's
direct sales force. For 1995 and 1996, 97% and 27%, respectively, of advertising
revenues were derived through two advertising sales agencies. With the addition
of its direct sales force, the Company does not expect to derive a significant
portion of its advertising revenues from advertising sales agencies in the
future. There can be no assurance that advertising over the Web will become
widespread, that a market for the Company's proposed services will emerge, or
that the Company's services will become generally adopted. See "Risk
Factors -- Reliance on Advertising Revenues," "-- Developing Market; Validation
of the Web as an Effective Advertising Medium" and "-- Dependence on Web
Infrastructure."
Two customers accounted for 26% and 16%, respectively, of total revenues in
1995. One customer accounted for approximately 12% of total revenues in 1996.
The increase in advertising revenues is due to increased sales of
advertisements and an increase in sales of targeted advertising with higher
rates per thousand impressions ("CPM") charged to advertisers. The Company
expects to continue to derive substantially all of its total revenue from
selling advertisements on its network. Because the market for advertising on the
Web is intensely competitive, advertising rates could be subject to pricing
pressures in the future. If the Company is forced to reduce its advertising
rates or experiences lower CPMs as a result of such competition or otherwise,
future revenues could be adversely affected. See "Risk Factors -- Reliance on
Advertising Revenues."
In connection with the Netscape Premier Provider Agreements, the Company
entered into advertising agreements with Netscape to deliver a guaranteed number
of Netscape advertising impressions on the Excite Network. As consideration for
such advertising services, Netscape agreed to reduce the Company's $10.0 million
in obligations under the Company's Premier Provider Agreements with Netscape by
$3.0 million, which was classified as deferred revenues to be recognized over
the one year term of the agreements based upon delivery of a specified number of
advertising impressions. For the year ended December 31, 1996, the Company
recognized approximately $1.8 million in revenue as a result of these
agreements. See Note 12 of Notes to Consolidated Financial Statements.
Cost of Revenues
Cost of revenues consists primarily of expenses related to the maintenance
and technical support of the Excite Network, which are comprised principally of
personnel costs, telecommunications costs, equipment depreciation, royalties,
overhead allocations and costs related to revenue sharing agreements. Cost of
revenues was $4.1 million, or 28% of total revenues for 1996. Cost of revenues
for 1994 and 1995 was not comparable to 1996 as the nature of the Company's
revenues changed significantly from 1995 with the launch of the Company's
services in October 1995. In the fourth quarter of 1996, the Company recognized
$186,000 in non-cash expenses for the amortization of purchased technology
relating to the Acquisition. Cost of revenues may increase in absolute dollars
and as a percentage of total revenues as the Company increases costs to support
expanded services.
Gross Margin
Gross margin was 72% of total revenues for 1996. Gross margins for 1994 and
1995 were not comparable to 1996 as the nature of the Company's revenues changed
significantly from 1995 with the launch of the Company's services in October
1995. In the future, gross margins may be affected by the types of
advertisements sold and revenue-sharing provisions of certain access and content
provider agreements. Advertisements which target a specific audience typically
have higher gross margins than advertisements which target the mass Web consumer
market. Furthermore, pursuant to the provisions of certain agreements with
operators of Web access points and with content providers, the Company shares
advertising revenues based upon the number of consumers directed to its network.
A low level of targeted advertising as a percentage of total advertising sold, a
decrease in targeted or mass Web advertising rates, whether due to the lack of
acceptance of the Web as an effective advertising medium, competition or
otherwise, or an increase in the Company's advertising revenue sharing
obligations could adversely affect gross margins.
24
<PAGE> 26
Operating Expenses
The Company's operating expenses have increased in absolute dollar amounts
in every consecutive quarter from inception through December 31, 1996. This
trend reflects the Company's rapid transition from the product development stage
to marketing and offering its services. The Company believes that continued
expansion of operations is essential to achieving and maintaining market
leadership. As a consequence, the Company intends to continue to increase
expenditures in all operating areas for the foreseeable future.
Included in operating expenses for 1996 was a $3.5 million charge for
purchased in-process technology related to the Acquisition, $3.1 million in
merger and acquisition related costs relating to the merger with McKinley and
the Acquisition and $11.9 million in distribution license fees including $1.6
million relating to the issuance of the AOL Warrant during the first quarter of
1996 and $10.0 million for distribution license agreements with Netscape ($6.5
million of which had been paid in cash or services as of December 31, 1996)
during the second quarter of 1996. The Company has recorded deferred
compensation of $640,000 for the difference between the exercise price and the
deemed fair value of the Company's Common Stock for shares subject to options
granted in 1995. The majority of this deferred compensation is being charged to
general and administrative expenses and is being amortized over the vesting
period of the options, generally on a monthly basis over a four year period.
Deferred compensation amortized was $9,000 and $243,000 for 1995 and 1996,
respectively. The amortization of this deferred compensation will continue to
have an adverse effect on the Company's results of operations. See Note 8 of
Notes to Consolidated Financial Statements.
Product development. Product development expenses consist principally of
engineering and editorial personnel costs, allocation of overhead, equipment
depreciation, consulting and supplies. Costs related to research, design and
development of products have been charged to product development expense as
incurred. See Note 1 of Notes to Consolidated Financial Statements. Product
development expenses increased from $415,000, or 141% of total revenues for
1994, to $2.8 million, or 295% of total revenues for 1995, and increased in
absolute dollars to $8.0 million, or 54% of total revenues for 1996. This dollar
increase is due primarily to increased engineering and editorial staff required
to develop and enhance the Company's services as well as increased product
development activities resulting from the Acquisition and the acquisition of
McKinley. The Company believes that a significant level of product development
expenses is required to remain competitive and, accordingly, the Company
anticipates that it will continue to devote substantial resources to product
development and that these costs will continue to increase in absolute dollars.
Sales and marketing. Sales and marketing expenses consist principally of
sales and marketing personnel costs, consulting fees, commissions, allocation of
overhead, creative services and promotional and advertising expenses. Sales and
marketing expenses were immaterial for 1994 and increased in absolute dollars
from $1.6 million, or 173% of total revenues for 1995, to $21.1 million, or 143%
of total revenues for 1996. This dollar increase was due primarily to the launch
of a significant media advertising campaign during the fourth quarter of 1996
and to increased sales personnel costs resulting from the transition during the
first half of 1996 from the use of outside advertising sales firms for the sales
of advertisements to a direct sales force and, to a lesser extent, the hiring of
other additional sales and marketing personnel and to increases in other
advertising and promotional expenses. The Company expects to incur significant
promotional and advertising expenses and to continue to hire additional sales
and marketing personnel, and anticipates that these costs will continue to
increase in absolute dollars. In particular, the Company is continuing, although
to a lesser degree, its media campaign which was launched during the fourth
quarter of 1996.
Distribution license fees. Distribution license fees were $11.9 million
for 1996. There were no distribution license fees for 1994 or 1995. Distribution
license fees included a one-time, non-cash charge of approximately $1.6 million
during the first quarter of 1996 related to the issuance of the AOL Warrant in
connection with a nonexclusive agreement entered into in March 1996, which will
be amended to be exercisable into an equivalent number of shares of Series E-3
Preferred Stock. See "Certain Transactions." Distribution license fees also
included a $10.0 million charge in the second quarter of 1996 relating to the
Company's Premier Provider Agreements with Netscape, which expire in April 1997.
In the future, it is anticipated that any such consideration will be expensed
over the term of the distribution agreement. See Note 12 of Notes to
Consolidated Financial Statements. There can be no assurance that the Company
will be able to enter into new agreements with Netscape on terms similar to
those of its current agreements, if at all. If the
25
<PAGE> 27
terms of any renewed agreements with Netscape are substantially similar to the
current agreements, the Company would anticipate incurring an expense of at
least $10.0 million during the term of the agreements. See "Risk
Factors -- Dependence on Netscape and AOL."
General and administrative. General and administrative expenses consist
principally of administrative and executive personnel costs, provision for
doubtful accounts, allocation of overhead and fees for professional services.
General and administrative expenses increased from $399,000, or 136% of total
revenues for 1994, to $2.3 million, or 244% of total revenues for 1995, to $7.1
million, or 48% of total revenues for 1996. This dollar increase in general and
administrative expenses was due to increased personnel, professional service
fees, provision for doubtful accounts and relocation to new facilities to
support the Company's growth. The Company anticipates that its general and
administrative expenses will continue to increase significantly in absolute
dollars as the Company expands its administrative and executive staff, adds
infrastructure, relocates to a new facility during the second quarter of 1997,
negotiates and assimilates acquisitions of acquired technologies and businesses
and incurs additional costs related to operating as a public company, such as
expenses related to directors' and officers' insurance, investor relations
programs and increased professional fees.
Charge for purchased in-process technology. The Company recognized a charge
of $3.5 million in the fourth quarter of 1996 for purchased in-process
technology related to the Acquisition. The $331,000 charge for purchased
in-process technology related to the acquisition of City.Net in November 1995.
There were no charges for purchased in-process technology for 1994.
Other merger and acquisition related costs, including amortization of
goodwill and other purchased intangibles. Other merger and acquisition related
costs, including amortization of goodwill and other purchased intangibles,
totaled $3.1 million in 1996. The charge included approximately $2.2 million
related to the merger with McKinley, which consisted primarily of legal and
other professional consulting fees, personnel severance and outplacement
expenses and expenses related to the termination of contracts and
discontinuation of duplicate operations and facilities in the third quarter of
1996, and approximately $769,000 related to the amortization of goodwill and
other intangible assets in 1996 resulting from the Acquisition and the
acquisition of City.Net and other intangible assets. There were no other
significant merger and acquisition related costs for 1994 and 1995.
Interest income (expense) and other. Interest income increased from $5,000
for 1995 to $1.4 million for 1996. This increase reflects larger amounts of
interest being earned on higher average investment balances, due primarily to
cash received from the Company's Series D Preferred Stock financing and initial
public offering in the first half of 1996. Interest expense increased from
$50,000 for 1995 to $409,000 for 1996. This increase was due primarily to
increased expenses associated with capital lease obligations and, to a lesser
extent, interest paid on bank borrowings. Interest income and interest expense
were immaterial for 1994.
Income Taxes
At December 31, 1996, the Company had federal and state net operating loss
carryforwards of approximately $37.9 million and $37.7 million, respectively.
The federal net operating loss carryforwards will expire beginning in 2009
through 2010, if not utilized. The state net loss operating carryforwards will
expire at various dates beginning in 2009 through 2011. An ownership change, as
defined in the Tax Reform Act of 1986, may restrict the utilization of
carryforwards. A valuation allowance has been recorded for the entire deferred
tax asset as a result of uncertainties regarding the realization of the asset
due to the lack of earnings history of the Company. See Note 9 of Notes to
Consolidated Financial Statements.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth a summary of the Company's unaudited
quarterly results for the eight quarters in the period ended December 31, 1996,
together with the percentage of total revenues represented by such results. This
information has been derived from unaudited consolidated financial statements of
the
26
<PAGE> 28
Company that, in the opinion of management, reflect all recurring adjustments
necessary to fairly present this information when read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere herein. The Company believes that quarterly operating results for 1995
are not comparable to those for 1996 as the nature of the Company's business
changed significantly from 1995 with the launch of the Company's services in
October 1995. The results of operations for any quarter are not necessarily
indicative of the results to be expected for any future period. See "Risk
Factors -- Potential Fluctuations in Quarterly Results; Unpredictability of
Future Revenues."
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
(In thousands; unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues......................... $ 28 $ 314 $ 37 $ 574 $ 1,374 $ 2,816 $ 4,049 $ 6,518
Cost of revenues....................... 20 104 19 85 389 427 1,165 2,168
-------- ------ -- -------- -------- -------- -------- -------- --------
Gross profit........................... 8 210 18 489 985 2,389 2,884 4,350
-------- ------ -- -------- -------- -------- -------- -------- --------
Operating expenses:
Product development.................. 258 403 785 1,364 1,376 2,109 2,038 2,507
Sales and marketing.................. 31 193 460 964 2,489 3,203 6,304 9,107
Distribution license fees............ -- -- -- -- 1,625 10,000 253 --
General and administrative........... 158 386 495 1,287 1,141 2,782 1,753 1,405
Charge for purchased in-process
technology......................... -- -- -- 331 -- -- -- 3,500
Other merger and acquisition related
costs including amortization of
goodwill and other purchased
intangibles........................ -- -- -- -- -- 73 2,292 769
-------- ------ -- -------- -------- -------- -------- -------- --------
Total operating expenses....... 447 982 1,740 3,946 6,631 18,167 12,640 17,288
-------- ------ -- -------- -------- -------- -------- -------- --------
Operating loss......................... (439) (772) (1,722) (3,457) (5,646) (15,778) (9,756) (12,938)
-------- ------ -- -------- -------- -------- -------- -------- --------
Net loss............................... $ (442) $ (769) $(1,739) $(3,485) $(5,644) $(15,408) $ (9,354) $(12,711)
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
AS A PERCENTAGE OF TOTAL REVENUES
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues......................... 100% 100% 100% 100% 100% 100% 100% 100%
Cost of revenues....................... 71 33 51 15 28 15 29 33
-------- -------- --------- -------- -------- -------- --------- --------
Gross profit........................... 29 67 49 85 72 85 71 67
-------- -------- --------- -------- -------- -------- --------- --------
Operating expenses:
Product development.................. 921 129 2,122 237 100 75 50 38
Sales and marketing.................. 111 61 1,243 168 181 114 156 140
Distribution license fees............ -- -- -- -- 119 355 6 --
General and administrative........... 564 123 1,338 224 83 99 43 21
Charge for purchased in-process
technology......................... -- -- -- 58 -- -- -- 54
Other merger and acquisition related
costs including amortization of
goodwill and other purchased
intangibles........................ -- -- -- -- -- 2 57 12
-------- -------- --------- -------- -------- -------- --------- --------
Total operating expenses....... 1,596 313 4,703 687 483 645 312 265
-------- -------- --------- -------- -------- -------- --------- --------
Operating loss......................... (1,567) (246) (4,654) (602) (411) (560) (241) (198)
-------- -------- --------- -------- -------- -------- --------- --------
Net loss............................... (1,579) (245) (4,700) (607) (411) (547) (231) (195)
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
With the exception of the third quarter of 1995, the Company's total
revenues have increased in each of the eight quarters ending December 31, 1996.
The decline in revenues in the third quarter of 1995 was due primarily to a
reduction in contract revenue, which was not a significant source of total
revenues in 1996. Gross margins for 1995 are not comparable to gross margins for
1996 as the nature of the Company's revenues changed significantly in 1996 with
the launch of the Company's services in October 1995. Gross margins have
27
<PAGE> 29
generally declined during 1996, due primarily to the growth in infrastructure
associated with the acquisition of McKinley and the amortization of purchased
in-process technology arising from the Acquisition and the expansion of
operations to support an expanded Excite Network.
During the fourth quarter of 1996, the Company entered into an agreement,
which is expected to close on or after March 31, 1997, to acquire the WebCrawler
Assets from AOL in exchange for 1,250,000 and 700,000 shares of the Company's
Series E-1 and E-2 Preferred Stock, respectively, and recorded the Acquisition
as of December 1, 1996. As a result of the Acquisition, during the fourth
quarter of 1996, the Company expensed $3.5 million for purchased in-process
technology and recorded amortization of other purchased intangibles of $769,000.
See Note 3 of Notes to Consolidated Financial Statements. During the second
quarter of 1996, the Company entered into two distribution license agreements
with Netscape for total consideration of $10.0 million ($6.5 million of which
had been paid in cash or services as of December 31, 1996), which was expensed
during the second quarter of 1996. In the future, it is anticipated that any
such consideration will be expensed over the term of the agreement. See Note 12
of Notes to Consolidated Financial Statements. Operating expenses other than
distribution license fees and other merger and acquisition related costs
including amortization of goodwill and other purchased intangibles generally
increased during 1996. The increase in such other operating expenses during 1996
is due to: increased personnel costs to support the growth in headcount across
all operating departments; recording of the merger with McKinley in the third
quarter of 1996 and of the Acquisition in the fourth quarter of 1996, which
resulted in additional product development and general and administrative
expenses; and the creation and launch of the Excite brand advertising and
promotion campaign, which resulted in additional sales and marketing expenses of
approximately $5.0 million in the fourth quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had $20.8 million in unrestricted cash,
cash equivalents and short-term investments. Prior to its initial public
offering, the Company financed its operations and met its capital expenditure
requirements primarily from proceeds of the private sale of equity and debt
securities totaling approximately $18.2 million. In April 1996, the Company
completed its initial public offering of Common Stock. The Company sold
2,300,000 shares of its Common Stock for net proceeds of approximately $35.4
million, net of underwriting discounts and other offering costs. During the
third quarter of 1996, the Company completed its merger with McKinley, resulting
in a significant increase in headcount and overhead, as well as the assumption
and payment of additional liabilities. The Company maintains its cash and cash
equivalents in short-term and medium-term investment-grade interest-bearing
securities until required for other purposes.
In connection with the merger with McKinley, the Company assumed McKinley's
obligations pursuant to a commitment letter with a bank. Pursuant to this
commitment, McKinley has a revolving line of credit and note of up to $1.1
million which bear interest at the bank's prime rate plus 1%. Outstanding
amounts under this commitment are due March 31, 1997. The Company believes that
the bank will extend this maturity date. As of December 31, 1996, $1.1 million
was outstanding under these commitments, which are secured by substantially all
of McKinley's assets and are guaranteed by the Company. See Note 4 of Notes to
Consolidated Financial Statements.
The Company's operating activities used cash of $4.7 million and $26.1
million in 1995 and 1996, respectively. The increased use of cash in 1996 was
primarily attributable to increased operating expenses and increases in accounts
receivable and prepaid expenses, reduced in part by increases in accrued
distribution license fees, accounts payable and other accrued liabilities.
Although the Company expensed $10.0 million in distribution license fees during
the second quarter of 1996 for its obligations under its Premier Provider
Agreements with Netscape, $2.3 million of this liability remained on the
Company's balance sheet as accrued distribution license fees at December 31,
1996. The Company expects that this amount, together with approximately $5.0
million in accounts payable related to the Company's advertising campaigning
launched during the fourth quarter of 1996, will be paid during the first
quarter of 1997, which payments, together with operating losses for such period,
will significantly reduce the Company's cash balances during such period.
28
<PAGE> 30
Investing activities used cash of $1.3 million and $19.4 million in 1995
and 1996, respectively, primarily for net purchases of short-term investments
and property and equipment. Financing activities generated cash of $6.7 and
$48.7 million in 1995 and 1996, respectively, due to the issuance of Preferred
and Common Stock and promissory notes and proceeds from the exercise of warrants
and options.
The Company's principal commitments at December 31, 1996 consisted of
obligations under operating and capital leases comprising $15.7 million and $7.1
million, respectively.
Capital expenditures have been, and future expenditures are anticipated to
be, primarily for facilities and equipment to support expansion of the Company's
operations and management information systems. The Company expects that its
capital expenditures will increase as its employee base grows. As of December
31, 1996, the Company did not have any material commitments for capital
expenditures, although the Company anticipates that its planned purchases of
capital equipment will require additional expenditures of approximately $5.0
million for 1997, a portion of which may be financed from proceeds of this
offering and a portion of which may be financed through equipment leases and
bank borrowings.
The Company expects to use the net proceeds of this offering for general
corporate purposes, including working capital. Furthermore, from time to time
the Company expects to evaluate the acquisition of products, businesses and
technologies that complement the Company's business, or the Company may enter
into distribution agreements, for which a portion of the net proceeds may be
used. Currently, however, the Company does not have any understandings,
commitments or agreements with respect to any such acquisitions or distribution
agreements. Management expects that cash in excess of current requirements will
be invested in investment-grade, short-term and medium-term interest-bearing
securities. See "Use of Proceeds."
The Company believes that the net proceeds from this offering, together
with available funds will be sufficient to meet its anticipated cash needs for
working capital, capital expenditures and business expansion for at least the
next 12 months. See "Risk Factors -- Future Capital Needs; Uncertainty of
Additional Financing."
29
<PAGE> 31
BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
The Excite Network, which includes the Excite and WebCrawler brands,
provides a gateway to the Web that organizes, aggregates and delivers
information to meet the needs of individual consumers. Designed to help
consumers make sense of the Web, the Excite Network contains a suite of
specialized information services which combine proprietary search technology,
editorial Web reviews, aggregated content from third parties, bulletin boards,
chart and personalization capabilities. The Company's goal is to be the Web's
leading branded media network with the largest consumer reach, thereby creating
an efficient means of advertising on the Web. To this end, the Excite Network
serves as a home base where consumers can gather, interact and return to during
each Web experience. For the most recent month reported, December 1996, PC
Meter, an independent Web tracking service, estimated that the Excite Network
was used by 45% of online households at least once during this month, which was
more than any other service reported by PC Meter. For the month of January 1997,
the Company had an average of approximately 13.0 million page views per day
(including page views attributable to the WebCrawler Assets).
INDUSTRY BACKGROUND
The Web as a New Medium
International Data Corporation estimates that the Web consumer population
will grow from approximately 35 million users in 1996 to approximately 160
million users by 2000. Veronis, Suhler & Associates estimates U.S. brand
advertising spending by U.S. companies will exceed $106 billion in 1997, and
reach approximately $136 billion by the year 2000. The Company believes that the
Web's emergence as a mass medium with attractive consumer demographics and
interactive capabilities make it a compelling medium for advertisers to deliver
their messages. Jupiter Communications initially estimated that approximately
$343 million would be spent on Web and online advertising in 1996, growing to
approximately $5 billion in the year 2000.
The Web is an attractive advertising medium because of its interactivity,
flexibility, targetability, proactivity and accountability. The interactive
nature of Web advertising enables advertisers to establish dialogues and more
meaningful relationships with potential customers. The flexible nature of a
digital medium like the Web enables advertisers to change their messages on a
daily basis in response to real world events and consumer feedback. The ability
to target advertisements to broad audiences, specific regional populations,
affinity groups or select individuals makes Web advertising versatile. Unlike
traditional advertising where advertisements are presented to consumers who may
or may not have an interest in them, Web advertisements are only delivered when
a consumer calls for a piece of information or a particular Web page. Unlike
more traditional media, the Company believes that the Web is a more accountable
medium where advertisers can receive reports on the impression levels,
demographic viewership and effectiveness of their advertisements.
The growing diversity of Web advertisers is one measurement of the Web's
emergence as an effective advertising medium. Web advertising pioneers were
mostly technology and Internet-related companies. Today, a growing percentage of
Web advertisers consist of more traditional business and consumer companies and
represent a growing percentage of Web advertisers. For example, Jupiter
Communications reported in November 1996 that Proctor & Gamble and American
Express each spent over $1.2 million on Web advertising, year-to-date. In
addition, the Company believes that financial service, packaged goods,
automotive and pharmaceutical companies are beginning to use the Web to deliver
advertising messages.
30
<PAGE> 32
Challenges Facing the New Medium
The rapid growth of the Web and proliferation of Web sites has made it
increasingly difficult for consumers, content providers and advertisers to
effectively reach one another. Consumers are challenged to quickly find the most
relevant information, products or services related to a particular interest or
topic. Content providers are challenged to differentiate their offerings in an
increasingly crowded medium and to improve the visibility of their sites.
Advertisers are challenged to more effectively deliver their advertising
messages to both large interested audiences and targeted groups, and to measure
the impact of their messages.
THE EXCITE SOLUTION
The Excite Network, which includes both the Excite and WebCrawler brands,
provides a gateway to the Web that organizes, aggregates and delivers
information to meet the needs of individual consumers. Designed to help
consumers make sense of the Web, the Excite Network contains a suite of
specialized information services which combine proprietary search technology,
editorial Web reviews, aggregated content from third parties and personalization
capabilities.
The Company seeks to make the Excite Network a leading branded media
network that is the principal gateway for all of a consumer's information needs
on the Web. As such, the Excite Network is intended to serve as a home base
where consumers will gather, interact and return to during each Web experience.
For the most recent month reported, December 1996, PC Meter, an independent Web
tracking service, estimated that the Excite Network was used by 45% of online
households at least once during that month, which was more than any other
service reported by PC Meyer. In addition, for the month of January 1997 the
Company had an average of approximately 13.0 million page views per day
(including page views attributable to the WebCrawler Assets).
The Excite Network's heavy consumer traffic, specialized information
services, targeting technology and direct sales organization offer advertisers
an efficient method of advertising on the Web. With a single monthly advertising
buy on the Excite Network, advertisers have the potential to reach nearly half
of all home-based Web consumers. Excite's specialized services and targeting
technology also enable advertisers to either target the mass audience of Web
consumers or tailor an advertising strategy for specific affinity groups or
consumers possessing certain demographic traits or requesting information
relevant to certain advertisers. The Company has also developed proprietary
tools to measure the effectiveness of and provide meaningful feedback with
respect to advertisements on the Excite Network.
STRATEGY
The Company's goal is to be the Web's leading branded media network with
the largest consumer reach. The key elements of the Company's strategy include:
Expand and enhance the Excite Network
The Company intends to broaden and deepen its network of information
services by leveraging its search technology, editorial reviews, strategic
partners' content and personalization capabilities. The Company expects to
continue marketing its network under both the Excite and WebCrawler brands. By
offering a network of complementary services, the Company seeks to increase the
amount of time consumers spend using the Excite Network. By offering a network
of brands, the Company seeks to build loyalty and awareness from different
consumer demographics and to market this large, segmented audience to
advertisers.
Build brand loyalty and consumer retention
The Company seeks to expose as many consumers as possible to the services
available on the Excite Network. To this end, the Company has entered into
arrangements which give the Excite Network highly visible placements on heavily
trafficked Web sites. In addition, the Company intends to continue to market and
advertise its Excite brand and WebCrawler brand, which it has agreed to
purchase, in order to increase consumer awareness among both experienced and new
Web consumers. For example, the Company
31
<PAGE> 33
launched a national brand-building campaign centered around the Jimi Hendrix
song "Are You Experienced?" and incurred expenses of $5.0 million for this
campaign during the fourth quarter of 1996. The Company believes that frequent
exposure to its services and brands leads to increased levels of consumer
loyalty and retention.
Maximize value for advertisers
The Company intends to continually develop innovative approaches for its
advertisers through advancements in demographic targeting, consumer tracking and
measurement technologies. The Company seeks to aggregate the largest possible
Web audience in order to give advertisers the most efficient and effective
advertising placements. The Company has developed and will continue to develop
services which encourage consumers to provide demographic and interest
information which the Company can then use to more effectively target
advertising. The Company also believes it has the strongest Web advertising
sales organization, consisting of 32 professionals who educate, guide and advise
advertisers on optimizing their Web advertising purchases.
Increase traffic through distribution
The Company seeks to maximize traffic by increasing the number and
visibility of entry points to the Excite Network. The Company has established
premier positions, which must be extended beyond March 31, 1997, on Web sites
operated by Microsoft and Netscape, two of the most heavily trafficked Web
sites, and has entered into an exclusive agreement with AOL, the leading OSP.
There also exist hundreds of thousands of hypertext links from across the Web
pointing to the Excite Network. In addition, the Company has established a
number of hardware distribution relationships with companies such as Apple, Sega
and WebTV.
Expand content relationships
The Company has entered into relationships with third-party information
providers seeking to exchange their content for distribution on the Excite
Network. These content providers typically share revenues with the Company in
exchange for such distribution. The Company believes that these relationships
will enable it to increase the breadth of content it offers consumers without
incurring significant development or maintenance costs. The Company also
believes that these relationships help solidify its position as an easy-to-use
interface for Web services and information. The Company currently has such
relationships with Big Book, WhoWhere, MapQuest and Quote.com.
Pursue global opportunities
The Company believes that there are significant opportunities to leverage
the Excite Network internationally. The Company is localizing its services for
Germany, France, Scandinavia, the United Kingdom and Japan and is exploring
other international markets. The Company is focused on international
distribution opportunities and has established relationships with Netscape,
Virgin and Pipex.
THE EXCITE NETWORK
The Company offers a network of services under the Excite brand and the
WebCrawler brand, which it has agreed to purchase, that target different
segments of Web consumers.
Excite services
Excite Search. The Excite Search Web search service helps consumers find
information on the Web by searching through Excite's index of Web documents.
Since October 1995, the Company has substantially increased the size of its
index of Web documents, from 1.5 million Web documents to over 50 million. The
Company's automatic spider technology completely refreshes this index in less
than a month. Excite's search technology allows consumers to search in multiple
ways: by keyword; by concept; by Boolean logic; and by proper name. Excite's
query-by-example technology allows users who find a document of interest to find
similar documents with the click of a button. In addition, Excite's automatic
abstract technology provides consumers with a brief abstract of each document
returned by a search.
32
<PAGE> 34
Excite Reviews. The Excite Reviews Web site review service contains over
60,000 professionally-authored reviews of Web sites. Each site reviewed is also
ranked on a scale of one to four. Consumers can find these reviews by browsing a
series of categories and subcategories or by searching directly using the
Company's concept-based searching technology. Excite's reviews are intended to
help narrow information choices to only high-quality and relevant Web sites and
to present information in a lively and entertaining style.
Excite City.Net. The Excite City.Net travel and destination service helps
consumers locate regional and travel oriented content using a geographically
organized database. This Web database is continually updated to provide access
to information on travel, entertainment, local business, government and
community services for a number of major cities and regions throughout the
world. Currently, the Excite City.Net database provides access to information on
over 4,300 cities and regions.
Excite Live! The Excite Live! personalized information service permits
consumers to personalize their Web interface. Consumers using Excite Live!
create a personal profile to select and update information of interest, such as
personalized stock quotes, news headlines, local and national sports scores,
updates on local and national weather, weekly television listings and horoscopes
as well as personal reminders. In order to use this service, consumers must
register and volunteer interest and demographic information which the Company
then uses to target both content and advertising. Currently, Excite Live! has
approximately 300,000 registered users.
Excite NewsTracker. The Excite NewsTracker personalized news service is a
personalizable news clipping service. Consumers can define custom topics that
they would like to monitor such as business competition, a local sports team, or
a favorite hobby. Using Excite's "spider" technology, Excite NewsTracker scans
300 magazines and newspapers on the Web twice daily (including such sources as
The New York Times, The Washington Post, The Boston Globe, Sports Illustrated,
Forbes and Fortune) for articles relevant to that consumer's selected topics and
provides the consumer with a listing of relevant articles. Consumers can also
search a database containing the last two weeks of news from these publications
or browse the news headlines from these sources by general category, such as top
stories, business or entertainment.
ExciteSeeing Tours. The ExciteSeeing Tours Web guide service is a "how to"
service designed to instruct a consumer how to perform a particular task using
information from the Web. Tours are professionally written and contain a mix of
narrative and hypertext links to relevant Web resources related to a topic.
Currently Excite has over 500 Web tours on such topics as researching
investments, choosing wines and financing a college education. Tours are
organized and can be accessed from a hierarchical menu of categories.
Excite Talk! The Excite Talk! Web community service is a bulletin board
and chat service which permits consumers to discuss topics of mutual interest.
Consumers can create their own discussions or choose to participate in ongoing
discussions. The Company believes that its Excite Talk! service encourages
consumer and brand loyalty by fostering a sense of community and encouraging
return visits.
Excite Reference. The Excite Reference online reference service provides
consumers with an interface into multiple information services such as yellow
pages, white pages, email finders, people finders, maps and shareware. The
Company does not develop any of these services itself, but instead has
relationships with third-party providers of these services. Generally, these
third parties co-brand their services and share advertising revenue with the
Company in exchange for distribution on the Company's Excite Reference pages.
Current partners include Big Book, WhoWhere, MapQuest and Quote.com. The Company
believes that this type of partner leverage is beneficial as it enables the
Company to offer a broad suite of services to consumers without having to incur
development and maintenance costs while enabling the Company to have the
opportunity to receive revenue from these services.
WebCrawler services
WebCrawler Search. The WebCrawler Web Search service helps consumers find
information on the Web by searching through WebCrawler's index of Web documents.
WebCrawler Search enables consumers to search the Web in multiple ways: by
keyword, by Boolean logic, by phrase and by example, or by document
33
<PAGE> 35
similarity. Search results can be listed by title only or by full listing with
an abstract. Listings which have been reviewed are identified and consumers can
easily click to the review.
WebCrawler Select. The WebCrawler Select Web site review service contains
over 4,600 professionally-authored Web site reviews organized into 18 top-level
categories. Consumers can find these reviews by selecting one of the top-level
categories, by searching on a topic of interest or by browsing the "what's new"
page. WebCrawler's Select database is intended to help consumers narrow
information choices to only the most valuable Web sites.
The Company also offers on the WebCrawler service, WebCrawler Map, Search
the Web Backwards and Web Roulette.
MARKETING
The Company endeavors to achieve broad market penetration and increased
usage of the Excite Network services by:
Building distribution
The Company actively seeks to obtain new consumers by providing multiple
gateways into the Excite Network, thereby increasing its visibility on Web
access points. The Company has established premier positions on Web sites
operated by Microsoft and Netscape, two of the most highly-trafficked Web sites,
and AOL the leading OSP. On the Microsoft and Netscape Web sites, the Company
has such positions, which must be extended beyond March 31, 1997, for both its
Excite and WebCrawler brands. In addition, the Company has established a number
of "off-Web" distribution opportunities with companies such as Apple, Sega and
WebTV. Typically, these arrangements feature Excite as the default Web
navigation network. See "-- Strategic Alliances," and "Risk
Factors -- Dependence on Netscape and AOL" and "-- Dependence on Third-Party
Relationships."
Building brand awareness and recognition
The Company's marketing goal is to build the brands of the Excite Network
into well-recognized consumer brands. During the fourth quarter of 1996, the
Company launched a national brand-building campaign centered around the Jimi
Hendrix song "Are You Experienced?" and incurred expenses of $5.0 million for
this campaign. This campaign included television, national print, radio and
outdoor advertising. The Company believes this campaign resulted in increased
Excite brand awareness. During the first quarter of 1997, the Company is
continuing its brand advertising campaign, although at lower spending levels as
compared with the fourth quarter of 1996. The Company believes that the
WebCrawler brand has strong consumer awareness today and the Company will make
selective marketing investments to maintain that awareness.
Increasing usage by existing consumers
The Company regularly enhances its services and updates the content hosted
on the Excite Network in order to encourage consumers to utilize the Excite
Network more frequently. The Company has also developed personalized services,
such as Excite Live! and Excite NewsTracker, that enable consumers to establish
a personal profile and receive information targeted to their interests. Because
customizing these personalized services typically requires some effort and time
on the part of the consumer, the Company believes that consumers who use these
personalized services will continue to use the Excite Network and not switch to
a competitive service. The Company also offers community building services, such
as Excite Talk!, designed to increase consumer usage and loyalty.
ADVERTISING AND SALES
The Company derives substantially all of its revenues from the sale of
advertisements. Advertisements on the Excite Network are banner or billboard
style advertisements and are prominently displayed throughout the
34
<PAGE> 36
Excite Network. As the consumer interacts with the Excite Network, new
advertisements are displayed. From each advertisement screen, consumers can
hyperlink directly to an advertiser's own Web site, thus enabling the advertiser
an opportunity to directly interact with a consumer who has expressed interest
in the advertisement. The Company believes that since consumers view
advertisements only after they request a new page, the focus of the consumer's
attention to the advertisement is likely to be higher than it is in other forms
of media. With the Company's growing number of services and ability to finely
target consumer interest with appropriate and related advertising, the Company
believes it can further increase the effectiveness of advertisements placed on
the Excite Network.
The Company generally enters into agreements with advertisers pursuant to
which the Company guarantees a minimum number of impressions for a fixed fee.
The Company charges higher per impression fees for advertising products that
target a specific audience. The Company's list prices for advertising currently
range from $26 to $65 CPM. The Company offers a variety of advertising programs
that enable advertisers to target their audiences at various levels of market
segmentation; mass market placement, which does not have any market
segmentation; and affinity placement, which delivers advertisements to an
audience with a specific content interest. The Company intends to offer even
more targeted placements which will display advertisements to consumers of a
specific demographic profile utilizing Excite's personalized services. The
Company's existing and planned advertising programs range from those with a
broad reach to those that are specifically targeted:
General Rotation (at a CPM of $26). The Company offers a general
rotation program that enables advertisers to reach a large number of Web
consumers. Advertising banners rotate through well-trafficked Excite
Network pages, including the home page and results pages of Excite and
WebCrawler. This program delivers a higher volume of mass market consumers
and provides frequent exposure for advertisers.
Content (at a CPM of $35). The Company provides a set of programs
that provide advertisers with the opportunity to target advertising by
content within services such as Excite Reviews, Excite NewsTracker,
ExciteSeeing Tours and WebCrawler Select pages. These programs deliver
highly targeted messages to preselected affinity groups in categories such
as sports, computing, automotive and finance.
City.Net (at a CPM of $40-$45). The Company provides a program on its
Excite City.Net service that enables advertisers to direct advertisements
to geographical affinity groups. This targeted approach can be used to
complement a national marketing strategy with local or regional messages.
Keywords (at a CPM of $48-$65). The Company's keyword program offers
advertisers an opportunity to target specific audiences by assigning
advertisement banners to certain key words or concepts. For example, when
Windows 95 is searched, a Microsoft advertisement could be displayed on the
search results page. Because of the ability to customize the targeted
nature of potential customers, the Company is able to charge premium rates
for such keyword advertising.
Excite Live! (to be offered at a CPM of $60-$80). The Company plans
to enable advertisers to target Excite Live! consumers at a greater level
of detail and precision than other advertising methods. Based upon the
demographic and psychographic information collected from subscribers of
Excite Live!, advertisers will be able to deliver targeted messages to
groups of individuals.
Currently, a substantial majority of the advertisements sold on the Excite
Network are general rotation advertisements. The Company's strategy is to
migrate advertisers to more targeted advertisement placements. The CPM rates
listed above are based on the Company's standard rate card. Actual CPM rates
depend upon a variety of factors, including, without limitation, the duration of
the advertising contract and the number of impressions purchased, and are often
negotiated on a case-by-case basis.
Through Excite's various advertising programs, advertisers can combine
multiple advertising packages in order to develop a complete advertising plan
that reaches many audience types and that is designed to maximize reach,
frequency of exposure and consumer response. For example, an airline company
might have general rotation as a base of mass exposure. The advertising schedule
could be enhanced based upon topical affinity, by displaying a banner every time
a consumer searches using the word "travel" or "airfare," as well as
35
<PAGE> 37
by displaying an advertisement to all Excite Live! consumers who have expressed
an interest in travel. The schedule could be further refined by placing banners
on the travel page in Excite Reviews or WebCrawler Select, as well as on a
variety of U.S. and international city pages on Excite City.Net that may
correspond to hubs of national or international business.
The Company has built a direct sales organization of 32 professionals
located in San Francisco, New York and Los Angeles. The Company believes that
such a sales force dedicated to selling advertising only on the Excite Network
provides a higher level of customer service and satisfaction to advertisers
during both the buying and reporting process. Because the Company's direct sales
organization is focused and well educated on the Excite Network, they can best
match high value advertising opportunities with companies who can benefit from
them. Because the Company has a dedicated group of professionals focused on
advertising reporting and measurement, advertisers can receive up-to-date
information on the placement and effectiveness of their advertisements. In
addition, the Company believes that in order to remain a leader in Web
advertising and provide the highest level of service, it must continue to
develop technologies for the precise and timely placement, targeting and
measurement of advertising.
36
<PAGE> 38
For 1996, over 500 brands from various industries were advertised on the
Excite Network as compared with 13 as of December 31, 1995. The following is a
list of brands or companies for which advertisers purchased more than $10,000 in
advertising on the Excite Network during 1996:
TECHNOLOGY
Apple
Fujitsu
Hewlett-Packard
Hitachi
IBM
Intel
Microsoft
Netscape
Silicon Graphics
Sun Microsystems
Toshiba
AUTOMOTIVE
Ford
Honda
Saturn
Toyota
FINANCIAL
American Express
Charles Schwab
Chemical Bank
Kaufmann Fund
Metlife
Prudential
Scudder
Wells Fargo Bank
TELECOMMUNICATIONS
AT&T
GTE
MCI
Pacific Bell
Sprint
U S West
PUBLISHING
The Atlanta Journal Constitution
The Chicago Tribune
Encyclopedia Brittanica
Newsweek
The New York Times
The Wall Street Journal
CONSUMER
American Greetings
Disney
Duracell
FTD
Glaxo Wellcome
J. C. Penney
Kodak
L.L. Bean
Proctor & Gamble
Sears, Roebuck
Time Warner
During 1996, one customer accounted for approximately 12% of total
revenues. No other customer accounted for more than 10% of revenues during 1996.
TECHNOLOGY
Search and Retrieval Technology
The Company's search services are based on proprietary retrieval technology
designed to permit efficient and highly effective searches by emphasizing
quality and precision in the search process. This technology combines a true
concept-based retrieval technology with sophisticated browsing tools. In
addition, the Company has developed proprietary spider technology designed to
enhance the quantity and quality of information contained in the Company's
databases, thereby enhancing the quality of information retrieved in a search.
Concept-Based Retrieval. The Company believes that most Web navigation
companies use "keyword" searching in their retrieval process, in which only
those documents that contain the keywords specified in the query are retrieved.
While keyword searching is effective in some instances (and may be enhanced by
the use of a built-in thesaurus), it does not allow the user to retrieve
information relevant to a search that does not include the exact text of a
keyword (or synonym, if a thesaurus is used). For example, a keyword search of
the words "intellectual property" may not return documents relating to software
piracy or copyright law if such documents do not contain the words
"intellectual" or "property." Keyword searching may also result in the retrieval
of a great deal of irrelevant information that happens to contain the keyword.
The Company's
37
<PAGE> 39
concept-based retrieval technology uses advanced statistical methods which it
believes increase the precision or relevance of information retrieved. The
Company's retrieval technology analyzes information for statistical correlations
between terms and documents. These correlations, which can be loosely described
as "concepts," are then used to improve the retrieval process. Accordingly, a
search can retrieve information that is relevant to the consumer's query even if
that information contains none of the keywords in the original query.
Scalability. Because of the size of its database (approximately 50 million
Web documents) as well as the number of searches conducted (approximately 4 to 5
million pages per day), the Company must maintain a strong core competency in
searching large databases efficiently. To this end, the Company has developed a
number of advanced, proprietary techniques to accelerate queries over large
databases while accommodating a large number of users.
Relevance Enhancement. Retrieval of relevant documents on the Web can be
particularly challenging. Many documents may contain keywords which a consumer
may search but which are not relevant to the query. In addition, some authors
create documents which use frequently searched words, an activity referred to as
"stuffing," in an attempt to artificially enhance their relevance to certain
queries. Consequently, the Company has developed technology that is designed to
enhance the relevance of "high-quality" documents and reduce the relevance of
documents that are "low-quality."
Browsing Tools. The Company's technology includes sophisticated browsing
tools that help consumers better understand the information that has been
retrieved. These browsing tools include:
Query-By-Example. If a consumer retrieves a document that he or she
finds particularly appropriate, the consumer can click on a
"query-by-example" button. Without requiring the consumer to reformulate
the query, the system then executes an additional search and retrieves
documents that it finds to be statistically similar to the example
document.
Automatic Abstracting. The Company's technology automatically creates
an abstract or summary of a Web document by selecting sentences from the
document that it finds to be statistically likely to closely describe its
core concepts. This technology lets consumers evaluate the relevancy of Web
documents without taking the time to visit them or read the entire
document. The Company believes that this abstracting function is better
than abstracting functions of most competitive systems, which it believes
generally select the first few sentences of a document or select one or
more sentences containing the keywords of the search.
Spider Technology. Information for the Company's databases is collected
through the use of "spiders," which are software programs that autonomously roam
the Web by following hypertext links, automatically identifying and collecting
material to be included in the Company's databases. The Company's spider
technology completely refreshes its index of 50 million pages in less than a
month. The Company's technology also allows it to refresh millions of the most
popular Web pages on a much more frequent basis (every few days).
Personalization Technology
The Company has developed a flexible set of tools to allow access to
customized content for each individual consumer. This technology is utilized in
the Excite Live! service. The Company also utilizes sophisticated learning
technology in its Excite NewsTracker service, which examines the concepts in a
consumer's profile and, over time, suggests related concepts that might also
interest the consumer.
Network Operations
The Company believes that Web site operational performance is a significant
factor in attracting and maintaining a customer base on the Web. Operational
performance includes reliable 24 hour accessibility and fast page download time.
In order to maintain the highest standards, the Company is building its network
operations center on its own premises in California. This state of the art
center will enable the Company to provide direct control over its main Web
sites. In addition, the Company has agreed to enter into a strategic
38
<PAGE> 40
relationship with AOL to host a mirrored site in Reston, Virginia. The Company
believes that this will provide better access for customers in the Eastern half
of the country.
As of February 1, 1997, there were 77 employees on the Company's research
and development staff. Excluding charges for purchased in-process technology,
product development costs were $415,000, $2.8 million and $8.0 million in 1994,
1995 and 1996, respectively. See "Risk Factors -- Technological Change;
Dependence on New and Enhanced Services; Risk of Delays" and "-- Risk of
Capacity Constraints; Dependence on Computer Infrastructure."
STRATEGIC ALLIANCES
A key element of the Company's business strategy is to enter into
relationships with both Web access points and content providers. To this end,
the Company has entered into a number of strategic alliances.
Netscape
The Company has entered into agreements with Netscape pursuant to which the
Company's Excite and WebCrawler brands are two of the five "Premier Providers"
of search and navigation services accessible from the "Net Search" button on the
Netscape home page. The Company believes that a substantial amount of its
traffic on a weekly basis is attributable to Netscape. The agreements provide
that the "Premier Provider" status will be established for one year from April
1, 1996, in exchange for which the Company will make payments totaling $5.0
million for each of the two "Premier Provider" positions over the term of the
agreements. The Company is currently in discussions with Netscape to extend its
relationship after the current agreements expire on March 31, 1997. See "Risk
Factors -- Dependence on Netscape and AOL."
AOL
In November 1996, the Company entered into a five-year distribution
agreement with AOL pursuant to which the Company will provide to AOL a
co-branded version of Excite and, for a minimum of a two year period, be the
exclusive provider of Web search and directory services for AOL. AOL and Excite
will share advertising revenues derived from the use of these services by AOL
subscribers. If either of the parties does not elect to continue the exclusivity
period for the remaining three year period of the agreement, AOL will be
permitted to offer other Web navigation services on its online service; however,
Excite will remain as the "default" Web navigation service and Excite will
receive a larger percentage of the advertising revenues derived from the use of
Excite through AOL. Excite will also advertise AOL's service on Excite and AOL
will pay a commission to the Company for new AOL subscribers referred from these
advertisements. The Company is also required to satisfy certain technical,
product feature and editorial criteria. In addition, the Company expects to
complete the purchase of the WebCrawler Assets from AOL on or after March 31,
1997. See "Risk Factors -- Dependence on Netscape and AOL," "-- Acquisition
Strategy; Pending WebCrawler Acquisition; Integration of Past and Future
Acquisitions" and "Certain Transactions."
Microsoft
The Company has entered into a distribution and license agreement with
Microsoft pursuant to which Excite is accessible to Microsoft's customers
through The Microsoft Network, Microsoft's Internet Explorer Web Browser and, at
Microsoft's discretion, other channels. The Company and Microsoft share
advertising space availability, or barter, for the traffic that is generated by
Microsoft. This agreement expires in March 1997. The Company is currently
negotiating to extend the term of this agreement. There can be no assurance that
the duration of this agreement will be extended or that a replacement agreement
will be entered into between the Company and Microsoft. To date, this
arrangement has not accounted for a significant portion of the Company's
traffic.
Content alliances
The Company has strategic alliances with a number of content providers
pursuant to which the Company engages in licensing of content or technology,
revenue sharing, syndication and co-branding arrangements. For
39
<PAGE> 41
example, Tribune Media Services ("Tribune") syndicates rights to Excite Reviews.
Excite also licenses television listing and horoscopes from Tribune, stock
quotes from Quote.com, scores from Sportsline, yellow pages from Big Book, white
page listings from WhoWhere, weather reports from Weatherlabs and maps from
Mapquest. See "Risk Factors -- Dependence on Third Party Relationships."
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 Infoseek Corporation, Lycos,
Inc., and Yahoo!, 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 for Web-based advertising has
increased substantially in 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.
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 databases 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, 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
40
<PAGE> 42
their advertising budget to the Web. See "Risk Factors -- Developing Market;
Validation of the Web as an Effective Advertising Medium" and "-- Intense
Competition."
LICENSES AND INTELLECTUAL PROPERTY
The Company regards its technology as proprietary and attempts to protect
it with copyrights, trademarks, trade secret laws, restrictions on disclosure
and transferring title and other methods, and has been issued a patent with
respect to certain aspects of its searching and indexing technology. The Company
is also in the process of preparing three patent applications with respect to
other aspects of its technology. There can be no assurance that the patent that
has been issued or that any that may issue from these pending applications will
be sufficiently broad to protect the Company's technology. In addition, there
can be no assurance that any patents that have been issued or that may be issued
will not be challenged, invalidated or circumvented, or that any rights granted
thereunder would provide proprietary protection to the Company. Failure of any
patents to provide protection of the Company's technology may make it easier for
the Company's competitors to offer technology equivalent to or superior to the
Company's technology. The Company also generally enters into confidentiality or
license agreements with its employees and consultants, and generally controls
access to and distribution of its documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use the Company's services or technology without
authorization, or to develop similar technology independently. In addition,
effective copyright, trademark and trade secret protection may be unavailable or
limited in certain foreign countries, and the global nature of the Web makes it
virtually impossible to control the ultimate destination of the Company's
services. Policing unauthorized use of the Company's technology is difficult.
There can be no assurance that the steps taken by the Company will prevent
misappropriation or infringement of its technology. In addition, litigation may
be necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets or to determine the validity and
scope of the proprietary rights of others. Such litigation could result in
substantial costs and diversion of resources and could have a material and
adverse effect on the Company's business, results of operations and financial
condition.
Many parties are actively developing search, indexing and related Web
technologies at the present time. The Company believes that they will take steps
to protect these technologies, including seeking patent protection. As a result,
the Company believes that disputes regarding the ownership of such technologies
are likely to arise in the future.
From time to time, the Company has received, and may receive in the future,
notice of claims of infringement of other parties' proprietary rights, including
claims for infringement resulting from the downloading of materials by the
online or Web services operated or facilitated by the Company. Although the
Company investigates claims and responds as it deems appropriate, there can be
no assurance that infringement or invalidity claims (or claims for
indemnification resulting from infringement claims) will not be asserted or
prosecuted against the Company or that any assertions or prosecutions will not
materially and adversely affect the Company's business, results of operations
and financial condition. Irrespective of the validity or the successful
assertion of such claims, the Company would incur significant costs and
diversion of resources with respect to the defense thereof which could have a
material adverse effect on the Company's business, results of operations and
financial condition. If any claims or actions were asserted against the Company,
the Company might seek to obtain a license under a third party's intellectual
property rights. There can be no assurance, however, that under such
circumstances a license would be available on commercially reasonable terms, or
at all. See "Risk Factors -- Liability for Information Retrieved from the Web."
The Company currently owns and also licenses from third parties its
technologies. As it continues to introduce new services that incorporate new
technologies, it may be required to license technology from others. There can be
no assurance that these third-party technology licenses will be available to the
Company on commercially reasonable terms, if at all. The inability of the
Company to obtain any of these technology licenses could result in delays or
reductions in the introduction of new services or could adversely affect the
performance of its services until equivalent technology could be identified,
licensed and integrated. See "Risk Factors -- Liability for Information
Retrieved from the Web" and "-- Proprietary Technology; Potential Litigation."
41
<PAGE> 43
EMPLOYEES
As of February 1, 1997, the Company had 191 full-time employees, including
77 in research and development, 80 in marketing, sales, 21 in finance and
administration and 13 in operations and support. The Company's future success
will depend, in part, on its ability to continue to attract, retain and motivate
highly qualified technical and management personnel, particularly highly skilled
technical personnel and engineers involved in new product development, for whom
competition is intense. From time to time, the Company also employs independent
contractors to support its research and development, marketing, sales and
support and administrative organizations. The Company's employees are not
represented by any collective bargaining unit, and the Company has never
experienced a work stoppage. The Company believes its relations with its
employees are good. See "Risk Factors -- Management of Growth" and
"-- Dependence on Key Personnel."
FACILITIES
The Company's headquarters are currently located in a leased facility in
Mountain View, California, consisting of approximately 13,500 square feet of
office space occupied under a lease expiring February 1, 1999 with a renewal
option for an additional year. The Company and the lessor of the Mountain View
facility have agreed that the Company shall surrender such facility in May 1997
and that the lease for such facility shall be canceled upon such surrender. In
April 1997, the Company intends to move its headquarters to a leased facility in
Redwood City, California, consisting of approximately 88,000 square feet of
office space under a ten year lease with a renewal option for an additional five
years. The Company's communications hardware and certain of its computer
hardware are located at a leased facility in San Jose, California which will be
moved to the Redwood City facility. The Company believes that its existing and
proposed facilities and offices are adequate to meet its requirements for the
foreseeable future. There can be no assurance that a system failure at its
current San Jose or future Redwood City operations facilities would not
adversely affect the performance of the Company's services. See "Risk
Factors -- Risk of Capacity Constraints; Dependence on Computer Infrastructure."
LEGAL PROCEEDINGS
On November 18, 1996, Kristine Paaso and Laura Lindsey filed a complaint in
the California Superior Court, Santa Clara County, against the Company and
certain of its founders alleging breach of an alleged oral agreement, breach of
fiduciary duty and fraud. The plaintiffs allege that they participated in the
creation of the Company's business plan and were entitled to participate as
officers and shareholders of the Company. The complaint seeks an unspecified
amount of damages, including punitive damages. The Company has filed a demurrer
to this complaint and intends to defend this action vigorously. Although it is
too early to ascertain the possible outcome of this litigation, any litigation,
regardless of outcome, could have an adverse effect on the Company's business,
results of operations and financial condition.
42
<PAGE> 44
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- ---- ---------------------------------------------------------
<S> <C> <C>
George Bell........................ 40 President, Chief Executive Officer and Director(1)
Brett T Bullington................. 43 Executive Vice President
Robert C. Hood..................... 55 Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
Cary H. Masatsugu.................. 40 Vice President, Development
Richard B. Redding................. 41 Vice President, Finance and Administration and Secretary
Jed L. Simmons..................... 36 Senior Vice President and Managing Director, Excite
International
Graham F. Spencer.................. 25 Chief Technology Officer
William B. White, Jr............... 39 Senior Vice President, Marketing
Joseph R. Kraus, IV................ 25 Senior Vice President and Director
Stephen M. Case.................... 38 Director
Donn M. Davis...................... 34 Director(1)
Vinod Khosla....................... 42 Director(2)
Geoffrey Y. Yang................... 37 Director(1)(2)
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Bell has been President, Chief Executive Officer and a director of the
Company since January 1996. From December 1995 until January 1996, he was a
consultant to the Company. From May 1991 to December 1995, Mr. Bell was employed
by The Times Mirror Company, a publishing and cable television company, most
recently as President -- The Skiing Company for Times Mirror Magazines and
previously as President -- The Outdoor Company and Vice President, Multimedia
for Times Mirror Magazines. Prior to joining The Times Mirror Company, Mr. Bell
worked as an independent producer, writer and packager of television sports and
documentary programming and as a staff producer and writer for the ABC
television network. Mr. Bell has received four Emmy Awards. He received a B.A.
in English from Harvard College.
Mr. Bullington has been Executive Vice President of the Company since
January 1997. From November 1995 to January 1997, he served as Senior Vice
President, Marketing and Sales of the Company and, from August 1995 until
November 1995, he was a consultant to the Company. From May 1995 to August 1995,
Mr. Bullington worked as an independent marketing and sales consultant. From May
1994 to May 1995, Mr. Bullington served as Vice President of Marketing and Sales
for Planning & Logic, Inc., a software company. From January 1992 to May 1994,
he was employed by Taligent, Inc., a software company, as Director of Worldwide
Channel Development. From 1986 to January 1992, Mr. Bullington was employed by
Computer Associates, a software company, where he served most recently as Vice
President, Sales and Marketing. He received a B.A. in Political Science from the
University of California at Santa Barbara.
Mr. Hood has been Executive Vice President, Chief Administrative Officer
and Chief Financial Officer of the Company since December 1996. From November
1996 to December 1996, he was a consultant to the Company. From July 1995 to
February 1996, Mr. Hood served as Chief Operating Officer of RockShox Inc., a
mountain bike component manufacturer. From March 1992 to April 1995, he served
as Senior Vice President and Chief Financial Officer of Crowley Maritime
Corporation, a transportation services company. From April 1991 to February
1992, Mr. Hood served as Executive Vice President and Chief Financial Officer of
Qume Corp., a computer peripherals company. He received a B.A. in Economics from
Bates College and an M.B.A. from Dartmouth College.
Mr. Masatsugu has been employed by the Company since April 1996, most
recently as Vice President, Development. From February 1996 to April 1996, he
was a consultant to the Company. From May 1995 to
43
<PAGE> 45
April 1996, Mr. Masatsugu was employed by Caere Corporation, a software company,
most recently as Vice President, Engineering. From July 1994 to December 1994,
he served as Vice President, Engineering for Calera Recognition, a software
company. From February 1994 to July 1994, Mr. Masatsugu was employed by EO,
Inc., a computer company, most recently as Vice President, Engineering. From
1988 to February 1994, he was employed by GO Corporation, a software company,
most recently as Director of Product Marketing. Mr. Masatsugu received a B.S. in
Electrical Engineering from Stanford University.
Mr. Redding has been Vice President, Finance and Administration since
January 1997 and Secretary of the Company since February 1996. From February
1996 to January 1997, Mr. Redding served as Director of Finance and Acting Chief
Financial Officer of the Company, and from October 1995 until February 1996, he
was a consultant to the Company. From July 1994 to January 1996, Mr. Redding was
employed by Vivus, Inc., a medical technology company, as Controller and
Manager, Financial Planning & Analysis. From November 1993 to July 1994, he
worked as an independent consultant. From 1990 to November 1993, Mr. Redding was
employed by Scios Nova Inc., a biotechnology company, most recently as
Treasurer. He received a B.A. in Biology from the University of California at
Santa Cruz and an M.B.A. from the University of Santa Clara.
Mr. Simmons has been Senior Vice President and Managing Director, Excite
International of the Company since January 1997. From November 1996 to January
1997, he was a consultant to the Company. From January 1992 to December 1996,
Mr. Simmons was employed by Hanna-Barbera Cartoons, Inc., an entertainment
company, most recently as Executive Vice President, International. Mr. Simmons
has a B.A. in Public Policy from Duke University and an M.B.A. from Dartmouth
College.
Mr. Spencer has been Chief Technology Officer of the Company since June
1994. From June 1994 to January 1997, he also served as Vice President,
Technology of the Company, and from June 1994 to March 1996, he was also a
director of the Company. Prior to joining the Company, Mr. Spencer was a student
at Stanford University and worked as an engineer for Apple Computer during June
1992 to September 1992 and June 1993 to September 1993. Mr. Spencer was also
employed, on a part-time basis, as an engineer at Stanford University from 1989
to 1994. He received a B.S. and an M.S. in Computer Science from Stanford
University.
Mr. White has been Senior Vice President, Marketing of the Company since
September 1996 and has been employed by the Company since September 1996. From
June 1993 to September 1996, Mr. White was employed by Sega Entertainment, Inc.,
a computer games company, most recently as Senior Vice President and General
Manager. From 1987 to March 1993, Mr. White served as Director of Marketing and
Corporate Communications for Nintendo of America, a computer games company. He
received a B.S. in Business Administration from the University of Southern
California and an M.B.A. from Loyola Marymount University.
Mr. Kraus has been Senior Vice President of the Company since January 1997
and a director of the Company since June 1994. He served as Senior Vice
President, Business Development of the Company from January 1996 to January 1997
and, from June 1994 to January 1996, served as President of the Company. Prior
to joining the Company, Mr. Kraus was a student at Stanford University. He
received a B.A. in Political Science from Stanford University.
Mr. Case has served as a director of the Company since December 1996. He is
currently also a director of AOL. Mr. Case has been President of AOL since July
1996 and Chief Executive Officer of AOL since April 1993. He also served as
President of AOL from January 1991 to February 1996. Mr. Case received a B.A. in
Political Science from Williams College. See "Certain Transactions."
Mr. Davis has served as a director of the Company since March 1996. He is
currently also a director of StarSight Telecast, Inc. Mr. Davis has been
President of Tribune Ventures, a Venture investment unit of Tribune Company,
since February 1995. From August 1992 to February 1995, Mr. Davis served as
Senior Counsel for Tribune Company. From 1988 to July 1992, Mr. Davis was an
associate with the law firm of Sidley & Austin. Mr. Davis received a B.S. in
Finance from Miami University (Ohio) and a J.D. from the University of Michigan
Law School.
Mr. Khosla has served as a director of the Company since July 1995. He is
currently also a director of Picture Tel, Spectrum Holobyte, The 3DO Company and
several privately held companies. He has been a
44
<PAGE> 46
general partner at Kleiner Perkins Caufield & Byers since 1986. Mr. Khosla
received a Bachelor of Technology in Electrical Engineering from the Indian
Institute of Technology, an M.S. in Biomedical Engineering from Carnegie Mellon
University and an M.B.A. from Stanford University.
Mr. Yang has served as a director of the Company since July 1995. He is
currently also a director of Applied Digital Access, Inc., as well as several
privately held companies. He has been a general partner of Institutional Venture
Partners since 1987. He received a B.A. in Economics and a B.S.E. in Information
Systems Engineering from Princeton University and an M.B.A. from Stanford
University.
Directors are elected by the shareholders at each annual meeting of
shareholders to serve until the next annual meeting of shareholders or until
their successors are duly elected and qualified. Certain shareholders have
entered into a voting agreement pursuant to which they have agreed to vote their
shares to elect one director designated by AOL for so long as AOL holds at least
1,315,165 shares of the Company's Common Stock on an as-converted-to-Common
Stock basis.
Executive officers are chosen by, and serve at the discretion of, the Board
of Directors. There are no family relationships among any of the directors and
executive officers of the Company.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during the year
ended December 31, 1996 by (i) the Company's Chief Executive Officer, (ii) the
Company's three other executive officers who were serving as executive officers
at the end of that year and whose total annual salary and bonus in such year
exceeded $100,000 and (iii) one other individual who was not serving as an
executive officer at the end of that fiscal year (together, the "Named
Officers"). No other executive officer who held office at December 31, 1996 met
the definition of "most highly compensated executive officer" within the meaning
of the Commission's executive compensation disclosure rules for this period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1) BONUS OPTIONS COMPENSATION
- ------------------------------------------ --------- ------- ------------ ------------
<S> <C> <C> <C> <C>
George Bell............................... $185,000 $60,000 48,458 $53,575(2)
President and Chief Executive Officer
Brett T Bullington........................ $155,000 -- 45,774 --
Executive Vice President
Graham F. Spencer......................... $116,333 -- -- --
Chief Technology Officer
Joseph R. Kraus, IV(3).................... $115,000 -- -- --
Senior Vice President
Cary H. Masatsugu......................... $107,941 $20,000 200,000 --
Vice President, Development
</TABLE>
- ---------------
(1) Robert C. Hood, who joined the Company in December 1996 as Executive Vice
President, Chief Administrative Officer and Chief Financial Officer, is
compensated at an annual base salary rate of $175,000. Jed L. Simmons, who
joined the Company in January 1997 as Senior Vice President and Managing
Director, Excite International, is compensated at an annual base salary rate
of $210,000. Mr. Simmons is also provided with an annual allowance of up to
$70,000 for housing and utilities in the United Kingdom. William B. White,
Jr., who joined the Company in September 1996 and began serving as Senior
Vice President, Marketing in January 1997, is compensated at an annual base
salary rate of $160,000. Mr. White also received a $15,000 signing bonus in
1996. See "-- Employment Agreements."
(2) Represents reimbursement for certain expenses in connection with the sale of
Mr. Bell's residence in New York.
(3) Mr. Kraus also served as President of the Company from June 1994 to January
1996, and currently serves as Senior Vice President of the Company.
45
<PAGE> 47
The following table sets forth further information regarding option grants
pursuant to the Company's 1995 Equity Incentive Plan (the "1995 Plan") and the
1996 Plan during 1996 to each of the Named Officers. In accordance with the
rules of the Commission, the potential realizable values for such options shown
in the table are based on assumed rates of stock price appreciation of 5% and
10% compounded annually from the date the respective options were granted to
their expiration date. The assumed rates of appreciation do not represent the
Company's estimate or projection of the appreciation of the Common Stock.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
NUMBER OF PERCENTAGE OF RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -------------------
NAME GRANTED(1) 1996 PER SHARE DATE 5% 10%
- -------------------------- ---------- ------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
George Bell............... 18,458 0.6% $ 2.50 2/07/06 $ 29,020 $ 73,543
30,000 1.0% $6.125 9/26/06 115,559 292,850
Brett T Bullington........ 25,774 0.9% $ 2.50 2/07/06 40,523 102,693
20,000 0.7% $6.125 9/26/06 77,040 195,233
Cary H. Masatsugu......... 200,000 6.9% $ 2.50 2/07/06 314,447 796,871
Graham F. Spencer......... -- -- -- -- -- --
Joseph R. Kraus, IV....... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Options granted under the 1995 Plan and the 1996 Plan in 1996 were incentive
stock options or nonqualified stock options that were granted at fair market
value at the time of grant and that generally vest over a four-year period
so long as the individual is employed by the Company. The options granted to
George Bell and Brett T Bullington on February 7, 1996 were immediately
exercisable on the date of grant. Options expire ten years from the date of
grant. In addition to the option grants set forth in the table above, in
September 1996, the Company granted to William B. White, Jr. an option to
purchase 150,000 shares of Common Stock at an exercise price of $6.125 per
share. In November 1996, the Company granted to Robert C. Hood and Jed L.
Simmons, who were at the time consultants to the Company, options to
purchase 200,000 shares and 220,000 shares, respectively, of Common Stock at
an exercise price of $6.125 per share. The options granted to Mr. Hood and
Mr. Simmons are contingent upon shareholder approval of an amendment to the
1996 Plan to increase the number of shares reserved under such plan.
The following table sets forth the number of shares covered by both
exercisable and unexercisable stock options held by each of the Named Officers
at December 31, 1996. Also reported are values of "in-the-money" options which
represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of the Company's Common
Stock as of December 31, 1996 ($10.25) based on the last sales price of the
Common Stock on the Nasdaq National Market on such date.
AGGREGATE OPTION EXERCISES IN 1996 AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George Bell.......... 20,000 $ 299,200 110,599 287,015 $ 1,060,774 $ 2,683,619
Brett T Bullington... 122,974 $1,312,845 -- 117,200 -- $ 1,066,650
Cary H. Masatsugu.... -- -- -- 200,000 -- $ 1,550,000
Graham F. Spencer.... -- -- -- -- -- --
Joseph R. Kraus,
IV................. -- -- -- -- -- --
</TABLE>
46
<PAGE> 48
DIRECTOR COMPENSATION
None of the members of the Company's Board of Directors (the "Board")
currently receives any fees associated with his attendance at Board meetings or
at Board Committee meetings. In March 1996, the Company granted Mr. Davis an
option to purchase 15,000 shares of Common Stock at an exercise price of $8.045
per share.
In February 1996, the Board adopted, and in March 1996, the shareholders of
the Company approved, the 1996 Directors Stock Option Plan (the "Directors
Plan") and reserved a total of 150,000 shares of the Company's Common Stock for
issuance thereunder. The Directors Plan was amended by the Board in March 1996.
Members of the Board who are not employees of the Company, or any parent,
subsidiary or affiliate of the Company, are, subject to certain exclusions,
eligible to participate in the Directors Plan. Each eligible person who first
becomes a member of the Board will automatically be granted an option for 15,000
shares on the date such person becomes a director. Also, at each annual meeting
of the Company, each eligible director will receive an additional grant of 7,500
shares if such director has served continuously as a member of the Board since
the later of the date the Board adopted the Directors Plan or the date such
director first became a member of the Board. Each option will vest as to 2.08%
of the shares covered thereby on the last date of each month following the grant
date. All options granted under the Directors Plan will be granted at an
exercise price equal to the fair market value of the Company's Common Stock on
the date of grant, and, in the event of a merger, consolidation or certain other
change of control transactions, the vesting of all options granted pursuant to
the Directors Plan will accelerate and the options will become exercisable in
full. The Directors Plan will terminate in February 2006, unless terminated
earlier in accordance with the provisions thereof. As of the date hereof,
132,054 shares of Common Stock are available for issuance under the Directors
Plan.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with the following
executive officers of the Company: George Bell, the Company's President and
Chief Executive Officer; Brett T Bullington, the Company's Executive Vice
President; Cary H. Masatsugu, the Company's Vice President, Development; Robert
C. Hood, the Company's Executive Vice President, Chief Administrative Officer
and Chief Financial Officer; Jed L. Simmons, the Company's Senior Vice President
and Managing Director, Excite International; William B. White, Jr., the
Company's Senior Vice President, Marketing; and Richard B. Redding, the
Company's Vice President, Finance and Administration and Secretary. See "Certain
Transactions."
Mr. Bell's employment agreement provides for an annual base salary of
$185,000 and the grant of an option to purchase an aggregate of 18,458 shares of
Common Stock. Pursuant to his employment agreement, Mr. Bell received a
guaranteed bonus of $60,000 during his first year of employment and the Company
reimbursed Mr. Bell for certain expenses in connection with the sale of his
residence in New York. Mr. Bell is eligible to receive a bonus of at least
$60,000 in each year subsequent to his first year of employment, subject to
certain performance criteria. This agreement may be terminated by the Company or
Mr. Bell at any time for any reason.
Mr. Bullington's employment agreement provides for an annual base salary of
$150,000 and the grant of an option to purchase an aggregate of 25,774 shares of
Common Stock. Mr. Bullington's annual base salary has subsequently been
increased to $170,000. This agreement may be terminated by the Company or by Mr.
Bullington at any time for any reason.
Mr. Masatsugu's employment agreement provides for an annual base salary of
$140,000 and a signing bonus of $20,000 that was paid in April 1996. This
agreement may be terminated by the Company or by Mr. Masatsugu at any time for
any reason. If Mr. Masatsugu is terminated during the first 12 months of his
employment, he will continue to receive his base salary for an additional three
months.
Mr. Hood's employment agreement provides for an annual base salary of
$175,000 and an option to purchase 200,000 shares of Common Stock that vests
over a four-year period. In the event that the Company
47
<PAGE> 49
is acquired by a company that does not continue to employ Mr. Hood before Mr.
Hood's option is fully vested, he will receive a consultant fee of $175,000 that
will entitle the Company to call on Mr. Hood for consulting services for a
period of one year following the acquisition. Mr. Hood is also eligible to
receive a bonus in 1997 that is based on profit-oriented goals and has a target
of 20% of his annual base salary. This agreement may be terminated by the
Company or Mr. Hood at any time for any reason. If Mr. Hood is terminated for
reasons other than cause, he will continue to receive his base salary for an
additional six months.
Mr. Simmons' employment agreement provides for an annual base salary of
$210,000 and an option to purchase 225,000 shares of Common Stock (this figure
was reduced by the Board to 220,000 shares). Mr. Simmons is also eligible to
receive an annual bonus that is based on certain performance criteria and has a
target of 20-30% of his annual base salary. The Company will reimburse Mr.
Simmons for up to $20,000 of moving expenses, will pay the United Kingdom
portion of Mr. Simmons' taxes and will provide Mr. Simmons with an annual
allowance of up to $70,000 for housing, utilities and other expenses. This
agreement may be terminated by the Company or Mr. Simmons at any time for any
reason, provided, however, that if Mr. Simmons is terminated for reasons other
than cause, he will continue to receive his base salary for an additional six
months.
Mr. White's employment agreement provides for an annual base salary of
$160,000, an option to purchase 150,000 shares of Common Stock, and a signing
bonus of $15,000 that Mr. White received in 1996. This agreement may be
terminated by the Company or Mr. White at any time for any reason. If Mr. White
is terminated by the Company within his first 12 months of employment due to
unforeseen business conditions, he will continue to receive his base salary for
an additional three months.
Mr. Redding's employment agreement provides for an annual base salary of
$80,000. Mr. Redding's annual base salary has subsequently been increased to
$125,000. This agreement may be terminated by the Company or Mr. Redding at any
time for any reason. If Mr. Redding is terminated without cause, he will
continue to receive his base salary for an additional six months.
EMPLOYEE BENEFIT PLANS
1996 Equity Incentive Plan
In February 1996, the Board adopted, and in March 1996, the shareholders of
the Company approved, the 1996 Plan. The 1996 Plan serves as the successor
equity incentive program to the Company's 1995 Plan. Options granted under the
1995 Plan before its termination in April 1996 remain outstanding in accordance
with their terms, but no further options have been granted under the 1995 Plan
after the date of its termination. The Company reserved 1,500,000 shares of the
Company's Common Stock for issuance under the 1996 Plan. In November 1996 and
January 1997, the Board approved amendments to the 1996 Plan to increase the
number of shares thereunder by 800,000 shares and 2,455,000 shares,
respectively. These amendments to the 1996 Plan to increase the total number of
shares thereunder to 4,755,000 shares will be submitted for shareholder approval
at the annual meeting of shareholders to be held in May 1997. Shares that (i)
are subject to issuance upon exercise of an option but cease to be subject to
such stock option for any reason other than exercise of such stock option, (ii)
are subject to an award granted under the 1996 Plan but are forfeited or are
repurchased by the Company at the original issue price or (iii) are subject to
an award that otherwise terminates without shares being issued will again be
available for grant and issuance in connection with future awards under the 1996
Plan.
The 1996 Plan provides for the grant of stock options and stock bonuses and
the issuance of restricted stock by the Company to its employees, officers,
directors, consultants, independent contractors and advisers.
48
<PAGE> 50
No person is eligible to receive more than 500,000 shares in any calendar year
pursuant to grants under the 1996 Plan, other than new employees of the Company
who will be eligible to receive up to a maximum of 800,000 shares in the
calendar year in which they commence employment with the Company. The 1996 Plan
is administered by the Compensation Committee of the Board, consisting of
Messrs. Khosla and Yang, both of whom are "non-employee directors" as that term
is defined under the Exchange Act, and "outside directors" as that term is
defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The 1996 Plan permits the Compensation Committee to grant options that
are either incentive stock options (as defined in Section 422 of the Code) or
non qualified stock options, on terms (including the exercise price, which may
not be less than 85% of the fair market value of the Company's Common Stock, and
the vesting schedule) determined by the Compensation Committee, subject to
certain statutory and other limitations in the 1996 Plan. In addition to, or in
tandem with, awards of stock options, the Compensation Committee may grant
participants restricted stock awards to purchase the Company's Common Stock for
not less than 85% of its fair market value at the time of grant. The other terms
of such restricted stock awards may be determined by the Compensation Committee.
The Compensation Committee may also grant stock bonus awards of the Company's
Common Stock either in addition to, or in tandem with, other awards under the
1996 Plan, under such terms, conditions and restrictions as the Compensation
Committee may determine. Under the 1996 Plan, stock bonuses may be awarded for
the satisfaction of performance goals established in advance. The 1996 Plan will
terminate in February 2006, unless terminated earlier in accordance with the
provisions of the 1996 Plan.
1996 Employee Stock Purchase Plan
In February 1996, the Board adopted, and in March 1996, the shareholders of
the Company approved, the 1996 Employee Stock Purchase Plan (the "Purchase
Plan") and reserved a total of 150,000 shares of the Company's Common Stock for
issuance thereunder. The Purchase Plan became effective in April 1996. The
Purchase Plan permits eligible employees to acquire shares of the Company's
Common Stock through payroll deductions. The Purchase Plan is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Code.
Except for the first offering, each offering under the Purchase Plan will be for
a period of 24 months (the "Offering Period") commencing on the first day of
February and August of each year. Except for the first offering, each Offering
Period will consist of four six-month purchase periods (each a "Purchase
Period"). The Board has the power to set the duration of Offering Periods or
Purchase Periods without shareholder approval, provided that the change is
announced at least fifteen days prior to the scheduled beginning of the first
Offering Period or Purchase Period to be affected. The first Offering Period
began on December 1, 1996 and will end on July 31, 1998. Eligible employees may
select a rate of payroll deduction between 2% and 10% of their compensation, up
to an aggregate total payroll deduction not to exceed $21,250 in any calendar
year. The purchase price for the Company's Common Stock purchased under the
Purchase Plan will be 85% of the lesser of the fair market value of the
Company's Common Stock on the first day of the applicable Offering Period or the
last day of the respective Purchase Period. The Purchase Plan will terminate on
the earlier of termination by the Board, issuance of all of the shares reserved
under the Purchase Plan or ten years from the date the Purchase Plan was adopted
by the Board.
401(k) Plan
The Company maintains the Excite, Inc. 401(k) Plan (the "401(k) Plan"), a
defined contribution 401(k) salary reduction plan intended to qualify under
Section 401 of the Code. Employees of the Company are eligible to participate in
the 401(k) Plan on the first day of each month coinciding with or immediately
following the date of their employment. A participating employee, by electing to
defer a portion of his or her compensation, may make pre-tax contributions to
the 401(k) Plan, subject to limitations under the Code, of a percentage (not to
exceed 15%) of his or her total compensation. Employee contributions and the
investment earnings thereon will be fully vested at all times. The Company is
not required to contribute to the 401(k) Plan and has made no contributions
since the inception of the 401(k) Plan.
49
<PAGE> 51
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
The Company's Amended and Restated Articles of Incorporation (the
"Articles") include a provision that eliminates to the fullest extent permitted
by law the personal liability of its directors to the Company and its
shareholders for monetary damages for breach of the directors' fiduciary duties.
This limitation has no effect on a director's liability (i) for acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a director's
duties, of a risk of a serious injury to the Company or its shareholders, (v)
for acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Company or its
shareholders, (vi) under Section 310 of the California Corporations Code (the
"California Code") concerning contracts or transactions between the Company and
a director or (vii) under Section 316 of the California Code concerning
directors' liability for improper dividends, loans and guarantees. The provision
does not extend to acts or omissions of a director in his capacity as an
officer. Further, the provision will not affect the availability of injunctions
and other equitable remedies available to the Company's shareholders for any
violation of a director's fiduciary duty to the Company or its shareholders.
The Company's Articles also include an authorization for the Company to
indemnify its agents (as defined in Section 317 of the California Code), through
bylaw provisions, by agreement or otherwise, to the fullest extent permitted by
law. Pursuant to this provision, the Company's Bylaws provide for
indemnification of the Company's directors and officers. In addition, the
Company, at its discretion, may provide indemnification to persons whom the
Company is not obligated to indemnify. The Bylaws also allow the Company to
enter into indemnity agreements with individual directors, officers, employees
and other agents. These indemnity agreements have been entered into with all
directors and provide the maximum indemnification permitted by law. These
agreements, together with the Company's Bylaws and Articles, may require the
Company, among other things, to indemnify these directors or executive officers
against certain liabilities that may arise by reason of their status or service
as directors (other than liabilities resulting from willful misconduct of a
culpable nature), to advance expenses to them as they are incurred, provided
that they undertake to repay the amount advanced if it is ultimately determined
by a court that they are not entitled to indemnification, and to obtain and
maintain directors' and officers' insurance if available on reasonable terms.
Section 317 of the California Code and the Company's Bylaws make provision for
the indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act. At present, there is no pending litigation or proceeding
involving a director, officer or employee of the Company pursuant to which
indemnification is sought, nor is the Company aware of any threatened litigation
that may result in claims for indemnification.
The Company maintains directors' and officers' liability insurance with a
per claim and annual aggregate coverage limit of $5,000,000.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
50
<PAGE> 52
CERTAIN TRANSACTIONS
Since June 9, 1994 (the date of the Company's inception), there has not
been, nor is there currently proposed, any transaction or series of similar
transactions to which the Company was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer or holder
of more than 5% of any class of voting securities of the Company or members of
such person's immediate family had or will have a direct or indirect material
interest other than (i) the compensation agreements which are described in
"Management," and (ii) the transactions described below.
PROMOTERS TRANSACTIONS
Each of Joseph R. Kraus, IV, Graham F. Spencer, Benjamin E. Lutch, Ryan A.
McIntyre, Martin R. Reinfried and Mark A. Van Haren (collectively the
"Founders") was involved in the founding and organization of the Company and may
be considered a promoter of the Company. Described below are items of value
received by each of the Founders in connection with services provided to the
Company.
In connection with the formation of the Company in June 1994, each of the
Founders assigned to the Company as a capital contribution all of their right,
title and interest in and to all assets and liabilities of their former
partnership, which was doing business as Architext Software. This assignment
included all technology and all derivative works of the technology of the former
partnership including but not limited to, certain searching and browsing
technology.
In September 1994, the Company issued an aggregate of 888,884 shares of
Common Stock to the Founders at a purchase price of $.00045 per share, which was
paid in cash. Each of the Founders, individually, purchased the number of shares
set forth immediately following his name: Joseph R. Kraus, IV (158,888); Graham
F. Spencer (172,222); Benjamin E. Lutch (148,888); Ryan A. McIntyre (148,888);
Martin R. Reinfried (111,110); and Mark A. Van Haren (148,888).
In July 1995, the Founders purchased an aggregate of 891,136 additional
shares of Common Stock at a purchase price of $0.035 per share which was paid in
cash. Each of the Founders purchased the number of shares of Common Stock set
forth immediately following his name: Joseph R. Kraus, IV (236,672); Graham F.
Spencer (421,118); Benjamin E. Lutch (48,892); Ryan A. McIntyre (48,892); Martin
R. Reinfried (86,670); and Mark A. Van Haren (48,892).
SECURITIES ISSUANCES
In July 1995, the Company sold shares of its Series A Preferred Stock
convertible into an aggregate of 2,250,000 shares of Common Stock to six
entities for an aggregate purchase price of $1.5 million which amount was paid
with a combination of cash and the cancellation of promissory notes issued by
the Company to four of the six entities. The following entities, which are 5%
shareholders or affiliates of a Board member or 5% shareholder, purchased shares
of Series A Preferred Stock convertible into the number of shares of Common
Stock indicated in parentheses as follows: Institutional Venture Partners VI
("IVP") (882,000); Institutional Venture Management VI ("IVM") (18,000); Kleiner
Perkins Caufield & Byers VII ("KPCB") (810,000); and KPCB VII Founders Fund
("KPCB Founders") (90,000). In March 1996, shares of the Series A Preferred
Stock convertible into 18,900 and 3,600 shares of Common Stock, respectively,
were transferred by KPCB and KPCB Founders, respectively, to KPCB Information
Sciences Zaibatsu Fund II ("KPCB Information").
In November 1995, the Company sold shares of its Series B Preferred Stock
convertible into an aggregate of 1,220,000 shares of Common Stock to seven
entities for an aggregate purchase price of approximately $1.5 million which
amount was paid in cash. The following entities, which are 5% shareholders or
affiliates of a Board member or 5% shareholder, purchased shares of Series B
Preferred Stock convertible into the number of shares of Common Stock indicated
in parentheses as follows: IVP (564,000); IVM (12,000); IVP Founders Fund I,
L.P. ("IVP Founders") (24,000); KPCB (527,400); KPCB Founders (57,600); and KPCB
Information (15,000). Each of these 5% shareholders, or affiliates of a Board
member or 5% shareholder also received warrants to purchase an equivalent number
of shares of the Company's Common Stock at an exercise
51
<PAGE> 53
price of $0.125 per share, subject to certain adjustments. These warrants were
net exercised at the initial public offering price of $17.00 per share,
resulting in the issuance of an aggregate 1,191,176 shares of Common Stock.
In December 1995, the Company sold shares of its Series C Preferred Stock
convertible into 309,278 shares of Common Stock to ten entities for an aggregate
purchase price of approximately $900,000, which amount was paid in cash. The
following entities, which are 5% shareholders, or affiliates of a Board member
or 5% shareholder, purchased shares of Series C Preferred Stock convertible into
the number of shares of Common Stock indicated in parentheses as follows: IVP
(58,104); IVM (1,236); IVP Founders (2,472); KPCB (54,332); KPCB Founders
(5,934); and KPCB Information (1,546).
Vinod Khosla, a member of the Company's Board, is a general partner of
KPCB, KPCB Founders and KPCB Information. Geoffrey Y. Yang, a member of the
Company's Board, is a general partner of IVM which is the general partner of IVP
and IVP Founders.
On March 8, 1996, the Company sold shares of its Series D Preferred Stock
to AOL and Tribune, convertible into 621,506 and 745,806 shares of Common Stock,
respectively, for an aggregate purchase price of $11.0 million. As a result of
the issuance of the Series D Preferred Stock, the Company believes that AOL and
Tribune became affiliates of the Company. In connection with the purchase of
Series D Preferred Stock, AOL and Tribune have agreed not to acquire beneficial
ownership of more than 20% of the outstanding securities of the Company without
the Company's consent for a five year period. At the time of its purchase of
Series D Preferred Stock, AOL purchased the AOL Warrant which was exercisable
into 650,000 shares of Common Stock at an exercise price of $8.00 per share and
will be amended to be exercisable into an equivalent number of shares of Series
E-3 Preferred Stock. See "Business -- Strategic Alliances." AOL and Tribune
purchased an aggregate of 117,647 shares of Common Stock in the Company's
initial public offering. See "Business -- Strategic Alliances."
Each of the shares of the Company's Series A, B, C and D Preferred Stock
described above were converted into shares of the Company's Common Stock prior
to the completion of the Company's initial public offering in April 1996. The
holders of such converted shares of Preferred Stock are entitled to certain
registration rights with respect to the shares of Common Stock which were issued
upon conversion thereof. AOL and Tribune also have certain registration rights
with respect to the shares of Common Stock which they purchased in the Company's
initial public offering. AOL is also entitled to certain registration rights
with respect to the shares of Common Stock issuable upon the exercise of its
warrant described above. See "Description of Capital Stock -- Registration
Rights."
PROMISSORY NOTES TO AND FROM THE COMPANY
In February 1995, the Company issued promissory notes in the principal
amount of $4,500, $220,500, $202,500 and $22,500 to IVM, IVP, KPCB and KPCB
Founders, respectively. These promissory notes were canceled in consideration
for the issuance of the shares of Series A Preferred Stock in July 1995.
In February 1996, the Company entered into a Bridge Line of Credit
Agreement (the "Credit Agreement") with KPCB, KPCB Founders, KPCB Information,
IVM, IVP and IVP Founders (collectively, the "Lenders"). Pursuant to the terms
of the Credit Agreement, the Lenders agreed to make loans of funds to the
Company from time to time on a non-revolving basis, in an aggregate cumulative
principal amount not to exceed $2.0 million. As of March 1, 1996, the Company
had outstanding $2.0 million under the Credit Agreement. Such amount was
evidenced by Convertible Promissory Notes and Promissory Notes, each dated as of
February 23 and February 26, 1996, respectively (collectively, the "Notes") and
bore interest at a rate of 8 3/4% per annum. The Company repaid $1.0 million in
principal amount of the Notes with the proceeds of the Company's Series D
Preferred Stock financing in March 1996. The remaining $1.0 million in principal
amount of the Notes was converted at the time of the Company's initial public
offering into 160,000 shares of Common Stock of the Company at a price of $6.25
per share.
In February 1996, the Company loaned $100,000 to Graham F. Spencer. The
loan is evidenced by a promissory note which bears interest at a rate of 5.32%
per annum and is payable in 35 successive monthly installments of $3,221.11
each, and the 36th and final payment of $3,221.15 is due on February 28, 1999.
Monthly installment payments will be deducted from Mr. Spencer's salary
beginning March 31, 1996.
52
<PAGE> 54
However, for each month in which an installment payment is due and in which Mr.
Spencer is providing full time services as an employee of the Company to the
reasonable satisfaction of the Board, the installment payment due under this
note is forgiven by the Company. The promissory note will immediately become due
and payable in full in the event Mr. Spencer is no longer employed by the
Company.
In March 1996, the Company loaned $64,435 to Brett T Bullington in
connection with his purchase of 25,774 shares of Common Stock pursuant to the
exercise of a stock option. The loan was evidenced by a secured full recourse
promissory note which bore interest at a rate of 5.32% per annum and was payable
in 60 successive monthly installments of $1,073.92 commencing April 1, 1996. The
promissory note was paid in full in January 1997.
CONSULTING ARRANGEMENTS
Prior to their employment by the Company, Messrs. Bell, Bullington,
Masatsugu, Hood, Simmons and Redding served as consultants to the Company. In
December 1995, Mr. Bell was granted an option to purchase 369,156 shares of
Common Stock at an exercise price of $0.29 per share. Mr. Bullington earned
consulting fees of $70,000 in 1995 and, in November 1995, was issued 4,000
shares of Common Stock and was granted an option to purchase 194,400 shares of
Common Stock at an exercise price of $0.125 per share. In February 1996, Mr.
Masatsugu was granted an option to purchase 200,000 shares of Common Stock at an
exercise price of $2.50 per share. In November 1996, Mr. Hood and Mr. Simmons
were granted options to purchase 200,000 shares and 220,000 shares,
respectively, of Common Stock at an exercise price of $6.125 per share. In
October 1995, Mr. Redding was granted an option to purchase 30,000 shares of
Common Stock at an exercise price of $0.125 per share. In each case of options
discussed above, such options are subject to vesting contingent upon such
individual providing substantial services to the Company as a consultant or an
employee.
ADDITIONAL TRANSACTIONS WITH AOL
On November 25, 1996, the Company, AOL and a wholly-owned subsidiary of AOL
entered into an Acquisition Agreement (the "Acquisition Agreement") pursuant to
which the Company agreed to acquire the WebCrawler Assets from AOL. In addition,
the Company entered into a Technology License, Distribution, Services and
Co-Marketing Agreement (the "Distribution Agreement") with AOL. In consideration
of the Acquisition the Company will issue to AOL 1,250,000 and 700,000 shares of
its Series E-1 and Series E-2 Preferred Stock, respectively. In addition, as
part of the transactions contemplated by the Acquisition Agreement and the
Distribution Agreement (i) AOL will have the right, for a 90-day period
following the Closing, to have the 680,330 shares of Common Stock beneficially
owned by AOL cancelled and an equivalent number of shares of Series E-4
Preferred Stock issued to it and (ii) the AOL Warrant, which previously was
exercisable into 650,000 shares of Common Stock at an exercise price of $8.00
per share, will be amended to become exercisable into 650,000 shares of Series
E-3 Preferred Stock at the same exercise price per share. See "Description of
Capital Stock -- Preferred Stock" and "-- Voting Trust" for a description of the
material terms of such Preferred Stock.
So long as AOL holds at least 1,640,165 shares of Series E Preferred Stock,
AOL shall be entitled to elect one member of the Board. In addition, the shares
of Preferred Stock (and the shares of Common Stock issuable upon conversion
thereof) to be issued to AOL directly, or indirectly upon exercise of warrants,
will be subject to a Voting Trust Agreement. AOL will also have registration
rights with respect to the Preferred Stock (and Common Stock issuable upon
conversion thereof) issuable directly or indirectly, upon exercise of the AOL
Warrant. See "Description of Capital Stock -- Registration Rights."
The Closing, which is subject to certain conditions, is expected to occur
on March 31, 1997. The Acquisition was recorded for accounting purposes as of
December 1, 1996 and was valued at $16.1 million. Pursuant to the Distribution
Agreement, the Company will be the exclusive provider of Web search and
directory services to AOL's customers for a minimum of two years. After the
initial two-year exclusivity period, either party may elect to terminate the
exclusivity arrangement by prior written notice. In the event of such a
termination, Excite's search and directory service will be the "default" search
and directory service for
53
<PAGE> 55
AOL. The Distribution Agreement has a term of five years and can be renewed by
AOL for an additional five year period and provides that the Company will
receive a share of revenues generated on the AOL search and directory site, with
AOL incurring all hosting, advertising and selling expenses. In addition, after
the term of the Distribution Agreement, AOL will have a non-exclusive,
non-transferable license to any navigation service owned or controlled by Excite
for successive one-year periods at "customary fair market rates" and other terms
to be mutually agreed upon by the Company and AOL. See "Acquisition Strategy;
Pending WebCrawler Acquisition; Integration of Past and Future Acquisitions."
Upon the Closing, AOL will pay to the Company a percentage of AOL's
advertising revenues with respect to the sales of advertising derived from the
WebCrawler Assets for the period between December 1, 1996 and the Closing, less
ordinary and customary reserves, and the Company will reimburse AOL for expenses
relating to the with WebCrawler Assets. Revenues recorded and derived from the
WebCrawler Assets during the period from December 1, 1996 through December 31,
1996 were immaterial.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and its
officers, directors and principal shareholders and their affiliates will be
approved by a majority of the Board, including a majority of the independent and
disinterested directors of the Board, and will be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
54
<PAGE> 56
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's Common Stock as of January 31,
1997, and as adjusted to reflect the sale of shares offered hereby, by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
Company's Common Stock, each of whom the Company believes to be an affiliate of
the Company, (ii) each of the Company's directors, (iii) each Named Officer (see
"Management -- Executive Compensation") and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) OFFERING(1)(2)
------------------ ------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------ -------- ------- -------- -------
<S> <C> <C> <C> <C>
Stephen M. Case
America Online, Inc.(3)............................. 3,280,330 22.2% 3,280,330 19.2%
Vinod Khosla.......................................... 2,593,322 18.3 2,593,322 15.8
Kleiner Perkins Caufield & Byers(4)
Geoffrey Y. Yang...................................... 2,293,322 16.2 2,293,322 14.0
Institutional Venture Partners(5)
Tribune Company(6).................................... 804,629 5.7 804,629 4.8
Graham F. Spencer(7).................................. 569,340 4.0 569,340 3.5
Joseph R. Kraus, IV(8)................................ 371,395 2.6 371,395 2.3
George Bell(9)........................................ 133,634 * 133,634 *
Brett T Bullington(10)................................ 119,949 * 119,949 *
Cary H. Masatsugu(11)................................. 54,160 * 54,160 *
Donn M. Davis(12)..................................... 3,744 * 3,744 *
All executive officers and directors as a group (13
persons)(13)........................................ 9,426,691 62.9 9,426,691 54.5
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares of Common Stock subject to options or warrants that are currently
exercisable or exercisable within 60 days of January 31, 1997 are deemed to
be outstanding and to be beneficially owned by the person holding such
options or warrants for the purpose of computing the percentage ownership
of such person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. Shares of Common
Stock subject to conversion privileges upon conversion of the Preferred
Stock to be issued to AOL are deemed to be outstanding for purposes of
computing the percentage ownership of all persons named in the table.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Includes (i) 1,250,000 and 700,000 shares of Series E-1 and E-2 Preferred
Stock, respectively, to be issued to AOL in connection with the
Acquisition, (ii) 680,330 shares of Series E-4 Preferred Stock to be issued
to AOL upon exercise of its right, for a period of 90 days following the
Closing, to exchange 680,330 shares of Common Stock beneficially owned by
it for an equivalent number of shares of Series E-4 Preferred Stock and
(iii) 650,000 Shares of Series E-3 Preferred Stock issuable upon exercise
of the AOL Warrant. All of the shares of Series E Preferred Stock are
convertible into Common Stock on a one-for-one basis. All shares of the
Series E Preferred Stock beneficially owned by AOL are subject to the terms
of a Voting Trust Agreement in the event that under California law a
separate class vote of the Series E Preferred Stock is required to be
taken. See "Certain Transactions" and "Description of Capital
Stock -- Voting Trust." Mr. Case, a director of the Company, is the
President, Chief Executive Officer and a director of AOL. Mr. Case
disclaims beneficial ownership of shares held by AOL. Mr. Case's and AOL's
address is 8619 Westwood Center Drive, Vienna, Virginia 22182.
55
<PAGE> 57
(4) Represents (i) 2,235,990 shares of Common Stock held of record by KPCB,
57,332 shares of Common Stock held of record by KPCB Information and
300,000 shares of Common Stock held of record by Mr. Khosla. Mr. Khosla, a
director of the Company, is a general partner of KPCB and KPCB Information
and may be deemed to beneficially own the shares owned by those entities.
Mr. Khosla disclaims beneficial ownership of such shares except to the
extent of his indirect pecuniary interest therein. The address of Mr.
Khosla and Kleiner Perkins Caufield & Byers is 2750 Sand Hill Road, Menlo
Park, California 94025.
(5) Represents 45,864 shares of Common Stock held of record by IVM, 2,191,722
shares of Common Stock held of record by IVP, and 55,736 shares of Common
Stock held of record by IVP Founders. Mr. Yang, a director of the Company,
is a general partner of IVM, which is the general partner of IVP and of IVP
Founders and may be deemed to beneficially own the shares beneficially
owned by these entities. Mr. Yang disclaims beneficial ownership of such
shares except for his proportional interest therein. The address of Mr.
Yang and Institutional Venture Partners is 3000 Sand Hill Road, Building 2,
Suite 290, Menlo Park, California 94025.
(6) Tribune's address is 435 North Michigan Avenue, Suite 600, Chicago,
Illinois 60611.
(7) Includes approximately 164,404 shares of Common Stock subject to a
repurchase right of the Company upon cessation of Mr. Spencer's service to
the Company. Such repurchase right lapses with respect to approximately
8,653 of such shares per month.
(8) Includes approximately 109,605 shares of Common Stock subject to a
repurchase right of the Company upon cessation of Mr. Kraus's service to
the Company. Such repurchase right lapses with respect to approximately
5,769 of such shares per month.
(9) Represents 133,634 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of January 31, 1997.
(10) Includes 11,975 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of January 31, 1997.
(11) Represents 54,160 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of January 31, 1997.
(12) Represents 3,744 shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of January 31, 1997.
Mr. Davis, a director of the Company, is the President of Tribune Ventures,
a unit of Tribune Company. Mr. Davis disclaims beneficial ownership of
shares held by Tribune Company. Mr. Davis' address is c/o Tribune Company,
435 North Michigan Avenue, Suite 600, Chicago, Illinois 60611.
(13) Includes an aggregate of 857,884 shares of Common Stock subject to options
or warrants that are currently exercisable or exercisable within 60 days of
January 31, 1997.
56
<PAGE> 58
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, no par value, and 4,000,000 shares of Preferred Stock, no par
value. As of January 31, 1997, there were outstanding 12,184,747 shares of
Common Stock beneficially held by approximately 200 record holders and no
outstanding shares of Preferred Stock. Upon consummation of the Acquisition,
which is expected to occur by March 31, 1997, there will be 11,504,417 shares of
Common Stock outstanding and 2,630,330 shares of Preferred Stock outstanding,
1,250,000, 700,000 and 680,330 shares of which will have been designated as
Series E-1, Series E-2 and Series E-4 Preferred Stock, respectively.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the shareholders. The Company's shareholders currently may
cumulate their votes for the election of directors. Cumulative voting will no
longer be permitted under the Articles at such time as (i) the Common Stock is
listed on the Nasdaq National Market and the Company has at least 800 holders of
its equity securities as of the record date of the Company's most recent annual
meeting of shareholders or (ii) the Company's shares of Common Stock are listed
on the New York Stock Exchange or the American Stock Exchange. The Company may
have at least 800 holders of its equity securities by the record date for its
next annual meeting of shareholders. The holders of Common Stock have no
preemptive or other rights to subscribe for additional shares. All outstanding
shares of Common Stock are, and those offered hereby will be, validly issued,
fully paid and nonassessable. Subject to preferences that may be applicable to
holders of any Preferred Stock then outstanding, holders of Common Stock are
entitled to such dividends as may be declared by the Board out of funds legally
available therefor. Upon liquidation, dissolution or winding up of the Company,
the assets legally available for distribution to shareholders are distributable
ratably among the holders of the Common Stock at that time outstanding, subject
to prior distribution rights of creditors of the Company and to the preferential
rights of any shares of Preferred Stock then outstanding.
PREFERRED STOCK
The Board has the authority, subject to any limitations prescribed by
California law, to issue shares of Preferred Stock in one or more series, to
establish from time to time the number of shares to be included in each such
series, to fix the rights, preferences and privileges of the shares of each
wholly unissued series and any qualifications, limitations or restrictions
thereon, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding); without
any further vote or action by the shareholders. The Board has the authority to
authorize the issuance of Preferred Stock with voting or conversion rights that
could adversely affect the voting power or other rights of the holders of Common
Stock. Thus, the issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company.
In connection with the Acquisition and the Distribution Agreement,
1,250,000 shares of Series E-1 Preferred Stock and 700,000 shares of Series E-2
Preferred Stock will be issued to AOL at the Closing. In addition, AOL will have
the right, for a 90 day period following the Closing, to have the 680,330 shares
of Common Stock beneficially owned by AOL cancelled and exchanged for an
equivalent number of shares of Series E-4 Preferred Stock. Furthermore, the AOL
Warrant (currently exercisable into 650,000 shares of Common Stock) will be
amended to become exercisable into 650,00 shares of Series E-3 Preferred Stock.
Such Series E Preferred Stock will, upon the liquidation, dissolution or winding
up of the Company, be entitled to receive a liquidation preference of $1.15,
$0.01, $8.00 and $8.819 per share for the Series E-1, E-2, E-3 and E-4 Preferred
Stock, respectively. Each share of Series E Preferred Stock will be convertible
into shares of Common Stock at the option of the holders thereof, with such
conversion to occur on a one-to-one basis, as adjusted for certain events. The
holders of outstanding shares of Series E Preferred Stock shall be entitled to
vote together with the holders of Common Stock, on an as converted to Common
Stock basis, provided, however, that for so long as at least an aggregate of
1,640,165 shares of Series E Preferred Stock are outstanding, the holders of the
Series E Preferred Stock, voting as a class shall be entitled to elect one
director of the Company. See "-- Voting Trust."
57
<PAGE> 59
WARRANTS
As of January 31, 1997, three warrants to purchase an aggregate of 659,451
shares of Common Stock were outstanding. In connection with the Acquisition and
related transactions with AOL, the warrant to purchase 650,000 shares of Common
Stock at an exercise price of $8.00 per share will be converted into a warrant
to purchase an equivalent number of shares of Series E-3 Preferred Stock at the
same exercise price per share. A warrant covering 2,356 shares of Common Stock
with an exercise price of $32.66 per share and a warrant covering 7,095 shares
of Common Stock with an exercise price of $101.27 per share were also
outstanding. See "Business -- Strategic Alliances" and "Certain Transactions."
REGISTRATION RIGHTS
Certain investors holding an aggregate of 5,909,953 shares of Common Stock
of the Company (the "Registrable Securities") have certain "demand" rights to
register those shares under the Securities Act. If requested by holders of more
than 50% of the Registrable Securities then outstanding and assuming a
reasonably anticipated aggregate price to the public of at least $7.5 million,
the Company must file a registration statement under the Securities Act covering
all Registrable Securities requested to be included by holders of Registrable
Securities. The Company is required to effect up to two such "demand"
registrations. The Company has the right to delay any such registration for up
to 120 days under certain circumstances.
In addition, holders of Registrable Securities have certain "piggyback"
registration rights. If the Company proposes to register any of its securities
under the Securities Act other than in connection with the Company's employee
benefit plans or a corporate reorganization, the holders of Registrable
Securities may require the Company to include all or a portion of their shares
in such registration, although the managing underwriter of any such offering has
certain rights to limit the number of shares in such registration. The Company
is required to effect two such "piggyback" registrations. In addition, certain
shareholders holding an aggregate of 15,000 shares of Common Stock that do not
have such "demand" registration rights have the right to participate in
"piggyback" registrations.
Further, if requested by (i) holders of more than 50% of the then
outstanding Registrable Securities (assuming there is a reasonably anticipated
aggregate price to the public of at least $1.75 million) or (ii) either Tribune
or CUC International Inc. (two former holders of the Company's Series D
Preferred Stock, which Preferred Stock was converted into Common Stock in
connection with the Company's initial public offering), the Company must file a
registration statement on Form S-3 when such form becomes available to the
Company, subject to certain conditions. The Company has the right to delay any
such registration for up to 90 days under certain circumstances. The Company is
required to effect up to two such registrations that are requested by holders of
more than 50% of the then outstanding Registrable Securities and one such
registration for each of Tribune and CUC International Inc.
All expenses incurred in connection with the above registrations (other
than the underwriters' and brokers' discounts and commissions) will be borne by
the Company. The rights of any particular holder of Registrable Securities, with
respect to such registration rights, will expire on April 4, 200l.
In addition to the above described registration rights, in connection with
the Company's acquisition of the WebCrawler Assets, AOL was granted certain
registration rights with respect to all of the shares of Common Stock owned or
issuable to AOL (the "AOL Registrable Securities"). Within thirty (30) days of
the Closing, the Company must use its best efforts to effect a "shelf"
registration statement (and maintain the effectiveness of such registration
statement for up to two years) providing for the resale by AOL of all of the AOL
Registrable Securities in accordance with the manner of sale provisions set
forth in Rule 144 under the Securities Act. The Company has the right to delay
the shelf registration, or the sale of the AOL Registrable Securities under such
shelf registration, for up to 60 or 90 days under certain circumstances. All
expenses in connection with the shelf registration will be borne by the Company.
In addition, upon the request of AOL the Company must file a registration
statement on Form S-3 during such period that Form S-3 is available to the
Company (an "S-3 Registration"), subject to certain conditions. The Company has
the right to delay any S-3 Registration for up to 60 days under certain
circumstances. The
58
<PAGE> 60
Company is required to effect only two S-3 Registrations. All expenses
(including registration and qualification fees, printers' and accounting fees
and fees and disbursements of counsel for the Company) incurred in connection
with such registrations will be borne by AOL.
AOL also has certain "piggyback" registration rights. All expenses incurred
in connection with any piggyback registrations on behalf of AOL (other than the
underwriters' and brokers' discounts and commissions) will be borne by the
Company.
The Company's obligation to register AOL Registrable Securities will
terminate upon the earlier of (i) the time that all AOL Registrable Securities
have been registered and sold or (ii) such time as all AOL Registrable
Securities held by AOL may be sold within a three month period under Rule 144.
VOTING TRUST
The Company and AOL have entered into a Voting Trust Agreement (the "Voting
Trust") with respect to the shares of Series E Preferred Stock issued (or to be
issued upon exercise of the AOL Warrant) to AOL in connection with the
Acquisition and the entering into of a Distribution Arrangement. The Voting
Trust provides that all of such shares shall be deposited into a voting trust
such that in the event that California law should require a separate class vote
of the Preferred Stock owned by AOL, such shares are to be voted consistently
with the majority of the Company's Common Stock. The trustee under the Voting
Trust is Richard B. Redding, the Company's Vice President, Finance and
Administration and Secretary. His address is c/o Excite, Inc., 1091 Shoreline
Boulevard, Mountain View, California 94043. The Voting Trust will terminate upon
the earlier to occur of (i) the date on which AOL no longer holds shares of
Preferred Stock; (ii) the effective date of any merger, consolidation, exchange
or other reorganization where the Company is not the surviving corporation;
(iii) the dissolution of the Company; or (iv) ten years from the date of the
creation of the Voting Trust.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is The
First National Bank of Boston.
LISTING
The Common Stock is reported on the Nasdaq National Market under the
trading symbol "XCIT."
59
<PAGE> 61
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding an
aggregate of 13,804,417 shares of Common Stock and 2,630,330 shares of Series E
Preferred Stock which is convertible into Common Stock on a one-for-one basis
(assuming no exercise of options or warrants). Of the total number of shares of
Common Stock outstanding upon consummation of this offering, 5,330,318 shares
will be freely tradeable without restriction or further registration under the
Securities Act, unless they are purchased by "affiliates" of the Company as that
term is used under the Securities Act, including the 2,300,000 shares of Common
Stock offered hereby. The remaining 11,104,429 shares (which include the
2,630,330 shares of Common Stock issuable upon conversion of the Series E
Preferred Stock issuable to AOL and exclude shares of Preferred Stock subject to
the AOL Warrant and Common Stock issuable upon exercise of options and warrants)
are "restricted securities" as defined in Rule 144 ("Rule 144") promulgated
under the Securities Act (the "Restricted Shares"). Of this amount, 40,865
Restricted Shares that are not subject to the lock-up agreements described below
will be eligible for sale in the public market pursuant to Rule 144 or Rule 701
("Rule 701") promulgated under the Securities Act.
All officers and directors of the Company, and certain shareholders of the
Company, holding an aggregate of 9,988,100 of the Restricted Shares, have agreed
with the Underwriters not to sell, directly or indirectly, any shares owned by
them for a period of 90 days after the date of this Prospectus without the prior
written consent of Robertson, Stephens & Company LLC. Immediately following the
expiration of this 90-day period, approximately 8,038,100 Restricted Shares will
become eligible for sale (subject, in some instances, to certain repurchase
rights of the Company) in the public market, subject to the provisions of Rule
144 and/or Rule 701, including certain volume limitations and other resale
restrictions.
In general, under Rule 144, as recently amended and which amendment will be
effective as of April 29, 1997, any person (or persons whose shares are
aggregated) who has beneficially owned his or her restricted securities (as that
term is defined in Rule 144) for at least one year is entitled to sell, within
any three-month period, a number of such securities that does not exceed the
greater of 1% of the then outstanding shares of the Company's Common Stock
(approximately 138,044 shares immediately after the offering) or the average
weekly trading volume during the four calendar weeks preceding the date on which
notice of such sale was filed under Rule 144, provided certain requirements
concerning availability of public information, manner of sale and notice of sale
are satisfied. A person who is not an affiliate, has not been an affiliate
within three months prior to such sale and has beneficially owned the restricted
securities for at least two years is entitled to sell such shares under Rule
144(k) without regard to any of the limitations described above. In meeting the
one year and two year holding periods described above, a holder of Restricted
Shares may include the holding period of a prior owner who is not an affiliate
of the Company.
As of January 31, 1997, options to purchase a total of approximately
3,695,556 shares were outstanding (which number includes options to purchase
886,473 shares of Common Stock which were granted subject to shareholder
approval), of which approximately 242,765 shares issuable upon the exercise of
stock options will be eligible for sale in the public market, immediately or, in
some cases, upon the expiration of lock-up agreements. Furthermore, the
Company's Board of Directors has approved an increase, subject to shareholder
approval, in the number of shares of Common Stock reserved for issuance under
the 1996 Plan by 3,255,000 shares (and has granted, subject to such shareholder
approval, options to purchase 886,473 shares of Common Stock). The Company has
filed a registration statement under the Securities Act to register shares of
Common Stock currently reserved for issuance under the 1995 Plan, the 1996 Plan
and the Directors Plan, thus permitting the resale of such shares by
non-affiliates and affiliates subject to Rule 144 volume limitations applicable
thereto, in the public market without restrictions under the Securities Act. The
Company intends to file an additional registration statement under the
Securities Act with respect to the additional 3,255,000 shares of Common Stock
to be covered by the 1996 Plan.
Also, holders of an aggregate of 5,924,953 shares of Common Stock and AOL,
who will beneficially own 3,280,330 shares of Common Stock (which includes the
AOL Warrant), will be entitled to certain rights to require the Company to
register these 9,205,283 shares of Common Stock beneficially owned for offer and
sale to the public. See "Description of Capital Stock -- Registration Rights."
60
<PAGE> 62
UNDERWRITING
The Underwriters named below, acting through their representatives,
Robertson, Stephens & Company LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Representatives"), have severally agreed with the Company,
subject to the terms and conditions of the Underwriting Agreement, to purchase
the number of shares of Common Stock set forth opposite their respective names
below. The Underwriters are committed to purchase and pay for all shares if any
are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
--------------------------------------------------------------- ---------
<S> <C>
Robertson, Stephens & Company LLC..............................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
---------
Total................................................ 2,300,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession of not in excess of $ per share, of which $ may
be reallowed to other dealers. After the public offering, the public offering
price, concession and reallowance to dealers may be reduced by the
Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 345,000
additional shares of Common Stock at the same price per share as the Company
will receive for the 2,300,000 shares that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of Common Stock
to be purchased by it shown in the above table represents as a percentage of the
2,300,000 shares offered hereby. If purchased, such additional shares will be
sold by the Underwriters on the same terms as those on which the 2,300,000
shares are being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act.
Pursuant to the terms of lock-up agreements, the holders of 9,988,100
shares of the Company's Common Stock (including 2,630,330 shares of Preferred
Stock that are convertible into shares of Common Stock) have agreed, for a
period of up to 90 days after the date of this Prospectus, that, subject to
certain exceptions, they will not sell, contract to sell or otherwise dispose of
any shares of Common Stock, any options or warrants to purchase shares of Common
Stock or any securities convertible into or exchangeable for shares of Common
Stock, owned directly by such holders or with respect to which they have the
power of disposition, without the prior written consent of Robertson, Stephens &
Company LLC. Robertson, Stephens & Company LLC may, in its sole discretion, and
at any time without notice, release all or any portion of the securities subject
to lock-up agreements. Approximately 8,038,100 shares of Common Stock subject to
the lock-up agreements will become eligible for sale in the public market upon
the expiration of the lock-up agreements, subject to the provisions of Rule 144
under the Securities Act. See "Shares Eligible For Future Sale."
In addition, the Company has agreed that until 90 days after the date of
this Prospectus, the Company will not, without prior written consent of
Robertson, Stephens & Company LLC, subject to certain exceptions, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock, any options
or warrants to
61
<PAGE> 63
purchase Common Stock or any securities convertible into or exchangeable for
shares of Common Stock other than the Company's sale of shares in this offering,
the issuance of shares of Common Stock upon the exercise of outstanding options
and warrants and the conversion of outstanding convertible promissory notes and
outstanding shares of Preferred Stock, the grant of options to purchase shares
of Common Stock under existing employee and director stock option plans, the
sale of stock pursuant to the Purchase Plan, and the issuance of securities to
acquire any entity or business.
The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
The rules of the Commission generally prohibit the Underwriters and other
members of the selling group from making a market in the Company's Common Stock
during the "cooling off" period immediately preceding the commencement of sales
in the offering. The Commission has, however, adopted an exemption from these
rules that permits passive market making under certain conditions. These rules
permit an Underwriter or other member of the selling group to continue to make a
market in the Company's Common Stock subject to the conditions, among others,
that its bid not exceed the highest bid by a market maker not connected with the
offering and that its net purchases on any one trading day not to exceed
prescribed limits. Pursuant to these exemptions, certain Underwriters and other
members of the selling group intend to engage in passive market making in the
Company's Common Stock during the cooling off period. Passive market making may
stabilize the market price of the Common Stock at a level above what might
otherwise prevail and, if commenced, may be discontinued at any time.
Robertson, Stephens & Company LLC served as co-managing underwriter of the
Company's initial public offering in April 1996 and received customary discounts
and commissions in connection therewith.
62
<PAGE> 64
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, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Gunderson Dettmer Stough Villeneuve Franklin
& Hachigian, LLP, Menlo Park, California. Certain members of the firm of Fenwick
& West LLP own an aggregate of 20,588 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, to the extent indicated in their report thereon also
appearing elsewhere herein. Such consolidated financial statements have been
included herein 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 this Prospectus, have
been audited by Price Waterhouse LLP, independent accountants, whose report
thereon appears herein. 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.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under 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 thereto. Statements contained in
this Prospectus regarding the contents of any contract or any other document to
which reference is made are necessarily summaries of the material terms of such
contracts or documents, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement and the exhibits thereto may be
inspected without charge at the principal office of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Public Regional
Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3848,
and copies of all or any part of the Registration Statement may be obtained from
the Public Reference Section of the Commission in Washington, D.C. upon the
payment of the fees prescribed by the Commission.
63
<PAGE> 65
EXCITE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors................................... F-2
Report of Price Waterhouse LLP, Independent Accountants............................. F-3
Consolidated Balance Sheets as of December 31, 1995 and 1996........................ F-4
Consolidated Statements of Operations for the years ended December 31, 1994, 1995
and 1996.......................................................................... F-5
Consolidated Statements of Shareholders' Equity (Net Capital Deficiency) for the
years ended December 31, 1994, 1995 and 1996...................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995
and 1996.......................................................................... F-7
Notes to Consolidated Financial Statements.......................................... F-8
</TABLE>
F-1
<PAGE> 66
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Excite, Inc.
We have audited the accompanying consolidated balance sheet of Excite, Inc.
as of December 31, 1996, and the related consolidated statements of operations,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our 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 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 audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Excite, Inc. at December 31, 1996, and the consolidated results of
its operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
We previously audited and reported on the consolidated balance sheet and
the related consolidated statements of operations, shareholders' equity (net
capital deficiency), and cash flows of Excite, Inc. as of December 31, 1995 and
for the period from inception (June 9, 1994) to December 31, 1994 and for the
year ended December 31, 1995, prior to their restatement for the 1996 pooling of
interests as described in Note 3 to the consolidated financial statements. The
contribution of Excite, Inc. to total assets at December 31, 1995 was 46% of the
restated total. The contribution to revenues in 1994 and 1995 was 29% and 46%,
respectively. The contribution to net loss in 1994 and 1995 was 8% and 51%,
respectively. Financial statements of the other pooled company included in the
1994 and 1995 restated consolidated statements were audited and reported on
separately by other auditors. The report of the other auditors who audited these
statements, which is presented elsewhere herein, contains an explanatory
paragraph with respect to going concern uncertainties affecting the other
company. We have also audited, as to combination only, the accompanying
consolidated balance sheet at December 31, 1995 and the restated consolidated
statements of operations, shareholders' equity (net capital deficiency) and cash
flows for each of the two years in the period ended December 31, 1995, after
restatement for the 1996 pooling of interests; in our opinion, such consolidated
financial statements have been properly combined on the basis described in Note
3 to the consolidated financial statements.
ERNST & YOUNG LLP
Palo Alto, California
January 29, 1997
F-2
<PAGE> 67
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
The McKinley Group, Inc.
In our opinion, the balance sheets and the related statements of
operations, stockholders' deficit, and cash flows present fairly, in all
material respects, the financial position of The McKinley Group, Inc. at
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
The financial statements have been prepared assuming the Company will
continue as a going concern. The Company has suffered recurring losses from
operations, has a net capital deficiency and is not in compliance with certain
covenants underlying outstanding bank borrowings. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
On August 6, 1996, the Company entered into an Agreement and Plan of
Reorganization (the "Agreement") with Excite, Inc. Upon the effectiveness of the
Agreement, the Company's stockholders will exchange all of their shares of
Common Stock for shares of Common Stock of Excite, Inc., in a business
combination to be accounted for as a pooling of interests.
PRICE WATERHOUSE LLP
San Jose, CA
August 6, 1996
F-3
<PAGE> 68
EXCITE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 760 $ 3,971
Short-term investments................................................ 358 16,863
Restricted investments................................................ 452 1,496
Accounts receivable, net.............................................. 338 3,340
Prepaid expenses and other current assets............................. 207 1,070
------ -------
Total current assets.......................................... 2,115 26,740
Property and equipment, net............................................. 1,450 8,194
Intangible assets....................................................... 190 11,841
Other assets............................................................ 46 923
------ -------
$ 3,801 $ 47,698
====== =======
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Notes payable, current portion........................................ $ 899 $ 1,200
Accounts payable...................................................... 1,111 6,699
Accrued compensation.................................................. 428 861
Accrued distribution license fees..................................... -- 2,300
Capital lease obligations, current portion............................ 213 2,325
Deferred revenues..................................................... 105 1,784
Other accrued liabilities............................................. 237 3,447
------ -------
Total current liabilities..................................... 2,993 18,616
------ -------
Notes payable........................................................... 587 --
Capital lease obligations............................................... 408 3,985
Commitments and contingencies
Redeemable convertible preferred stock, no par value; issuable in
series: 4,000 shares authorized at December 31, 1995 (none at December
31, 1996), 1,890 shares issued and outstanding at December 31, 1995
(none at December 31, 1996)........................................... 3,847 --
Shareholders' equity (net capital deficiency):
Preferred stock issuable, no par value
Authorized - 4,000 shares issuable in series
Issuable at December 31, 1996 - 1,950 shares - aggregate
liquidation preference of $1,445.................................. -- 15,816
Common stock, no par value
Authorized - 25,000 shares.........................................
Issued and outstanding - 2,448 and 12,108 shares at December 31,
1995 and 1996, respectively....................................... 3,530 59,999
Deferred compensation................................................. (631) (388)
Unrealized gain (loss) on available-for-sale investments.............. 152 (128)
Accumulated deficit................................................... (7,085) (50,202)
------ -------
Total shareholders' equity (net capital deficiency)........... (4,034) 25,097
------ -------
$ 3,801 $ 47,698
====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 69
EXCITE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Revenues:
Advertising revenues..................................... $ 57 $ 145 $ 14,030
Contract and other revenues.............................. 236 808 727
------- ------- --------
Total revenues................................... 293 953 14,757
Cost of revenues:
Cost of advertising revenues............................. -- 65 3,296
Cost of contract and other revenues...................... 88 163 667
Amortization of purchased technology..................... -- -- 186
------- ------- --------
Total cost of revenues........................... 88 228 4,149
------- ------- --------
Gross profit............................................... 205 725 10,608
Operating expenses:
Product development...................................... 415 2,810 8,030
Sales and marketing...................................... 37 1,648 21,103
Distribution license fees................................ -- -- 11,878
General and administrative............................... 399 2,326 7,081
Charge for purchased in-process technology............... -- 331 3,500
Other merger and acquisition related costs, including
amortization of goodwill and other purchased
intangibles........................................... -- -- 3,134
------- ------- --------
Total operating expenses......................... 851 7,115 54,726
------- ------- --------
Operating loss............................................. (646) (6,390) (44,118)
Interest income............................................ -- 5 1,410
Interest expense and other................................. (4) (50) (409)
------- ------- --------
Net loss................................................... $ (650) $(6,435) $(43,117)
======= ======= ========
Net loss per share......................................... $ (0.06) $ (0.58) $ (3.65)
======= ======= ========
Shares used in computing net loss per share ............... 10,576 11,070 11,818
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 70
EXCITE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
<TABLE>
<CAPTION>
TOTAL
SHAREHOLDERS'
PREFERRED STOCK COMMON STOCK UNREALIZED EQUITY
--------------- --------------- DEFERRED GAIN/(LOSS) ACCUMULATED (NET CAPITAL
SHARES AMOUNT SHARES AMOUNT COMPENSATION ON INVESTMENTS DEFICIT DEFICIENCY)
------ ------- ------ ------- ------------ -------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993..... -- $ -- 35 $ 1 $ -- $ -- $ -- $ 1
Issuance of common stock for
cash......................... -- -- 899 100 -- -- -- 100
Issuance of common stock for
services..................... -- 356 7 -- -- -- 7
Net loss....................... -- -- -- -- -- -- (650) (650)
----- ------- ------ ------- ----- ----- -------- --------
Balance at December 31, 1994..... -- -- 1,290 108 -- -- (650) (542)
Issuance of common stock for
cash......................... -- -- 1,024 1,921 -- -- -- 1,921
Exercise of stock options...... -- -- 1 6 -- -- -- 6
Issuance of common stock for
equity securities............ -- -- 33 300 -- -- -- 300
Issuance of common stock for
services..................... -- -- 8 196 -- -- -- 196
Note payable conversion........ -- -- 22 275 -- -- -- 275
Issuance of common stock and
warrant in connection with
asset purchase agreement..... -- -- 70 84 -- -- -- 84
Deferred compensation related
to stock options, net of
amortization................. -- -- -- 640 (631) -- -- 9
Unrealized gain on
available-for-sale
investments.................. -- -- -- -- -- 152 -- 152
Net loss....................... -- -- -- -- -- -- (6,435) (6,435)
----- ------- ------ ------- ----- ----- -------- --------
Balance at December 31, 1995..... -- -- 2,448 3,530 (631) 152 (7,085) (4,034)
Issuance of common stock for
cash......................... -- -- 283 1,412 -- -- -- 1,412
Notes payable conversion....... -- -- 87 400 -- -- -- 400
Issuance of warrant in
connection with distribution
agreement.................... -- -- -- 1,625 -- -- -- 1,625
Issuance of shares, note
payable conversion and
exercise of outstanding
warrants in connection with
the Company's IPO, net of
issuance costs of $3,682..... -- -- 3,651 36,418 -- -- -- 36,418
Conversion of redeemable
preferred stock in connection
with the Company's IPO....... -- -- 5,324 16,129 -- -- -- 16,129
Exercise of stock options...... -- -- 300 375 -- -- -- 375
Amortization of deferred
compensation, net of
cancellations................ -- -- -- 7 243 -- -- 250
Issuance of common and
preferred stock issuable in
connection with asset
purchase agreements.......... 1,950 15,816 15 103 -- -- -- 15,919
Unrealized loss on
available-for-sale
investments.................. -- -- -- -- -- (280) -- (280)
Net loss....................... -- -- -- -- -- -- (43,117) (43,117)
----- ------- ------ ------- ----- ----- -------- --------
Balance at December 31, 1996..... 1,950 $15,816 12,108 $59,999 $ (388) $ (128) $ (50,202) $ 25,097
===== ======= ====== ======= ===== ===== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 71
EXCITE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1994 1995 1996
----- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss..................................................... $(650) $(6,435) $(43,117)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of deferred compensation..................... -- 9 243
Issuance of warrants...................................... -- -- 1,625
Equity securities issued for services..................... 7 196 --
Depreciation.............................................. 11 140 2,189
Amortization of intangible assets......................... -- 19 954
Charge for purchased in-process technology................ -- 331 3,500
Loss on disposal of property and equipment................ -- -- 96
Provision for loan impairment............................. -- -- 629
Changes in assets and liabilities:
Accounts receivable..................................... (3) (335) (2,957)
Prepaid expenses and other current assets............... (11) (168) (863)
Other assets............................................ (23) (36) (873)
Accounts payable........................................ 136 1,021 5,515
Accrued compensation.................................... 44 384 425
Accrued distribution license fees....................... -- -- 2,300
Other accrued liabilities............................... 122 117 2,533
Deferred revenues....................................... -- 105 1,679
----- ------- --------
Net cash used in operating activities................ (367) (4,652) (26,122)
----- ------- --------
Cash flows from investing activities:
Purchases of property and equipment.......................... (85) (811) (892)
Purchases of investments..................................... -- (358) (49,765)
Sales and maturities of investments.......................... -- -- 31,936
Notes and advances to Novo MediaGroup, Inc................... -- -- (629)
Payment on asset purchase.................................... -- (150) --
----- ------- --------
Net cash used in investing activities................ (85) (1,319) (19,350)
----- ------- --------
Cash flows from financing activities:
Payments on capital lease obligations........................ -- (69) (1,875)
Proceeds from notes payable.................................. 344 1,277 3,490
Payments on notes payable.................................... -- (263) (2,426)
Proceeds from sale of redeemable convertible preferred
stock..................................................... -- 3,847 12,282
Proceeds from sale of common stock and common stock
warrants.................................................. 100 1,927 37,212
----- ------- --------
Net cash provided by financing activities............ 444 6,719 48,683
----- ------- --------
Net increase in cash and cash equivalents...................... (8) 748 3,211
Cash and cash equivalents at beginning of period............... 20 12 760
----- ------- --------
Cash and cash equivalents at end of period..................... $ 12 $ 760 $ 3,971
===== ======= ========
Non-cash financing activities:
Conversion of redeemable convertible preferred stock to
common.................................................... $ -- $ -- $ 16,129
Conversion of notes payable to common stock.................. $ -- $ 275 $ 1,400
Fixed assets acquired under capital leases................... $ -- $ 676 $ 7,564
Supplemental cash flow disclosure:
Cash paid for interest....................................... $ -- $ 17 $ 379
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 72
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company and Basis of Presentation
Excite, Inc. ("Excite" or the "Company"), formerly Architext Software,
Inc., was formed in June 1994 and combines proprietary technology with media
expertise to develop and provide navigation services and products for the
Internet and the World Wide Web (the "Web") which enable consumers, content
providers and advertisers to access and interact with one another more
efficiently and thereby realize the Web's potential as a new medium. The Company
derives a substantial portion of its revenues from selling advertising on its
Web sites to customers in various industries.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. On August 30, 1996, the Company acquired The
McKinley Group, Inc. ("McKinley") in a merger transaction accounted for as a
pooling of interests (see Note 3). McKinley was incorporated in December 1993.
All financial information has been restated to reflect the combined operations
of the Company and McKinley. From December 7, 1993 (inception) through December
31, 1993, McKinley had no revenues and insignificant operating expenses which
have been included in the consolidated results of operations for the year ended
December 31, 1994.
The Company has incurred operating losses to date and incurred a net loss
of approximately $43.1 million for the year ended December 31, 1996. The Company
believes that additional equity funding will be needed to finance expected
operations in the year ending December 31, 1997. If such additional equity
funding is not available, management believes that available resources will
provide sufficient funding to enable the Company to meet its obligations through
at least December 31, 1997. If anticipated operating results are not achieved,
management has the intent and believes it has the ability to delay or reduce
expenditures so as not to require additional financial resources if such
resources were not available.
The Company currently derives a large percentage of its revenues from
advertising through the "Net Search" buttons on the Netscape home page. Under
the terms of the April 1996 agreements with Netscape (see Note 12), this
facility expires on March 31, 1997. If the Company for any reason fails to enter
into replacement agreements with Netscape or if the Company enters into
replacement agreements on materially worse terms than the current agreements,
the Company could experience a reduction in advertising revenues and as a
result, the Company's operating results and financial condition would be
adversely affected.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassifications
Certain previously reported amounts have been reclassified to conform to
the current presentation format.
Long-Lived Assets
In 1995, the Financial Accounting Standards Board released Statement of
Financial Accounting Standard No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121").
SFAS 121 requires recognition of impairment of long-lived assets in the event
the net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. The adoption of SFAS 121 in fiscal 1996 had no
impact on the Company's financial condition or operating results.
F-8
<PAGE> 73
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The carrying value of goodwill and intangible assets is reviewed on a
regular basis for the existence of facts or circumstances, both internally and
externally, that may suggest impairment. To date no such impairment has been
indicated. Should there be an impairment in the future, the Company will measure
the amount of the impairment based on undiscounted expected future cash flows
from the impaired assets. The cash flow estimates that will be used will contain
management's best estimates, using appropriate and customary assumptions and
projections at the time.
Revenue Recognition
Advertising revenues are derived principally from short-term advertising
contracts in which the Company guarantees a minimum number of impressions (a
view of an advertisement by a consumer) for a fixed fee. Advertising revenues
are recognized ratably over the term of the contract. To the extent minimum
guaranteed impression levels are not met, the Company defers recognition of the
corresponding revenues until guaranteed levels are achieved.
Revenues from the sale of certain advertising space are shared with third
parties pursuant to the terms of certain agreements. To date, amounts allocable
to third parties have not been significant. Contract and other revenues during
the years ended December 31, 1994 and 1995 consisted primarily of contract
revenues earned under agreements to modify the Company's Internet directory
technology and fees for the licensing of Internet directory content and
technology. Contract revenues are recognized as the work is performed using the
percentage of completion method. License revenues are recognized at the time of
delivery, provided that no significant obligations remain and collection of the
resulting receivable is considered probable.
Advertising
Costs related to advertising are expensed as incurred. Advertising expense
was insignificant for the year ended December 31, 1994 and was approximately
$144,000 and $10.4 million for the years ended December 31, 1995 and 1996,
respectively.
Cash, Cash Equivalents, Short-Term Investments and Fair Value of Financial
Instruments
The Company considers investments in highly liquid instruments purchased
with an original maturity of 90 days or less to be cash equivalents. All of the
Company's cash equivalents and short-term investments, consisting principally of
commercial paper and government securities, are classified as available-for-sale
as of the balance sheet date. These securities are recorded at fair market
value. Unrealized gains and losses on these investments are included in
shareholders' equity. The cost of securities sold is based on specific
identification. There were no material gross realized gains or losses from sales
of securities in the periods presented. The amortized cost and fair value of
investments are based on quoted market prices at December 31, 1996. The
F-9
<PAGE> 74
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
estimates presented herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange. All available-for-sale
investments generally mature in one year or less.
<TABLE>
<CAPTION>
GROSS UNREALIZED
HISTORICAL -----------------
COST GAIN LOSS FAIR VALUE
---------- ------ ------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents:
Cash............................................... $ 758 $ -- $ -- $ 758
U.S. Government securities......................... 1,604 -- -- 1,604
Money market funds................................. 1,609 -- -- 1,609
--
------ ----- -------
$ 3,971 $ -- $ -- $ 3,971
====== == ===== =======
Short-term investments:
Commercial paper................................... $ 3,882 $ 3 $ -- $ 3,885
U.S. Government securities......................... 12,203 5 -- 12,208
Corporate notes.................................... 770 -- -- 770
--
------ ----- -------
$ 16,855 $ 8 $ -- $ 16,863
====== == ===== =======
Restricted investments:
Restricted certificate of deposit.................. $ 1,332 $ -- $ -- $ 1,332
Restricted investment in common stock.............. 300 -- (136) 164
--
------ ----- -------
$ 1,632 $ -- $ (136) $ 1,496
====== == ===== =======
</TABLE>
The restricted certificate of deposit is being held as collateral by a
financial institution against a letter of credit for tenant improvements at the
Company's new headquarters (see Note 5).
The restricted investment in common stock is being held as collateral by a
financial institution against the Company's line of credit borrowings (see Note
4).
Property and Equipment
Property and equipment are stated at cost, net of accumulated amortization
and depreciation. Property and equipment are depreciated on a straight-line
basis over the estimated useful lives of the assets (one to five years).
Equipment purchased under capital leases is amortized on a straight-line basis
over the lesser of the estimated useful life of the asset or the lease term.
Property and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------ -------
(IN THOUSANDS)
<S> <C> <C>
Purchased computer equipment and internal use software.................... $ 901 $ 1,968
Leased computer equipment and internal use software....................... 673 7,891
Purchased furniture and fixtures.......................................... 13 370
Leased furniture and fixtures............................................. 3 297
Leasehold improvements.................................................... 16 60
------ ------
1,606 10,586
Less accumulated depreciation and amortization............................ (156) (2,392)
------ ------
$1,450 $ 8,194
====== ======
</TABLE>
F-10
<PAGE> 75
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intangible Assets
Intangible assets consist primarily of goodwill, developed technology,
distribution rights, trademarks, bookmarks and trade names, and are being
amortized generally over periods ranging from four months to three years. These
purchased intangibles and goodwill relate to the acquisitions of certain assets
from other companies. Accumulated amortization of intangible assets was
approximately $19,000 and $967,000 at December 31, 1995 and 1996, respectively.
Concentration of Credit Risk
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, does not require collateral on accounts receivable.
When required, the Company maintains allowances for credit losses and such
losses have been within management's expectations. The Company's services are
provided to customers in several industries, primarily in North America.
Provisions for doubtful accounts were insignificant in 1995 and $670,000
for the year ended December 31, 1996. Accounts receivable are stated net of
allowances for doubtful accounts of $425,000 at December 31, 1996 (none at
December 31, 1995).
Two customers accounted for approximately 52% and 17% respectively, of
total revenues in 1994. Two customers accounted for 26% and 16% respectively, of
total revenues in 1995. One customer accounted for approximately 12% of total
revenues in 1996.
Product Development Costs
Product development expenditures are charged to operations as incurred.
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between completion of the working
model and the point at which the product is ready for general release have been
insignificant. Therefore, all product development costs have been charged to
operations as incurred.
Per Share Amounts
Net loss per share is computed using the weighted average number of shares
of Common Stock outstanding during the period and excludes all common stock
equivalents as they are anti-dilutive. However, pursuant to Securities and
Exchange Commission Staff Accounting Bulletins, for the periods prior to the
Company's initial public offering, such computations include all common and
common equivalent shares issued within twelve months of the filing date as if
they were outstanding for all periods presented. Common equivalent shares
consist of the incremental common shares issued upon conversion of redeemable
convertible preferred stock (using the if-converted method) and shares issuable
upon the exercise of stock options and warrants (using the treasury stock
method).
2. INITIAL PUBLIC OFFERING
In April 1996, the Company completed its initial public offering and issued
2,300,000 shares of its Common Stock at a price of $17.00 per share. The Company
received approximately $35.4 million in cash, net of underwriting discounts,
commissions and other offering costs. Simultaneously with the closing of the
initial public offering, each outstanding share of redeemable convertible
preferred stock was automatically converted into two shares of Common Stock,
outstanding warrants were exercised (on a net exercise basis) at an exercise
price of $17.00 per share, resulting in the issuance of 1,191,176 shares of
Common Stock, and $1.0 million principal amount of notes payable was converted
into 160,000 shares of Common Stock.
F-11
<PAGE> 76
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. MERGER AND ASSET PURCHASES
Merger
In August 1996, the Company acquired McKinley, a closely held private
company and creator of the Magellan On-Line Guide. The transaction was effected
through the issuance of approximately 850,000 shares of the Company's Common
Stock and was accounted for as a pooling of interests. In connection with the
transaction, the Company incurred approximately $2.2 million in merger related
expenses, including $1.0 million for legal and other professional fees, $901,000
for personnel severance and outplacement expenses and $345,000 for termination
of distribution contracts and discontinuation of duplicate operations and
facilities. A total of approximately $524,000 was included in other accrued
liabilities at December 31, 1996 for the remaining merger related liabilities.
Separate results of the combined entities for the years ended December 31,
1994 and 1995, and for the eight month period ended August 30, 1996 (date of
merger) are as follows:
<TABLE>
<CAPTION>
UNAUDITED
YEAR ENDED YEAR ENDED EIGHT MONTHS
DECEMBER 31, DECEMBER 31, ENDED AUGUST 30,
1994 1995 1996
------------ ------------ ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Excite............................................... $ 83 435 $ 5,182
McKinley............................................. 210 518 1,661
----- ------- --------
$ 293 953 $ 6,843
===== ======= ========
Net loss:
Excite............................................... $ (51) $ (3,257) $(13,793)
McKinley............................................. (599) (3,178) (12,306)
----- ------- --------
$ (650) $ (6,435) $(26,099)
===== ======= ========
</TABLE>
There were no significant inter-company transactions between the two companies
and no significant conforming accounting adjustments.
Asset Purchases
In November 1995, the Company entered into an asset purchase agreement with
City.Net Express ("City.Net"), a company which develops automated software
systems for managing content and links over the Internet. Under the terms of the
agreement, the Company purchased certain assets of City.Net in exchange for cash
of $150,000, 70,000 shares of Common Stock, a promissory note of $300,000, and a
warrant to purchase 45,000 shares of Common Stock at an exercise price of $3.33
per share for a total purchase consideration valued at $534,000. Of the purchase
price, $203,000 was allocated to identified intangible assets and $331,000 was
allocated to purchased in-process technology which was charged to operations at
the time of the acquisition. The Company determined the amounts to be allocated
to developed and in-process technology based on whether technological
feasibility had been achieved and whether there was an alternative future use
for the technology.
In November 1996, the Company entered into a series of agreements with
America Online, Inc.("AOL"), a provider of Internet online services, whereby
Excite became the exclusive Internet search and directory service for AOL. Under
these agreements, Excite acquired AOL's WebCrawler search and directory
technology ("The WebCrawler Assets"), for 1,950,000 shares of the Company's
Series E-1 and E-2 convertible preferred stock, that are issuable upon closing
(see Note 7). In addition, as part of the transactions contemplated by these
agreements, AOL will have the right, for a 90 day period following the closing,
which is expected to be March 31, 1997, to have 680,330 shares of common stock
beneficially owned by AOL
F-12
<PAGE> 77
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
cancelled and an equivalent number of shares of series E-4 preferred stock
issued to it, and a warrant held by AOL (which previously was exercisable into
650,000 shares of common stock at an exercise price of $8.00 per share) was
amended to become exercisable into 650,000 shares of series E-3 preferred stock
at the same exercise price per share. The acquisition was recorded as of
December 1, 1996. Upon closing, AOL will pay to the Company a percentage of
AOL's advertising revenues with respect to the sales of advertising derived from
the WebCrawler Assets for the period between December 1, 1996 and the closing,
less ordinary and customary reserves, and the Company will reimburse AOL for
expenses relating to the WebCrawler Assets. Revenues recorded in the period
ended December 31, 1996 were immaterial. Shareholders' equity at December 31,
1996 includes the 1,950,000 shares of preferred stock issuable to AOL.
The series of agreements have been accounted for as the acquisition of
rights to developed and in-process technologies and distribution rights. The
intangible assets were recorded based on their independently appraised fair
values as of December 1, 1996. Of the total purchase price, $3.5 million was
allocated to purchased in-process technology and the remaining excess purchase
price of approximately $12.6 million was allocated to trademarks, distribution
rights, bookmarks, trade names, goodwill and other. The amount of the purchase
price allocated to purchased in-process technology was charged to the Company's
operations as of December 1, 1996.
The Company determined the amounts to be allocated to developed and
in-process technology based on whether technological feasibility had been
achieved (as defined and utilized by the Company in assessing software
capitalization) and whether there was any alternative future use for the
technology. Other considerations included the time and cost to complete each
project, expected income, and associated risks which included the inherent
difficulties and uncertainties in completing the project and thereby achieving
technological feasibility and risks related to the viability of and potential
changes to future target markets. The Company concluded that the in-process
technology had no alternative future use after taking into consideration the
potential for usage of the technology in different products, resale of the
technology and internal usage.
F-13
<PAGE> 78
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. BANK LINE OF CREDIT AND NOTES PAYABLE
Bank borrowings and other notes payable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------ -------
(IN THOUSANDS)
------------------
<S> <C> <C>
Bank line of credit....................................................... $ 796 $ 1,100
Note payable in connection with asset purchase (Note 3)................... 300 --
Other notes payable....................................................... 390 100
----- -----
1,486 1,200
Less current portion...................................................... (899) (1,200)
----- -----
$ 587 $ --
===== =====
</TABLE>
Bank Line of Credit
The Company has a $1.0 million revolving line of credit with a bank
available through March 31, 1997. Additionally, in May 1996, the Company
received $100,000 from the same bank under a demand note. Borrowings at December
31, 1996 totaled $1.1 million and are secured by substantially all of McKinley's
assets and are guaranteed by the Company. Interest on borrowings is payable
monthly at the bank's prime rate (8.25% at December 31, 1996) plus 1%. At
December 31, 1996, a short-term investment with a carrying amount of $164,000
was held by the bank as collateral for borrowings under the line of credit and
is not available to the Company.
Notes Payable
In 1996, the Company repaid $150,000 of the note payable which arose in
connection with an asset purchase, and converted the remaining $150,000 into
45,000 shares of Common Stock. Other notes payable represent amounts due to
individuals with interest rates ranging from 6% to 11%. In 1996, the Company
converted $250,000 of other notes payable into 41,604 shares of Common Stock.
5. COMMITMENTS
Capital Leases
In March 1996, the Company entered into a master equipment lease which
provides for the purchase of up to $2.5 million of property and equipment under
capital leases. At December 31, 1996, $132,000 was available under this lease
line. In the second half of 1996, the Company entered into additional equipment
leases, not included in the master lease line, totaling $4.8 million. These
leases generally have terms of 30 to 36 months.
Building Lease
In August 1996, the Company entered into a lease for new corporate offices
located in Redwood City, California. The Company anticipates that this lease,
which has a ten year term, will commence during the first half of 1997 at which
time the Company will move from its present offices in Mountain View, Sausalito
and San Jose, California.
F-14
<PAGE> 79
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Annual minimum commitments under these leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Years Ending December 31:
1997.................................................................... $ 1,257 $ 2,812
1998.................................................................... 1,849 2,707
1999.................................................................... 1,586 1,576
2000.................................................................... 1,514 --
2001.................................................................... 1,514 --
Thereafter.............................................................. 7,948 --
------ -------
Total minimum payments required........................................... $15,668 $ 7,095
======
-------
Less amounts representing interest........................................ (785)
Present value of future lease payments.................................... 6,310
Less current portion...................................................... (2,325)
-------
$ 3,985
=======
</TABLE>
Rent expense under operating leases was approximately $24,000, $152,000 and
$722,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK
Each share of redeemable convertible preferred stock outstanding at
December 31, 1995 automatically converted to two shares of Common Stock upon the
closing of the Company's initial public offering on April 3, 1996.
7. SHAREHOLDERS' EQUITY
Convertible Preferred Stock
Information regarding convertible preferred stock, including the amounts
issuable under the acquisition of certain assets from AOL, consists of the
following (no par value):
<TABLE>
<CAPTION>
SHARES
ISSUABLE AT
SHARES DECEMBER 31, LIQUIDATION
AUTHORIZED 1996 PREFERENCE
---------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Series E-1................................................... 1,250 1,250 $ 1,438
Series E-2................................................... 700 700 7
Series E-3................................................... 650 -- --
Series E-4................................................... 680 -- --
----- ----- ------
Total Series E..................................... 3,280 1,950 $ 1,445
===== ======
Undesignated................................................. 720
-----
Total authorized................................... 4,000
=====
</TABLE>
Holders of the Series E Preferred Stock will be entitled to non-cumulative
dividends, as and if declared by the Board of Directors ("The Board"), on a pro
rata basis with the common stock holders.
F-15
<PAGE> 80
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The holders of Series E-1, E-2, E-3 and E-4 Preferred Stock will be
entitled to liquidation preferences of $1.15, $0.01, $8.0 and $8.819 per share
respectively, prior to and in preference to any payment or distribution to
holders of Common Stock.
Each holder of shares of Preferred Stock shall be entitled to a number of
votes equal to the number of shares of Common Stock into which such shares of
Preferred Stock could convert and, so long as at least 1,640,165 shares of
Series E Preferred Stock are outstanding, the Preferred Stock as a class shall
be entitled to elect one director. Subject to adjustment, the Preferred Stock
holders are entitled, upon conversion, to the same number of Common shares as
represented by their Preferred Stock holdings. At the option of the holder, each
share of Preferred Stock shall be convertible, at any time or from time to time,
into fully and nonassessable shares of Common Stock.
Common Stock
At December 31, 1996, 1,780,020 shares of Common Stock issued by the
Company were subject to stock repurchase agreements whereby the Company has the
option to repurchase the unvested shares upon termination of employment for any
reason, with or without cause, at the original price paid for the shares.
Generally the stock vests 30% immediately with the remaining 70% vesting ratably
over 48 months from the date of issuance. At December 31, 1996, 493,226 shares
of Common Stock were subject to repurchase at the option of the Company at the
original exercise price ranging from $0.00045 to $0.035.
Warrants
During 1995, the Company issued warrants to purchase 30,000 shares of
Series A and 16,000 shares of Series B redeemable convertible preferred stock at
exercise prices of $1.3333 and $2.50 per share, respectively, in connection with
an equipment lease agreement. These warrants expire in July and November, 2002,
respectively.
During 1995, the Company issued warrants to purchase 1,200,000 shares of
Common Stock at an exercise price of $0.125 per share in connection with the
sale of Series B redeemable convertible preferred stock. These warrants were
exercised in April 1996 in connection with the Company's initial public
offering.
During 1995, the Company issued warrants to purchase 36,000 and 28,540
shares of Common Stock at exercise prices of $0.67 and $1.25 per share,
respectively, in connection with an employment offer. These warrants were
exercised in 1996.
During 1995, the Company issued warrants to purchase 2,356 shares of Common
Stock at an exercise price of $32.66 per share in connection with obtaining a
working capital line of credit from a bank (see Note 4). These warrants expire
in September 2001.
In February 1996, the Company issued warrants to purchase 7,095 shares of
Common Stock at an exercise price of $101.27 per share in connection with a
consulting services agreement. These warrants fully vest on January 31, 1997 and
expire on January 31, 1999.
In March 1996, the Company entered into an agreement with AOL whereby, in
return for certain distribution rights, the Company issued a warrant to purchase
650,000 shares of Common Stock at an exercise price of $8.00 per share. The
warrant expires in March 2001. The value of the warrant was established though
an independent appraisal. A charge to operations of $1.6 million for the fair
value of the warrant was recorded at the time of issuance. Upon the closing of
the acquisition of the WebCrawler Assets, this warrant will be converted into a
warrant to purchase an equivalent number of shares of Series E-3 Preferred Stock
at the same exercise price per share.
F-16
<PAGE> 81
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Stock Splits
In July 1995, the Company completed a one-for-nine reverse stock split. In
addition, in February 1996, the Company completed a two-for-one stock split. All
of the share and per share data have been adjusted to reflect these stock
splits.
8. EMPLOYEE BENEFIT PLANS
Stock Option Plans
During 1995, the Company adopted the 1995 Equity Incentive Plan (the "1995
Plan") under which incentive stock options or non-qualified stock options to
purchase Common Stock may be granted to eligible participants. Under the 1995
Plan, options to purchase Common Stock may be granted at prices no less than 85%
of the fair market value on the date of grant (110% of fair value in certain
instances). Options generally vest over a 48-month period. Options granted under
the 1995 Plan before its termination in April 1996 remain outstanding in
accordance with their terms, but no further options have been granted under the
1995 Plan after the date of its termination.
Additionally, in February 1996 the Company's Board of Directors adopted,
and in March 1996 the Company's shareholders approved, the 1996 Equity Incentive
Plan (the "1996 Plan") and 1996 Directors Stock Option Plan (the "Directors
Plan") which authorized the issuance of 1,500,000 and 150,000 shares of Common
Stock, respectively, upon exercise of stock options granted to eligible
participants under the 1996 Plan and to directors under the Directors Plan.
Under the 1996 Plan, options to purchase Common Stock may be granted at prices
no less than 85% of the fair market value on the date of the grant. In November
1996 and January 1997, the Board approved amendments to the 1996 Plan to
increase the number of shares thereunder by 800,000 and 2,455,000 shares,
respectively.
A summary of activity under the Plans is as follows:
<TABLE>
<CAPTION>
SHARES OPTIONS OUTSTANDING
AVAILABLE --------------------------- WEIGHTED
FOR NUMBER OF AVERAGE
GRANT SHARES PRICE PER SHARE EXERCISE PRICE
---------- --------- --------------- --------------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Initial shares authorized...................... 1,650 -- -- --
Options granted.............................. (1,375) 1,375 $0.035- $34.612 $ 0.31
Options exercised............................ -- (1) $ 8.194 $ 8.19
----- -----
Balance at December 31, 1995................... 275 1,374 $0.035- $34.612 $ 0.31
Additional shares authorized................. 2,450 -- -- --
Options granted.............................. (2,820) 2,820 $2.500- $67.757 $ 6.80
Options exercised............................ -- (300) $0.035- $ 5.750 $ 0.33
Options canceled............................. 263 (263) $0.035- $67.757 $10.50
Options expired.............................. (528) -- -- --
----- -----
Balance at December 31, 1996................... (360) 3,631 $0.035- $67.757 $ 4.66
===== =====
</TABLE>
Deferred Compensation
The Company has recorded deferred compensation expense of $640,000 for the
difference between the exercise price and the deemed fair value of certain of
the Company's Common Stock options granted in 1995. This amount is being
amortized over the vesting period of the individual options, generally a
48-month period. Deferred compensation expense recognized in the years ended
December 31, 1995 and 1996 totaled $9,000 and $243,000, respectively.
F-17
<PAGE> 82
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Accounting for Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"),
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, if the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996, respectively: risk-free interest rates of
approximately 5.7%, and 5.9%; dividend yields of 0%, volatility factors of the
expected market price of the Company's Common Stock of 0.0, and 0.75; and a
weighted-average expected life of the options of two years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1995 1996
------- --------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net loss -- as reported............................................... $(6,435) $(43,117)
===== ======
Net loss -- pro forma................................................. $(6,437) $(44,104)
===== ======
Net loss per share -- as reported..................................... $ (0.58) $ (3.65)
===== ======
Net loss per share -- pro forma....................................... $ (0.58) $ (3.73)
===== ======
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------- -------------------------------------
NUMBER WEIGHTED- NUMBER
OUTSTANDING AT AVERAGE WEIGHTED- EXERCISABLE AT WEIGHTED-
RANGE OF EXERCISE DEC. 31, 1996 REMAINING AVERAGE EXERCISE DEC. 31, 1996 AVERAGE EXERCISE
PRICES (IN THOUSANDS) CONTRACTUAL LIFE PRICE (IN THOUSANDS) PRICE
- ----------------- --------------- ----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.035- $ 0.290 1,005 8.3 years $ 0.19 186 $ 0.20
2.500- 2.500 237 9.1 2.50 18 2.50
5.500- 9.875 2,231 9.5 6.26 24 6.44
11.190- 17.125 155 9.3 12.62 4 12.00
67.757- 67.757 3 9.3 67.67 -- --
3,631 232 1.22
</TABLE>
F-18
<PAGE> 83
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Employee Stock Purchase Plan
In February 1996 the Company's Board of Directors adopted, and in March
1996 the Company's shareholders approved, the 1996 Employee Stock Purchase Plan
(the "ESPP") to provide employees of the Company with an opportunity to purchase
Common Stock through payroll deductions. Under the ESPP, 150,000 shares of
Common Stock have been reserved for issuance, subject to anti-dilution
adjustments. The ESPP became effective in December 1996. The Board of Directors
has the authority to determine the duration of offering periods, up to a maximum
of 24 months. Eligible employees may participate in the ESPP by authorizing
payroll deductions of an amount determined by the Board of Directors. The amount
of authorized payroll deductions may not be less than 2% nor more than 10% of an
employee's compensation, not to exceed $21,250 per year. Amounts withheld are
applied at the end of every six-month accumulation period to purchase shares of
Common Stock, but not more than the number of shares as the Board of Directors
shall determine.
Participants may withdraw their contributions at any time prior to fifteen
days before the stock is purchased, and such contributions will be returned to
the participants without interest. The purchase prices is equal to 85% of the
lower of (i) the market price of the Company's Common Stock immediately before
the beginning of the applicable period or (ii) the market price of the Company's
Common Stock at the time of the purchase. As of December 31, 1996, no shares had
been purchased under the ESPP.
Employee Benefit Plan
The Company has a savings plan (the "Savings Plan") that qualifies as a
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the Savings Plan, participating employees may defer a percentage (not to
exceed 15%) of their pretax earnings up to the Internal Revenue Service's annual
contribution limit. The Company is not required to contribute to the Savings
Plan and has made no contributions since the inception of the Savings Plan.
9. INCOME TAXES
As of December 31, 1996, the Company had federal and state net operating
loss carryforwards of approximately $37.9 million and $37.7 million,
respectively. The federal net operating loss carryforwards will expire at
various dates beginning in 2009 through 2011. The state net operating loss
carryforwards will expire at various dates beginning in 1999 through 2001.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
1995 1996
------ -------
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforwards.......................................... $2,200 $15,200
Research credits (expiring 2009-2011)..................................... 100 400
Non-deductible merger and acquisition costs............................... -- 1,300
Purchased in-process technology........................................... 140 1,400
Other..................................................................... 120 900
------ -------
Total deferred tax assets....................................... 2,560 19,200
Valuation allowance for deferred tax assets............................... (2,560) (19,200)
------ -------
Net deferred tax assets......................................... $ -- $ --
====== =======
</TABLE>
F-19
<PAGE> 84
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $2.5 million during the year ended December 31, 1995.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change provisions of the
Internal Revenue Code of 1986. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
10. NOVO MEDIAGROUP, INC. NOTE RECEIVABLE
During 1996, the Company advanced amounts under notes and advances
receivable to Novo MediaGroup, Inc. ("Novo") in the amount of $629,000, of which
$330,000 was evidenced by an 8% promissory note convertible into shares of Novo
common stock. Based on management's assessment of the financial uncertainty with
regard to Novo's ability to repay the outstanding amounts, an impairment reserve
of $629,000 was provided in the quarter ended June 30, 1996.
11. LITIGATION
On November 18, 1996, Kristine Paaso and Laura Lindsey filed a complaint in
the California Superior Court, Santa Clara County, against the Company and
certain of its founders alleging breach of an alleged oral agreement, breach of
fiduciary duty and fraud. The plaintiffs allege that they participated in the
creation of the Company's business plan and were entitled to participate as
officers and shareholders of the Company. The complaint seeks an unspecified
amount of damages, including punitive damages. The Company has filed a demurrer
to this complaint and intends to defend this action vigorously. Although it is
too early to ascertain the possible outcome of this litigation, an unfavorable
outcome could have an adverse effect on the Company's business, results of
operations and financial condition.
The Company is subject to other legal proceedings and claims that arise in
the ordinary course of business. Management currently believes that the ultimate
amount of liability, if any, with respect to any pending actions, either
individually or in the aggregate, will not materially affect the financial
position, results of operations or liquidity of the Company. However, the
ultimate outcome of any litigation is uncertain. If an unfavorable outcome were
to occur, the impact could be material. Furthermore, any litigation, regardless
of the outcome, can have an adverse impact on the Company's results of
operations as a result of defense costs, diversion of management resources, and
other factors.
12. SIGNIFICANT AGREEMENTS
In April 1996, the Company (including McKinley) entered into two agreements
with Netscape Communications Corporation ("Netscape") under which the Company
and McKinley were each designated as one of five "Premier Providers" of search
and navigation services accessible from the "Net Search" button on the Netscape
home page. These agreements provide that the "Premier Provider" status will be
established for one year from April 1, 1996, in exchange for which the Company
will make payments totaling $10.0 million over the course of the year.
Management considered that there was significant uncertainty regarding the
recoverability of the amount from future operations; therefore, the $10.0
million total consideration was expensed as distribution license fee costs
during the quarter ended June 30, 1996.
In May 1996, the Company entered into advertising agreements with Netscape
to deliver a guaranteed number of Netscape advertising impressions through the
Company's services. As consideration for such advertising services, Netscape
agreed to reduce the $10.0 million Premier Provider obligation by $3.0 million,
contingent upon delivery of a specified number of advertising impressions, which
was reclassified to deferred revenue to be recognized over the term of the
agreement (one year) based upon delivery of a specified number
F-20
<PAGE> 85
EXCITE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of advertising impressions. As of December 31, 1996, approximately $1.8 million
in revenue has been recognized as a result of these agreements.
13. EVENT SUBSEQUENT TO DATE OF AUDITOR'S REPORT
On February 25, 1997, the Board of Directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its Common Stock to the
public.
F-21
<PAGE> 86
(PHOTO)
<PAGE> 87
APPENDIX -- DESCRIPTION OF GRAPHICS
COVER: The Front Cover of the Prospectus includes the Excite logo at the
top of the page.
Description of LOGO: The Excite logo consists of the word "excite" in small
letters, with the letter "x" stylized such that it resembles an x-shaped stick
figure.
INSIDE FRONT COVER: The inside front cover of the Prospectus contains three
separate sections, labeled vertically along the left edge of the page as "Access
Points," "Gateway," and "Products," with downward arrows leading from the words
"Access Points" to the word "Gateway" and from the word "Gateway" to the word
"Products." The stylized "x" from the Excite logo appears in the background.
Description #1: Description of the top third of the page: The logos of four
companies, America Online Incorporated, Netscape, Microsoft and WebTV appear in
four equal-sized boxes, each with a downward arrow leading from it. The bracket
along the left edge of the page labels the boxes as "Access Points."
Description #2: Description of the middle third of the page: The Excite
logo (as described above) appears in one box, and the WebCrawler logo
(consisting of a cartoon-depiction of a spider holding a magnifying glass and
the word "WebCrawler") in an equal-sized box adjacent to the box containing the
Excite logo. A bracket along the left edge of the page labels the boxes as
"Gateway," and the words "The Excite Network" appear centered above the two
boxes. A downward arrow leads from each box.
Caption: "WebCrawler -- Just What You're Looking For!" (contained inside
the box with the WebClawer logo) "www.excite.com" and "www.webcrawler.com"
appear below each of the corresponding boxes.
Description #3: Description of bottom third of page: Two equal-sized boxes
appear, one containing a list of Excite serves and the other containing a list
of WebCrawler services. A bracket along the left edge of the page labels the
boxes as "Products."
Caption:
Box #1: "Excite Search," "Excite Reviews," "Excite City.Net,"
"Excite Live!," "Excite News-Tracker," "ExciteSeeing Tours,"
"Excite Talk! and Excite Reference."
Box #2: "WebCrawler Search," "WebCrawler Map," "WebCrawler
Select," "Search the Web Backwards" and "WebRoulette."
The bottom of the page contains a statement that information
contained on the Company's Web sites shall not constitute a part
of the Prospectus and also contains stabilizing legend.
<PAGE> 88
INSIDE BACK COVER: The inside back cover of the Prospectus contains the
words "The Excite Network" at the top of the page, and contains four
screenprints from the Company's services: www.excite.com, www.webcrawler.com,
live.excite.com and talk.excite.com.
Description #1 www.excite.com.
This is a screenprint of the main Excite Web page from which the "Search,"
"Reviews," "City.Net," "Live,!" "Talk!" and "NewsTracker" selections can be
accessed. A number of search or subject matter selections appear below the
headings "Excite Search," "Excite Web Reviews" and "Excite NewsTracker," as well
as under "Reference" and "Live!" An advertising banner is included in the top
portion of the screen.
Description #2 www.webcrawler.com.
This is a screenprint of the main WebCrawler Web page, which provides the
options "Search," "Browse," "Special," "Add URL" and "Help." Furthermore, a
number of topic selections appear, as well as selection buttons for several Web
services. Sample advertising banners are included on the right-hand side and
bottom portions of the screen.
Description #3 live.excite.com.
This is a screenprint of the Excite Live! Web page, containing a number of
topic selections under the headings "Personalize," "Help Menu," "NewsTracker"
and "News." There also appear a number of topic selections along the top of the
page, as well as an advertising banner.
Description #4 talk.excite.com.
This is a screenprint of the Excite Talk! Web page, containing selections
for a number of bulletin boards of various topics, and a beta-version live chat
selection. An advertising banner is included on the top portion of the screen.
BACK COVER: The back cover of the Prospectus displays the Excite logo.
Description of LOGO: The Excite logo consists of the word "excite" in
small letters, with the letter "x" stylized such that it resembles an x-shaped
stick figure.
<PAGE> 89
LOGO
<PAGE> 90
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid in
connection with the sale of the shares of Common Stock being registered hereby.
All amounts are estimates except for the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee..................... $ 12,323.30
NASD filing fee......................................................... 4,567.00
Nasdaq National Market filing fee....................................... 17,500.00
Accounting fees and expenses............................................ 75,000.00
Legal fees and expenses................................................. 175,000.00
Printing................................................................ 175,000.00
Road show expenses...................................................... 30,000.00
Blue sky fees and expenses.............................................. 5,000.00
Transfer agent fees and expenses........................................ 5,000.00
Miscellaneous........................................................... 25,609.70
-----------
Total......................................................... $525,000.00
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation include a provision that
eliminates the personal liability of its directors to the Registrant and its
shareholders for monetary damages for breach of the directors' fiduciary duties
to the fullest extent permitted by law. This limitation has no effect on a
director's liability (i) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (ii) for acts or
omissions that a director believes to be contrary to the best interests of the
Registrant or its shareholders or that involve the absence of good faith on the
part of the director, (iii) for any transaction from which a director derived an
improper personal benefit, (iv) for acts or omissions that show a reckless
disregard for the director's duty to the Registrant or its shareholders in
circumstances in which the director was aware, or should have been aware, in the
ordinary course of performing a director's duties, of a risk of a serious injury
to the Registrant or its shareholders, (v) for acts or omissions that constitute
an unexcused pattern of inattention that amounts to an abdication of the
director's duty to the Registrant or its shareholders, (vi) under Section 310 of
the California Corporations Code (the "California Code") (concerning contracts
or transactions between the Registrant and a director) or (vii) under Section
316 of the California Code (concerning directors' liability for improper
dividends, loans and guarantees). The provision does not extend to acts or
omissions of a director in his capacity as an officer. Further, the provision
will not affect the availability of injunctions and other equitable remedies
available to the Registrant's shareholders for any violation of a director's
fiduciary duty to the Registrant or its shareholders.
The Registrant's Articles of Incorporation also include an authorization
for the Registrant to indemnify its agents (as defined in Section 317 of the
California Code), through bylaw provisions, by agreement or otherwise, to the
fullest extent permitted by law. Pursuant to this latter provision, the
Registrant's Bylaws provide for indemnification of the Registrant's directors
and officers. In addition, the Registrant, at its discretion, may provide
indemnification to persons whom the Registrant is not obligated to indemnify.
The Bylaws also allow the Registrant to enter into indemnity agreements with
individual directors, officers, employees and other agents. These indemnity
agreements have been entered into with all directors and provide the maximum
indemnification permitted by law. These agreements, together with the
Registrant's Bylaws and Articles of Incorporation, may require the Registrant,
among other things, to indemnify such directors against certain liabilities that
may arise by reason of their status or service as directors (other than
liabilities resulting from willful misconduct of a culpable nature), to advance
expenses to them as they are incurred, provided that they undertake to repay the
amount advanced if it is ultimately determined by a court that they are not
entitled to indemnification, and to obtain directors' and officers' insurance if
available on reasonable terms.
Section 317 of the California Code and the Registrant's Bylaws make
provision for the indemnification of officers, directors and other corporate
agents in terms sufficiently broad to indemnify such persons, under
II-1
<PAGE> 91
certain circumstances for liabilities (including reimbursement of expenses
incurred) arising under the Securities Act.
Section 8 of the Underwriting Agreement to be filed as Exhibit 1.01 hereto
sets forth certain provisions with respect to the indemnification of certain
controlling persons, directors and officers against certain losses and
liabilities, including certain liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
The Registrant has directors and officers liability insurance with a per
claim and annual aggregate coverage limit of $5,000,000.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT
DOCUMENT NUMBER
-------------------------------------------------------------------------- -------
<S> <C>
Underwriting Agreement.................................................... 1.01
Registrant's Articles of Incorporation.................................... 3.01
Registrant's Bylaws....................................................... 3.02
Form of Indemnity Agreement............................................... 10.05
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities sold by
the Registrant since the Company's inception (June 9, 1994).
<TABLE>
<CAPTION>
AGGREGATE
TITLE OF NUMBER OF PURCHASE FORM OF
PURCHASER DATE OF SALE SECURITIES(1) SHARES PRICE CONSIDERATION
--------------------------------- ------------------ ------------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Ryan A. McIntyre................. September 1, 1994 Common Stock 148,888 $ 67.00 Cash
Benjamin E. Lutch................ September 1, 1994 Common Stock 148,888 67.00 Cash
Martin R. Reinfried.............. September 1, 1994 Common Stock 111,110 50.00 Cash
Graham F. Spencer................ September 1, 1994 Common Stock 172,222 77.50 Cash
Mark A. Van Haren................ September 2, 1994 Common Stock 148,888 67.00 Cash
Joseph R. Kraus, IV.............. September 5, 1994 Common Stock 158,888 71.50 Cash
Ken Keller....................... April 3, 1995 Two Warrants (2) 100.00 Cash and
to Purchase Services
Common Stock
Joseph R. Kraus.................. July 26, 1995 Common Stock 141,112 4,938.92 Cash
Benjamin E. Lutch................ July 26, 1995 Common Stock 1,112 38.92 Cash
Ryan A. McIntyre................. July 26, 1995 Common Stock 1,112 38.92 Cash
Martin R. Reinfried.............. July 26, 1995 Common Stock 38,890 1,361.15 Cash
Graham F. Spencer................ July 26, 1995 Common Stock 277,778 9,722.23 Cash
Mark A. Van Haren................ July 26, 1995 Common Stock 1,112 38.92 Cash
Charles River Partnership VII.... July 28, 1995 Series A 112,500 150,000.00 Cash
Preferred
Stock(3)
IDG Holdings, Inc................ July 28, 1995 Series A 112,500 150,000.00 Cash and
Preferred Cancellation of
Stock(3) Indebtedness
Institutional Venture Management
VI Geoffrey Yang............... July 28, 1995 Series A 9,000 12,000.00 Cash and
Preferred Cancellation of
Stock(3) Indebtedness
Institutional Venture Management
VI Geoffrey Yang............... July 28, 1995 Series A 441,000 588,000.00 Cash and
Preferred Cancellation of
Stock(3) Indebtedness
Kleiner Perkins Caufield & Byers
VII, Vinod Khosla.............. July 28, 1995 Series A 405,000 540,000.00 Cash and
Preferred Cancellation of
Stock(3) Indebtedness
</TABLE>
II-2
<PAGE> 92
<TABLE>
<CAPTION>
AGGREGATE
TITLE OF NUMBER OF PURCHASE FORM OF
PURCHASER DATE OF SALE SECURITIES(1) SHARES PRICE CONSIDERATION
--------------------------------- ------------------ ------------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
KPCB VII Founder's Fund
Vinod Khosla................... July 28, 1995 Series A 45,000 60,000.00 Cash and
Preferred Cancellation of
Stock(3) Indebtedness
Joseph R. Kraus.................. July 31, 1995 Common Stock 95,560 3,344.60 Cash
Benjamin E. Lutch................ July 31, 1995 Common Stock 47,780 1,672.30 Cash
Ryan A. McIntyre................. July 31, 1995 Common Stock 47,780 1,672.30 Cash
Martin R. Reinfried.............. July 31, 1995 Common Stock 47,780 1,672.30 Cash
Graham F. Spencer................ July 31, 1995 Common Stock 143,340 5,016.90 Cash
Mark A. Van Haren................ July 31, 1995 Common Stock 47,780 1,672.30 Cash
Mark A. Vershel.................. August 1, 1995 Common Stock 4,032 141.12 Services
Lighthouse Capital Partners,
L.P............................ August 2, 1995 Warrant to (4) 100.00 Cash
Purchase
Series A
Preferred
Stock
F & W Investments 1994........... November 6, 1995 Series B 10,000 25,000.00 Cash
Preferred
Stock(3)
Institutional Venture Management
VI
Geoffrey Yang.................. November 6, 1995 Series B 6,000 15,000.00 Cash
Preferred
Stock(3)
Institutional Venture Partners VI
Geoffrey Yang.................. November 6, 1995 Series B 282,000 705,000.00 Cash
Preferred
Stock(3)
IVP Founders Fund I, L.L.P.
Geoffrey Yang.................. November 6, 1995 Series B 12,000 30,000.00 Cash
Preferred
Stock(3)
Kleiner Perkins Caufield & Byers
VII
Vinod Khosla..................... November 6, 1995 Series B 263,700 659,250.00 Cash
Preferred
Stock(3)
KPCB Information Sciences
Zaibatsu Fund II
Vinod Khosla................... November 6, 1995 Series B 7,500 18,750.00 Cash
Preferred
Stock(3)
KPCB VII Founders Fund
Vinod Khosla................... November 6, 1995 Series B 28,800 72,000.00 Cash
Preferred
Stock(3)
Institutional Venture Management
VI
Geoffrey Yang.................. November 6, 1995 Warrant to 12,000 (5) (5)
Purchase
Common Stock
Institutional Venture Partners VI
Geoffrey Yang.................. November 6, 1995 Warrant to 564,000 (5) (5)
Purchase
Common Stock
IVP Founders Fund L.L.P.
Geoffrey Yang.................. November 6, 1995 Warrant to 24,000 (5) (5)
Purchase
Common Stock
Kleiner Perkins Caufield & Byers
VII
Vinod Khosla................... November 6, 1995 Warrant to 527,400 (5) (5)
Purchase
Common Stock
KPCB Information Sciences
Zaibatsu
Fund II
Vinod Khosla................... November 6, 1995 Warrant to 15,000 (5) (5)
Purchase
Common Stock
KPCB VII Founders Fund
Vinod Khosla................... November 6, 1995 Warrant to 57,600 (5) (5)
Purchase
Common Stock
Kevin Altis...................... November 9, 1995 Common Stock 70,000 8,750.00 Sale of assets
Kevin Altis...................... November 9, 1995 Warrant to (6) (6) Sale of assets
Purchase
Common Stock
</TABLE>
II-3
<PAGE> 93
<TABLE>
<CAPTION>
AGGREGATE
TITLE OF NUMBER OF PURCHASE FORM OF
PURCHASER DATE OF SALE SECURITIES(1) SHARES PRICE CONSIDERATION
--------------------------------- ------------------ ------------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Lighthouse Capital Partners,
L.P. .......................... November 30, 1995 Warrant to (7) 100.00 Cash
Purchase
Series B
Preferred
Stock
Brett T Bullington............... November 30, 1995 Common Stock 4,000 500.00 Services
Institutional Venture Partners VI
Geoffrey Yang.................. December 8, 1995 Series C 29,052 169,082.64 Cash
Preferred
Stock(3)
Institutional Venture Management
VI
Geoffrey Yang.................. December 8, 1995 Series C 618 3,596.76 Cash
Preferred
Stock(3)
IVP Founders Fund I, L.L.P.
Geoffrey Yang.................. December 8, 1995 Series C 1,236 7,193.52 Cash
Preferred
Stock(3)
Kleiner Perkins Caufield & Byers
VII
Vinod Khosla................... December 8, 1995 Series C 27,166 159,106.12 Cash
Preferred
Stock(3)
KPCB VII Founders Fund
Vinod Khosla................... December 8, 1995 Series C 2,967 17,267.94 Cash
Preferred
Stock(3)
KPCB Information Sciences
Zaibatsu
Fund II
Vinod Khosla................... November 6, 1995 Series C 773 4,498.86 Cash
Preferred
Stock(3)
F & W Investments 1994........... November 6, 1995 Series C 294 1,711.08 Cash
Preferred
Stock(3)
Charles River Partnership VII.... November 6, 1995 Series C 3,311 19,270.02 Cash
Preferred
Stock(3)
IDG Holdings, Inc................ November 6, 1995 Series C 3,311 19,270.02 Cash
Preferred
Stock(3)
Rosewood Stone Group, Inc........ November 6, 1995 Series C 85,911 500,002.02 Cash
Preferred
Stock(3)
Kevin Altis...................... February 28, 1996 Common Stock 45,000 150,000.00 Cancellation of
Indebtedness
Ken Keller....................... March 1, 1996 Common Stock 64,540 59,675.00 Cash
AOL Ventures, Inc................ March 8, 1996 Series D 310,753 5,000,015.77 Cash
Preferred
Stock(3)
Tribune Company.................. March 8, 1996 Series D 372,903 6,000,009.27 Cash
Preferred
Stock(3)
Robert Pittman................... March 8, 1996 Series D 6,215 99,999.35 Cash
Preferred
Stock(3)
CUC International Inc............ March 8, 1996 Series D 62,150 999,993.50 Cash
Preferred
Stock(3)
Itochu Technology................ March 8, 1996 Series D 3,107 49,991.63 Cash
Preferred
Stock(3)
Itochu Technology................ March 8, 1996 Series D 12,430 199,998.70 Cash
Preferred
Stock(3)
</TABLE>
II-4
<PAGE> 94
<TABLE>
<CAPTION>
AGGREGATE
TITLE OF NUMBER OF PURCHASE FORM OF
PURCHASER DATE OF SALE SECURITIES(1) SHARES PRICE CONSIDERATION
--------------------------------- ------------------ ------------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
IDG Holdings, Inc................ March 8, 1996 Series D 5,000 80,450.00 Release of
Preferred Claims
Stock(3)
AOL Ventures, Inc. ("AOL
Ventures")..................... March 8, 1996 Warrant to (8) (8) Cash
Purchase
Common Stock
2 shareholders of GoMedia,
Inc............................ August 1, 1996 Common Stock 15,000 (9) (9)
33 shareholders of The McKinley
Group, Inc..................... August 30, 1996 Common Stock 849,997 (10) (10)
5 optionees...................... February 7,
1996 -- July 1,
1996 Common Stock 132,301 73,262.00 Cash and
Promissory Notes
</TABLE>
- ---------------
(1) All sales, unless otherwise noted, were made in reliance on Section 4(2) of
the Securities Act and/or Regulation D or Rule 701 promulgated under the
Securities Act and were made without general solicitation or advertising.
The purchasers were sophisticated investors with access to all relevant
information necessary to evaluate these investments, and who represented to
the Registrant that the shares were being acquired for investment.
(2) Warrant No. 1 to purchase up to 36,000 shares of Common Stock at an
exercise price of $0.8666 per share and Warrant No. 2 to purchase up to
28,540 shares of Common Stock at an exercise price of $1.25 per share.
(3) Each share of Preferred Stock was converted into two shares of Common
Stock.
(4) Warrant to purchase up to 15,000 shares of Series A Preferred Stock
(convertible into 30,000 shares of Common Stock) at an exercise price of
$1.33 per share of Series A Preferred Stock.
(5) Issued in conjunction with the purchase of Series B Preferred Stock. This
Warrant was exercisable at an exercise price of $0.125 per share.
(6) Issued in conjunction with a sale of assets by Purchaser to the Registrant.
45,000 shares of Common Stock were subject to the Warrant.
(7) Warrant to purchase up to 8,000 shares of Series B Preferred Stock
(convertible into 16,000 shares of Common Stock) at an exercise price of
$2.50 per share of Series B Preferred Stock.
(8) Warrant to purchase up to 650,000 shares of Common Stock at an exercise
price of $8.00 per share. See "Certain Transactions."
(9) On August 1, 1996, the Registrant merged with GoMedia, Inc. ("GoMedia") and
acquired all of the outstanding shares of common stock of GoMedia in
exchange for 15,000 shares of the Registrant's Common Stock.
(10) On August 30, 1996, Excite Acquisition, Inc., a wholly owned subsidiary of
the Registrant, merged with The McKinley Group, Inc. ("McKinley") and
acquired all of the outstanding shares of common stock of McKinley in
exchange for 849,997 shares of the Registrant's Common Stock issued
pursuant to Section 3(a)(10) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ ---------------------------------------------------------------------------------
<C> <C> <S>
1.01 -- Form of Underwriting Agreement.*
2.01 -- Agreement and Plan of Reorganization dated as of August 7, 1996 by and among the
Registrant, Excite Acquisition Corporation, The McKinley Group, Inc., Isabel
Maxwell, Christine Maxwell, David Hayden, Roger Malina and Daniel Lynch.(1)
2.02 -- Agreement of Merger dated as of August 30, 1996 by and between Excite Acquisition
Corporation and the McKinley Group, Inc.(1)
3.01 -- Registrant's Amended and Restated Articles of Incorporation.(2)
3.02 -- Registrant's Bylaws, as amended.(3)
4.01 -- Form of Specimen Certificate for Registrant's Common Stock.(4)
4.02 -- Restated and Amended Investors' Rights Agreement.(4)
4.03 -- Amendment to Restated and Amended Investors' Rights Agreement dated as of August
1, 1996.
</TABLE>
II-5
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ ---------------------------------------------------------------------------------
<C> <C> <S>
4.04 -- Amendment to Restated and Amended Investors' Rights Agreement dated as of
November 25, 1996.*
4.05 -- Registration Rights Agreement dated as of November 25, 1996 by and among the
Registrant, America Online, Inc. and AOL Ventures, Inc.
4.06 -- Voting Agreement dated as of November 25, 1996 by and among the Registrant and
certain shareholders.*
4.07 -- Letter Agreement dated as of November 25, 1996 by and among certain shareholders
of Excite, Inc.*
5.01 -- Opinion of Fenwick & West LLP regarding legality of the securities being issued.*
9.01 -- Voting Trust Agreement dated as of November 25, 1996 by and among the Registrant,
America Online, Inc, AOL Ventures, Inc. and Richard Redding.
10.01 -- Registrant's 1995 Equity Incentive Plan.(3)
10.02 -- Registrant's 1996 Equity Incentive Plan, as amended.
10.03 -- Registrant's 1996 Directors Stock Option Plan.(3)
10.04 -- Registrant's 1996 Employee Stock Purchase Plan.(3)
10.05 -- Registrant's 401(k) Plan.
10.06 -- Form of Indemnity Agreement entered into by Registrant with each of its
directors.(3)
10.07 -- Bridge Line of Credit Agreement, dated as of February 23, 1996, among the
Registrant and Kleiner Perkins Caufield & Byers VII, KPCB VII Founders Fund, KPCB
Information Sciences Zaibatsu Fund II, Institutional Venture Partners VI,
Institutional Venture Management VI and IVP Founders Fund I, L.P., and Form of
Convertible Promissory Note and Form of Promissory Note, as amended.(3)
10.08 -- Promissory Note, dated as of February 27, 1996, issued by Graham F. Spencer to
the Registrant.(3)
10.09 -- Secured Full Recourse Promissory Note, dated as of March 15, 1996, issued by
Brett T Bullington to the Registrant.
10.10 -- Stock Pledge Agreement dated as of March 15, 1996 by and between the Registrant
and Brett T Bullington.
10.11 -- Offer Letter dated January 25, 1996, as amended, to Richard B. Redding.(3)
10.12 -- Offer Letter dated November 30, 1995, as amended, to Brett T Bullington.(3)
10.13 -- Offer Letter dated March 6, 1996, to Cary H. Masatsugu.(3)
10.14 -- Offer Letter dated January 16, 1996, as amended, to George Bell.(3)
10.15 -- Offer Letter dated as of November 15, 1996, to Robert C. Hood.
10.16 -- Offer Letter dated as of September 23, 1996 to William White Jr.
10.17 -- Offer Letter dated as of November 21, 1996, to Jed Simmons.
10.18 -- Consulting Agreement dated as of November 19, 1996 by and between the Registrant
and Robert C. Hood.
10.19 -- Consulting Agreement dated as of November 22, 1996 by and between the Registrant
and Jed Simmons.
10.20 -- Office Lease, dated as of January 22, 1996, by and between the Registrant and
McCandless Land and Cattle Company.(3)
10.21 -- Series D Preferred Stock Purchase Agreement dated as of March 8, 1996 by and
among the Registrant and various investors.(5)
10.22 -- Warrant to purchase 650,000 shares of Common Stock dated March 8, 1996 issued to
AOL Ventures, Inc.(5)
10.23 -- Net Search Program -- Premier Provider Agreement dated as of March 28, 1996
between the Registrant and Netscape Communications Corporation.(6)
10.24 -- Office Lease, dated as of August 9, 1996, by and between the Registrant and
Martin/Campus Associated, L.P.(7)
10.25 -- Acquisition Agreement dated as of November 25, 1996 by and among the Registrant,
America Online, Inc. and Global Network Navigator, Inc.
10.26 -- Net Search Program - Premier Provider Agreement dated as of March 27, 1996, and
as amended March 27, 1996 and January 21, 1997, between The McKinley Group, Inc.
and Netscape Communications Corporation.(8)
</TABLE>
II-6
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ ---------------------------------------------------------------------------------
<C> <C> <S>
11.01 -- Statement of earnings per share.
21.01 -- List of Subsidiaries
23.01 -- Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 -- Consent of Ernst & Young LLP, Independent Auditors.
23.03 -- Consent of Price Waterhouse LLP, Independent Accountants.
24.01 -- Power of Attorney (included in Part II of this Registration Statement).
27.01 -- Financial Data Schedule (EDGAR version only).
</TABLE>
- ---------------
* To be filed by amendment.
(1) Previously filed with the Commission on September 12, 1996, as an exhibit to
the Registrant's Form 8-K (File No. 0-28064) regarding the acquisition of
The McKinley Group, Inc.
(2) Previously filed with the Commission on July 4, 1996, as an exhibit to the
Registrant's Registration Statement on Form S-8 (File No. 333-07625).
(3) Previously filed with the Commission on March 11, 1996, as an exhibit to the
Registrant's Registration Statement on Form SB-2 (File No. 333-2328-LA)
(4) Previously filed with the Commission on March 29, 1996, as an exhibit to
Amendment No. 1 to the Registrant's Registration Statement on Form SB-2
(File No. 333-2328-LA)
(5) Previously filed with the Commission on April 3, 1996, as an exhibit to
Amendment No. 2 to the Registrant's Registration Statement on Form SB-2
(File No. 333-2328-LA)
(6) Previously filed with the Commission on April 3, 1996, as an exhibit to
Amendment No. 3 to the Registrant's Registration Statement on Form SB-2
(File No. 333-2328-LA)
(7) Previously filed with the Commission on November 8, 1996, as an exhibit to
the Registrant's Form 10-Q SB (File No. 0-28064) for the period ended
September 30, 1996.
(8) Previously filed with the Commission on February 28, 1997, as an exhibit to
the Registrant's Form 10-Q SB/A (File No. 0-28064).
(b) Financial Statement Schedules.
All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes the following:
(1) For determining liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-7
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mountain View, State of
California, on March 3, 1997.
EXCITE, INC.
By: /s/ ROBERT C. HOOD
--------------------------------------
Robert C. Hood
Executive Vice President, Chief
Administrative
Officer and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints George Bell and Robert C. Hood, and each of them,
his or her true and lawful attorneys-in-fact, with full power of substitution,
for him and in his name, place and stead in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and sign any registration statement for the same offering covered by
the Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- ---------------------------------- ---------------
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ GEORGE BELL President, Chief Executive Officer March 3, 1997
- --------------------------------------------- and Director
George Bell
PRINCIPAL FINANCIAL AND PRINCIPAL
ACCOUNTING OFFICER:
/s/ ROBERT C. HOOD Executive Vice President, Chief March 3, 1997
- --------------------------------------------- Administrative Officer and Chief
Robert C. Hood Financial Officer
ADDITIONAL DIRECTORS:
/s/ JOSEPH R. KRAUS Acting General Manager and March 3, 1997
- --------------------------------------------- Director
Joseph R. Kraus
/s/ VINOD KHOSLA Director March 3, 1997
- ---------------------------------------------
Vinod Khosla
/s/ DONN DAVIS Director March 3, 1997
- ---------------------------------------------
Donn Davis
/s/ GEOFFREY Y. YANG Director March 3, 1997
- ---------------------------------------------
Geoffrey Y. Yang
/s/ STEPHEN M. CASE Director March 3, 1997
- ---------------------------------------------
Stephen M. Case
</TABLE>
II-8
<PAGE> 98
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT PAGE NUMBER
-------------------------------------------------------------------------
<C> <C> <S> <C>
1.01 -- Form of Underwriting Agreement.*
2.01 -- Agreement and Plan of Reorganization dated as of August 7, 1996 by and
among the Registrant, Excite Acquisition Corporation, The McKinley Group,
Inc., Isabel Maxwell, Christine Maxwell, David Hayden, Roger Malina and
Daniel Lynch.(1)
2.02 -- Agreement of Merger dated as of August 30, 1996 by and between Excite
Acquisition Corporation and the McKinley Group, Inc.(1)
3.01 -- Registrant's Amended and Restated Articles of Incorporation.(2)
3.02 -- Registrant's Bylaws, as amended.(3)
4.01 -- Form of Specimen Certificate for Registrant's Common Stock.(4)
4.02 -- Restated and Amended Investors' Rights Agreement.(4)
4.03 -- Amendment to Restated and Amended Investors' Rights Agreement dated as of
August 1, 1996.
4.04 -- Amendment to Restated and Amended Investors' Rights Agreement dated as of
November 25, 1996.*
4.05 -- Registration Rights Agreement dated as of November 25, 1996 by and among
the Registrant, America Online, Inc. and AOL Ventures, Inc.
4.06 -- Voting Agreement dated as of November 25, 1996 by and among the
Registrant and certain shareholders.*
4.07 -- Letter Agreement dated as of November 25, 1996 by and among certain
shareholders of Excite, Inc.*
5.01 -- Opinion of Fenwick & West LLP regarding legality of the securities being
issued.*
9.01 -- Voting Trust Agreement dated as of November 25, 1996 by and among the
Registrant, America Online, Inc, AOL Ventures, Inc. and Richard Redding.
10.01 -- Registrant's 1995 Equity Incentive Plan.(3)
10.02 -- Registrant's 1996 Equity Incentive Plan, as amended.
10.03 -- Registrant's 1996 Directors Stock Option Plan.(3)
10.04 -- Registrant's 1996 Employee Stock Purchase Plan.(3)
10.05 -- Registrant's 401(k) Plan.
10.06 -- Form of Indemnity Agreement entered into by Registrant with each of its
directors.(3)
10.07 -- Bridge Line of Credit Agreement, dated as of February 23, 1996, among the
Registrant and Kleiner Perkins Caufield & Byers VII, KPCB VII Founders
Fund, KPCB Information Sciences Zaibatsu Fund II, Institutional Venture
Partners VI, Institutional Venture Management VI and IVP Founders Fund I,
L.P., and Form of Convertible Promissory Note and Form of Promissory
Note, as amended.(3)
10.08 -- Promissory Note, dated as of February 27, 1996, issued by Graham F.
Spencer to the Registrant.(3)
10.09 -- Secured Full Recourse Promissory Note, dated as of March 15, 1996, issued
by Brett T Bullington to the Registrant.
10.10 -- Stock Pledge Agreement dated as of March 15, 1996 by and between the
Registrant and Brett T Bullington.
10.11 -- Offer Letter dated January 25, 1996, as amended, to Richard B.
Redding.(3)
10.12 -- Offer Letter dated November 30, 1995, as amended, to Brett T
Bullington.(3)
10.13 -- Offer Letter dated March 6, 1996, to Cary H. Masatsugu.(3)
</TABLE>
<PAGE> 99
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT PAGE NUMBER
<C> <C> <S> <C>
10.14 -- Offer Letter dated January 16, 1996, as amended, to George Bell.(3)
10.15 -- Offer Letter dated as of November 15, 1996, to Robert C. Hood.
10.16 -- Offer Letter dated as of September 23, 1996 to William White Jr.
10.17 -- Offer Letter dated as of November 21, 1996, to Jed Simmons.
10.18 -- Consulting Agreement dated as of November 19, 1996 by and between the
Registrant and Robert C. Hood.
10.19 -- Consulting Agreement dated as of November 22, 1996 by and between the
Registrant and Jed Simmons.
10.20 -- Office Lease, dated as of January 22, 1996, by and between the Registrant
and McCandless Land and Cattle Company.(3)
10.21 -- Series D Preferred Stock Purchase Agreement dated as of March 8, 1996 by
and among the Registrant and various investors.(5)
10.22 -- Warrant to purchase 650,000 shares of Common Stock dated March 8, 1996
issued to AOL Ventures, Inc.(5)
10.23 -- Net Search Program -- Premier Provider Agreement dated as of March 28,
1996 between the Registrant and Netscape Communications Corporation.(6)
10.24 -- Office Lease, dated as of August 9, 1996, by and between the Registrant
and Martin/Campus Associated, L.P.(7)
10.25 -- Acquisition Agreement dated as of November 25, 1996 by and among the
Registrant, America Online, Inc. and Global Network Navigator, Inc.
10.26 -- Net Search Program - Premier Provider Agreement dated as of March 27,
1996, and as amended March 27, 1996 and January 21, 1997, between The
McKinley Group, Inc. and Netscape Communications Corporation.(8)
11.01 -- Statement of earnings per share.
21.01 -- List of Subsidiaries.
23.01 -- Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 -- Consent of Ernst & Young LLP, Independent Auditors.
23.03 -- Consent of Price Waterhouse LLP, Independent Accountants.
24.01 -- Power of Attorney (included in Part II of this Registration Statement).
27.01 -- Financial Data Schedule (EDGAR version only).
</TABLE>
- ---------------
* To be filed by amendment.
(1) Previously filed with the Commission on September 12, 1996, as an exhibit to
the Registrant's Form 8-K (File No. 0-28064) regarding the acquisition of
The McKinley Group, Inc.
(2) Previously filed with the Commission on July 4, 1996, as an exhibit to the
Registrant's Registration Statement on Form S-8 (File No. 333-07625).
(3) Previously filed with the Commission on March 11, 1996, as an exhibit to the
Registrant's Registration Statement on Form SB-2 (File No. 333-2328-LA)
(4) Previously filed with the Commission on March 29, 1996, as an exhibit to
Amendment No. 1 to the Registrant's Registration Statement on Form SB-2
(File No. 333-2328-LA)
(5) Previously filed with the Commission on April 3, 1996, as an exhibit to
Amendment No. 2 to the Registrant's Registration Statement on Form SB-2
(File No. 333-2328-LA)
(6) Previously filed with the Commission on April 3, 1996, as an exhibit to
Amendment No. 3 to the Registrant's Registration Statement on Form SB-2
(File No. 333-2328-LA)
(7) Previously filed with the Commission on November 8, 1996, as an exhibit to
the Registrant's Form 10-Q SB (File No. 0-28064) for the period ended
September 30, 1996.
(8) Previously filed with the Commission on February 28, 1997, as an exhibit to
the Registrant's Form 10-Q SB/A (File No. 0-28064).
<PAGE> 1
EXHIBIT 4.03
AMENDMENT TO RESTATED AND AMENDED
INVESTORS' RIGHTS AGREEMENT
This Amendment is entered into as of August 1, 1996, by and among Excite, Inc.,
a California corporation (the "Company") and the other persons and entities
whose names are set forth on the signature pages hereto. This Amendment is
intended to amend that certain Restated and Amended Investors' Rights Agreement
dated as of March 8, 1996 by and among the Company and the investors listed on
the signature pages thereto (the "Rights Agreement").
RECITALS
A. On March 8, 1996, the Company entered into the Rights Agreement with
certain of its securities holders.
B. On August 1, 1996, Go Media, Inc., a Texas corporation ("Go Media"),
merged with and into the Company (the "Merger") and pursuant to such Merger, the
Company issued 15,000 shares of the Company's Common Stock to Julie Gomoll and
Rachel Matthews in exchange for all of Go Media's outstanding stock.
C. In order to comply with the Merger Agreement, the Company and certain
Investors (as defined in the Rights Agreement) desire to amend the Rights
Agreement to provide for the inclusion of the Merger Shares as Registrable
Securities (as defined in the Rights Agreement) thereunder for the purposes of
piggyback registration rights.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the Company and the Investors hereby agree that the Rights Agreement
shall be amended as follows:
1. Section 2.1(b) and 2.1(d) of the Investors' Agreement shall be
amended in their entirety as set forth below:
"(b) Registrable Securities. The term "Registrable Securities" means: all
the shares of Common Stock of the Company issued or issuable (i) upon conversion
of any shares of Series A Stock issued under the Series A Agreement or under the
Preferred Stock Purchase Warrant dated August 2, 1995 issued by the Company to
Lighthouse Capital Partners, L.P., or (ii) upon conversion of any shares of
Series B Stock issued under the Series B Agreement or under the Preferred Stock
Purchase Warrant dated November 17, 1995 issued by the Company to Lighthouse
Capital Partners, L.P., or (iii) upon conversion of any shares of Series C Stock
issued under the Series C Agreement or (iv) upon exercise of those Common Stock
Purchase Warrants dated November 6, 1995 issued by the Company under the Series
B Agreement to those Investors indicated on Exhibit A (the "Common Stock
Purchase Warrants") or (v) upon conversion of any shares of Series D Stock
issued under the Series D Agreement or (vi) to Kevin Altis pursuant to the Asset
Acquisition Agreement or upon exercise of that certain Stock Purchase Warrant
issued to Kevin Altis pursuant to the Asset Acquisition Agreement or (vii) to
Julie Gomoll or Rachel Matthews, as shareholders of Go Media, Inc., pursuant to
that certain Agreement and Plan of Reorganization dated July 31, 1996, by and
between the Company, Go Media, Inc. and Julie Gomoll (the "Merger Shares") or
(viii) to AOL Ventures, Inc. or Tribune Company or any other party pursuant to
Section 8 of the Series D Agreement (the "IPO Shares") or upon exercise of the
<PAGE> 2
Warrant issued by the Company to AOL Ventures, Inc. pursuant to the Series D
Agreement (the "AOL Warrant") in accordance with its terms (provided, however,
that the shares of Common Stock issued or issuable upon exercise of the AOL
Warrant shall not be considered "Registrable Securities" until the Exercise
Commencement Date (as defined in the AOL Warrant)), that are now owned or may
hereafter be acquired by any Investor or any Investor's permitted successors and
assigns, excluding any securities previously sold to the public or held by a
Holder (as defined below) whose securities set forth in subsections (i) through
(viii) herein may be sold in any three month period without registration under
the Securities Act pursuant to Rule 144 of the Securities Act; provided,
however, that notwithstanding anything to herein to the contrary, the Merger
Shares shall not be Registrable Shares for purposes of Sections 2.2, 2.4 or 3."
"(d) Holder. For purposes of this Section 2 and Sections 3 and 4 hereof,
the term "Holder" means any person owning of record Registrable Securities that
have not been sold to the public or pursuant to Rule 144 promulgated under the
Securities Act or any assignee of record of such Registrable Securities to whom
rights under this Section 2 have been duly assigned in accordance with this
Agreement; provided, however, that for purposes of this Agreement, a record
holder of shares of Series A Stock or Series B Stock or Series C Stock or Series
D Stock convertible into such Registrable Securities shall be deemed to be the
Holder of such Registrable Securities; provided, further, that a holder of
Merger Shares (as defined in Section 2.1(b)) shall not be a Holder with respect
to such Merger Shares for purposes of Sections 2.2, 2.4 or 3; and provided,
further, that the Company shall in no event be obligated to register shares of
Series A Stock or Series B Stock or Series C Stock or Series D Stock or warrants
therefor or for Common Stock, and that Holders of Registrable Securities will
not be required to convert their shares of Series A Stock or Series B Stock or
Series C Stock or Series D Stock into Common Stock in order to exercise the
registration rights granted hereunder, until immediately before the closing of
the offering to which the registration relates."
2. All notices and other communications under the Rights Agreement
shall be made to Julie Gomoll and Rachel Matthews at the addresses specified
below and thereafter at such other address, notice of which is given in
accordance with Section 6.1 of the Rights Agreement:
Julie Gomoll
1711 South Congress Avenue, Third Floor
Austin, Texas 78704
Rachel Matthews
1711 South Congress Avenue, Third Floor
Austin, Texas 78704
3. The Rights Agreement as modified herein shall remain in full force
and effect as so modified.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
EXCITE, INC.
By: /s/ George Bell
----------------------
George Bell, President
INVESTORS:
INSTITUTIONAL VENTURE PARTNERS VI
By: Its Managing General Partner
Institutional Venture Management VI
By: /s/ Geoffrey Y. Yang
-----------------------------------------
Geoffrey Y. Yang, General Partner
INSTITUTIONAL VENTURE MANAGEMENT VI
By: /s/ Geoffrey Y. Yang
-----------------------------------------
Geoffrey Y. Yang, General Partner
IVP FOUNDERS FUND I, L.P.
By: Its General Partner
Institutional Venture Management VI
By: /s/ Geoffrey Y. Yang
-----------------------------------------
Geoffrey Y. Yang, General Partner
KLEINER PERKINS CAUFIELD & BYERS VII
By: /s/ Vinod Khosla
-----------------------------------------
Vinod Khosla, General Partner
3
<PAGE> 4
KPCB VII FOUNDERS FUND
By: /s/ Vinod Khosla
-----------------------------------------
Vinod Khosla, General Partner
KPCB INFORMATION SCIENCES ZAIBATSU
FUND II
By: Its General Partner
KPCB VII Associates
By: /s/ Vinod Khosla
-----------------------------------------
Vinod Khosla, General Partner
Agreed and Accepted:
JULIE GOMOLL
/s/ Julie Gomoll
- --------------------------------------------
RACHEL MATTHEWS
/s/ Rachel Matthews
- --------------------------------------------
4
<PAGE> 1
EXHIBIT 4.05
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of November 25, 1996 (the "EFFECTIVE DATE") by and between
EXCITE, INC., a California corporation ("EXCITE"), AMERICA ONLINE, INC., a
Delaware corporation ("AOL"), and AOL VENTURES, INC., a Delaware corporation and
wholly owned subsidiary of AOL ("AOL VENTURES"). References herein to AOL shall
be deemed to include AOL Ventures.
RECITALS
A. AOL and Excite have entered into a certain Acquisition Agreement
dated as of November 25, 1996 (the "ACQUISITION AGREEMENT") and a certain
Operating Agreement dated as of November 25, 1996 (the "OPERATING AGREEMENT"),
pursuant to which AOL will sell certain assets to Excite and perform certain
services for Excite and in partial consideration therefor will receive shares of
Excite Series E-1 and E-2 Preferred Stock. The Acquisition Agreement also
provides that AOL will have the right to exchange shares of Common Stock
currently held by it for shares of Excite Series E-4 Preferred Stock.
B. AOL and Excite have also entered into a certain Technology
License, Distribution, Services and Co-Marketing Agreement dated as of November
25, 1996 (the "COMMERCIAL AGREEMENT") which provides that the warrant currently
held by AOL Ventures to purchase shares of Excite Common Stock (the "WARRANT")
will be amended to make the Warrant exercisable for shares of Excite Series E-3
Preferred Stock. The shares of Excite Series E-1, E-2, E-3 and E-4 Preferred
Stock (the "SERIES E STOCK") will be convertible, pursuant to Excite's Articles
of Incorporation, into shares of Excite Common Stock (the "CONVERSION SHARES").
C. Excite and AOL, along with certain other investors in Excite, are
parties to a certain Restated and Amended Investors' Rights Agreement dated as
of March 8, 1996 (the "INVESTORS' RIGHTS AGREEMENT"), which provides AOL with
certain registration rights for the shares of Excite Common Stock beneficially
owned by it. It is intended that this Agreement supersede the Investors' Rights
Agreement with respect to all registration rights to be held by AOL, but not
otherwise negatively affect the rights of the other parties to the Investors'
Rights Agreement.
D. It is the intention of the parties that the issuance by Excite of
the Series E Stock and the related Conversion Shares (collectively, the "EXCITE
SECURITIES") be qualified by a permit issued by the Department of Corporations
of the State of California (the "DEPARTMENT OF CORPORATIONS") pursuant to the
exemption from registration provided by Section 3(a)(10) of the Securities Act
of 1933 (the "1933 ACT"), under which the parties will request the Department of
Corporations to conduct a hearing for the purpose of determining whether the
proposed issuance of the Excite Securities in connection with the transactions
contemplated by the Acquisition Agreement is fair, just and equitable (the
"FAIRNESS HEARING") and upon such a finding, to grant a permit qualifying such
issuance (the "CALIFORNIA PERMIT"). Excite has agreed to grant to AOL certain
registration rights with respect to that portion, if any, of the Conversion
Shares for which a California Permit is not obtained, and certain other
registration rights with respect to all of the
<PAGE> 2
Conversion Shares, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter set forth, Excite and AOL hereby agree as follows:
1. REGISTRATION RIGHTS.
1.1 Definitions. For purposes of this Section 1:
(a) Form S-3. The term "FORM S-3" means such form under the
1933 Act as is in effect on the date hereof or any successor registration form
under the 1933 Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by Excite with the SEC.
(b) Holder. The term "HOLDERS" shall mean holders of
Registrable Securities of Excite that have registration rights pursuant to the
Investors' Rights Agreement, provided that Holders shall not be deemed to
include AOL.
(c) Registration. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement in compliance with the 1933 Act, and the declaration or
ordering of effectiveness of such registration statement.
(d) AOL Registrable Securities. The term "AOL REGISTRABLE
SECURITIES" means: (1) all of the Conversion Shares, and (2) any shares of
Common Stock of Excite issued as a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Conversion Shares; excluding in
all cases, however, (i) any AOL Registrable Securities sold by a person in a
transaction in which rights under this Section 1 are not assigned in accordance
with this Agreement, or (ii) any AOL Registrable Securities sold in a public
offering pursuant to a registration statement filed with the SEC or sold
pursuant to Rule 144 promulgated under the 1933 Act ("RULE 144").
(e) Prospectus: The term "PROSPECTUS" shall mean the
prospectus included in any Shelf Registration Statement or other registration on
Form S-3 (including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the 1933 Act), as amended
or supplemented by any prospectus supplement (including, without limitation, any
prospectus supplement with respect to the terms of the offering of any portion
of the AOL Registrable Securities covered by such Shelf Registration Statement),
and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
(f) Registrable Securities. The term "REGISTRABLE
SECURITIES" shall have the meaning ascribed to such term in the Investor's
Rights Agreement, except that for purposes of this Agreement only, Registrable
Securities shall not be deemed to include any securities of Excite held by AOL.
(g) Excite Registrable Securities. The term "EXCITE
REGISTRABLE
-2-
<PAGE> 3
SECURITIES" collectively means the AOL Registrable Securities and the
Registrable Securities.
(h) SEC. The term "SEC" or "COMMISSION" means the U.S.
Securities and Exchange Commission.
(i) Shelf Registration Statement. See Section 1.2(a).
1.2 Form S-3 Shelf Registration.
(a) Registration. Excite shall prepare and file with the SEC
within 30 days following the Closing Date (as defined in Section 1.4 of the
Acquisition Agreement), and use its best efforts to have declared effective as
soon as practicable thereafter, a registration statement on Form S-3 (provided
that at such time Excite is eligible to file a registration statement on Form
S-3) providing for the resale by AOL of all of the AOL Registrable Securities in
accordance with the manner of sale provisions set forth in Rule 144(f) under the
1933 Act or otherwise in customary brokerage transactions on the Nasdaq National
Market or other public market on which Excite's shares of Common Stock are
traded (the "SHELF REGISTRATION STATEMENT"). Excite shall use its best efforts
to keep the Shelf Registration Statement continuously effective, pursuant to the
rules, regulations or instructions applicable to the Form S-3 used by Excite for
such Shelf Registration Statement or the 1933 Act, until the date that is two
years after the Closing Date or such shorter period ending (A) when the AOL
Registrable Securities cease to meet the definition of AOL Registrable
Securities pursuant to Section 1.1(d) or (B) Excite's obligations hereunder
terminate pursuant to Section 1.9; provided, however:
(i) that AOL will sell the AOL Registrable Securities
pursuant to such registration only during a "PERMITTED WINDOW" (as defined
below), provided that there will be no more than four Permitted Windows during
the effectiveness of the Shelf Registration Statement; and that there will be at
least a 90-day interval between any two Permitted Windows.
(ii) if Excite furnishes to AOL a certificate signed by
the President or Chief Executive Officer of Excite stating that, in the good
faith judgment of the Board of Directors of Excite, it would be seriously
detrimental to Excite and its shareholders for such Form S-3 registration to be
effected at such time (or, in the case a "NOTICE OF RESALE" (as defined below)
has been given, that would be seriously detrimental to Excite and its
shareholders for the Permitted Window to commence at such time) due to (A) the
existence of a material development or potential material development involving
Excite which Excite would be obligated to disclose in the Prospectus contained
in the Shelf Registration Statement, which disclosure would in the good faith
judgment of the Board of Directors of Excite be premature or otherwise
inadvisable at such time and would have a material adverse affect upon Excite
and its shareholders or (B) concurrent public filings with the SEC of other
registration statements; in which event(s) Excite will have the right to defer
the filing (the "DEFERRAL RIGHT") of the Form S-3 registration statement (or the
commencement of the Permitted Window, as the case may be) for a period of not
more than 60 days after the date it would otherwise be required to file the
Shelf Registration Statement pursuant to this Section 1.2(a) (or after receipt
of the Notice of Resale, as the case may be); provided, however, that Excite
will not utilize the Deferral Right more than once in any twelve month period;
and provided further, however, that Excite may defer the filing
-3-
<PAGE> 4
of the Shelf Registration Statement (or the commencement of the Permitted Window
as the case may be) for up to 90 days if the material development or potential
material development or SEC filing that is the reason for the deferral directly
relates to AOL and for up to 180 days if so requested by an underwriter in
connection with an underwritten offering of Excite securities so long as the
selling shareholders in such underwritten offering are subject to a lock-up
agreement of the same duration (other than with respect to Excite securities to
be sold by such selling shareholders in such underwritten offering);
(iii) that Excite will not be required to effect any
such registration, qualification or compliance in any particular jurisdiction in
which Excite would thereby be required to qualify to do business or to execute a
general consent to service of process.
(iv) that Excite will not be required to effect any
such registration, qualification or compliance of any AOL Registrable Securities
with respect to which a California Permit is granted which provides an exemption
from the registration requirements of the 1933 Act.
(b) Permitted Window.For the purposes of this Section 1.2, a
"PERMITTED WINDOW" is a period of 30 consecutive calendar days commencing upon
receipt by AOL of Excite's written notification to AOL in response to a Notice
of Resale that the Prospectus contained in the Shelf Registration Statement is
available for resale. In order to cause a Permitted Window to commence, AOL must
first give written notice to Excite of its present intention to sell part or all
of the AOL Registrable Securities pursuant to such registration (a "NOTICE OF
RESALE"). Upon receipt of such Notice of Resale, Excite will give written notice
to AOL as soon as practicable, but in no event not more than five business days
after such receipt, that (A) the Prospectus contained in the Shelf Registration
Statement is current and that the Permitted Window will commence on the date
such notice is received by AOL, (B) it is necessary for Excite to supplement the
Prospectus or make an appropriate filing under the Securities Exchange Act of
1934, as amended, (the "1934 ACT") so as to cause the Prospectus to become
current (unless a certificate of the President is delivered as provided in
1.2(a)(ii) above), or (C) Excite is required under the 1933 Act and the
regulations thereunder to amend the Shelf Registration Statement in order to
cause the Prospectus to be current (unless a certificate of the President is
delivered as provided in 1.2(a)(ii) above). In the event that Excite determines
that a supplement to the Prospectus, the filing of a report pursuant to the 1934
Act or an amendment to the Shelf Registration Statement required under the 1933
Act, as provided above, is necessary, it will take such actions as soon as
practicable; whereupon it will notify AOL of the filing of such supplement,
report or amendment, and, in the case of an amendment, the effectiveness
thereof, and the Permitted Window will then commence.
(c) Closing of Permitted Window. During a Permitted Window
and in the event (i) of the happening of any event of the kind described in
Section 1.5(f) hereof or (ii) that, in the judgment of Excite's Board of
Directors, it is advisable to suspend use of the Prospectus for a discrete
period of time due to pending corporate developments or public filings with the
SEC, Excite shall deliver a certificate in writing to AOL to the effect of the
foregoing and, upon receipt of such certificate, the Permitted Window shall
terminate. The Permitted Window shall resume upon AOL's receipt of copies of the
supplemented or amended Prospectus,
-4-
<PAGE> 5
or at such time as AOL is advised in writing by Excite that the Prospectus may
be used, and at such time as AOL has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus and which are required to be delivered as part of the
Prospectus. Excite will use its best efforts to ensure that the use of the
Prospectus may be resumed, and the Permitted Window will commence, as soon as
practicable and, in the case of a pending corporate development or SEC filing,
as soon, in the judgment of Excite's chief executive officer, as disclosure of
the material information relating to such pending corporate development or SEC
filing would not have a materially adverse effect on Excite's ability to
consummate the transaction, if any, to which such corporate development or SEC
filing relates, but in any event the Permitted Window shall resume no later than
the later of (x) 60 days after it has been terminated pursuant to this Section
1.2(c) or (y) the beginning of the calendar quarter subsequent to the calendar
quarter in which the Permitted Window was terminated.
(d) Expenses. The first fifty thousand dollars ($50,000) of
fees and expenses incurred by Excite in connection with the Fairness Hearing,
the Shelf Registration Statement and actions taken by Excite in connection with
each Permitted Window (taken in the aggregate) shall be borne by Excite, and AOL
shall pay all fees and expenses thereafter. Notwithstanding the foregoing,
Excite shall not be required to pay for any fees and expenses in connection with
the commencement of a Permitted Window begun pursuant to this Section 1.2 if the
request to commence the Permitted Window is subsequently withdrawn at the
request of AOL, unless such withdrawal is the result of a material adverse
change in the business of Excite that was unknown to AOL at the time the request
to commence the Permitted Window was made and the withdrawal of such request is
made with reasonable promptness upon learning of such material adverse change. A
withdrawal of a request to commence a Permitted Window will not be applied
against the maximum of four Permitted Windows provided to AOL under this
Agreement if such withdrawal was made pursuant to the immediately preceding
sentence or if the withdrawal is at the request of Excite.
1.3 Form S-3 Registration.
(a) Request by Holders. If Excite shall receive at any time
during which it is eligible to file a registration statement on Form S-3, a
written request from AOL that Excite effect a registration statement under the
1933 Act on Form S-3 and any related qualification or compliance with respect to
all or a part of the AOL Registrable Securities, then Excite shall, as soon as
practicable, effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of AOL's Registrable Securities which
AOL requests to be registered.
(b) Underwriting. If AOL intends to distribute the AOL
Registrable Securities covered by its request by means of an underwriting, then
it shall so advise Excite as a part of its request made pursuant to this Section
1.3. AOL shall enter into an underwriting agreement in customary form with the
managing underwriter or underwriters selected for such underwriting by Excite.
Notwithstanding any other provision of this Section 1.3, if the underwriter(s)
advise(s) Excite in writing that marketing factors require a limitation of the
number of securities to be underwritten then Excite shall so advise AOL, and the
number of AOL Registrable Securities that may be included in the underwriting
shall be reduced as required by
-5-
<PAGE> 6
the underwriter(s), provided that any securities included in the underwriting by
holders of Excite securities other than AOL shall be withdrawn completely from
the underwriting before the number of AOL Registrable Securities that may be
included in the underwriting shall be reduced. Any AOL Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn from the
registration.
(c) Maximum Number of Demand Registrations. Excite is
obligated to effect only two (2) such registrations pursuant to this Section
1.3.
(d) Deferral; Jurisdictional Requirements. Notwithstanding
the foregoing, if Excite shall furnish to AOL, a certificate signed by the
President or Chief Executive Officer of Excite stating that in the good faith
judgment of the Board of Directors of Excite, it would be seriously detrimental
to Excite and its shareholders for such registration statement to be filed and
it is therefore essential to defer the filing of such registration statement,
then Excite shall have the right to defer such filing for a period of not more
than 60 days after receipt of the request of AOL; provided, however, that Excite
may not utilize this right more than once in any twelve (12) month period.
Excite will not be required to effect any registration, qualification or
compliance pursuant to this Section 1.3 in any particular jurisdiction in which
Excite would thereby be required to qualify to do business or to execute a
general consent to service of process.
(e) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 1.3, including without limitation all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for Excite, fees and disbursements of counsel for AOL,
and underwriters' discounts and commissions, shall be borne by AOL.
(f) Withdrawn Request. AOL may withdraw a request for
registration under this Section 1.3 at any time, provided that AOL will remain
liable for all expenses incurred in conjunction therewith. A request for
registration that is so withdrawn shall not count toward the maximum number of
registrations provided for in Section 1.3(c).
1.4 Piggyback Registrations. Excite shall notify AOL in
writing at least thirty (30) days prior to filing any registration statement
under the 1933 Act for purposes of effecting a public offering of securities of
Excite (including, but not limited to, registration statements relating to
secondary offerings of securities of Excite, but excluding registration
statements on Form S-8 or S-4 or relating solely to any employee benefit plan or
an acquisition of any entity or business) and will afford AOL, subject to the
terms and conditions set forth herein, an opportunity to include in such
registration statement all or any part of the AOL Registrable Securities then
held by AOL. AOL shall, within twenty (20) days after receipt of the
above-described notice from Excite, so notify Excite in writing, and in such
notice shall inform Excite of the number of AOL Registrable Securities AOL
wishes to include in such registration statement. If AOL decides not to include
all of the AOL Registrable Securities in any registration statement thereafter
filed by Excite, AOL shall nevertheless continue to have the right to include
any AOL Registrable Securities not included in such registration statement in
any subsequent registration statement or registration statements as may be filed
by Excite with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
-6-
<PAGE> 7
(a) Underwriting. If a registration statement with respect to
which Excite gives notice under this Section 1.4 pertains to an underwritten
offering, then Excite shall so advise AOL. In such event, the right of AOL to
have the AOL Registrable Securities included in a registration pursuant to this
Section 1.4 shall be conditioned upon AOL's participation in such underwriting
and the inclusion of the AOL Registrable Securities in the underwriting to the
extent provided herein. AOL shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriter(s) selected for such
underwriting. Notwithstanding any other provision of this Agreement, if the
managing underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including AOL Registrable Securities) from
the registration and the underwriting, and the number of shares that may be
included in the registration and the underwriting shall be allocated, first, to
Excite, and second, to AOL and the participating Holders on a pro-rata basis
based on the total number of Excite Registrable Securities held by each such
holder; provided however, that the right of the underwriters to exclude shares
(including AOL Registrable Securities) from the registration and underwriting as
described above shall be restricted so that: (i) the number of Excite
Registrable Securities included in any such registration is not reduced below
twenty percent (20%) of the shares included in the registration; and (ii) all
shares that are not Excite Registrable Securities and are held by other
shareholders of Excite shall first be excluded from such registration and
underwriting before any Excite Registrable Securities are so excluded. If AOL
disapproves of the terms of any such underwriting, AOL may elect to withdraw
therefrom by written notice to Excite and the managing underwriter, delivered at
least ten (10) business days prior to the effective date of the registration
statement. Any AOL Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration.
(b) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 1.4 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for Excite and reasonable fees and disbursements of
counsel for AOL, shall be borne by Excite.
1.5 Obligations of Excite. Whenever required to effect the
registration of any AOL Registrable Securities under this Agreement, Excite
shall, as expeditiously as reasonably possible:
(a) Prepare promptly and file with the SEC a registration
statement with respect to such AOL Registrable Securities, which registration
statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, cause such registration statement to become effective as
soon as practicable and with respect to registrations effected pursuant to
Section 1.3 keep such registrations effective for up to ninety (90) days or such
shorter period of time as is agreed to in writing by AOL.
-7-
<PAGE> 8
(b) Prepare promptly and file with the SEC such amendments
and supplements to such registration statement and the Prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to AOL such number of copies of a Prospectus,
including a preliminary Prospectus, in conformity with the requirements of the
1933 Act, and such other documents as it may reasonably request in order to
facilitate the disposition of the AOL Registrable Securities owned by it that
are included in such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by AOL,
provided that Excite shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering.
(f) Notify AOL promptly (i) of any request by the SEC or any
other federal or state governmental authority during the period of effectiveness
of a registration statement for amendments or supplements to such registration
statement or related prospectus or for additional information, (ii) of the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of a registration statement or the
initiation of any proceedings for that purpose, (iii) of the receipt by Excite
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the AOL Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (iv) of the happening of any event which makes any statement made in a
registration statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
which requires the making of any changes in the registration statement or
prospectus so that, in the case of a registration statement, it will not contain
any untrue statement of a material fact required to be stated therein or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and (v) of Excite's reasonable determination that a post-effective
amendment to a registration statement would be appropriate; except that notice
of an event or determination referred to in (iv) or (v) above (x) need be made
only if AOL has delivered the Notice of Resale referred to in Section 2(b) and
Excite is required to cause a Permitted Window to go into effect pursuant to
such Notice of Resale as provided therein or if a Permitted Window is then in
effect and (y) need not describe the nature or details of such event or
determination.
(g) Furnish, at the request of AOL, but only with respect to
an underwritten offering, on the date that such AOL Registrable Securities are
delivered to the
-8-
<PAGE> 9
underwriters for sale, (i) an opinion, dated as of such date, of the counsel
representing Excite for the purposes of such registration, in form and substance
as is customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to AOL, addressed to the underwriters, and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of Excite, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a AOL, addressed to the
underwriters.
1.6 Furnish Information. It shall be a condition precedent to the
obligations of Excite to take any action pursuant to Sections 1.2, 1.3 or 1.4
that AOL shall furnish to Excite such information regarding it, the AOL
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to timely effect the registration of its
AOL Registrable Securities.
1.7 Indemnification. In the event any AOL Registrable Securities
are included in a registration statement under Sections 1.2, 1.3 or 1.4:
(a) By Excite. To the extent permitted by law, Excite will
indemnify and hold harmless AOL, officers and directors of AOL, any underwriter
(as defined in the 1933 Act) for AOL and each person, if any, who controls AOL
or such underwriter within the meaning of the 1933 Act or the 1934 Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the 1933 Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in a registration statement filed pursuant
to this Section 1 (including a registration statement with respect
to which AOL exercises it rights under Section 1.4), including any
preliminary prospectus or final prospectus contained therein or in
any amendments or supplements thereto;
(ii) the omission or alleged omission to state in a
registration statement filed pursuant to this Section 1 (including
a registration statement with respect to which AOL exercises it
rights under Section 1.4), including any preliminary prospectus or
final prospectus contained therein or in any amendments or
supplements thereto, a material fact required to be stated
therein, or necessary to make the statements therein not
misleading; or
(iii) any violation or alleged violation by Excite of the
1933 Act, the 1934 Act, any federal or state securities law or any
rule or regulation promulgated under the 1933 Act, the 1934 Act or
any federal or state securities law in connection with the
offering covered by such registration statement;
-9-
<PAGE> 10
and Excite will reimburse each of AOL, such officer or director, underwriter or
controlling person for any legal or other expenses reasonably incurred by them,
as incurred, in connection with investigating or defending any such loss, claim,
damage, liability or action; provided however, that the indemnity agreement
contained in this subsection 1.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of Excite (which consent shall not be
unreasonably withheld), nor shall Excite be liable in any such case for any such
loss, claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by AOL, or by such, officer, director, underwriter or controlling
person of AOL.
(b) By AOL. To the extent permitted by law, AOL will
indemnify and hold harmless Excite, each of its directors, each of its officers
who have signed the registration statement, each person, if any, who controls
Excite within the meaning of the 1933 Act, and any underwriter, against any
losses, claims, damages or liabilities (joint or several) to which Excite or any
such director, officer, controlling person or underwriter may become subject
under the 1933 Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by AOL expressly for use in connection with such
registration; and AOL will reimburse any legal or other expenses reasonably
incurred by Excite or any such director, officer, controlling person,
underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection 1.7(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of AOL, which consent shall not be
unreasonably withheld; and provided further, that the total amounts payable in
indemnity by AOL under this Section 1.7(b) in respect of any Violation shall not
exceed the net proceeds received by AOL in the registered offering out of which
such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party
under this Section 1.7 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim for
indemnification in respect thereof is to be made against any indemnifying party
under this Section 1.7, deliver to the indemnifying party a written notice of
the commencement of such an action and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflict of
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have
-10-
<PAGE> 11
to any indemnified party otherwise than under this Section 1.7.
(d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of Excite and AOL are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or in the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL
PROSPECTUS"), such indemnity agreements shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the 1933 Act.
(e) Contribution. In order to provide for just and equitable
contribution to joint liability under the 1933 Act in any case in which either
(i) AOL (and/or any officer, director, underwriter or controlling person who may
be indemnified under Section 1.7(a)), makes a claim for indemnification pursuant
to this Section 1.7 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 1.7 provides for indemnification in such case, or (ii) contribution
under the 1933 Act may be required on the part of AOL (and/or any officer,
director, underwriter or controlling person who may be indemnified under Section
1.7(a)) in circumstances for which indemnification is provided under this
Section 1.7; then, and in each such case, Excite and AOL (and/or such other
person) or will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
proportion to their relative fault as determined by a court of competent
jurisdiction; provided however, that in no event, except in instances of fraud
by AOL in which there is no limitation, (i) shall AOL be responsible for more
than the portion represented by the percentage that the public offering price of
its AOL Registrable Securities offered by and sold under the registration
statement bears to the public offering price of all securities offered by and
sold under such registration statement and (ii) shall AOL be required to
contribute any amount in excess of the public offering price of all such
Registrable Securities offered and sold by AOL pursuant to such registration
statement; and in any event, no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
(f) Survival. The obligations of Excite and AOL under this
Section 1.7 shall survive the completion of any offering of AOL Registrable
Securities in a registration statement, and otherwise.
1.8 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the AOL Registrable Securities to the public without
registration, for so long as AOL owns any Registrable Securities, Excite agrees
to:
(a) Make and keep adequate, current public information
available, as
-11-
<PAGE> 12
those terms are understood and defined in Rule 144 under the 1933 Act, at all
times;
(b) File with the Commission in a timely manner all reports
and other documents required of Excite under the 1934 Act; and
(c) So long as AOL owns any AOL Registrable Securities, to
furnish to AOL forthwith upon request a written statement by Excite as to its
compliance with the reporting requirements of said Rule 144, a copy of the most
recent annual or quarterly report of Excite, and such other reports and
documents of Excite as AOL may reasonably request in availing itself of any rule
or regulation of the Commission allowing a Holder to sell any such securities
without registration.
1.9 Termination of Excite's Obligations. Excite shall have no
obligations to register AOL Registrable Securities (i) if all AOL Registrable
Securities have been registered and sold pursuant to registrations effected
pursuant to this Agreement, or (ii) at such time as all AOL Registrable
Securities may be sold within a three month period under Rule 144, as it may be
amended from time to time, including but not limited to amendments that reduce
that period of time that securities must be held before such securities may be
sold pursuant to such rule.
2. ASSIGNMENT.
2.1 Assignment. Notwithstanding anything herein to the contrary,
the registration rights of AOL under Section 1 hereof may be assigned only to
(a) a party who acquires from AOL at least fifteen percent (15%) of the shares
of Common Stock (on an as converted basis) that constituted the original number
of AOL Registrable Securities (as such number may be adjusted to reflect
subdivisions, combinations and stock dividends of Excite's Common Stock) or (b)
any party who acquires ownership or control of AOL through a merger,
consolidation, sale of assets or similar business combination (either such party
is referred to as a "ASSIGNEE"); provided, however that (w) no party may be
assigned any of the foregoing rights until Excite is given written notice by the
assigning party at the time of such assignment stating the name and address of
the assignee and identifying the securities of Excite as to which the rights in
question are being assigned; (x) that any such Assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement,
including without limitation the provisions of this Section 2, and (y) upon such
an assignment or assignments, the rights held by AOL under this Agreement may
only be exercised by persons or entities holding a majority of the AOL
Registrable Securities, and (z) no such assignment or assignments shall increase
the obligations of Excite hereunder.
3. GENERAL PROVISIONS.
3.1 Notices. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows:
(a) if to Excite, at:
-12-
<PAGE> 13
Excite, Inc.
1091 N. Shoreline Blvd., Suite 200
Mountain View, CA 94043
Attention: President
Facsimile: 415/943-2888
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Mark Stevens
Facsimile: 415/494-1417
(b) If to AOL:
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
Attention: General Counsel
Facsimile: 703/265-2208
with a copy to:
Piper & Marbury L.L.P.
1200 Nineteenth St., N.W.
Washington, D.C. 20036-2430
Attention: Edwin Martin
Facsimile: 202/223-2085
Any party hereto (and such party's permitted assigns) may by notice so given
provide and change its address for future notices hereunder. Notice shall
conclusively be deemed to have been given when personally delivered or when
deposited in the mail in the manner set forth above.
3.2 Entire Agreement. This Agreement, the Acquisition Agreement
and the Investor Rights Agreement constitute and contains the entire agreement
and understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties respecting the subject
matter hereof.
3.3 Amendment of Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of Excite and AOL (and/or any of their permitted successors or
assigns).
3.4 Governing Law. This Agreement shall be governed by and
construed exclusively in accordance with the laws of the State of California,
excluding that body of law
-13-
<PAGE> 14
relating to conflict of laws.
3.5 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
3.6 Third Parties. Nothing in this Agreement, express or implied,
is intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
3.7 Successors And Assigns. Subject to the provisions of Section
2.1, the provisions of this Agreement shall inure to the benefit of, and shall
be binding upon, the successors and permitted assigns of the parties hereto.
3.8 Captions. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
3.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
3.10 Costs And Attorneys' Fees. In the event that any action, suit
or other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
3.11 Investors' Rights Agreement. AOL agrees that all rights
granted to it under the Investors' Rights Agreement are superseded in their
entirety by the rights granted to AOL herein.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
AMERICA ONLINE, INC. EXCITE, INC.
By: /s/ Miles Gilburne By: /s/ George Bell
------------------------------------ ---------------------------------
Name: Name:
---------------------------------- -------------------------------
Title: Title:
--------------------------------- ------------------------------
AOL VENTURES, INC.
By: /s/ Miles Gilburne
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
-15-
<PAGE> 1
EXHIBIT 9.01
VOTING TRUST AGREEMENT
This Voting Trust Agreement (the "Agreement") is entered into as of
November 25, 1996 (the "Effective Date"), by and among Excite, Inc., a
California corporation (the "Company"), America Online, Inc., a Delaware
corporation (the "Shareholder"), AOL Ventures, Inc., a Delaware corporation and
wholly owned subsidiary of the Shareholder ("AOL Ventures"), and Richard Redding
(the "Voting Trustee"). References herein to the Shareholder shall be deemed to
include AOL Ventures.
In consideration of the mutual promises contained herein, the Company,
the Shareholder and the Voting Trustee agree as follows:
1. Purpose of Voting Trust; Effectiveness. The purpose of this Voting
Trust is to ensure that, during the term of this Agreement, votes, actions and
consents to be taken with respect to all voting shares of the Preferred Stock of
the Company held by the Shareholder and to be deposited into the trust created
hereby (the "Preferred Stock") shall be taken by the Voting Trustee on behalf of
the Shareholder in each instance and only in each such instance where the
General Corporation Law of the State of California (the "GCL") would require
that the outstanding shares of Preferred Stock be entitled to a separate class
vote (a "Class Voting Event") and, in any such instance, solely with respect to
such class vote. It is intended that upon a Class Voting Event, the Preferred
Stock shall be voted consistently with the majority of the Company's Common
Stock. Nothing herein shall preclude Shareholder from voting the Preferred Stock
on a Common Stock equivalent basis in accordance with the Company's Articles of
Incorporation with regard to any matter placed before the holders of Common
Stock of the Company, including any matter for which a class vote of the
Preferred Stock is required under the GCL. This Agreement shall be effective as
of the closing of the transactions contemplated by that certain Acquisition
Agreement of even date herewith by and between the Company, Shareholder and
Global Network Navigator, Inc. (the "Acquisition Agreement").
2. Agreement.
2.1 Available for Inspection. Conformed copies of this Agreement
and of each amendment hereto shall be kept on file with the Secretary of the
Company and shall be available for inspection by any holder of a "Voting Trust
Certificate" or any shareholder of the Company at the Company's principal office
during business hours. The Shareholder and the Voting Trustee shall be furnished
with a conformed copy of this Agreement.
2.2 Rights of Shareholder. The Shareholder shall have rights in the
Voting Trust Certificate(s) and in the shares of Preferred Stock deposited in
trust by such Shareholder subject to the terms and provisions of this Agreement.
Any heir, assignee or transferee or person entitled to an interest in the rights
of the Shareholder to the Voting Trust Certificate or the shares of Preferred
Stock deposited by such Shareholder in trust hereunder shall be subject to and
bound by the provisions of this Agreement. Except as otherwise provided herein,
the Shareholder will
<PAGE> 2
have all of the rights of a shareholder of the Company with respect to the
shares of Preferred Stock deposited into trust.
3. Transfer of Preferred Stock to Voting Trustee.
3.1 Stock Certificates. Upon the Closing, as such term is defined in
Section 1.4 of the Acquisition Agreement, the Company shall deliver to the
Voting Trustee certificates for the shares of Preferred Stock that are issued at
such time to the Shareholder pursuant to the Acquisition Agreement and referred
to therein as Transaction Shares, and if Shareholder exercises its right under
the Acquisition Agreement to exchange the shares of Company Common Stock held by
it for shares of Excite Preferred Stock at the Closing or thereafter, the
Company shall deliver to the Voting Trustee certificates for all shares of
Preferred Stock issuable to the Shareholder as the result of such exchange.
During the term of this Agreement, the Company or the Shareholder, as
applicable, will deliver to the Voting Trustee certificates for all shares of
Preferred Stock that are issued to Shareholder during such term, including, but
not limited to, all shares issued upon exercise of warrants held by Shareholder.
All such Stock certificates shall be endorsed in blank. The Company shall bear
all expenses of such transfers. Upon surrender of such endorsed stock
certificates transferred by the Shareholder or the Company, the Company shall
issue to the Voting Trustee one or more stock certificates representing the
shares of Preferred Stock deposited in trust hereunder and registered in the
name of the Voting Trustee as a trustee under this Voting Trust Agreement.
Unless otherwise specified by the Voting Trustee the stock certificates issued
in the name of the Voting Trustees shall be held by the Secretary of the
Company.
3.2 Delivery of Voting Trust Certificate. In exchange for the
certificates of shares of Preferred Stock delivered from time to time by the
Shareholder or the Company, the Voting Trustees shall issue and deliver to the
Shareholder Voting Trust Certificates representing the shares of Preferred Stock
deposited by such Shareholder. The Secretary of the Company may, on behalf of
the Voting Trustee, execute any and all Voting Trust Certificates issued
hereunder.
4. Acceptance of Trust. The Voting Trustee hereby accepts the trust
created hereby in accordance with all of the terms and conditions contained in
this Agreement.
5. Voting Trust Certificates. The Voting Trust Certificates to be
issued and delivered by the Voting Trustee under this Agreement in respect of
any shares of Preferred Stock shall be legended as required by the terms of the
agreement between the Company and such Shareholder pursuant to which such
Shareholder acquired its Preferred Stock, together with substantially the
following legend:
SALE, PLEDGE OR OTHER DISPOSITION OR TRANSFER OF THIS VOTING
TRUST CERTIFICATE AND THE SHARES OF STOCK OF EXCITE, INC.
REPRESENTED HEREBY IS RESTRICTED BY THE TERMS OF A VOTING
TRUST AGREEMENT WHICH MAY BE EXAMINED AT THE OFFICES OF THE
COMPANY IN MOUNTAIN VIEW, CALIFORNIA.
-2-
<PAGE> 3
6. Transfer of Certificates.
6.1 Transfer Procedures. The Voting Trust Certificates shall be
transferable only on the books of the Company upon surrender of such Voting
Trust Certificates (duly endorsed in blank or accompanied by a proper instrument
of assignment duly executed in blank, together with all requisite tax stamps
attached thereto and an amount sufficient to pay all federal, state and local
taxes or other governmental charges, if any, then payable in connection with
such transfer) by the registered holder in person or by such holder's duly
authorized attorney to the Company. Upon the surrender of any Voting Trust
Certificate for transfer (provided such transfer does not violate the
restrictions on transfer contained herein, in any other agreement to which the
Shareholders may be bound, or imposed by law), the Company shall cancel such
Voting Trust Certificate and issue to the transferee one or more new Voting
Trust Certificates in the same form and representing the same number of shares
of Preferred Stock as the Voting Trust Certificates presented for cancellation.
6.2 Registered Owner. The Voting Trustee may treat the registered
holder of each of such Voting Trust Certificates as the absolute owner thereof
for all purposes whatsoever, and accordingly shall not be required to recognize
any legal, equitable or other claim or interest in such Voting Trust Certificate
on the part of any other person, whether or not it or they shall have express or
other notice thereof.
6.3 Lost, Stolen Certificates. If a Voting Trust Certificate is
lost, stolen, mutilated, or destroyed, the Voting Trustee, in his discretion,
may cause to be issued a duplicate of such certificate upon receipt of: (a)
evidence of such fact satisfactory to them; (b) indemnity satisfactory to them;
(c) the existing certificate, if mutilated; and (d) the reasonable fees and
expenses incurred in connection with the issuance of a new Voting Trust
Certificate.
6.4 Securities Laws. The Voting Trust Certificates may not be
offered, sold, transferred or hypothecated in the absence of registration or the
availability of an exemption from registration under the Securities Act of 1933,
as amended (the "Act") and any applicable state law regulating securities. Every
holder of Voting Trust Certificates agrees not to sell, transfer, pledge or
hypothecate the Voting Trust Certificates unless the Voting Trustee shall be
reasonably satisfied that such sale or other disposition does not violate the
provisions of any agreement of which the Shareholder is a party and unless
either: (i) the transfer of the Voting Trust Certificates is registered under
the Act pursuant to a current and effective registration statement at the time
of such sale, transfer, pledge or hypothecation and is registered or qualified
under any applicable state law regulating securities; or (ii) the Voting Trustee
has been furnished an opinion of counsel satisfactory in form and substance to
the Voting Trustee that the Voting Trust Certificates may be so transferred or
disposed of without such registration or qualification. Every holder of Voting
Trust Certificates agrees that the Voting Trustee may refuse to transfer any
Voting Trust Certificate except as aforesaid.
7. Dividends.
7.1 Paid to Voting Trustees. The Voting Trustee shall receive and
distribute to the registered holders of Voting Trust Certificates any dividends
or distributions paid in cash or property other than voting securities of the
Company in respect of the Preferred Stock received
-3-
<PAGE> 4
by the Voting Trustee to holders of voting Trust Certificates in proportion to
their respective interests in the underlying Preferred Stock deposited
hereunder. The Voting Trustee also shall receive and hold, subject to the terms
of this Agreement, any voting preferred stock of the Company issued by reason of
any capital reorganization, stock split, stock dividend, combination or the like
and shall issue and deliver Voting Trust Certificates therefor to the holders of
the Voting Trust Certificates in proportion to their respective interests as
shown on the books of the Voting Trustee.
7.2 Paid to Shareholder. In lieu of receiving cash dividends upon
the Preferred Stock and paying the same to the holders of Voting Trust
Certificates pursuant to the provisions of this Agreement, the Voting Trustee
may instruct the Company in writing to pay such dividends to the holders of the
Voting Trust Certificates. Upon receipt of such written instructions, the
Company shall pay such dividends directly to the holders of the Voting Trust
Certificates. The Voting Trustee may at any time revoke such instructions and by
written notice to the Company direct it to make dividend payments to the Voting
Trustee. Upon such instructions being given by the Voting Trustee to the
Company, and until revoked by it, all liability of the Voting Trustee with
respect to such dividends shall cease.
8. Dissolution of the Company. In the event that upon dissolution or
total or partial liquidation of the Company, whether voluntary or involuntary,
the Voting Trustee shall receive the moneys, securities, rights or property to
which the holders of the Preferred Stock deposited hereunder are entitled, then
the Voting Trustee shall distribute the same among the registered holders of
Voting Trust Certificates in accordance with the terms of the Company's Articles
of Incorporation in proportion to the registered holders' respective interests
as shown by the books of the Voting Trustee, or the Voting Trustee may in his
discretion deposit such moneys, securities, rights or property with any bank or
trust company with authority and instructions to distribute the same as above
provided, and upon such deposit all further obligations or liabilities of the
Voting Trustee in respect of such moneys, securities, rights or property so
deposited shall cease.
9. Successor Voting Trustees. The Voting Trustee may at any time resign
by delivering to the Company his resignation in writing, to be effective in
accordance with its terms, including without limitation any specification of a
successor. Except as otherwise provided herein, if the Voting Trustee shall
resign or be removed and a successor is not automatically appointed pursuant to
the preceding sentence, then a successor will be appointed by the Company.
Except as otherwise provided herein, the successor Voting Trustee may be removed
at any time upon the request of the Shareholder.
10. Rights and Powers of Voting Trustee. Until the termination of this
Agreement as provided herein, at each Class Voting Event, including without
limitation, any vote involving a change in control of the Company, and whether
occurring at a duly called and held meeting of Company shareholders or with
respect to any written consent of shareholders of the Company, the Voting
Trustee shall vote, in person or by proxy, the shares deposited hereunder in a
manner that is consistent with the vote of the holders of a majority of the
Company's voting Common Stock (which Common Stock shall be deemed to include the
shares of Company Common Stock issuable upon conversion of the shares of
Preferred Stock deposited hereunder). The Voting
-4-
<PAGE> 5
Trustee shall have no authority to sell, pledge, hypothecate, or otherwise
dispose of any of the shares deposited pursuant to this Agreement, provided
however, that if the holders of a majority of the Company's voting Common Stock
and preferred stock that is not held by the Voting Trustee on behalf of the
Shareholder tender their shares pursuant to a tender offer under Section 14(d)
of the Securities Exchange Act of 1934, as amended, the Voting Trustee shall
tender the shares deposited hereunder, receive the proceeds in consideration
thereof and distribute such proceeds to the Shareholder.
11. Liability of Voting Trustee. In voting, or otherwise acting
hereunder with respect to shares deposited hereunder, the Voting Trustee shall
be entitled to exercise his own absolute discretion and judgment subject to the
conditions imposed by Section 10 hereof; but he assumes no responsibility in
respect to any action taken by him or his agents, and neither the Voting Trustee
nor any of his agents shall incur any responsibility or liability by reason of
any error of law or anything done or suffered or omitted, except for individual
malfeasance. Neither the Voting Trustee nor any of his agents shall be required
to give any bond or other security for the discharge of duties.
12. Expenses of Voting Trustee. The Voting Trustee may employ counsel,
and provide for such other assistance as may be convenient, in the performance
of his functions. The Company shall indemnify the Voting Trustee against all
expenses, claims and liabilities incurred by him in connection with or arising
out of this Agreement for the discharge of his duties hereunder to the full
extent permitted by law. The Company shall, at the request of the Voting
Trustee, advance funds to pay expenses incurred for legal or other assistance
provided to the Voting Trustees or for legal fees or other expenses incurred by
the Voting Trustee in the defense of any action, claim or proceeding arising as
aforesaid.
13. Surrender of Shares for Cancellation. The Voting Trustee may at any
time in his discretion, and to such extent as he may deem advisable, deliver in
exchange for Voting Trust Certificates, certificates for shares of the Company
in an amount equal to the shares represented by such Voting Trust Certificates
in order to enable the surrender to the Company for cancellation of the shares
so delivered, or otherwise as the Voting Trustee may in his absolute discretion
deem advisable, and the delivery of any such shares of the Company to any one or
more holders of Voting Trust Certificates shall not entitle such holder or
holders or any other holder or holders of Voting Trust Certificates to demand
delivery of all or any part of the shares of the Company remaining deposited
hereunder.
14. Conversion of Shares Into Common Stock. If the Shareholder or any
subsequent holder of Voting Trust Certificates wishes to convert the shares of
Preferred Stock in which it has a beneficial interest into shares of the
Company's Common Stock (a "Converting Holder"), the following procedure shall be
followed: (i) the Converting Holder shall deliver Voting Trust Certificate(s) to
the Company (covering the beneficial interest in all shares to be converted)
together with instructions as to how many shares of Preferred Stock are to be
converted into Common Stock; (ii) the shares requested to be converted shall be
deemed converted immediately upon receipt of such instructions and Voting Trust
Certificate(s) by the Company; (iii) the Company, shall immediately instruct its
transfer agent to issue shares of Common Stock to the Converting Holder or its
successors or assigns in accordance with the instructions of the
-5-
<PAGE> 6
Converting Holder (and pursuant to the terms of the Company's Amended and
Restated Articles of Incorporation); and (iv) the Company shall inform the
Voting Trustee of the conversion and the Voting Trustee shall promptly issue to
the Converting Holder new Voting Trust Certificates representing the interest in
any shares not converted by the Converting Holder. Any shares of Common Stock
issued upon conversion shall no longer be subject to this Agreement. Except as
otherwise provided by this Agreement, a Converting Holder shall have no right to
the delivery of any shares of Preferred Stock not converted under this Section
14.
15. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given on the
date of service if served personally or on the date of mailing if mailed by
first class mail, registered or certified, postage prepaid and addressed as
follows: if to registered holders of Voting Trust Certificates, at the address
for each such holder set forth on his Voting Trust Certificate; if to the Voting
Trustee at the address specified below its signature on this Agreement; if to
the Company, at Excite, Inc., 1091 N. Shoreline Blvd., Suite 200, Mountain View,
CA 94043; or such different address as may be specified to the other parties by
notice given as provided herein.
16. Term. This Agreement shall continue in effect until and shall
terminate upon the earlier to occur of (i) the date on which no shares of
Preferred Stock are held by Shareholder, or (ii) the effective date of a merger
or consolidation of the Company or an exchange or other reorganization where the
Company is not the surviving or parent corporation; or (iii) the voluntary or
involuntary dissolution of the Company, or (iv) the death, resignation or
incapacity to act of the Voting Trustee if no other trustee is appointed
pursuant hereto to fill the vacancy within 90 days after such death, resignation
or incapacity; or (v) ten years from the Effective Date. Renewal of the Voting
Trust may be effected pursuant to the provisions of the GCL.
17. Conversion of Shares. Upon termination, the holder of the Voting
Trust Certificate may present such Voting Trust Certificate to the Voting
Trustee and, upon such presentation, the Voting Trustee shall deliver to such
holder a certificate or certificates, expressed to be fully paid and
nonassessable, for shares of Preferred Stock, as provided in the Voting Trust
Certificate.
18. Execution of this Agreement. This Agreement may be executed in
several counterparts, each of which shall be an original.
19. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the executors, administrators, heirs, successors and assigns of
the parties.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the corporation law of the State of California, excluding that
body of law known as conflicts of law.
22. Successors and Assigns. Except as expressly set forth to the
contrary in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the successors, assigns, heirs, administrators, executors and
legal representatives of the parties hereto; provided, however, that the
transfer of any interest in this Agreement shall be subject to the transferee's
consent to be bound by all provisions of this Agreement.
-6-
<PAGE> 7
23. Captions. The captions to Sections of this Agreement have been
inserted for identification and reference purposes and shall not by themselves
determine the construction or interpretation of this Agreement.
24. Amendment. Except as otherwise provided, any term of this Voting
Trust may be amended and the observance of any term of this Voting Trust may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the consent of the Company, the Voting Trustee and the
Shareholder.
IN WITNESS WHEREOF, the Company, the Voting Trustee, AOL Ventures and
the Shareholder have executed this Voting Trust Agreement as of the date first
written above.
AMERICA ONLINE, INC.: EXCITE, INC.
By: /s/ Eric Keller By: /s/ George Bell
--------------------------------- ---------------------------------
Name: Name:
------------------------------- -------------------------------
Title: Title:
------------------------------ ------------------------------
AOL VENTURES, INC.:
By: /s/ Miles Gilburne
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE VOTING TRUSTEE:
/s/ Richard Redding
- ------------------------------------
Richard Redding
c/o Excite, Inc.
1091 N. Shoreline Blvd., Ste. 200
Mountain View, CA 94043
-7-
<PAGE> 1
EXHIBIT 10.02
EXCITE, INC.
1996 EQUITY INCENTIVE PLAN
As Adopted February 29, 1996
and Amended November 19, 1996
and January 2, 1997
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options, Restricted Stock and
Stock Bonuses. Capitalized terms not defined in the text are defined in Section
23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 18,
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 4,755,000 Shares. Subject to Sections 2.2 and 18,
Shares that: (a) are subject to issuance upon exercise of an Option but cease to
be subject to such Option for any reason other than exercise of such Option; (b)
are subject to an Award granted hereunder but are forfeited or are repurchased
by the Company at the original issue price; or (c) are subject to an Award that
otherwise terminates without Shares being issued will again be available for
grant and issuance in connection with future Awards under this Plan. At all
times the Company shall reserve and keep available a sufficient number of Shares
as shall be required to satisfy the requirements of all outstanding Options
granted under this Plan and all other outstanding but unvested Awards granted
under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the shareholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent, Subsidiary or Affiliate of the
Company; provided such consultants, contractors and advisors render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. No person will be eligible to receive more than
500,000 Shares in any calendar year under this Plan pursuant to the grant of
Awards hereunder, other than new employees of the Company or of a Parent,
Subsidiary or Affiliate of the Company (including new employees who are also
officers and directors of the Company or any Parent, Subsidiary or Affiliate of
the Company) who are eligible to receive up to a maximum of 800,000 Shares in
the calendar year in which they commence their employment. A person may be
granted more than one Award under this Plan.
<PAGE> 2
Excite, Inc.
1996 Equity Incentive Plan
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent, Subsidiary or
Affiliate of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.
4.3 Exchange Act Requirements. If two or more members of the Board
are Outside Directors, the Committee will be comprised of at least two (2)
members of the Board, all of whom are Outside Directors and Disinterested
Persons. During all times that the Company is subject to Section 16 of the
Exchange Act, the Company will take appropriate steps to comply with the
disinterested administration requirements of Section 16(b) of the Exchange Act,
which will consist of the appointment by the Board of a Committee consisting of
not less than two (2) members of the Board, each of whom is a Disinterested
Person.
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will
be evidenced by an Award Agreement which will expressly identify the Option as
an ISO or an NQSO ("STOCK
-2-
<PAGE> 3
Excite, Inc.
1996 Equity Incentive Plan
OPTION AGREEMENT"), and will be in such form and contain such provisions (which
need not be the same for each Participant) as the Committee may from time to
time approve, and which will comply with and be subject to the terms and
conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date
on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately
(subject to repurchase pursuant to Section 12 of this Plan) or may be
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten (10)
years from the date the Option is granted; and provided further that no ISO
granted to a person who directly or by attribution owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Parent or Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will
be exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for the exercise of Options to become
exercisable at one time or from time to time, periodically or otherwise, in such
number of Shares or percentage of Shares as the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Shareholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by delivery
to the Company of a written stock option exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set forth in
the Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no later
than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after
a Termination other than because of Participant's death or
disability), then Participant's Options may be exercised only to
the extent that such Options would have been exercisable by
Participant on the Termination Date and must be exercised by
Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination
Date (or such shorter or longer time period not exceeding five (5)
years as may be determined by the Committee, with any such
exercise beyond (a) three (3) months after the Termination Date
when the Termination is for any reason other than the
Participant's death or Disability, or
-3-
<PAGE> 4
Excite, Inc.
1996 Equity Incentive Plan
(b) twelve (12) months after the Termination Date when the
Termination is for Participant's death or Disability, deemed to be
an NQSO), but in any event no later than the expiration date of
the Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) will not exceed $100,000. If the
Fair Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the Effective Date (as defined in Section 19 below) of this Plan to
provide for a different limit on the Fair Market Value of Shares permitted to be
subject to ISOs, such different limit will be automatically incorporated herein
and will apply to any Options granted after the effective date of such
amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code.
5.10 No Disqualification. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to
a Restricted Stock Award will be determined by the Committee and will be at
least 85% of the Fair Market Value of the Shares on the date the Restricted
Stock Award is granted, except in the case of a sale to a Ten Percent
Shareholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
this Plan.
6.3 Restrictions. Restricted Stock Awards will be subject to such
restrictions (if any) as the Committee may impose. The Committee may provide for
the lapse of such restrictions in installments and
-4-
<PAGE> 5
Excite, Inc.
1996 Equity Incentive Plan
may accelerate or waive such restrictions, in whole or part, based on length of
service, performance or such other factors or criteria as the Committee may
determine.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent, Subsidiary or
Affiliate of the Company pursuant to an Award Agreement (the "STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. A Stock Bonus may
be awarded upon satisfaction of such performance goals as are set out in advance
in the Participant's individual Award Agreement (the "PERFORMANCE STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent, Subsidiary or Affiliate
and/or individual performance factors or upon such other criteria as the
Committee may determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the Participant and whether such Shares will
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee will determine: (a) the nature, length and starting date of any period
during which performance is to be measured (the "PERFORMANCE PERIOD") for each
Stock Bonus; (b) the performance goals and criteria to be used to measure the
performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of cash,
whole Shares, including Restricted Stock, or a combination thereof, either in a
lump sum payment or in installments, all as the Committee will determine.
7.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee will
determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares); or (2) were
obtained by Participant in the public market;
-5-
<PAGE> 6
Excite, Inc.
1996 Equity Incentive Plan
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are not
employees or directors of the Company will not be entitled to
purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant for
services rendered;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant and
a broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD DEALER") whereby the
Participant irrevocably elects to exercise the Option and to
sell a portion of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
(2) through a "margin" commitment from the Participant and a NASD
Dealer whereby the Participant irrevocably elects to exercise
the Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company;
or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may, in its
sole discretion, allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined (the "TAX DATE"). All elections by a Participant to
have Shares withheld for this purpose will be made in writing in a form
acceptable to the Committee and will be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, then except as provided below, the election will be
irrevocable as to the particular Shares as to which the election
is made;
(c) all elections will be subject to the consent or disapproval of the
Committee;
-6-
<PAGE> 7
Excite, Inc.
1996 Equity Incentive Plan
(d) if the Participant is an Insider and if the Company is subject to
Section 16(b) of the Exchange Act: (1) the election may not be
made within six (6) months of the date of grant of the Award,
except as otherwise permitted by SEC Rule 16b-3(e) under the
Exchange Act, and (2) either (A) the election to use stock
withholding must be irrevocably made at least six (6) months prior
to the Tax Date (although such election may be revoked at any time
at least six (6) months prior to the Tax Date) or (B) the exercise
of the Option or election to use stock withholding must be made in
the ten (10) day period beginning on the third day following the
release of the Company's quarterly or annual summary statement of
sales or earnings; and
(e) in the event that the Tax Date is deferred until six (6) months
after the delivery of Shares under Section 83(b) of the Code, the
Participant will receive the full number of Shares with respect to
which the exercise occurs, but such Participant will be
unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's original Purchase Price pursuant to Section
12.
10.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as consistent with the specific
Plan and Award Agreement provisions relating thereto. During the lifetime of the
Participant an Award will be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Shares that are not "Vested" (as defined
in the Award Agreement) held by a Participant following such Participant's
Termination at any time within ninety (90) days after the later of Participant's
Termination Date and the date Participant purchases Shares under this Plan, for
cash and/or cancellation of purchase money indebtedness, at the Participant's
original Purchase Price.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the
-7-
<PAGE> 8
Excite, Inc.
1996 Equity Incentive Plan
Company or an agent designated by the Company to hold in escrow until such
restrictions have lapsed or terminated, and the Committee may cause a legend or
legends referencing such restrictions to be placed on the certificates. Any
Participant who is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under this Plan will be required to
pledge and deposit with the Company all or part of the Shares so purchased as
collateral to secure the payment of Participant's obligation to the Company
under the promissory note; provided, however, that the Committee may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company will have full recourse against the
Participant under the promissory note notwithstanding any pledge of the
Participant's Shares or other collateral. In connection with any pledge of the
Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company or limit in any
way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate Participant's employment or other relationship at any time,
with or without cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the shareholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company (other than any shareholder
which merges (or which owns or controls another corporation which merges) with
the Company in such merger) cease to own their shares or other equity interests
in the Company, (d) the sale of substantially all of the assets of the Company,
or (e) any other transaction which qualifies as a "corporate transaction" under
Section 424(a) of the Code wherein the shareholders of the Company give up all
of their equity interest in the Company (except for the acquisition, sale or
transfer of all or substantially all of the outstanding shares of the Company
from or by the shareholders of the Company), any or all outstanding Awards may
be assumed, converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
shareholders (after taking into account the existing provisions of the
-8-
<PAGE> 9
Excite, Inc.
1996 Equity Incentive Plan
Awards). The successor corporation may also issue, in place of outstanding
Shares of the Company held by the Participant, substantially similar shares or
other property subject to repurchase restrictions no less favorable to the
Participant. In the event such successor corporation (if any) refuses to assume
or substitute Awards, as provided above, pursuant to a transaction described in
this Subsection 18.1, such Awards will expire on such transaction at such time
and on such conditions as the Board will determine.
18.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Subsection 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.3 Assumption of Awards by the Company. The Company, from time
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date on which the registration statement filed by the Company with the
SEC under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "EFFECTIVE DATE");
provided, however, that if the Effective Date does not occur on or before
December 31, 1996, this Plan will terminate having never become effective. This
Plan shall be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon the
Effective Date, the Board may grant Awards pursuant to this Plan; provided,
however, that: (a) no Option may be exercised prior to initial shareholder
approval of this Plan; (b) no Option granted pursuant to an increase in the
number of Shares subject to this Plan approved by the Board will be exercised
prior to the time such increase has been approved by the shareholders of the
Company; and (c) in the event that shareholder approval of such increase is not
obtained within the time period provided herein, all Awards granted hereunder
will be canceled, any Shares issued pursuant to any Award will be canceled, and
any purchase of Shares hereunder will be rescinded. So long as the Company is
subject to Section 16(b) of the Exchange Act, the Company will comply with the
requirements of Rule 16b-3 (or its successor), as amended, with respect to
shareholder approval.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of shareholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the shareholders of the Company, amend this Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or (if the Company is subject
to the Exchange Act or Section 16(b) of the Exchange Act) pursuant to the
Exchange Act or Rule 16b-3 (or its successor), as amended, thereunder,
respectively.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be
-9-
<PAGE> 10
Excite, Inc.
1996 Equity Incentive Plan
construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including,
without limitation, the granting of stock options and bonuses otherwise than
under this Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
23. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:
"AFFILIATE" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no such committee is appointed, the Board.
"COMPANY" means Excite, Inc.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"DISINTERESTED PERSON" means a director who has not, during the
period that person is a member of the Committee and for one year prior to
commencing service as a member of the Committee, been granted or awarded equity
securities pursuant to this Plan or any other plan of the Company or any Parent,
Subsidiary or Affiliate of the Company, except in accordance with the
requirements set forth in Rule 16b-3(c)(2)(i) (and any successor regulation
thereto) as promulgated by the SEC under Section 16(b) of the Exchange Act, as
such rule is amended from time to time and as interpreted by the SEC.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the last
trading day prior to the date of determination as reported in The
Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the last
trading day prior to the date of determination on the principal
national securities exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal;
-10-
<PAGE> 11
Excite, Inc.
1996 Equity Incentive Plan
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the last trading day prior to the date of
determination as reported in The Wall Street Journal; or
(d) if none of the foregoing is applicable, by the Committee in good
faith.
"INSIDER" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"OUTSIDE DIRECTOR" means any director who is not; (a) a current
employee of the Company or any Parent, Subsidiary or Affiliate of the Company;
(b) a former employee of the Company or any Parent, Subsidiary or Affiliate of
the Company who is receiving compensation for prior services (other than
benefits under a tax-qualified pension plan); (c) a current or former officer of
the Company or any Parent, Subsidiary or Affiliate of the Company; or (d)
currently receiving compensation for personal services in any capacity, other
than as a director, from the Company or any Parent, Subsidiary or Affiliate of
the Company; provided, however, that at such time as the term "Outside
Director", as used in Section 162(m) of the Code is defined in regulations
promulgated under Section 162(m) of the Code, "Outside Director" will have the
meaning set forth in such regulations, as amended from time to time and as
interpreted by the Internal Revenue Service.
"OPTION" means an award of an option to purchase Shares pursuant
to Section 5.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under this Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this
Plan.
"PLAN" means this Excite, Inc. 1996 Equity Incentive Plan, as
amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, director, consultant, independent contractor or
advisor to the Company or a Parent, Subsidiary or Affiliate of the Company,
except in the case of sick leave, military leave, or any other leave of absence
approved by the Committee, provided that such leave is for a period of not more
than ninety (90) days, or reinstatement upon the expiration of such leave is
guaranteed by contract or statute. The Committee will have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "TERMINATION
DATE").
-11-
<PAGE> 1
EXHIBIT 10.05
SUMMARY PLAN DESCRIPTION
EXCITE, INC. 401(K) PLAN
<PAGE> 2
EXCITE, INC. 401(K) PLAN
I BASIC PLAN INFORMATION 2
A Account 2
B Employer 2
C Participant 2
D Plan Administrator 2
E Plan Number 2
F Plan Qualification 2
G Plan Year 2
H Service of Process 2
I Trust Fund 2
J Trustee 3
II PARTICIPATION 4
A Eligibility Requirements 4
III CONTRIBUTIONS 5
A Employee Pretax Contributions 5
<PAGE> 3
B Limit on Contributions 5
C Rollover Contributions 6
IV INVESTMENTS 7
A Investments 7
B Statement of Account 8
V VESTING 9
VI PARTICIPANT LOANS 10
A Loans 10
VII HARDSHIP WITHDRAWALS 11
VIII IN-SERVICE WITHDRAWALS 12
A Withdrawals After Age 59 1/2 12
IX TOTAL DISTRIBUTION OF BENEFITS 13
A Benefit on Termination of Employment 13
B Death Benefit 13
<PAGE> 4
C Retirement Benefit 13
D Payment and Form of Benefits 13
X MISCELLANEOUS INFORMATION 15
A Benefits Not Insured by PBGC 15
B Nontransferable Account 15
C Plan Amendment 15
D Plan Termination 15
E Interpretation of Plan 15
XI INTERNAL REVENUE SERVICE TEST 16
A Non-Discrimination Test 16
B Top Heavy Test 16
XII PARTICIPANT RIGHTS 17
A Claims 17
B Statement of ERISA Rights 17
<PAGE> 5
- --------------------------------------------------------------------------------
SUMMARY PLAN DESCRIPTION
EXCITE, INC. 401(K) PLAN
- --------------------------------------------------------------------------------
The Excite, Inc. 401(k) Plan (the 'Plan') of Excite, Inc. (the 'Employer') was
adopted as of November 1, 1996 (the 'Effective Date'). This Plan is intended to
be a qualified retirement plan under the Internal Revenue Code.
The purpose of the Plan is to enable eligible Employees to save for retirement.
It may also provide certain benefits in the event of death, disability, or other
termination of employment. The Plan is for the exclusive benefit of eligible
Employees and their beneficiaries.
This booklet is call a Summary Plan Description (SPD) and it contains a summary
in understandable language of your rights and benefits under the Plan. If you
have difficulty understanding any part of this SPD, you should contact the Plan
Administrator identified on page two during normal business hours for
assistance.
This SPD is a brief description of the Plan and Trust Agreement (Plan Document).
It is not meant to interpret, extend or change the Plan Document in any way. A
copy of the Plan Document is on file with the Plan Administrator and may be read
by any Employee at any reasonable time. The Plan Document shall govern in the
event of any discrepancy between this SPD and the actual provisions of the Plan.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 1
<PAGE> 6
- --------------------------------------------------------------------------------
I. BASIC PLAN INFORMATION
- --------------------------------------------------------------------------------
A. ACCOUNT
This is an Account established by the Trustee for the purpose of recording
contributions made on your behalf and any income, expenses, gains or losses
thereon. It may also be referred to as 'Account' balance.
B. EMPLOYER
The name, address and business telephone number of the Employer is:
Excite, Inc.
1091 North Shoreline Blvd.
Mountain View, CA 94043
(415) 943-2850
The Employer's Identification Number is -
C. PARTICIPANT
A participant is an eligible Employee who has satisfied the eligibility and
entry date requirements and is eligible to participate in the Plan.
D. PLAN ADMINISTRATOR
The Plan Administrator is responsible for the administration of the Plan. The
Plan Administrator's duties are specifically identified in the Plan Document.
The name, address and business telephone number of the Plan Administrator is:
Excite, Inc.
1091 North Shoreline Blvd.
Mountain View, CA 94043
(415) 943-2850
E. PLAN NUMBER
The Plan number is 001.
F. PLAN QUALIFICATION
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 2
<PAGE> 7
If this is the only qualified plan ever maintained by the Employer then the Plan
is operating under an Internal Revenue Service opinion letter and is a qualified
plan under the Internal Revenue Code.
G. PLAN YEAR
The Plan Year is the twelve-month period ending on the last day of December.
H. SERVICE OF PROCESS
The Plan's agent for service of legal process is the Plan Administrator.
I. TRUST FUND
The Plan is administered under a trust fund arrangement. There is a written Plan
and Trust Agreement entered into between the Trustee and the Employer.
J. TRUSTEE
The trustee is responsible for holding the Plan assets. The trustee's duties are
specifically identified in the Plan Document and relate only to the assets in
its possession. The name and address of the Plan's Trustee is:
Fidelity Management Trust Company
82 Devonshire Street, L10A
Boston, MA 02109.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 3
<PAGE> 8
- --------------------------------------------------------------------------------
II. PARTICIPATION
- --------------------------------------------------------------------------------
A. ELIGIBILITY REQUIREMENTS
You are eligible to participate in the Plan if you are an Employee of the
Employer. You will become eligible to participate in the Plan on the first day
of the following month.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 4
<PAGE> 9
- --------------------------------------------------------------------------------
III. CONTRIBUTIONS
- --------------------------------------------------------------------------------
For purposes of computing contributions under the Plan, as listed below, your
Employer must first define 'compensation'. Eligible compensation generally means
the taxable compensation for a Plan Year reportable by your Employer on your IRS
Form W-2 for a Plan Year, excluding. Your compensation will also include any
Employee pretax contributions you made under the Plan and any salary reductions
you made under your Employer's cafeteria plan, 401(k) plan or other similar
plan, if any. Compensation does not include any taxable fringe benefits or
taxable Employee moving and other expense reimbursements reportable on your
annual IRS Form W-2. Compensation for your first year of eligible Plan
participation will be based upon compensation paid for the entire Plan Year. Tax
laws limit the amount of compensation that may be taken into account each Plan
Year and the maximum amount for the 1996 Plan Year is $150,000 (this amount is
subject to adjustment each year).
A. EMPLOYEE PRETAX CONTRIBUTIONS
(1). REGULAR CONTRIBUTIONS
You may elect to contribute a percentage of your eligible compensation
into the Plan after you satisfy the Plan's eligibility requirements.
Your compensation will be withheld from each payroll by the percentage
you have elected on a pretax basis and contributed to the Plan on your
behalf. You may defer, in whole percentages, up to an annual maximum of
the lesser of 15% of eligible compensation or $9,500 in a calendar year
(in 1996 and thereafter as adjusted by the Secretary of the Treasury).
Your Employee pretax contributions belong to you and cannot be
forfeited for any reason. However, there are special Internal Revenue
Code rules which must be satisfied and may require that the amount of
your contributions be reduced. If a reduction in your contribution is
necessary, you will be notified by the Plan Administrator. You may
increase or decrease the amount you contribute as of the first day of
each month. You may completely suspend your contributions with
sufficient notice to the Plan Administrator. Thereafter, if you want to
resume your Employee pretax contributions as of the first day of each
month, you must complete a new election form.
(2). CATCH UP CONTRIBUTIONS
You may make 'catch up' Employee pretax contributions in December. You
may defer a whole percentage between 1 to 100% of your eligible
compensation in December into the Plan on a pretax basis by completing
a special election form. The total amount of your catch up and Employee
pretax contributions for the Plan Year may not exceed 15% of your
eligible compensation or other applicable
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 5
<PAGE> 10
Internal Revenue Code limits. The Employer may refuse to accept any or
all of your catch up contribution if it will have an adverse effect on
the Plan's Non-Discrimination Test.
B. LIMIT ON CONTRIBUTIONS
Federal law requires that amounts contributed by you and on your behalf by
your Employer for a given limitation year generally may not exceed the lesser
of:
- $30,000 (or such amount as may be prescribed by the Secretary
of the Treasury); or
- 25% of your annual compensation, excluding any salary
reductions to an employer sponsored cafeteria plan, a 401(k) plan,
a simplified employee pension or a tax-deferred annuity.
Contributions under this Plan may not exceed the above limits. If this does
occur then excess contributions in your Account may be forfeited or
refunded to you. Income tax consequences may apply to you on any refund.
You will be notified by the Plan Administrator if you will be subject to
reduced contributions on your behalf.
The limitation year for purposes of applying the above limits is the twelve
month period ending December 31. Rollover contributions are not included
in the limits on Employee and Employer contributions.
C. ROLLOVER CONTRIBUTIONS
You can rollover part or all of an 'eligible rollover distribution' you received
from a prior employer's qualified plan, if allowed by the Plan
Administrator. (The Plan Administrator reserves the right to refuse to
accept any rollover contribution.) Alternatively, you may rollover a
distribution you received from a rollover Individual Retirement Account
(IRA) which consisted solely of an eligible rollover distribution and
earnings thereon. If the rollover to the Plan is not a direct rollover
(i.e. you received a cash distribution from your prior employer's plan or
from your rollover IRA), then it must be received by the Trustee within
60 DAYS of your receipt of the distribution.
You may make a rollover contribution to the Plan before becoming a Participant.
However, you will not become a Participant entitled to make Employee
pretax contributions until you have met the Plan's eligibility and entry
date requirements. Your rollover contribution Account will be subject to
the terms of this Plan and will always be fully vested and
nonforfeitable.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 6
<PAGE> 11
- --------------------------------------------------------------------------------
IV. INVESTMENTS
- --------------------------------------------------------------------------------
A. INVESTMENTS
The Employee Retirement Income Security Act of 1974 (ERISA) imposes certain
duties on the parties who are responsible for the operation of the plan. These
parties, called fiduciaries, have a duty to invest plan assets in a prudent
manner. However, an exception exists for plans which comply with ERISA Section
404(c) and permit a participant to exercise control over the assets in his/her
Account and choose from a broad range of investment alternatives. This Plan is
intended to be a Section 404(c) plan. This means that you and not the Plan
fiduciaries are responsible for the investment decisions relating to the assets
in your individual Account under the Plan.
You will have the opportunity to direct the investments of your Account among
the following Fidelity Investments Funds (the Fidelity Fund Number assigned to
each fund is identified in parentheses):
1. Fidelity Retirement Money Market Portfolio (0630)
Objective: Seeks a high current income, preservation of capital,
and liquidity from money market investments.
2. Fidelity Intermediate Bond Fund (0032)
Objective: Seeks a high level of current income, through
investment in high- and medium-grade, fixed income
obligations.
3. Fidelity Puritan Fund (0004)
Objective: Seeks as much income as possible, consistent with the
preservation of capital, by investing in a broadly
diversified portfolio of high-yielding bonds,
common stocks and preferred stocks.
4. Fidelity Growth & Income Portfolio (0027)
Objective: Seeks long-term capital growth, current income and
growth of income, consistent with reasonable
investment risk.
5. Fidelity Contrafund (0022)
Objective: Seeks high capital appreciation.
6. Fidelity Emerging Growth Fund (0324)
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 7
<PAGE> 12
Objective: Seeks long-term capital appreciation by investing
mainly in equity securities of companies believed
to offer the potential for accelerated growth.
7. Fidelity Low-Priced Stock Fund (0316)
Objective: Capital appreciation; invests mainly in a portfolio of
low-priced stocks that may be undervalued,
overlooked or out-of-favor.
8. Fidelity Diversified International Fund (0325)
Objective Seeks capital growth by investing mainly in countries
which are included in the Morgan Stanley EAFE
Index; focuses on companies with market
capitalizations of $100,000,000 or more; seeks a
rate of return which exceeds that of the GDP-
Weighted EAFE Index.
You may obtain a prospectus or financial report for each of the above mutual
funds by calling Fidelity at 1-800-544-8888. You may redirect the investment of
your future contributions or exchange your existing Account balance among the
above Fidelity mutual funds by calling 1-800-835-5097 on any business day
between 8:30 AM (ET) and 8:00 PM (ET). You may call this same number 24 hours
per day, seven days per week to check Account balances, prices or yields. All
telephone calls will be recorded. You have the right to vote any mutual funds
proxies based on the number of shares you own.
Exchanges requested before 4:00 PM (ET) will be processed on that same business
day based on the closing price of the mutual fund. Exchanges requested after
4:00 PM (ET) will be processed based on the next business day's closing price of
the mutual fund. The minimum exchange is the lesser of $250 or 100% of your
Account balance in the mutual fund. If your exchange is less than $250 then it
may only be exchanged into one mutual fund. A written confirmation of your
exchange will be mailed to you within seven business days. Fidelity reserves the
right to change, restrict, or terminate participant exchange procedures to
protect mutual fund shareholders.
B. STATEMENT OF ACCOUNT
Your Account will be updated each business day to reflect any investment
earnings or losses on each Fidelity Investments mutual fund. A quarterly
statement disclosing the value of your Account will be mailed to you within 20
days of the following dates: February 28, May 31, August 31 and November 30.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 8
<PAGE> 13
- --------------------------------------------------------------------------------
V. VESTING
- --------------------------------------------------------------------------------
The term 'vesting' refers to your nonforfeitable right to the money in your
Account. You receive vesting credit for the number of year(s) that you have
worked for the Employer and any other legally related Employer. If you terminate
your employment with the Employer, then you may be able to receive a portion or
all of your Account based on your vested percentage. You are always 100% vested
in your own Employee pretax Account, rollover Account and earnings thereon.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 9
<PAGE> 14
- --------------------------------------------------------------------------------
VI. PARTICIPANT LOANS
- --------------------------------------------------------------------------------
A. LOANS
Loans from the Plan may be available, if approved by the Plan Administrator, on
amounts in your Account based upon the following procedures.
(1). LOAN APPLICATION
All Plan loans shall be administered by the Plan Administrator.
Application for loans shall be made to the Plan Administrator on
forms available from the Plan Administrator. You may only apply for
one loan each Plan Year. The Plan Administrator is responsible for
approving or denying participant loans. Loans will be allowed for any
purpose. You will incur a set-up fee and annual maintenance fee for
your loan.
(2). LOAN AMOUNT
The minimum loan is $1,000. The maximum amount is the lesser of
one-half of your vested Account balance or $50,000 reduced by the
highest outstanding loan balance in your Account during the prior
twelve month period. Your vested Account balance will be used as
collateral for any loan.
(3). NUMBER OF LOANS
You may only have one loan outstanding at any given time. If
you have an existing loan you may not apply for another loan until
the existing loan is paid in full. You may not refinance an existing
loan or obtain a second loan for the purpose of paying off the
existing loan.
(4). INTEREST RATE
All loans shall bear a reasonable rate of interest as
determined by the Plan Administrator based on the prevailing interest
rates charged by persons in the business of lending money for loans
which would be made under similar circumstances.
(5). MATURITY OF LOAN
All loans must be repaid in level payments on at least a
quarterly basis over a five year period unless it is for the purchase
of your principal residence. Then the loan may be repaid over a ten
year period.
(6). SOURCE OF LOAN PROCEEDS
Loan proceeds will be withdrawn from available contribution
sources and investment options in the order established by the
Trustee. Consult your Plan Administrator for more information.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 10
<PAGE> 15
(7). DEFAULT OR TERMINATION OF EMPLOYMENT
The Plan Administrator shall treat a loan in default if any
scheduled repayment remains unpaid more than 90 days or there is an
outstanding principal existing on a loan after the last scheduled
repayment date. Upon default, death or termination of employment, the
entire outstanding principal and accrued interest shall be
immediately due and payable. Additionally, you will be deemed to have
received a taxable distribution from the Plan.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 11
<PAGE> 16
- --------------------------------------------------------------------------------
VII. HARDSHIP WITHDRAWALS
- --------------------------------------------------------------------------------
If approved by the Plan Administrator, you may withdraw your Employee pretax
contributions, and rollover contributions is applicable, to satisfy any of the
following immediate and heavy financial needs: (1) unreimbursed medical expenses
for you, your spouse, children or dependents; (2) the purchase of your principal
residence; (3) to prevent your eviction from or foreclosure on your principal
residence; or (4) to pay for post-secondary education expenses for you, your
spouse, children or dependents for the next twelve months.
In accordance with Internal Revenue Service regulations you must first exhaust
all other assets available to you prior to obtaining a hardship withdrawal. This
includes obtaining a loan from this Plan and any other qualified plan maintained
by your Employer. Your Employee pretax contributions to this Plan and any other
Employer-sponsored qualified or non-qualified plan will be suspended for twelve
months after your receipt of the hardship withdrawal. The minimum hardship
withdrawal is $1,000.
The Plan Administrator will provide you with the appropriate form upon request.
Hardship withdrawals will be withdrawn from available investment options in the
order established by the Trustee. Consult your Plan Administrator for more
information.
You will be taxed on the amount of any hardship withdrawal under Internal
Revenue Code rules and a 10% IRS premature distribution penalty tax may also be
imposed on your withdrawal. Your hardship withdrawal will also be subject to the
mandatory 20% Federal income tax withholding. You should refer to the 'Total
Distribution of Benefits' section of this SPD.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 12
<PAGE> 17
- --------------------------------------------------------------------------------
VIII. IN-SERVICE WITHDRAWALS
- --------------------------------------------------------------------------------
A. WITHDRAWALS AFTER AGE 59-1/2
If you have reached the age 59-1/2 then you may elect to withdraw all or a
portion of your entire Account while you are still employed by your Employer.
The Plan Administrator will provide you with the appropriate form upon request.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 13
<PAGE> 18
- --------------------------------------------------------------------------------
IX. TOTAL DISTRIBUTION OF BENEFITS
- --------------------------------------------------------------------------------
A. BENEFIT ON TERMINATION OF EMPLOYMENT
If you terminate your employment with your Employer, then you may elect to
receive a distribution of your vested Account balance from the Plan. You should
contact the Plan Administrator to obtain the appropriate form to complete to
request a distribution.
B. DEATH BENEFIT
If you die while a Participant in the Plan or before any or all benefits are
paid to you, then your beneficiary or beneficiaries will be entitled to receive
your Account balance. You may designate a beneficiary or beneficiaries on a
designation form. The completed beneficiary designation form must be filed with
the Plan Administrator. If you are married and want to designate someone other
than your spouse as your primary beneficiary, then your spouse must consent to
this designation by signing the form. His/her signature must be witnessed by a
Plan representative or a Notary Public. You should contact the Plan
Administrator to obtain a beneficiary designation form.
C. RETIREMENT BENEFIT
You do not have to terminate your employment with your Employer just because you
attain your normal retirement age of 65.
D. PAYMENT AND FORM OF BENEFITS
The Plan is designed to provide you with benefits at the time of your
retirement. However if your employment with your Employer is terminated because
of death, disability, retirement, or for any other reason, then you may request
a distribution of your vested Account balance upon proper written direction
delivered to the Plan Administrator. You should contact the Plan Administrator
to obtain the appropriate form to request a distribution and a copy of the
'Special Tax Notice Regarding Plan Payments'. Even if your employment with the
Employer has not terminated, the Plan Administrator will direct the Trustee to
begin distributions to you no later than April 1 of the calendar year after you
attain the age of 70-1/2.
The Plan Administrator will direct the Trustee to make a lump sum distribution
to you if you terminate your employment and your vested Account balance is less
then $3,500 regardless of whether you request the distribution. Your written
consent will be required for any distribution before age 65 if your vested
Account balance is greater than $3,500. Properly authorized distribution
requests will be processed by the Trustee on a monthly basis. The following form
of benefit is available under the Plan:
- LUMP SUM DISTRIBUTIONS
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 14
<PAGE> 19
Your entire vested Account balance will be paid to you within
one calendar year.
Distributions will be subject to the following rules:
(1). CASH DISTRIBUTION
Any taxable distribution paid by the Trustee directly to you
will be subject to mandatory Federal income tax withholding of 20% of
the requested distribution. You will receive 80% of the taxable
distribution and the other 20% will be sent to the IRS as Federal
income tax withholding for that year. You cannot elect out of this
tax withholding. This withholding is not a penalty but rather a
prepayment of your Federal income taxes.
You may rollover the taxable distribution you receive to an IRA
or your new employer's qualified Plan, if it accepts rollover
contributions. However, you must rollover this distribution within 60
DAYS after receipt. You will not be taxed on any amounts rolled over
directly into the IRA or your new employer's qualified Plan until
those amounts are later distributed to you.
(2). DIRECT ROLLOVER DISTRIBUTION
As an alternative to a cash distribution, you may request that
your entire distribution be rolled directly into a Fidelity IRA, a
non-Fidelity IRA or to your new employer's qualified plan if it
accepts rollover contributions. Federal income taxes will not be
withheld on any direct rollover distribution.
(a). Rollover to a Fidelity IRA - You must complete a Fidelity
'SEE' Rollover IRA application. Attached this application to the
completed Payout form. After authorizing your distribution, the
Plan Administrator will forward this material to the Trustee. Your
vested Account balance will be transferred to a Fidelity Rollover
IRA.
(b). Rollover to a Non-Fidelity IRA - You must complete a Payout
form and indicate the name and address of the custodian or
trustee, and Account number for your IRA. After authorizing your
distribution, the Plan Administrator will forward the form to the
Trustee. A check will be issued by the Trustee payable to the IRA
custodian or trustee for your benefit. The check will contain the
notation 'Direct Rollover' and it will be mailed directly to you.
You will be responsible for forwarding it on to the custodian or
trustee. You must provide the Plan Administrator with complete
information to facilitate your direct rollover distribution.
(c). Rollover to your New Employer's Qualified Plan - You should
check with your new employer to determine if its plan will accept
rollover contributions. If allowed, then you must complete a
Payout form and indicate the name, address and plan number of your
new employer's qualified plan. After authorizing your
distribution, the Plan Administrator will forward the form to the
Trustee. A check will be issued by the Trustee
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 15
<PAGE> 20
payable to the trustee of your new employer's qualified plan. The
check will contain the notation 'Direct Rollover' and it will be
mailed directly to you. You will be responsible for forwarding it
on to the new trustee. You must provide the Plan Administrator
with complete information to facilitate your direct rollover
distribution.
(3). COMBINATION CASH DISTRIBUTION AND DIRECT ROLLOVER DISTRIBUTION
You may request that part of your distribution be paid directly to
you and the balance to be rolled into an IRA or your new Employer's
qualified Plan. Any cash distribution you receive will be subject to
the Federal income tax withholding rules referred to in (1). Any
direct rollover distribution will be made in accordance with (2).
You will pay income tax on the amount of any taxable distribution
you receive from the Plan unless it is rolled into an IRA or your
new employer's qualified Plan. A 10% IRS premature distribution
penalty tax may also apply to your taxable distribution unless it
is rolled into an IRA or another qualified plan. The 20% Federal
income tax withheld under this section may not cover your entire
income tax liability. Consult with your tax advisor for further
details.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 16
<PAGE> 21
- --------------------------------------------------------------------------------
X. MISCELLANEOUS INFORMATION
- --------------------------------------------------------------------------------
A. BENEFITS NOT INSURED BY PBGC
Benefits provided by the Plan are not insured or guaranteed by the Pension
Benefit Guaranty Corporation (PBGC) under Title IV of the Employee Retirement
Income Security Act of 1974 (ERISA) because the insurance provisions under ERISA
are not applicable to this particular Plan. You will only be entitled to the
vested benefits in your Account based upon the provisions of the Plan.
B. NONTRANSFERABLE ACCOUNT
Your Account may not be transferred, assigned or used as collateral for a loan
outside of this Plan except to the extent required by law. Creditors may not
attach, garnish or otherwise interfere with your Account balance except in the
case of a Qualified Domestic Relations Order (QDRO). A QDRO is a special order
issued by the court in a divorce, child support or similar proceeding. In this
situation, your spouse (or former spouse) or someone other than you or your
beneficiary, may be entitled to a portion or all of your Account balance.
C. PLAN AMENDMENT
Certain provisions of the Plan are subject to amendment by the Employer that may
directly or indirectly modify certain Plan rights and benefits. Any amendment
changing the vesting schedule cannot reduce the existing vested percentage of
your Account balance derived from Employer contributions. If you have three or
more years of service with the Employer and the vesting schedule is amended then
you will be given a choice to have the vested percentage of future Employer
contributions made to your Account computed under the new or the old vesting
schedule. The Plan Administrator will provide you with the appropriate
information to make an informed decision if the Plan's vesting schedule is
amended.
D. PLAN TERMINATION
The Employer has no legal or contractual obligation to make annual contributions
to or to continue the Plan. With the approval of the Board of Directors, the
Employer may at any time reduce or suspend its contributions, if applicable. In
the event the Plan should terminate, the Plan Administrator will facilitate the
distribution of Account balances under the provisions of the Plan and Trust
Agreement until all assets have been distributed by the Trustee. Each
participant in the Plan upon Plan termination will automatically become 100%
vested in your Account balance. While the Employer intends to continue the Plan,
it reserves the right to change or terminate the Plan at any time as
circumstances may dictate.
E. INTERPRETATION OF PLAN
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 17
<PAGE> 22
The Plan Administrator has the power and discretionary authority to construe the
terms of the Plan and to determine all questions that arise under it. Such power
and authority include, for example, the administrative discretion necessary to
resolve issues with respect to an Employee's eligibility for benefits, credited
services, disability, and retirement, or to interpret any other term contained
in Plan documents. The Plan Administrator's interpretations and determinations
are binding on all participants, employees, former employees, and their
beneficiaries.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 18
<PAGE> 23
- --------------------------------------------------------------------------------
XI. INTERNAL REVENUE SERVICE TEST
- --------------------------------------------------------------------------------
A. NON-DISCRIMINATION TEST
Your Plan is intended to qualify under Section 401(k) of the Internal Revenue
Code. The Internal Revenue Service requires the Plan to meet special
non-discrimination test as of the last day of each Plan Year. This test is
intended to ensure that there is a fair level of participation by all eligible
participants.
In order to meet the test, the Employer encourages participation from all
eligible Employees. Depending upon the results of the test, the Plan
Administrator may have to refund Employee pretax contributions contributed to
the Plan to certain highly compensated employees, as determined under Internal
Revenue Service regulations. Employee pretax contributions will be refunded on a
prorata basis from each investment option. You will be notified by the Plan
Administrator if any of your contributions will be refunded to you.
B. TOP HEAVY TEST
The Plan is subject to strict Internal Revenue Service rules. One of these rules
involves a 'Top-Heavy' test. Each Plan Year, the Plan Administrator tests this
Plan together with all other Employer-sponsored qualified plans to make sure
that no more then 60% of the benefits are for 'Key' Employees. If this Plan is
Top-Heavy, then the Employer may be required to make minimum annual
contributions to this Plan for you if you are employed as of Plan Year-end.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 19
<PAGE> 24
- --------------------------------------------------------------------------------
XII. PARTICIPANT RIGHTS
- --------------------------------------------------------------------------------
A. CLAIMS
(1). CLAIM PROCEDURE
You or your Beneficiary should make a request to obtain any
benefits you are entitled to under the Plan in the event of your
termination of employment. The Plan Administrator will provide you
with a request form to complete. Your request will be considered a
claim and will be subject to a full and fair review by the Plan
Administrator. If your claim is wholly or partially denied by the
Plan Administrator then you may appeal it in accordance with the
claim review procedure.
(2). CLAIM REVIEW PROCEDURE
You or your Beneficiary may file a claim for benefits under the
Plan with the Plan Administrator on a form supplied by the
Employer. The Plan Administrator will provide you with written
notice of the disposition of your claim within 90 days after it
has been filed (or, in certain circumstances, within 180 days). In
the event the claim is denied then the reasons shall be disclosed
and/or provisions of the Plan shall be cited as appropriate.
You or your Beneficiary upon request to the Plan Administrator may
appeal the denial of your claim. If you wish further consideration
of your position then you must provide the Plan Administrator with
a written request for a hearing. You must also provide a detailed
written statement of your position for your claim and file it with
the Plan Administrator no later than 60 days after requesting a
hearing. The Plan Administrator shall make a decision on your
claim and it will be communicated to you in writing within 60 days
(or, in certain circumstances, within 120 days). It will advise
you if you have any right to appeal the decision.
B. STATEMENT OF ERISA RIGHTS
As a participant in this Plan you are entitled to certain rights and protections
under ERISA that provides that all Plan Participants shall be entitled to the
following:
- Examine, without charge, at the Plan Administrator's office
and at other specified locations such as work sites and union
halls, all Plan Documents, including insurance contracts,
collective bargaining agreements and copies of all documents filed
by the Plan with the U.S. Department of Labor, such as detailed
annual reports and Plan descriptions.
- Obtain copies of all Plan Documents and other Plan information
upon written request to the Plan Administrator; the Plan
Administrator may make a reasonable charge for the copies.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 20
<PAGE> 25
- Receive a summary of the Plan's annual financial report. The
Plan Administrator is required by law to furnish you with a copy
of this summary annual report.
- Obtain a statement of your Account under the Plan. You must
direct this request in writing to the Plan Administrator. You may
request a statement only once a year and the Plan must provide the
statement free of charge.
In addition to creating rights for Plan Participants, ERISA imposes duties upon
the people who are responsible for the operation of the employee benefit
plan. The people who operate your Plan, called 'fiduciaries' of the Plan,
have a duty to do so prudently and in the interest of you and other Plan
Participants and beneficiaries. No one, including your Employer, your union,
or any other person, may fire you or otherwise discriminate against you in
any way to prevent you from obtaining a pension benefit or exercising your
rights under ERISA.
If your claim for a benefit is denied, in whole or in part, you must receive a
written explanation of the reason for the denial. You have the right to have
the Plan Administrator review and reconsider your claim. Under ERISA, there
are steps you can take to enforce the above rights. For instance, if you
request materials from the Plan and do not receive them within 30 days, you
may file suit in a federal court. In such a case, the court may require the
Plan Administrator to provide the materials and pay you up to $100 a day
until you receive the materials, unless the materials were not sent for
reasons beyond the control of the Plan Administrator.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or federal court. If it should happen
that Plan fiduciaries misuse the Plan's money, or if you are discriminated
against for asserting your rights, you may seek assistance from the U.S.
Department of Labor, or you may file suit in a federal court. If you are
successful, the court may order the person you have sued to pay these costs
and fees. If you lose, the court may order you to pay these costs and fees;
for example, if it finds your claim frivolous. If you have any questions
about your Plan, you should contact the Plan Administrator. If you have any
questions about your rights under ERISA, you should contact the nearest area
office of the U.S. Labor-Management Services Administration, Department of
Labor.
- --------------------------------------------------------------------------------
Excite, Inc. 401(k) Plan 21
<PAGE> 1
EXHIBIT 10.09
SECURED FULL RECOURSE PROMISSORY NOTE
Palo Alto, California
$64,435.00 March 15, 1996
1. OBLIGATION. In exchange for the issuance to the undersigned
("Purchaser") of 12,887 shares (the "Shares") of the Common Stock of Excite,
Inc., a California corporation (the "Company"), receipt of which is hereby
acknowledged, Purchaser hereby promises to pay to the order of the Company on or
before April 1, 2001, at the Company's principal place of business at 1091 N.
Shoreline Blvd., Suite 200, Mountain View, California 94043, or at such other
place as the Company may direct, in installments as hereinafter set forth the
principal sum of Sixty-Four Thousand Four Hundred Thirty Five Dollars
($64,435.00) together with interest compounded semi-annually on the unpaid
principal at the rate of Five and Thirty Eight Hundredths Percent (5.38%), which
rate is not less than the minimum rate established pursuant to Section 1274(d)
of the Internal Revenue Code of 1986, as amended, on the earliest date on which
there was a binding contract in writing for the purchase of the Shares;
provided, however, that the rate at which interest will accrue on unpaid
principal under this Note will not exceed the highest rate permitted by
applicable law. The principal sum will be payable in sixty (60) successive
monthly installments of One Thousand Seventy Three Dollars and Ninety Two Cents
($1,073.92) each, each due and payable on the first day of each calendar month
beginning April 1996 and all payments of accrued interest will be payable with
each installment of principal.
2. SECURITY. Payment of this Note is secured by a security interest in
the Shares granted to the Company by Purchaser under a Stock Pledge Agreement
dated of even date herewith between the Company and Purchaser (the "Pledge
Agreement"). This Note is being tendered by Purchaser to the Company as the
purchase price of the Shares pursuant to that certain Stock Option Exercise
Agreement between Purchaser and the Company dated of even date with this Note
(the "Purchase Agreement").
3. DEFAULT; ACCELERATION OF OBLIGATION. Purchaser will be deemed to be
in default under this Note and the principal sum of this Note, together with all
interest accrued thereon, will immediately become due and payable in full: (a)
upon Purchaser's failure to make any payment when due under this Note; (b) in
the event Purchaser is Terminated (as defined in the Company's 1995 Equity
Incentive Plan) for any reason and the Company exercises its Repurchase Option
to repurchase all or some of the Shares under the Purchase Agreement; (c) upon
any transfer of any of the Shares (except a transfer to the Company); (d) upon
the filing by or against Purchaser of any voluntary or involuntary petition in
bankruptcy or any petition for relief under the federal bankruptcy code or any
other state or federal law for the relief of debtors; or (e) upon the execution
by Purchaser of an assignment for the benefit of creditors or the appointment of
a receiver, custodian, trustee or similar party to take possession of
Purchaser's assets or property.
4. REMEDIES ON DEFAULT. Upon any default of Purchaser under this Note,
the Company will have, in addition to its rights and remedies under this Note
and the Pledge
<PAGE> 2
Agreement, full recourse against any real, personal, tangible or intangible
assets of Purchaser, and may pursue any legal or equitable remedies that are
available to it.
5. PREPAYMENT. Prepayment of principal and/or interest due under this
Note may be made at any time without penalty. Unless otherwise agreed in writing
by the Company, all payments will be made in lawful tender of the United States
and will be applied first to the payment of accrued interest, and the remaining
balance of such payment, if any, will then be applied to the payment of
principal. If Purchaser prepays all or a portion of the principal amount of this
Note, the Shares paid for by the portion of principal so paid will continue to
be held in pledge under the Pledge Agreement to serve as independent collateral
for the outstanding portion of this Note for the purpose of commencing the
holding period under Rule 144(d) of the Securities and Exchange Commission with
respect to other Shares purchased with this Note unless Purchaser notifies the
Company in writing otherwise and the Company consents to release of the Shares
from the Pledge Agreement.
6. GOVERNING LAW; WAIVER. The validity, construction and performance of
this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
7. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
8. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (A) THE PURCHASE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (B) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date and
year first above written.
Brett Bullington /s/ Brett Bullington
- ------------------------------------- ---------------------------------------
Purchaser's Name [type or print] Purchaser's Signature
[SIGNATURE PAGE TO EXCITE, INC., SECURED FULL
RECOURSE PROMISSORY NOTE]
2
<PAGE> 1
EXHIBIT 10.10
STOCK PLEDGE AGREEMENT
This Agreement is made and entered into as of March 15, 1996, between
EXCITE, INC., a California corporation (the "Company"), and Brett Bullington
("Pledgor").
R E C I T A L S
A. In exchange for Pledgor's Secured Full Recourse Promissory Note to
the Company of even date herewith (the "Note"), the Company has issued and sold
to Pledgor 12,887 shares of its Common Stock (the "Shares") pursuant to the
terms and conditions of that Stock Option Exercise Agreement between the Company
and Pledgor of even date herewith (the "Purchase Agreement").
B. Pledgor has agreed that repayment of the Note will be secured by the
pledge of the Shares pursuant to this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST. Pursuant to the provisions of the
California Commercial Code, Pledgor hereby grants to the Company, and the
Company hereby accepts, a first and present security interest in the Shares as
collateral to secure the payment of Pledgor's obligation to the Company under
the Note. Pledgor herewith delivers to the Company Common Stock certificate No.
68, representing all the Shares, together with one stock power for each
certificate in the form attached as an Exhibit to the Purchase Agreement, duly
executed (with the date and number of shares left blank) by Pledgor and
Pledgor's spouse, if any. For purposes of this Agreement, the Shares pledged to
the Company hereby, together with any additional collateral pledged pursuant to
Sections 5 and 6 hereof, will hereinafter be collectively referred to as the
"Collateral." Pledgor agrees that the Collateral pledged to the Company will be
deposited with and held by the Escrow Holder (as defined in the Purchase
Agreement) and that, notwithstanding anything to the contrary in the Purchase
Agreement, for purposes of carrying out the provisions of this Agreement, Escrow
Holder will act solely for the Company as its agents.
2. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants to the Company that Pledgor has good title (both record and
beneficial) to the Collateral, free and clear of all claims, pledges, security
interests, liens or encumbrances of every nature whatsoever, and that Pledgor
has the right to pledge and grant the Company the security interest in the
Collateral granted under this Agreement. Pledgor further agrees that, until the
entire principal sum and all accrued interest due under the Note has been paid
in full, Purchaser will not, without the Company's prior written consent, (i)
sell, assign or transfer, or attempt to sell, assign or transfer, any of the
Collateral, or (ii) grant or create, or attempt to grant or create, any security
interest, lien, pledge, claim or other encumbrance with respect to any of the
Collateral.
3. RIGHTS ON DEFAULT. In the event of default (as defined in the Note)
by Pledgor under the Note, the Company will have full power to sell, assign and
deliver the whole or any part of the Collateral at the broker's exchange or
elsewhere, at public or private sale, at the option
<PAGE> 2
of the Company, in order to satisfy any part of the obligations of Pledgor now
existing or hereinafter arising under the Note. On any such sale, the Company or
its assigns may purchase all or any part of the Collateral. In addition, at its
sole option, the Company may elect to retain all the Collateral in full
satisfaction of Pledgor's obligation under the Note, in accordance with the
provisions and procedures set forth in the California Commercial Code.
4. ADDITIONAL REMEDIES. The rights and remedies granted to the Company
herein upon default under the Note will be in addition to all the rights, powers
and remedies of the Company under the California Commercial Code and applicable
law and such rights, powers and remedies will be exercisable by the Company with
respect to all of the Collateral. Pledgor agrees that the Company's reasonable
expenses of holding the Collateral, preparing it for resale or other
disposition, and selling or otherwise disposing of the Collateral, including
attorneys' fees and other legal expenses, will be deducted from the proceeds of
any sale or other dispositions and will be included in the amounts Pledgor must
tender to redeem the Collateral. All rights, powers and remedies of the Company
will be cumulative and not alternative. Any forbearance or failure or delay by
the Company in exercising any right, power or remedy hereunder will not be
deemed to be a waiver of any such right, power or remedy and any single or
partial exercise of any such right, power or remedy hereunder will not preclude
the further exercise thereof.
5. DIVIDENDS; VOTING. All dividends hereinafter declared on or payable
with respect to the Collateral during the term of this pledge (excluding only
ordinary cash dividends, which will be payable to Pledgor so long as Pledgor is
not in default under the Note) will be immediately delivered to the Company to
be held in pledge under this Agreement. Notwithstanding this Agreement, so long
as Pledgor owns the Share and is not in default under the Note, Pledgor will be
entitled to vote any share comprising the Collateral, subject to any proxies
granted by Pledgor.
6. ADJUSTMENTS. In the event that during the term of this pledge, any
stock dividend, reclassification, readjustment, stock split or other change is
declared or made with respect to the Collateral, or if warrants or any other
rights, options or securities are issued in respect of the Collateral, then all
new, substituted and/or additional shares or other securities issued by reason
of such change or by reason of the exercise of such warrants, rights, options or
securities, will be immediately pledged to the Company to be held under the
terms of this Agreement in the same manner as the Collateral is held hereunder.
7. RIGHTS UNDER PURCHASE AGREEMENT. Pledgor understands and agrees that
the Company's rights to repurchase the Collateral under the Purchase Agreement,
if any, will continue for the periods and on the terms and conditions specified
in the Purchase Agreement, whether or not the Note has been paid during such
period of time, and that to the extent that the Note is not paid during such
period of time, the repurchase by the Company of the Collateral may be made by
way of cancellation of all or any part of Pledgor's indebtedness under the Note.
8. REDELIVERY OF COLLATERAL. Upon payment in full of the entire
principal sum and all accrued interest due under the Note, and subject to the
terms and conditions of the Purchase Agreement, the Company will immediately
redeliver the Collateral to Pledgor and this
2
<PAGE> 3
Agreement will terminate; provided, however, that all rights of the Company to
retain possession of the Shares pursuant to the Purchase Agreement will survive
termination of this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit of
the respective heirs, personal representatives, successors and assigns of the
parties hereto.
10. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by and
construed in accordance with the internal laws of the State of California,
excluding that body of law relating to conflicts of law. Should one or more of
the provisions of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions nevertheless will remain effective and
will be enforceable.
11. MODIFICATION; ENTIRE AGREEMENT. This Agreement will not be amended
without the written consent of both parties hereto. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings related to such
subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
EXCITE, INC. PLEDGOR
By: /s/ George Bell /s/ Brett Bullington
---------------------------------- ---------------------------------------
(Signature)
GEORGE BELL BRETT BULLINGTON
- ------------------------------------- ---------------------------------------
(Please print name) (Please print name)
PRESIDENT
- -------------------------------------
(Please print title)
[SIGNATURE PAGE TO EXCITE, INC. STOCK PLEDGE AGREEMENT]
3
<PAGE> 1
EXHIBIT 10.15
November 15, 1996
Mr. Robert C. Hood
911 Camille Lane
Alamo, CA 94507
Dear Bob:
I've enjoyed the chance to get to know you over the past month, and I'm
convinced that you can make a vital contribution to Excite at a crucial time in
our evolution. Therefore, it's my pleasure to offer you the position of Chief
Administrative Officer, and a member of the company's Executive Committee,
reporting directly to me. Your principal duties will consist of overseeing
Finance, Administration, Facilities, Accounting, Human Resources, General
Counsel, the financial aspects of Investor Relations, MIS and other duties that
we may agree on after you have settled into and organized these areas to our
mutual satisfaction. In addition, I look to you for leadership in planning,
measurements by which to judge the company's progress, infusing the culture with
a greater sense of fiscal discipline and prudent decision making, and providing
a general sense of predictability for Wall St. and other important
constituencies.
Your starting salary will be $175,000 annually, payable semi-monthly. This will
be supplemented by a bonus plan in 1997, in which your bonus target will be 20%
based on profit-oriented goals. The bonus will likely consist of cash and/or
options; a formal bonus program for Senior Management is not yet in place but
will be for 1997. In addition to your salary and bonus, I will recommend that
the Compensation Committee of the Board approve an employee stock option grant
of 200,000 shares of Excite's Common Stock. The exercise price of the
non-qualified options would be fair market value, as determined by the
Compensation Committee at the time of the grant. The options will be subject to
vesting at a rate of one-fourth (1/4) on the first anniversary of employment and
thereafter at a rate of one-forty eighths (1/48) each full succeeding month over
a period of three years.
The option granted by Excite is subject to the Compensation Committee's
approval, it is not a promise of compensation, and is not intended to create any
obligation on the part of Excite. Further details on Excite's Option Plan and
any specific grant to you will be provided upon approval of such grant by the
Compensation Committee.
In the event that Excite is acquired before you are fully vested, and further
that the acquiring company does not seek to employ you, then you will be
entitled to receive $175,000 as a consultant fee from Excite, which shall
entitle Excite to call on your consulting services for a period of one year
after Excite is acquired.
You will be eligible to participate in Excite's group medical, dental, and life
insurance plans, 401K and employee stock purchase plans, offered to all full
time employees. If you accept this offer of employment, you will be given
benefit plan documents which will describe more fully these and other benefits
of your employment with Excite.
<PAGE> 2
Mr. Robert C. Hood
November 15, 1996
Page 2
If you accept this offer, your employment with Excite shall be "at will" which
means that it is not for any specified period of time and can be terminated by
yourself or Excite for any or no particular reason or cause and at any time with
or without advance notice. Even though your job duties, title, compensation and
benefits, as well as Excite's human resources policies and procedures, may
change from time to time during your tenure with Excite the "at will" nature of
your employment is one aspect which may not be changed, except in an express
writing signed by the President of Excite.
If you are terminated for reasons other than cause, you shall receive six months
of base salary, as defined herein, subject to non-compete and other agreements.
Any representations contrary to those contained in this letter which may have
been made to you are superseded by this offer. If you accept this offer, the
terms described in this letter constitute the terms of your employment with
Excite.
This offer of employment is contingent upon receipt of satisfactory proof of
identification and work authorization as required by the Immigration Reform and
Control Act, the return of a signed copy of this letter indicating your
acceptance of our offer, and receipt of a signed copy of Excite's Employee
Invention Agreement and Confidentiality Agreement on the first day of your
employment. I would appreciate your confirming the acceptance of this offer by
signing on the space provided. As you know, we are much in need of the skills
you would bring to the job, and I would appreciate knowing your reply to this
offer no later than November 19, 1996.
Let me close by reaffirming my belief that the skills and background you bring
to Excite will be critical to our success, with your help and leadership, we can
build Excite into a tremendous success. I look forward to you joining Excite.
Sincerely,
/s/ George Bell
- ---------------------
George Bell
President and CEO
Excite, Inc.
I accept the offer of employment with Excite:
Signed: /s/ Robert C. Hood Date: 12-02-96
--------------------------- -----------
Robert Hood
cc: Clifford Scheffel
Coopers & Lybrand
<PAGE> 1
EXHIBIT 10.16
September 23, 1996
William White Jr.
25 Barbara Lane
Menlo Park, CA 94025
Dear Bill:
I'm pleased to offer you a position as Senior Vice President, Marketing at
Excite Inc., reporting to me, with an employment start date of September 24,
1996. I understand your prior vacation commitments and grant your request for an
unpaid leave of absence ending on your first day in the office, October 16,
1996.
The offer is contingent upon our obtaining:
1. documentation of U.S. citizenship or authorized alien work status,
2. return of a signed copy of this letter indicating your acceptance of our
offer, and
3. receipt of a signed copy of Excite's Employee Invention Agreement and
Confidentiality Agreement on the first day of your employment.
Your compensation will consist of a base salary of $160,000.00 per year, and a
sign-on bonus of $15,000.00. Additionally we will work with you to maintain this
compensation level once a formal bonus plan is put in place. Management will
recommend that the Board of Directors approve a grant to you of stock options
for 150,000 shares of Excite's Common Stock. The exercise price of the options
would be the fair market value, as determined by the Board at the time of the
grant. The options would be subject to vesting at a rate of one-fourth (1/4) on
the first anniversary of employment and thereafter at rate of one-forty eighths
(1/48) each full succeeding month over a period of three years. However, the
grant of such options by Excite is subject to the Board's approval and this is
not a promise of compensation, and is not intended to create any obligation on
the part of Excite. Further details on Excite's Option Plan and any specific
grant to you will be provided upon approval of such grant by the Board.
Additionally, Excite will provide 3 months of base salary if you are terminated
by the company due to unforeseen business conditions during the first 12 months
of employment.
You will be eligible to participate in Excite's group medical, dental, and life
insurance plans offered to all full time employees. If you choose to participate
in these plans, your share of the premium(s), if any, will be deducted from your
paycheck. If you accept this offer of employment, you will be given benefit plan
documents which will describe more fully these and other benefits of your
employment with Excite.
<PAGE> 2
William White Jr.
September 23, 1996
Page 2
If you accept this offer, your employment with Excite shall be "at will" which
means that it is not for any specified period of time and can be terminated by
yourself or Excite for any or no particular reason or cause and at anytime with
or without advance notice. Even though your job duties, title, compensation and
benefits, as well as Excite's personnel policies and procedures, may change from
time to time during your tenure with Excite, the "at will" nature of your
employment is one aspect which may not be changed, except in an express writing
signed by the President of Excite.
Any representations contrary to those contained in this letter which may have
been made to you are superseded by this offer. If you accept this offer, the
terms described in this letter constitute the terms of your employment with
Excite.
We are looking forward to having you with us as of October 16, 1996. If you
accept the above-described offer, please return to me a signed copy of this
letter. This offer will expire unless your acceptance is actually received in
Excite's offices by the close of business on October 15, 1996.
If you have any questions about the contents of this letter, or employment at
Excite, please feel free to contact me.
Sincerely,
/s/ George Bell
---------------------
George Bell
President and CEO
I accept the offer of employment with Excite pursuant to the terms and
conditions set forth in this letter.
Signed: /s/ William B. White Jr. Date: 10/14/96
---------------------------- ------------
William White Jr.
<PAGE> 1
EXHIBIT 10.17
November 21, 1996
Mr. Jed Simmons
Onslow Gardens
London, England
U.K.
Dear Jed:
I appreciate the time you have spent getting to know Excite, an the opportunity
it represents for all of us, and I look forward with much anticipation to your
contributing to our future in a critical and senior role. Therefore, it's my
pleasure to offer you a position as Managing Director, Excite International,
reporting directly to me. You will also be a member of the Executive Committee
of the company and be expected to contribute to the development of our business
strategies on a regular basis.
Your starting base salary will be $210,000 per year, payable semi-monthly. You
will also be eligible for an annual bonus, targeted as 20-30% of your annual
base salary, to be formalized when we approve the company's 1997 plan. The bonus
will be comprised principally on your achievements against an agreed-upon set of
goals for Excite International, and on Excite Inc.'s performance overall.
Additionally, Excite agrees to re-imburse you for up to $20,000 of moving
expenses, for which you shall provide Excite with receipts for such services
rendered. Also, Excite agrees to pay for the U.K. portion of your income taxes,
and any related fees, such that you are left in no worse position than if you
had been a California-based employee of Excite drawing the base salary defined
above. Excite will be entitled to keep any refund of your U.K. taxes annually.
Excite will also provide round trip business class tickets for you and each
member of your family to make one trip annually back to the U.S.A. Lastly,
Excite will provide up to $70,000 annually for allowances covering Housing and
Utilities, Goods and Services and other such expenses, for which you will make
best faith efforts to provide Excite with receipts for such expenses. Your
Housing and Utilities, Goods and Services allowance shall be paid in
quarterly installments. Lastly, in 1998, we shall agree to discuss the
possibility of a school allowance made up of the difference between a
California-based private school tuition and a school tuition of the same calibre
in the U.K.
In addition to your base salary, target bonus and expense re-imbursement as
outlined above, the management will recommend that the Compensation Committee of
the Board approve an employee stock option grant of 225,000 shares of Excite's
Common Stock. The exercise price of the non-qualified options would be fair
market value, as determined by the Compensation Committee at the time of the
grant. The non-qualified options will be subject to vesting at a rate of
one-fourth (1/4) on the first anniversary of employment and thereafter at a rate
of one-forty eighths (1/48) each full succeeding month over a period of three
years. However, the option granted by Excite is subject to
<PAGE> 2
Mr. Jed Simmons
November 21, 1996
Page 2
the Compensation Committee's approval, it is not a promise of compensation, and
is not intended to create any obligation on the part of Excite. Further details
on Excite's Option Plan and any specific grant to you will be provided upon
approval of such grant by the Compensation Committee. I will also discuss other
forms of equity participation you may benefit from if we proceed to set up Joint
Ventures, new companies and spin-outs in Europe and other territories.
You will be eligible to participate in Excite's group medical, dental, and life
insurance plans offered to all full time employees. If you accept this offer of
employment, you will be given benefit plan documents which will describe more
fully these and other benefits of your employment with Excite. I understand that
we must investigate benefit options for you as an American living in England,
and our intent is to leave you no worse off in London than you would have been
as a California-based employee of Excite.
Excite shall also assist you in the completion of your work visa and other
issues related to your employment in the U.K.
If you accept this offer, your employment with Excite shall be "at will" which
means that it is not for any specified period of time and can be terminated by
yourself or Excite for any or no particular reason or cause and at any time with
or without advance notice. Even though your job duties, title, compensation and
benefits, as well as Excite's human resources policies and procedures, may
change from time to time during your tenure with Excite, the "at will" nature of
your employment is one aspect which may not be changed, except in an express
writing signed by the President of Excite.
If you are terminated for reasons other than cause or egregious behavior, Excite
agrees to pay you six months base salary, provided that if Excite makes a
strategic decision to cease investment in its overseas development, you shall
still be entitled to such severance payment.
Any representations contrary to those contained in this letter which may have
been made to you are superseded by this offer. If you accept this offer, the
terms described in this letter constitute the terms of your employment with
Excite.
This offer of employment is contingent upon receipt of satisfactory proof of
identification and work authorization as required by the Immigration Reform and
Control Act, the return of a signed copy of this letter indicating your
acceptance of our offer, and receipt of a signed copy of Excite's Employee
Invention Agreement and Confidentiality Agreement on the first day of your
employment. I would appreciate your confirming the acceptance of this offer by
signing on the space provided.
<PAGE> 3
Mr. Jed Simmons
November 21, 1996
Page 3
Let me close by reaffirming my belief that you will bring a tremendous amount of
experience and seasoning to Excite, and I look forward to you playing a vital
role in making Excite a long-term success.
Sincerely,
George Bell
President and CEO
Excite, Inc.
I accept the offer of employment with Excite:
Signed: /s/ Jed Simmons Date:
---------------------- ----------------
Name
<PAGE> 1
EXHIBIT 10.18
CONSULTING AGREEMENT
This Agreement ("Agreement") is entered into as of the 19th day of
November, 1996 ("Effective Date") by and between Excite, Inc., a California
corporation located at 1091 N. Shoreline Boulevard, Mountain View, California
94043 ("Excite"), and Robert C. Hood ("Consultant").
RECITALS
Consultant desires to perform, and Excite desires to have Consultant perform,
consulting services as an independent contractor to Excite.
Therefore, the parties agree as follows:
1. SERVICES PROVIDED TO EXCITE
a) Consultant will perform the services (the "Services")
described in Exhibit A (the "Project Description").
b) Consultant will use his best efforts to perform the Services
to achieve the results described in the Project Description
and within the time limits stated therein.
c) Because the Services are personal and unique, Consultant may
not assign Consultant's rights or delegate Consultant's duties
under this Agreement either in whole or in part without the
prior written consent of Excite. Any attempted assignment or
delegation without such consent will be void.
2. PAYMENT TO CONSULTANT
a) As sole compensation for the performance of the Services,
Excite will pay Consultant the consulting rate stated in the
Project Description in accordance with the terms set forth
therein. Any reasonable and necessary expenses incurred by
Consultant in performing the Services will be reimbursed by
Excite, provided that all such expenses are properly
documented and accounted for in accordance with the
requirements of the Internal Revenue Service, and provided
further that all expenses exceeding one hundred dollars ($100)
are subject to Excite's prior approval.
b) Consultant will invoice Excite on a monthly basis for the
number of hours spent and expenses incurred in performing the
Services. Excite will pay each such invoice no later than
thirty (30) days after receipt.
c) Consultant will receive no royalty or other remuneration on
the production or distribution of any products or services
developed by Excite and/or Consultant in connection with or
based upon the Services.
3. TERM
The term of this Agreement will begin on the Effective Date
and will end at the earlier of (i) Consultant's employment by
Excite in a full time capacity or (ii) six (6) months later,
unless at that time the Services are still being performed in
a timely manner pursuant to a Project
1
<PAGE> 2
Description which specifies a later completion date, in which
case the term of this Agreement will terminate on such
completion date.
4. RELATIONSHIP OF THE PARTIES
a) Consultant is an independent contractor and is not an agent or
employee of, and has no authority to bind, Excite, by contract
or otherwise. Consultant will perform the Services under the
general direction of Excite, but Consultant will determine, in
Consultant's sole discretion, the manner and means by which
the Services are accomplished, subject to the requirement that
Consultant shall at all times comply with applicable law.
Excite has no right or authority to control the manner or
means by which the Services are accomplished.
(b) Consultant will report as self-employment income all
compensation received by Consultant pursuant to this
Agreement. Consultant will indemnify Excite and hold it
harmless from and against all claims, damages, losses and
expenses, including reasonable fees and expenses of attorneys
and other professionals, relating to any obligation imposed by
law on Excite to pay any withholding taxes, social security,
unemployment or disability insurance, or similar items in
connection with compensation received by Consultant pursuant
to this Agreement. Consultant will not be entitled to receive
any vacation or illness payments, or to participate in any
plans, arrangements, or distributions by Excite pertaining to
any bonus, stock option, profit sharing, insurance or similar
benefits for Excite's employees.
c) Consultant will maintain adequate insurance to protect
Consultant from: (i) claims under worker's compensation and
state disability acts; (ii) claims for damages because of
bodily injury, sickness, disease or death which arise out of
any negligent act or omission of Consultant; and (iii) claims
for damages because of injury to or destruction of tangible or
intangible property, including loss of use resulting
therefrom, which arise out of any negligent act or omission of
Consultant.
5. PROPERTY OF EXCITE
a) For the purposes of this Agreement, "Designs and Materials"
means all designs, discoveries, inventions, products,
services, computer programs, procedures, improvements,
developments, drawings, notes, documents, information and/or
materials made, conceived and/or developed by Consultant alone
and/or with others which result from or relate to the
Services.
b) Consultant hereby irrevocably transfers and assigns any and
all of his right, title, and interest in and to Designs and
Materials including, but not limited to, all copyrights,
patent rights, trade secrets and trademarks, to Excite.
Designs and Materials will be the sole property of Excite and
Excite will have the sole right to determine the treatment of
any Designs and Materials, including the right to keep them as
trade secrets, to file and execute patent applications on
them, to use and disclose them without prior patent
application, to file registrations for copyright or trademark
on them in its own name, or to follow any other procedure that
Excite deems appropriate.
2
<PAGE> 3
c) Consultant will: (i) disclose promptly in writing to Excite
all Designs and Materials; (ii) cooperate with and assist
Excite to apply for, and to execute any applications and/or
assignments reasonably necessary to obtain, any patent,
copyright, trademark or other statutory protection for Designs
and Materials in Excite's name as Excite deems appropriate;
and (iii) otherwise treat all Designs and Materials as
"Confidential Information," as defined below. These
obligations to disclose, assist, execute and keep confidential
will survive any expiration or termination of this Agreement.
d) "Moral Rights" means any right to claim authorship of a work,
any right to object to any distortion or other modification of
a work and any similar right existing under the law of any
country in the world or under any treaty. Consultant hereby
irrevocably transfers and assigns to Excite any and all Moral
Rights that Consultant may have in any Services and/or Designs
and Materials. Consultant also hereby forever waives and
agrees never to assert against Excite, its successors or
licensees any and all Moral Rights Consultant may have in any
Services and/or Designs and Material, even after expiration or
termination of this Agreement.
6. CONFIDENTIAL INFORMATION
a) Consultant may acquire information and materials from Excite
and knowledge about the business, products, programming
techniques, experimental work, customers, clients and
suppliers of Excite in connection with providing the Services.
Consultant agrees that all such knowledge, information and
materials acquired, the existence, terms and conditions of
this Agreement, and the Designs and Materials, are and will be
the trade secrets and confidential and proprietary information
of Excite (collectively "Confidential Information") whether or
not the information is explicitly designated as "confidential"
or "proprietary".
b) Confidential Information will not include information that (i)
is in or enters the public domain without breach of this
Agreement, (ii) Consultant lawfully receives from a third
party without restriction on disclosure and without breach of
a nondisclosure obligation or (iii) Consultant knew prior to
receiving such information from Excite.
c) Consultant agrees (i) that he will not disclose to any third
party or use any Confidential Information disclosed to
Consultant by Excite except as expressly permitted in this
Agreement and (ii) that he will take all reasonable measures
to maintain the confidentiality of all Confidential
Information in his possession or control, which will in no
event be less than the measures Consultant uses to maintain
the confidentiality of Consultant's own information of similar
importance.
7. INDEMNITY
Consultant will indemnify and, at Excite's option, defend
Excite and hold it harmless from and against all claims,
damages, losses and expenses, including court costs and
reasonable fees and expenses of attorneys, expert witnesses,
and other professionals, arising out of or resulting from: (i)
any action by a third party against Excite that is based on
any claim that any Services performed under this Agreement, or
their results, infringe a patent, copyright or other
proprietary right or violate a trade secret and/or (ii) any
action by a third party that is based on
3
<PAGE> 4
any negligent act or omission or willful conduct of Consultant
which results in any bodily injury, sickness, disease or
death, any injury or destruction to tangible or intangible
property (including computer programs and data) or any loss of
use resulting therefrom, or any violation of any statute,
ordinance, or regulation.
8. TERMINATION AND EXPIRATION
a) Either party may terminate this Agreement in the event of a
breach by the other party of this Agreement if such breach
continues uncured for a period of ten (10) days after written
notice.
b) Excite may terminate this Agreement at any time, for any
reason or no reason, by written notice to Consultant.
c) The election by Excite to terminate this Agreement in
accordance with its terms shall not be deemed an election of
remedies, and all other remedies provided by this Agreement or
available at law or in equity shall survive any termination.
d) Upon the expiration or termination of this Agreement for any
reason, each party will be released from all obligations to
the other arising after the date of expiration or termination,
except that expiration or termination of this Agreement will
not relieve Consultant of his obligations under Sections 4(b),
4(c), 5(c), 6, 7 or 10(c), nor will expiration or termination
relieve Consultant or Excite from any liability arising from
any breach of this Agreement.
e) Upon the expiration or termination of this Agreement for any
reason, Consultant will promptly notify Excite of all
Confidential Information, including but not limited to the
Designs and Materials, in Consultant's possession and, at the
expense of Consultant and in accordance with Excite's
instructions, will promptly deliver to Excite all such
Confidential Information.
9. LIMITATION OF LIABILITY
IN NO EVENT SHALL EXCITE BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND IN
CONNECTION WITH THIS AGREEMENT, EVEN IF EXCITE HAS BEEN
INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.
10. COVENANTS, WARRANTIES AND REPRESENTATIONS
a) Consultant will not during the term of this Agreement,
directly or indirectly, in any individual or representative
capacity, engage or participate in or provide services to any
business that is competitive with the types and kinds of
business being conducted by Excite.
b) Consultant represents and warrants that Consultant is not
under any pre-existing obligation inconsistent with the
provisions of this Agreement.
4
<PAGE> 5
c) Because of the trade secret subject matter of Excite's
business, Consultant agrees that he will not solicit the
services of any of the employees, consultants, suppliers or
customers of Excite during the term of this Agreement and for
six (6) months thereafter.
11. DISPUTE RESOLUTION
a) The parties agree that any breach of either of the parties'
obligations regarding confidentiality (Section 6), exclusivity
(Section 10(a)) and/or non-solicitation (Section 10(c)) would
result in irreparable injury for which there is no adequate
remedy at law. Therefore, in the event of any breach or
threatened breach of a party's obligations regarding
confidentiality (Section 6), exclusivity (Section 10(a))
and/or non-solicitation (Section 10(c)), the aggrieved party
will be entitled to seek equitable relief in addition to its
other available legal remedies in a court of competent
jurisdiction. For the purposes of this section only, the
parties consent to venue in either the state courts of the
county in which Excite has its principal place of business or
the United States District Court for the Northern District of
California.
b) In the event of disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement,
other than disputes arising from or concerning confidentiality
(Section 6), exclusivity (Section 10(a)) and/or
non-solicitation (Section 10(c)), the parties will first
attempt to resolve the dispute(s) through good faith
negotiation. In the event that the dispute(s) cannot be
resolved through good faith negotiation, the parties will
refer the dispute(s) to a mutually acceptable mediator for
hearing in the county in which Excite has its principal place
of business.
c) In the event that disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement,
other than disputes arising from or concerning confidentiality
(Section 6), exclusivity (Section 10(a)) and/or
non-solicitation (Section 10(c)), cannot be resolved through
good faith negotiation and mediation, the parties will refer
the dispute(s) to the American Arbitration Association for
resolution through binding arbitration by a single arbitrator
pursuant to the American Arbitration Association's rules
applicable to commercial disputes. The arbitration will be
held in the county in which Excite has its principal place of
business.
12. GENERAL
a) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of
California, notwithstanding the actual state or country of
residence or incorporation of Consultant.
b) Notice. Any notice under this Agreement will be in writing and
delivered by personal delivery, express courier, confirmed
facsimile, confirmed email or certified or registered mail,
return receipt requested, and will be deemed given upon
personal delivery, one (1) day after deposit with express
courier, upon confirmation of receipt of facsimile or email or
five (5) days after deposit in the mail. Notices will be sent
to a party at its address set forth below or such other
address as that party may specify in writing pursuant to this
Section.
5
<PAGE> 6
c) No Agency. The parties are independent contractors and will
have no power or authority to assume or create any obligation
or responsibility on behalf of each other. This Agreement will
not be construed to create or imply any partnership, agency or
joint venture.
d) Entire Agreement. This Agreement is the complete and exclusive
agreement between the parties with respect to the subject
matter hereof, superseding any prior agreements and
communications (both written and oral) regarding such subject
matter. This Agreement may only be modified, or any rights
under it waived, by a written document executed by both
parties.
e) Severability. In the event that any of the provisions of this
Agreement are held by to be unenforceable by a court or
arbitrator, the remaining portions of the Agreement will
remain in full force and effect.
f) Force Majeure. Any delay in or failure of performance by
either party under this Agreement will not be considered a
breach of this Agreement and will be excused to the extent
caused by any occurrence beyond the reasonable control of such
party including, but not limited to, acts of God, power
outages and governmental restrictions.
Consultant Excite, Inc.
By: /s/ ROBERT C. HOOD By: /s/ GEORGE BELL
------------------------------ ------------------------------
Name: Robert C. Hood Name: George Bell
------------------------------ ----------------------------
Date: 11-19-96 Title: Pres. and CEO
------------------------------ ---------------------------
Date: 11-19-96
----------------------------
911 Camille Lane 1091 N. Shoreline Boulevard
Alamo, California 94507 Mountain View, California 94043
415.943.1200 (voice)
415.943.1299 (fax)
6
<PAGE> 7
EXHIBIT A
PROJECT DESCRIPTION
Services
General consulting services on an executive level regarding financial
and administrative planning and organization and corporate financial strategies.
Compensation
Two hundred thousand (200,000) options to purchase shares of the common
stock of Excite, Inc. (the "Options"), at a price and conditions to be
determined by the Compensation Committee of the Excite Board of Directors.
7
<PAGE> 1
EXHIBIT 10.19
CONFIDENTIAL
CONSULTING AGREEMENT
This Agreement ("Agreement") is entered into as of the 22nd day of November,
1996 ("Effective Date") by and between Excite, Inc., a California corporation
located at 1091 N. Shoreline Boulevard, Mountain View, California 94043
("Excite"), and Jed Simmons, Onslow Gardens, London, England ("Consultant").
RECITALS
Consultant desires to perform, and Excite desires to have Consultant perform,
consulting services as an independent contractor to Excite.
Therefore, the parties agree as follows:
1. SERVICES PROVIDED TO EXCITE
a) Consultant will perform the services (the "Services")
described in Exhibit A (the "Project Description").
b) Consultant will use his best efforts to perform the Services
to achieve the results described in the Project Description
and within the time limits stated therein.
c) Because the Services are personal and unique, Consultant may
not assign Consultant's rights or delegate Consultant's duties
under this Agreement either in whole or in part without the
prior written consent of Excite. Any attempted assignment or
delegation without such consent will be void.
2. PAYMENT TO CONSULTANT
a) As sole compensation for the performance of the Services,
Excite will pay Consultant the consulting rate stated in the
Project Description in accordance with the terms set forth
therein. Any reasonable and necessary expenses incurred by
Consultant in performing the Services will be reimbursed by
Excite, provided that all such expenses are properly
documented and accounted for in accordance with the
requirements of the Internal Revenue Service, and provided
further that all expenses exceeding one hundred dollars ($100)
are subject to Excite's prior approval.
b) Consultant will invoice Excite on a monthly basis for the
number of hours spent and expenses incurred in performing the
Services. Excite will pay each such invoice no later than
thirty (30) days after receipt.
c) Consultant will receive no royalty or other remuneration on
the production or distribution of any products or services
developed by Excite and/or Consultant in connection with or
based upon the Services.
<PAGE> 2
CONFIDENTIAL
3. TERM
The term of this Agreement will begin on the Effective Date
and will end at the earlier of (i) Consultant's employment by
Excite in a full time capacity or (ii) six (6) months later,
unless at that time the Services are still being performed in
a timely manner pursuant to a Project Description which
specifies a later completion date, in which case the term of
this Agreement will terminate on such completion date.
4. RELATIONSHIP OF THE PARTIES
a) Consultant is an independent contractor and is not an agent or
employee of, and has no authority to bind, Excite, by contract
or otherwise. Consultant will perform the Services under the
general direction of Excite, but Consultant will determine, in
Consultant's sole discretion, the manner and means by which
the Services are accomplished, subject to the requirement that
Consultant shall at all times comply with applicable law.
Excite has no right or authority to control the manner or
means by which the Services are accomplished.
b) Consultant will report as self-employment income all
compensation received by Consultant pursuant to this
Agreement. Consultant will indemnify Excite and hold it
harmless from and against all claims, damages, losses and
expenses, including reasonable fees and expenses of attorneys
and other professionals, relating to any obligation imposed by
law on Excite to pay any withholding taxes, social security,
unemployment or disability insurance, or similar items in
connection with compensation received by Consultant pursuant
to this Agreement. Consultant will not be entitled to receive
any vacation or illness payments, or to participate in any
plans, arrangements, or distributions by Excite pertaining to
any bonus, stock option, profit sharing, insurance or similar
benefits for Excite's employees.
c) Consultant will maintain adequate insurance to protect
Consultant from: (i) claims under worker's compensation and
state disability acts; (ii) claims for damages because of
bodily injury, sickness, disease or death which arise out of
any negligent act or omission of Consultant; and (iii) claims
for damages because of injury to or destruction of tangible or
intangible property, including loss of use resulting
therefrom, which arise out of any negligent act or omission of
Consultant.
5. PROPERTY OF EXCITE
a) For the purposes of this Agreement, "Designs and Materials"
means all designs, discoveries, inventions, products,
services, computer programs, procedures, improvements,
developments, drawings, notes, documents, information and/or
2
<PAGE> 3
CONFIDENTIAL
materials made, conceived and/or developed by Consultant alone
and/or with others which result from or relate to the
Services.
b) Consultant hereby irrevocably transfers and assigns any and
all of his right, title, and interest in and to Designs and
Materials including, but not limited to, all copyrights,
patent rights, trade secrets and trademarks, to Excite.
Designs and Materials will be the sole property of Excite and
Excite will have the sole right to determine the treatment of
any Designs and Materials, including the right to keep them as
trade secrets, to file and execute patent applications on
them, to use and disclose them without prior patent
application, to file registrations for copyright or trademark
on them in its own name, or to follow any other procedure that
Excite deems appropriate.
c) Consultant will: (i) disclose promptly in writing to Excite
all Designs and Materials; (ii) cooperate with and assist
Excite to apply for, and to execute any applications and/or
assignments reasonably necessary to obtain, any patent,
copyright, trademark or other statutory protection for Designs
and Materials in Excite's name as Excite deems appropriate;
and (iii) otherwise treat all Designs and Materials as
"Confidential Information," as defined below. These
obligations to disclose, assist, execute and keep confidential
will survive any expiration or termination of this Agreement.
d) "Moral Rights" means any right to claim authorship of a work,
any right to object to any distortion or other modification of
a work and any similar right existing under the law of any
country in the world or under any treaty. Consultant hereby
irrevocably transfers and assigns to Excite any and all Moral
Rights that Consultant may have in any Services and/or Designs
and Materials. Consultant also hereby forever waives and
agrees never to assert against Excite, its successors or
licensees any and all Moral Rights Consultant may have in any
Services and/or Designs and Material, even after expiration or
termination of this Agreement.
6. CONFIDENTIAL INFORMATION
a) Consultant may acquire information and materials from Excite
and knowledge about the business, products, programming
techniques, experimental work, customers, clients and
suppliers of Excite in connection with providing the Services.
Consultant agrees that all such knowledge, information and
materials acquired, the existence, terms and conditions of
this Agreement, and the Designs and Materials, are and will be
the trade secrets and confidential and proprietary information
of Excite (collectively "Confidential Information") whether or
not the information is explicitly designated as "confidential"
or "proprietary".
b) Confidential Information will not include information that (i)
is in or enters the public domain without breach of this
Agreement, (ii) Consultant lawfully receives from a third
party without restriction on disclosure and without breach of
a
3
<PAGE> 4
CONFIDENTIAL
nondisclosure obligation or (iii) Consultant knew prior to
receiving such information from Excite.
c) Consultant agrees (i) that he will not disclose to any third
party or use any Confidential Information disclosed to
Consultant by Excite except as expressly permitted in this
Agreement and (ii) that he will take all reasonable measures
to maintain the confidentiality of all Confidential
Information in his possession or control, which will in no
event be less than the measures Consultant uses to maintain
the confidentiality of Consultant's own information of similar
importance.
7. INDEMNITY
Consultant will indemnify and, at Excite's option, defend
Excite and hold it harmless from and against all claims,
damages, losses and expenses, including court costs and
reasonable fees and expenses of attorneys, expert witnesses,
and other professionals, arising out of or resulting from: (i)
any action by a third party against Excite that is based on
any claim that any Services performed under this Agreement, or
their results, infringe a patent, copyright or other
proprietary right or violate a trade secret and/or (ii) any
action by a third party that is based on any negligent act or
omission or willful conduct of Consultant which results in any
bodily injury, sickness, disease or death, any injury or
destruction to tangible or intangible property (including
computer programs and data) or any loss of use resulting
therefrom, or any violation of any statute, ordinance, or
regulation.
8. TERMINATION AND EXPIRATION
a) Either party may terminate this Agreement in the event of a
breach by the other party of this Agreement if such breach
continues uncured for a period of ten (10) days after written
notice.
b) Excite may terminate this Agreement at any time, for any
reason or no reason, by written notice to Consultant.
c) The election by Excite to terminate this Agreement in
accordance with its terms shall not be deemed an election of
remedies, and all other remedies provided by this Agreement or
available at law or in equity shall survive any termination.
d) Upon the expiration or termination of this Agreement for any
reason, each party will be released from all obligations to
the other arising after the date of expiration or termination,
except that expiration or termination of this Agreement will
not relieve Consultant of his obligations under Sections 4(b),
4(c), 5(c), 6, 7 or 10(c), nor will expiration or termination
relieve Consultant or Excite from any liability arising from
any breach of this Agreement.
4
<PAGE> 5
CONFIDENTIAL
e) Upon the expiration or termination of this Agreement for any
reason, Consultant will promptly notify Excite of all
Confidential Information, including but not limited to the
Designs and Materials, in Consultant's possession and, at the
expense of Consultant and in accordance with Excite's
instructions, will promptly deliver to Excite all such
Confidential Information.
9. LIMITATION OF LIABILITY
IN NO EVENT SHALL EXCITE BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND IN
CONNECTION WITH THIS AGREEMENT, EVEN IF EXCITE HAS BEEN
INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.
10. COVENANTS, WARRANTIES AND REPRESENTATIONS
a) Consultant will not during the term of this Agreement,
directly or indirectly, in any individual or representative
capacity, engage or participate in or provide services to any
business that is competitive with the types and kinds of
business being conducted by Excite.
b) Consultant represents and warrants that Consultant is not
under any pre-existing obligation inconsistent with the
provisions of this Agreement.
c) Because of the trade secret subject matter of Excite's
business, Consultant agrees that he will not solicit the
services of any of the employees, consultants, suppliers or
customers of Excite during the term of this Agreement and for
six (6) months thereafter.
11. DISPUTE RESOLUTION
a) The parties agree that any breach of either of the parties'
obligations regarding confidentiality (Section 6), exclusivity
(Section 10(a)) and/or non-solicitation (Section 10(c)) would
result in irreparable injury for which there is no adequate
remedy at law. Therefore, in the event of any breach or
threatened breach of a party's obligations regarding
confidentiality (Section 6), exclusivity (Section 10(a))
and/or non-solicitation (Section 10(c)), the aggrieved party
will be entitled to seek equitable relief in addition to its
other available legal remedies in a court of competent
jurisdiction. For the purposes of this section only, the
parties consent to venue in either the state courts of the
county in which Excite has its principal place of business or
the United States District Court for the Northern District of
California.
b) In the event of disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement,
other than disputes arising from or concerning confidentiality
(Section 6), exclusivity (Section 10(a)) and/or
non-
5
<PAGE> 6
CONFIDENTIAL
solicitation (Section 10(c)), the parties will first attempt
to resolve the dispute(s) through good faith negotiation. In
the event that the dispute(s) cannot be resolved through good
faith negotiation, the parties will refer the dispute(s) to a
mutually acceptable mediator for hearing in the county in
which Excite has its principal place of business.
c) In the event that disputes between the parties arising from or
concerning in any manner the subject matter of this Agreement,
other than disputes arising from or concerning confidentiality
(Section 6), exclusivity (Section 10(a)) and/or
non-solicitation (Section 10(c)), cannot be resolved through
good faith negotiation and mediation, the parties will refer
the dispute(s) to the American Arbitration Association for
resolution through binding arbitration by a single arbitrator
pursuant to the American Arbitration Association's rules
applicable to commercial disputes. The arbitration will be
held in the county in which Excite has its principal place of
business.
12. GENERAL
a) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of
California, notwithstanding the actual state or country of
residence or incorporation of Consultant.
b) Notice. Any notice under this Agreement will be in writing and
delivered by personal delivery, express courier, confirmed
facsimile, confirmed email or certified or registered mail,
return receipt requested, and will be deemed given upon
personal delivery, one (1) day after deposit with express
courier, upon confirmation of receipt of facsimile or email or
five (5) days after deposit in the mail. Notices will be sent
to a party at its address set forth below or such other
address as that party may specify in writing pursuant to this
Section.
c) No Agency. The parties are independent contractors and will
have no power or authority to assume or create any obligation
or responsibility on behalf of each other. This Agreement will
not be construed to create or imply any partnership, agency or
joint venture.
d) Entire Agreement. This Agreement is the complete and exclusive
agreement between the parties with respect to the subject
matter hereof, superseding any prior agreements and
communications (both written and oral) regarding such subject
matter. This Agreement may only be modified, or any rights
under it waived, by a written document executed by both
parties.
e) Severability. In the event that any of the provisions of this
Agreement are held by to be unenforceable by a court or
arbitrator, the remaining portions of the Agreement will
remain in full force and effect.
6
<PAGE> 7
CONFIDENTIAL
f) Force Majeure. Any delay in or failure of performance by
either party under this Agreement will not be considered a
breach of this Agreement and will be excused to the extent
caused by any occurrence beyond the reasonable control of such
party including, but not limited to, acts of God, power
outages and governmental restrictions.
Consultant Excite, Inc.
By: /s/ Jed Simmons By: /s/ George Bell
------------------------------- ---------------------------------
Name: Jed Simmons Name: George Bell
----------------------------- -------------------------------
Date: 11/22/96 Title: Pres. and CEO
----------------------------- ------------------------------
Date: 11/22/96
-------------------------------
Onslow Gardens 1091 N. Shoreline Boulevard
London, England Mountain View, California 94043
415.943.1200 (voice)
415.943.1299 (fax)
7
<PAGE> 8
CONFIDENTIAL
EXHIBIT A
PROJECT DESCRIPTION
Services
General consulting services on an executive level regarding on the
development of a business plan, strategy and timing for launch of Excite
services in Europe.
Compensation
Two hundred twenty thousand (220,000) options to purchase shares of the
common stock of Excite, Inc. (the "Options"), at a price and conditions to be
determined by the Compensation Committee of the Excite Board of Directors.
8
<PAGE> 1
EXHIBIT 10.25
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "AGREEMENT") is made as of November
25, 1996 (the "EFFECTIVE DATE"), by and among AMERICA ONLINE, INC., a Delaware
corporation with its principal offices at 22000 AOL Way, Dulles, Virginia 20166
("AOL"), GLOBAL NETWORK NAVIGATOR, INC., a Delaware corporation and wholly owned
subsidiary of AOL with its principal offices at 2855 Telegraph Avenue, Berkeley,
CA 94705 ("GNN"), and EXCITE, INC., a California corporation with its principal
offices at 1091 N. Shoreline Boulevard, Ste. 200, Mountain View, CA 94043
("EXCITE"). AOL and GNN are collectively referred to herein as AOL.
R E C I T A L S
A. AOL operates a business known as "WEBCRAWLER" (sometimes referenced
herein as "WC") that engages in the business of providing search and directory
services under the service mark "WebCrawler" on the World Wide Web and on the
AOL Network (as defined in the Commercial Agreement described below), and
selling advertising contracts with respect to "impressions" or "avails"
generated by such services (the "WC BUSINESS").
B. AOL desires to sell to Excite, and Excite desires to purchase from
AOL, substantially all of the assets of the WC Business in exchange for: (i) One
Million Two Hundred Fifty Thousand (1,250,000) shares of the Series E-1
Preferred Stock of Excite (the "ACQUISITION SHARES"); and (ii) the assumption by
Excite of certain enumerated liabilities of the WC Business, in each case all on
the terms and conditions set forth in this Agreement. In addition, in
consideration for services to be rendered by AOL to Excite pursuant to the
Operating Agreement (as defined below) in connection with the transfer of the WC
Business to Excite, Excite will issue to AOL Seven Hundred Thousand (700,000)
shares of the Series E-2 Preferred Stock of Excite (the "SERVICES SHARES"). The
Acquisition Shares and Services Shares are collectively referred to herein as
the "TRANSACTION SHARES."
C. AOL, in its own name or in the name of AOL Ventures, Inc. ("AOL
VENTURES"), currently holds 680,330 shares of Excite Common Stock (the "EXISTING
EXCITE SHARES") and a warrant to purchase an additional 650,000 shares of Excite
Common Stock (the "EXISTING AOL WARRANT"). As part of the transactions
contemplated by this Agreement and the Commercial Agreement, the Existing AOL
Warrant will be amended to become exercisable for shares of Excite Series E-3
Preferred Stock (the "WARRANT SHARES") and the expiration date with respect to
exercisability of the Existing AOL Warrant will be subject to the provisions of
the Commercial Agreement. Excite shall also grant AOL the right to exchange the
Existing Excite Shares for a similar number of common-equivalent shares of
Excite Series E-4 Preferred Stock. The shares of each series of Excite Series E
Preferred Stock (collectively, the "EXCITE PREFERRED SHARES") will have the
rights, preferences and privileges described in the form of the Certificate of
Determination attached hereto as Exhibit A (the "CERTIFICATE OF DETERMINATION").
The Excite Preferred Shares may not be sold or otherwise transferred by AOL or
any affiliate thereof, although such shares may be converted into shares of
Excite Common Stock pursuant to the
<PAGE> 2
Certificate of Determination, whereupon the shares will only be subject to any
applicable transfer restrictions under state and federal securities laws.
D. The Transaction Shares shall be issued to AOL either (i) in a
private placement pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended (the "1933 ACT") or (ii) pursuant to the
exemption from registration provided by Section 3(a)(10) of the 1933 Act under
which the parties will request the Department of Corporations of the State of
California (the "DEPARTMENT OF CORPORATIONS") to conduct a hearing for the
purpose of determining whether the proposed issuance of the Transaction Shares
in connection with the transactions contemplated herein is fair, just and
equitable (the "FAIRNESS HEARING") and upon such a finding, to grant a permit
qualifying such issuance (the "CALIFORNIA PERMIT").
E. The shares of Excite Common Stock issuable upon conversion of the
Excite Preferred Shares (the "CONVERSION SHARES") that are not qualified under
the California Permit shall have all the registration rights set forth in the
Registration Rights Agreement in the form attached hereto as Exhibit B (the
"REGISTRATION RIGHTS AGREEMENT"), and regardless of whether the Conversion
Shares are qualified under the California Permit, such shares shall have the
Form S-3 demand and piggyback registration rights set forth in the Registration
Rights Agreement.
F. The Excite Preferred Shares held by AOL shall be subject to the
voting requirements set forth in that certain Voting Trust Agreement in the form
attached hereto as Exhibit C (the "VOTING TRUST AGREEMENT"), the sole intent of
which will be to remove any class voting rights that would otherwise accrue to
the Excite Preferred Shares.
G. The parties understand that the closing of the transactions
contemplated by this Agreement is subject to a number of conditions. Pending the
closing of the transactions contemplated under this Agreement, the parties will
enter into an Operating Agreement in the form attached hereto as Exhibit D (the
"OPERATING AGREEMENT"), which will be binding upon the parties hereto from the
date hereof until the Closing (as defined in Section 1.4) or earlier termination
of this Agreement.
H. In connection with this Agreement, the parties are concurrently
entering into a Technology License, Distribution, Services and Co-Marketing
Agreement in the form attached hereto as Exhibit E (the "COMMERCIAL AGREEMENT").
The Commercial Agreement, Operating Agreement, Registration Rights Agreement and
Voting Trust Agreement are referred to herein as the "ANCILLARY AGREEMENTS."
NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter set forth, Excite and AOL hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 CERTAIN DEFINITIONS. As used in this Agreement:
(a) WC Assets. The "WC ASSETS" means those tangible and
intangible assets, properties and rights that, as of the Closing Date (as
defined in Section 1.4), are owned or controlled by AOL or an entity controlled
by AOL, are used by AOL or an entity controlled by
-2-
<PAGE> 3
AOL in the operation and conduct of the WC Business as it is currently conducted
and as it is proposed to be conducted following the date hereof and which are
set forth on Schedules 1.2(a) through (e) of the WC Assets Letter. As used in
this Agreement, the phrase "as it is proposed to be conducted following the date
hereof" shall mean the conduct of the WC Business as if it were to be continued
in substantially the same manner in which it is currently being run by AOL,
except that the party owning the WC Business will be Excite and that the volume
of transactions processed by the WC Business will be consistent with projections
provided by AOL, provided however, that the parties recognize that additional
system capacity may be required to accommodate such projections, and provided
further, that the parties recognize that (i) no warranty is being made as to
whether the anticipated volume of transactions will be met, (ii) there is no
guarantee that the advertising revenues will not suffer if employees directly
involved with the WC Business do not continue their employment after the
Effective Date, and (iii) the acquisition of additional system capacity is
beyond the control of AOL.
(b) Intellectual Property. "INTELLECTUAL PROPERTY" means and
includes patents, patent applications and the right to file for patent
applications (including but not limited to continuations, continuations-in-part,
divisionals and reissues), trademarks, logos, service marks, trade names and
service names (in each case whether or not registered) and applications for and
the right to file applications for registration thereof, copyrights (whether or
not registered) and applications for and the right to file applications for
registration thereof, moral rights, mask works and mask work registrations and
applications for the right to file applications for registration thereof, trade
secrets, trade dress, publicity and privacy rights, and any other intellectual
property rights arising under the laws of the United States of America, any
State thereof, or any country or province.
1.2 AGREEMENT TO SELL AND PURCHASE WC ASSETS. Subject to the terms and
conditions of this Agreement, and in reliance on the representations, warranties
and covenants set forth in this Agreement, AOL agrees to sell, assign, transfer
and convey to Excite at the Closing (as defined in Section 1.4), and Excite
agrees to purchase and acquire from AOL at the Closing, all of AOL's right,
title and interest in and to all of the WC Assets. The WC Assets will be sold,
assigned, transferred and conveyed to Excite on the Closing Date, free and clear
of all mortgages, pledges, liens, licenses, rights of possession, security
interests, restrictions, encumbrances, charges, title retention, conditional
sale or other security arrangements and all claims or agreements of any nature
whatsoever, except as otherwise expressly disclosed on the AOL Exceptions Letter
(as defined below). The WC Assets to be purchased by Excite under this Agreement
shall consist of the following assets and properties owned or controlled by AOL
on the date hereof or on the Closing Date:
(a) Contracts. All right, title and interest of AOL in the
contracts, agreements, engagements, leases, advertising sales contracts and
licenses, written or oral, relating to the WC Business that are listed on
Schedule 1.2(a) of the WC Assets Letter (each a "WC CONTRACT" and collectively,
the "WC CONTRACTS"); provided, however, that this Agreement will not effect the
sale, assignment or transfer to Excite of any WC Contracts that by their terms
cannot be so sold, assigned or transferred to Excite without the consent of a
third party unless and until such consent has been obtained; provided further,
that, as to any such WC Contracts, AOL will take such actions and grant such
rights as may be necessary such that Excite will have
-3-
<PAGE> 4
the full right and benefit under such WC Contracts notwithstanding such failure
to sell, assign or transfer to Excite;
(b) Intellectual Property. All right, title and interest of
AOL in the Intellectual Property that is listed on Schedule 1.2(b) to the WC
Assets Letter (the "WC INTELLECTUAL PROPERTY"), provided that the WC
Intellectual Property shall not include the electronic or other media upon which
such WC Intellectual Property is stored;
(c) Software. All right, title and interest of AOL in any
computer software (in source and object code form) and related documentation
that is listed on Schedule 1.2(c) to the WC Assets Letter (the "WC SOFTWARE"),
provided that the WC Software shall not include the electronic or other media
upon which such WC Software is stored;
(d) Web Sites. All right, title and interest of AOL in any
World Wide Web sites maintained in connection with the WC Business, including
all related URL addresses and related rights (including all agreements listed on
Schedule 1.2(a), if any, related to "hot links" or other pointers to such Web
sites), that is listed on Schedule 1.2(d) to the WC Assets Letter (the "WC WEB
SITES");
(e) Tangible WC Assets. The tangible assets and tangible
embodiments of intangible assets, including all additions or accessions thereto
that occur from the date hereof until Closing, that are listed on Schedule
1.2(e) to the WC Assets Letter (the "WC TANGIBLE ASSETS").
(f) Documents. Copies of all financial records, logs, books,
records, files, customer lists and histories, lists of advertisers, supplier
lists and files, product component lists, engineering and design drawings,
diagrams and other documentation depicting or specifying the designs and
components of all the WC Contracts, the WC Intellectual Property, the WC
Software, the WC Web Sites, the WC Accounts or the Tangible WC Assets, as well
as any and all sales and marketing materials for the WC Business, provided that
the documents described herein shall not be deemed to include any of the assets
described in Schedules 1.2(a)-(e);
(g) Media. The electronic or other media upon which the WC
Intellectual Property and WC Software that is not transmitted electronically is
stored.
(h) Goodwill. All the goodwill of the WC Business.
1.3 ASSET TRANSFER; PASSAGE OF TITLE; DELIVERY; POWER OF ATTORNEY.
(a) Title Passage. Except as otherwise provided in this
Section, upon the Closing, title to all of the WC Assets shall pass to Excite;
and AOL shall deliver to Excite possession of all of the WC Assets as provided
in subsection 1.3(b), and shall further deliver to Excite a fully executed
Assignment and Bill of Sale in the form attached hereto as Exhibit F (the "BILL
OF SALE"), as well as any other assignments, conveyances and bills of sale
sufficient to convey to Excite good and marketable title to all the WC Assets,
free and clear of all mortgages, pledges, liens, licenses, rights of possession,
security interests, restrictions, encumbrances, charges, title retention,
conditional sale or other security arrangements and all claims or
-4-
<PAGE> 5
agreements of any nature whatsoever, except as otherwise expressly disclosed on
the AOL Exceptions Letter, as well as such other instruments of conveyance as
counsel for Excite may reasonably deem necessary or desirable (both at and after
the Closing) to effect or evidence the transfers contemplated hereby;
(b) Delivery of WC Assets. The WC Assets shall be delivered by AOL
to Excite on the Closing Date at Excite's facility in Mountain View, California
or at such other location as Excite shall designate. Delivery shall be
effectuated by electronic transmission to the greatest extent possible.
1.4 CLOSING. The consummation of the purchase and sale of the WC Assets
and the delivery of the consideration therefor will take place at a closing to
be held at the offices of Excite's counsel, Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California (the "CLOSING") on March 31, 1997 or the earliest
practicable and mutually agreeable date following the satisfaction or waiver of
the conditions to closing set forth in Section 8 hereof (the "CLOSING DATE"), or
at such other time or date, and at such place, or by such other means of
exchanging documents, as may be agreed to by the parties hereto.
1.5 EXCHANGE RIGHT. At or within ninety (90) days following the
Closing, AOL shall have the right to exchange all or a portion of the Existing
Excite Shares for a similar number of common-equivalent Excite Series E-4
Preferred Shares with the rights, preferences and privileges described in the
form of the Certificate of Determination attached hereto as Exhibit A. Such
exchange shall be effectuated by the surrender by AOL within the time period
referenced above of the stock certificate(s) representing the Existing Excite
Shares to Excite along with a notice requesting Excite to issue the appropriate
number of Excite Series E-4 Preferred Shares to AOL, whereupon Excite or
Excite's transfer agent shall cancel the certificate(s) representing the
Existing Excite Shares and issue the certificate(s) for the Excite Series E-4
Preferred Shares. The date of the certificate(s) for the Excite Series E-4
Preferred Shares shall be the date on which Excite or Excite's transfer agent
receives the certificates for the Existing Excite Shares that are being
surrendered.
2. PURCHASE PRICE; PAYMENTS.
2.1 PURCHASE PRICE. In consideration of the sale, transfer, conveyance
and assignment of all the WC Assets to Excite at the Closing and the other
consideration provided by AOL hereunder, as of the Closing:
(a) Acquisition Shares. Excite will issue and deliver a certificate
or certificate(s) representing One Million Two Hundred Fifty Thousand
(1,250,000) shares of Excite Series E-1 Preferred Stock, registered in the name
of AOL (or such wholly-owned subsidiary of AOL as AOL may direct). In addition,
Excite will issue 700,000 shares of Series E-2 Preferred Stock in consideration
of the services to be provided by AOL, as provided for in the Operating
Agreement, attached hereto as Exhibit D.
(b) Assumption of Liabilities. Excite will deliver to AOL an
Assumption Agreement in the form attached hereto as Exhibit G, under which
Excite agrees to assume all the
-5-
<PAGE> 6
Assumed Liabilities (as defined in Section 3.1) and no other liabilities of the
WC Business or of AOL.
2.2 REGISTRATION RIGHTS. AOL shall have certain registration rights
with respect to the shares of Excite Common Stock issuable upon conversion of
the Excite Preferred Shares, as more fully set forth in the Registration Rights
Agreement and Section 6.3 hereof.
2.3 SALES TAX. Any sales or use tax liability that arises with respect
to the transfer of the WC Assets from AOL to Excite will be borne equally by AOL
and Excite.
3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS
3.1 ASSUMED LIABILITIES. The following liabilities of AOL related to
the WC Business expressly listed below in this Section 3.1 will be assumed by
Excite (collectively, the "ASSUMED LIABILITIES"):
(a) WC Contracts. The obligations of AOL arising from and after the
Closing under those (and only those) WC Contracts specifically listed in
Schedule 1.2(a) to the WC Assets Letter, provided however, that notwithstanding
the foregoing, Excite will not assume, and the Assumed Liabilities will not
include, any obligation of AOL under any such WC Contract that arises or is
related to a breach of such WC Contract by AOL, to the extent such breach occurs
prior to the Closing Date other than an obligation of AOL that results from a
breach of a WC Contract by AOL during the Transition Period (as defined in the
Operating Agreement) if the breach results from an action (or lack of action)
taken at the direction of Excite or is taken to avoid a breach of the Operating
Agreement; and
(b) Listed Liabilities. Any liabilities expressly listed on
Schedule 3.1 to the WC Assets Letter, to the extent clearly and unambiguously
described therein.
3.2 LIABILITIES AND OBLIGATIONS NOT ASSUMED. Except as expressly set
forth in Section 3.1 above, Excite shall not assume or become obligated in any
way to pay any liabilities, debts or obligations of AOL or of the WC Business
whatsoever, including but not limited to any liabilities or obligations now or
hereafter arising from or with respect to, any current or future outstanding
options to purchase AOL Common Stock, the sale or license of any products or
services of AOL that occurred prior to the Closing, the termination by AOL of
the employment of any current or future employees of AOL or any of its
affiliates, any other claims brought against AOL arising from AOL's employment
of any person, any duties or obligations under any existing or future employee
benefit plans of AOL or any of its affiliates, any present or future obligations
or liabilities of AOL or any of its affiliates to existing or future employees
of AOL or any of its affiliates under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), the Federal Worker Adjustment
and Retraining Act ("WARN") or any severance pay obligations of AOL or any of
its affiliates or any obligations or liabilities or arising from any breach or
default by AOL of any contract, agreement or commitment of AOL (including but
not limited to the Contracts that occurred (or arose from facts occurring) prior
to the Closing). All liabilities, debts and obligations of AOL not expressly
assumed by Excite hereunder are hereinafter referred to as the "EXCLUDED
LIABILITIES".
-6-
<PAGE> 7
3.3 NO OBLIGATIONS TO THIRD PARTIES. The execution and delivery of this
Agreement shall not be deemed to confer any rights upon any person or entity
other than the parties hereto, or make any person or entity a third party
beneficiary of this Agreement, or to obligate the parties to any person or
entity other than the parties to this Agreement. Assumption by Excite of any
liabilities or obligations of AOL under Section 3.1 shall in no way expand the
rights or remedies of third parties against Excite as compared to the rights and
remedies such parties would have against AOL if the Closing were not
consummated.
4. REPRESENTATIONS AND WARRANTIES OF EXCITE.
Excite hereby represents and warrants to AOL that except as set forth
on the Excite Disclosure Letter delivered concurrently herewith, all the
following statements are true, accurate and correct:
4.1 ORGANIZATION AND GOOD STANDING. Excite is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as proposed to
be conducted, and is qualified as a foreign corporation in each jurisdiction in
which a failure to be so qualified could reasonably be expected to have a
material adverse effect on its present operations or financial condition.
4.2 POWER, AUTHORIZATION AND VALIDITY.
4.2.1 Excite has the right, power, legal capacity and authority to
enter into and perform its obligations under this Agreement, and all agreements
to which Excite is or will be a party that are required to be executed pursuant
to this Agreement (the "EXCITE ANCILLARY AGREEMENTS"). The execution, delivery
and performance of this Agreement and the Excite Ancillary Agreements have been
duly and validly approved and authorized by Excite's Board of Directors.
4.2.2 No filing, authorization or approval, governmental or
otherwise, is necessary to enable Excite to enter into, and to perform its
obligations under this Agreement and the Excite Ancillary Agreements, except for
(a) filings required under federal antitrust laws; and (b) such filings as may
be required to comply with federal and state securities laws.
4.2.3 This Agreement and the Excite Ancillary Agreements are, or
when executed by Excite will be, valid and binding obligations of Excite
enforceable in accordance with their respective terms, except as to the effect,
if any, of (a) applicable bankruptcy and other similar laws affecting the rights
of creditors generally, (b) rules of law governing specific performance,
injunctive relief and other equitable remedies and (c) the enforceability of
provisions requiring indemnification in connection with the offering, issuance
or sale of securities;
4.2.4 Due Authorization. The Excite Preferred Shares, when issued
and delivered by Excite pursuant to the terms of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable and will be free and
clear of all liens, encumbrances and
-7-
<PAGE> 8
adverse claims. Based in part on the representations made by AOL in Section 5
hereof, the Excite Preferred Shares and (assuming no change in applicable law
and no unlawful distribution of the Excite Preferred Shares by AOL or other
parties) the shares of Excite Common Stock issued upon conversion of the Excite
Preferred Shares, will be issued in full compliance with the registration and
prospectus delivery requirements of the 1933 Act and the registration and
qualification requirements of all securities laws of the States of the United
States (collectively, "BLUE SKY LAWS").
4.3 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution and
delivery of this Agreement nor any Excite Ancillary Agreement, nor the
consummation of the transactions contemplated hereby or thereby, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination or material breach or violation of (a) any provision of the Articles
of Incorporation of Excite, or the Bylaws of Excite, all as currently in effect,
(b) in any material respect, any agreement material to Excite's business (c) any
federal, state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to Excite or its assets or properties.
4.4 DISCLOSURE. Excite has made available to AOL an investor
disclosure package consisting of true and complete copies of (a) the final
prospectus from the initial public offering of Excite's Common Stock dated April
3, 1996, and (b) all Forms 10-Q and 8-K filed by Excite with the Securities and
Exchange Commission (the "SEC") since December 31, 1995 and up to the date of
this Agreement (collectively, the "EXCITE DISCLOSURE PACKAGE"). The Excite
Disclosure Package, as of the date filed with the SEC, unless subsequently
amended, this Agreement, the exhibits and schedules hereto, and any certificates
or documents to be delivered to AOL pursuant to this Agreement, when taken
together, do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which such statements
were made, not misleading.
4.5 CAPITALIZATION. The authorized capital stock of Excite consists
of 25,000,000 shares of Common Stock and 4,000,000 shares of Preferred Stock.
11,965,450 shares of Excite Common Stock were issued and outstanding and no
shares of Excite Preferred Stock were outstanding as of November 15, 1996. An
aggregate of 2,200,000 shares of Excite Common Stock are reserved and authorized
for issuance pursuant to the Excite 1995 Equity Incentive Plan, an aggregate of
1,500,000 shares of Excite Common Stock are reserved and authorized for issuance
pursuant to the Excite 1996 Equity Incentive Plan, an aggregate of 150,000
shares of Excite Common Stock are reserved and authorized for issuance pursuant
to the Excite 1996 Directors Stock Option Plan, and an aggregate of 150,000
shares of Excite Common Stock are reserved and authorized for issuance pursuant
to the Excite 1996 Employee Stock Purchase Plan (all such plans are referred to
herein as the "STOCK PLANS"). As of November 15, 1996, options to purchase
2,387,107 shares of Excite Common Stock were outstanding under the Stock Plans
and no options have been issued outside of the Stock Plans. Without giving
effect to the transactions contemplated hereby, warrants to purchase 705,451
shares of Excite Common Stock are outstanding. All issued and outstanding shares
of Excite Common Stock have been duly authorized and validly issued, are fully
paid and non assessable, are not subject to any right of rescission, and have
been offered, issued, sold and delivered by Excite in compliance with all
-8-
<PAGE> 9
registration or qualification requirements (or applicable exemptions therefrom)
of applicable federal and state securities laws. Except as set forth in this
Section 4.5, there are no options, warrants, calls, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
any of Excite's authorized but unissued capital stock or any securities
convertible into or exchangeable for shares of Excite Capital Stock or
obligating Excite to grant, extend, or enter into any such option, warrant,
call, right, commitment, conversion privilege or other right or agreement, and
there is no liability for dividends accrued but unpaid. There are no voting
agreements, rights of first refusal or other restrictions (other than normal
restrictions on transfer under applicable federal and state securities laws)
applicable to any of Excite's outstanding securities. Excite is not under any
obligation to register under the Securities Act any securities that may be
subsequently issued.
4.6 LITIGATION. There is no claim, action, suit or proceeding pending
or, to Excite's knowledge, threatened, against Excite, at law, in equity, by way
of arbitration or before any governmental department, commission, board or
agency that might have a material adverse effect on Excite, nor is Excite aware
of any reasonable basis therefor. There are no judgments, decrees, injunctions
or orders of any court, governmental department, commission, agency,
instrumentality or arbitrator against Excite.
5. REPRESENTATIONS AND WARRANTIES OF AOL.
AOL represents and warrants to Excite that, except as set forth in the
AOL Disclosure Letter delivered concurrently with the execution hereof, all of
the following statements are true, accurate and correct:
5.1 CORPORATE ORGANIZATION. AOL is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
AOL is duly qualified to transact business as a foreign corporation, and is in
good standing, in all jurisdictions where the failure to be so qualified would
adversely affect the WC Business. AOL has all necessary corporate power and
authority to own and use the WC Assets and to operate the WC Business and to
enter into this Agreement and all assignments or other documents that AOL is
required to execute and deliver hereunder, including without limitation the
Ancillary Agreements (the "AOL ANCILLARY AGREEMENTS"), and holds all permits,
licenses, orders and approvals of all federal, state and local governmental or
regulatory bodies necessary and required therefor. For purposes of this Section
5.1 and with respect to Section 5.2, each representation and warranty given
herein and therein shall be deemed, as applicable, a separate representation and
warranty of each of AOL (not including GNN) and GNN.
5.2 POWER AND AUTHORITY; NO DEFAULT UPON TRANSFER. The execution,
delivery and performance by AOL of this Agreement and the AOL Ancillary
Agreements, and the consummation of all the transactions contemplated hereby and
thereby, have been duly and validly authorized by AOL by all necessary corporate
action of AOL's Board of Directors and shareholders. This Agreement and the AOL
Ancillary Agreements, when executed and delivered by AOL, will be duly and
validly executed and delivered and will be the valid and binding obligations of
AOL, enforceable against AOL in accordance with their respective terms, except
as to the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of
-9-
<PAGE> 10
creditors generally, (b) rules of law governing specific performance, injunctive
relief and other equitable remedies and (c) the enforceability of provisions
requiring indemnification in connection with the offering, issuance or sale of
securities. Neither the execution and delivery of this Agreement or the AOL
Ancillary Agreements by AOL, nor the performance by AOL of its obligations under
this Agreement or the AOL Ancillary Agreements, will (i) violate AOL's
Certificate of Incorporation or By-Laws, (ii) result in a material violation or
breach of, or permit any third party to rescind any term or provision of, or
constitute a default under, any loan, note, indenture, mortgage, deed of trust,
security agreement, lease or material contract, WC Contract, license or other
agreement to which AOL is a party or by which AOL or any of the WC Assets is
bound or (iii) violate any law, statute, rule or regulation or order, writ,
judgment, injunction or decree of any court, administrative agency or government
body applicable to AOL or the WC Business.
5.3 TITLE. AOL has good and marketable title to all of the WC Assets,
free and clear of all mortgages, pledges, liens, licenses, rights of possession,
security interests, restrictions, encumbrances, charges, title retention,
conditional sale or other security arrangements and all claims or agreements of
any nature whatsoever. Title to all the WC Assets is freely transferable from
AOL to Excite without obtaining the consent or approval of any person or party.
5.4 EMPLOYEES. Included as Schedule 5.4 to the AOL Disclosure Letter is
a complete list of AOL's employees whose work relates directly to the WC
Business as of the date hereof, including, with respect to each full-time
employee a description of the title and responsibilities of each such employee,
the current compensation payable to each such employee, the date of hire and the
date and amount of last compensation adjustment and any contract, agreement,
understanding or ongoing commitment of AOL to such employee, whether or not in
written form, and with respect to each part-time employee a description of the
title and responsibilities of each such employee.
5.5 CONDITION AND COMPLETENESS OF TANGIBLE WC ASSETS. Schedule 1.2(e)
to the WC Assets Letter contains a complete list of all WC Tangible Assets, and
such list sets forth all of the tangible assets required to conduct the WC
Business as presently conducted and as it is proposed to be conducted following
the date hereof. As of the Closing, all of the material WC Tangible Assets will
be in good working condition and repair, ordinary wear and tear excepted.
5.6 LITIGATION. There is no claim, action, suit or proceeding pending
or, to AOL's knowledge, threatened, against AOL (including but not limited to
any claim, action, suit or proceeding relating to or affecting the WC Business
or the WC Assets), at law, in equity, by way of arbitration or before any
governmental department, commission, board or agency that might have a material
adverse effect on the WC Business or the WC Assets, nor is AOL aware of any
reasonable basis therefor. There are no judgments, decrees, injunctions or
orders of any court, governmental department, commission, agency,
instrumentality or arbitrator against AOL affecting the WC Assets or the WC
Business.
5.7 CONTRACTS AND COMMITMENTS. Schedule 5.7, attached to the WC Assets
Letter, lists and describes all contracts, agreements, understandings and
commitments of AOL directly related to the WC Business, whether written or oral
(other than oral agreements to employ
-10-
<PAGE> 11
employees of AOL): (i) that involve the payment by any party thereto of
consideration in an amount of $20,000 or more; (ii) under which performance may
extend beyond six (6) months after the Closing Date; (iii) that involve the
lending or borrowing of money or any guarantees by AOL or the payment of
indebtedness or performance of an obligation of any third party; (iv) that
involve transactions not in the ordinary course of the WC Business; (v) that
involve the lease or purchase of real estate; (vi) that involve the purchase or
license of any Intellectual Property related to or used in the WC Business; or
(vii) that are otherwise material to the WC Business or the WC Assets (the
"MATERIAL WC Contracts"). AOL is not in violation, breach or default of any of
the Material WC Contracts. AOL has delivered to Excite a true and correct copy
of each written WC Contract included in the WC Assets and listed on Schedule
1.2(a). AOL has obtained, or by Closing will obtain, all written consents of
third parties required to assign and transfer all Material WC Contracts to
Excite without the breach or violation of any such Material WC Contract. The
Material WC Contracts, together with the Commercial Agreement and this
Agreement, constitute in every material respect, sufficient contractual rights
to continue to operate the WC Business in the manner in which it has been
previously conducted by AOL and as it is proposed to be conducted following the
date hereof. AOL has not entered into any contracts, agreements, understandings
or commitments directly related to the WC Business, whether written or oral,
outside of the ordinary course of business since November 4, 1996.
5.8 INTELLECTUAL PROPERTY. Schedule 1.2(b) of the AOL Disclosure Letter
sets forth all Intellectual Property used to conduct the WC Business as it is
now being conducted by AOL, and such WC Intellectual Property is sufficient to
conduct the WC Business as it is now being conducted and as it is proposed to be
conducted following the date hereof, in every material respect. AOL owns,
possesses, has the exclusive right to make, use, sell and license, has the right
to bring actions for the infringement of, and where necessary, has made timely
and proper application for protection of, all WC Intellectual Property rights
that are used in the WC Business or that comprise a portion of the WC Assets.
AOL has not granted any third party any outstanding licenses or other rights to
any of the WC Intellectual Property and AOL is not liable, nor has it made any
contract or arrangement whereby it may become liable, to any person for any
royalty or other compensation for the use of any WC Intellectual Property. AOL
has not received notice of any claim that any WC Intellectual Property infringes
any Intellectual Property right of any third party and there is no basis for
such claim known to AOL. All employees and consultants of AOL and any other
third parties who have been involved in product development for AOL have
executed invention assignment agreements and all employees and consultants who
have access to confidential or trade secret information concerning AOL's
technology or products have executed nondisclosure agreements, each
substantially similar to the form of agreement attached hereto as Schedule 5.8.
To the best of AOL's knowledge, no former employee or consultant of AOL has
possession of any software (in source code or object code form) that is owned by
AOL and used in the WC Business.
5.9 COMPLETENESS OF WC ASSETS. The WC Assets, as described in Section
1.2 and listed on Schedules 1.2(a) through (e), constitute in every material
respect, all of the assets that have been used in the operation of the WC
Business, and that are sufficient to continue to operate the WC Business in the
manner in which it has been conducted by AOL prior to the date hereof and as it
is proposed to be conducted following the date hereof.
-11-
<PAGE> 12
5.10 COMPLIANCE WITH LAWS. In the operation of the WC Business, AOL
has, to the best of AOL's knowledge, duly complied with all applicable laws,
rules, regulations and orders of federal, state, local and foreign governments
(including but not limited to all export control laws and regulations of the
United States of America or any governmental, authority or agency of the United
States government), except where the failure to comply would not have a
materially adverse effect on the WC Assets or the WC Business, and AOL is not in
default with respect to any order, judgment, writ, injunction, decree, award,
rule or regulation of any court, governmental or regulatory body or arbitrator
which restrains or limits the operations of the WC Business or the use of the WC
Assets.
5.11 LABOR AND EMPLOYEE RELATIONS. There are no agreements between any
union, labor organization or other collective bargaining agent in respect of any
employee of AOL who is involved with the WC Business. The relations between AOL
and the employees of the WC Business are generally good in that the WC business
has not experienced excessive turnover and the employees of the WC Business are
generally supportive of management's goals.
5.12 AUTHORIZATION FOR THIS AGREEMENT. Except for filings required
under federal antitrust laws, no authorization, approval, consent of, or filing
with any governmental department, bureau, agency, public board, authority or
other third party is required for the consummation by AOL of the transactions
contemplated by this Agreement.
5.13 TAXES. At the Closing, and upon the date of any subsequent
transfer of WC Assets to Excite in accordance with this Agreement, there will be
no federal, state or local tax liens against any of the WC Assets to be
transferred to Excite hereunder. AOL has paid or will pay, when due, any
federal, state or local taxes attributable to periods prior to the Effective
Date with respect to the WC Assets or the WC Business which, if unpaid, may
result in a lien against any of the WC Assets.
5.14 MATERIAL MISSTATEMENTS OR OMISSIONS. No representation or warranty
by AOL in this Agreement, and no document, written statement, certificate or
schedule furnished or to be furnished to Excite by (or on behalf of) AOL
pursuant thereto, when construed together with all other such representations,
warranties, documents, written statements, certificates or schedules contains,
or will, when furnished, contain, any untrue statement of a material fact, or
omits, or will then omit to state, a material fact necessary to make any
statement of facts contained herein or therein not materially misleading. There
have been no events or transactions, or information which has come to the
attention of AOL which, as related directly to the WC Business or the WC Assets,
could reasonably be expected to have a material adverse effect on the business,
operations, affairs, prospects or condition of the WC Business or the WC Assets
other than for general economic or industry conditions or trends.
5.15 ENVIRONMENTAL MATTERS. To AOL's knowledge, without any independent
investigation, the facilities in which the WC Business operates (the
"FACILITIES") are not in violation of any federal, state or local law, ordinance
or regulation relating to disposal of Hazardous Materials (as defined below) or
the environmental conditions on or under such properties or facilities,
including but not limited to, soil and groundwater conditions. During the time
AOL has owned, leased or occupied the Facilities, AOL has not used, generated,
-12-
<PAGE> 13
manufactured or stored on or under any part of the Facilities, or transported to
or from any part of the Facilities, any Hazardous Materials in violation of
CERCLA (as defined below) or any other applicable state or federal environmental
law. AOL has no knowledge of any presence, disposals, releases or threatened
releases of any Hazardous Materials on, from or under any part of the
Facilities. For purposes of this Section, "HAZARDOUS MATERIALS" means any
hazardous or toxic substance, material or waste that is, or becomes prior to the
Closing, regulated or defined as a "hazardous substance," "pollutant",
"contaminant", "toxic chemical", "hazardous material", "toxic substance" or
"hazardous chemical" or similar hazardous substance under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any other similar state or federal law, statute, ordinance, rule
or regulation having a scope of purpose similar to that of CERCLA.
5.16 REPRESENTATIONS WITH RESPECT TO EXCITE PREFERRED SHARES. AOL and
AOL Ventures (each referred to as AOL for purposes of this Section 5.16 only),
each hereby represent and warrant to Excite, with respect to the Excite
Preferred Shares, as follows:
(a) Experience. AOL has experience in evaluating and investing in
private placement transactions so that AOL is capable of evaluating the merits
and risks of AOL's investment in Excite. AOL, by reason of AOL's business or
financial experience or the business or financial experience of AOL's
professional advisors who are unaffiliated with and who are not compensated by
Excite or any affiliate or selling agent of Excite, directly or indirectly, has
the capacity to protect AOL's own interests in connection with the purchase of
the securities hereunder. AOL is an accredited investor (as defined in Rule
501(a) under Regulation D under the 1933 Act), and intends for Excite to rely
upon AOL's representations when accepting AOL's investment.
(b) Investment. AOL is acquiring the Excite Preferred Shares for
investment purposes only, for AOL's own account, not as a nominee or agent, and
not with a view to, or for resale in connection with, any distributions thereof
within the meaning of the 1933 Act. AOL understands that the Excite Preferred
Shares have not been, and will not be, registered under the 1933 Act and are
being issued in accordance with a specific exemption from the registration
provisions of the 1933 Act, which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of AOL's representations
as expressed herein.
(c) Rule 144. AOL acknowledges that the Excite Preferred Shares
must be held indefinitely unless subsequently registered under the 1933 Act or
an exemption from such registration requirement is available. AOL is aware of
the provisions of Rule 144 promulgated under the 1933 Act, which permit limited
resale of securities purchased in a private placement, subject to the
satisfaction of certain conditions.
(d) Access to Data. AOL has met with representatives of Excite and
thereby has had the opportunity to ask questions of, and receive answers from,
said representatives concerning Excite and the terms and conditions of this
transaction, as well as to obtain any information requested by AOL. Any
questions raised by AOL or its representatives concerning the transaction have
been answered to the satisfaction of AOL and its representatives. AOL's
-13-
<PAGE> 14
decision to purchase the Excite Preferred Shares is based in part on AOL's own
evaluation of the risks and merits of the purchase and Excite's proposed
business activities.
(e) Tax Consequences. AOL has reviewed with its own tax advisors
the federal, state, local and foreign tax consequences of the investment in the
Excite Preferred Shares. AOL is relying solely on such advisors and not on any
statements or representations of Excite or any of its agents and understands
that AOL (and not Excite) shall be responsible for AOL's own tax liability (if
any) that may arise as a result of the investment in the Excite Preferred
Shares.
(f) Transferability. AOL agrees, acknowledges and understands
that, without the consent of Excite, the Excite Preferred Shares may not be
sold, pledged, transferred or otherwise disposed of, provided that such
restrictions shall not prevent AOL from converting the Excite Preferred Shares
to shares of Excite Common Stock pursuant to the Certificate of Determination
whereupon such shares may be transferred subject to applicable securities law
restrictions.
(g) Legends. AOL acknowledges and understands that the securities
of Excite issued hereunder shall bear the following legends (and any other
legends required under state securities laws in the opinion of legal counsel for
Excite):
(i) The Excite Preferred Shares shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY MAY NOT BE GIFTED, TRANSFERRED,
PLEDGED, RESOLD OR OTHERWISE DISPOSED OF. THE SHARES EVIDENCED BY
THIS CERTIFICATE (1) ARE CONVERTIBLE INTO SHARES OF COMMON STOCK
OF THE COMPANY AT THE OPTION OF THE HOLDER, OR (2) UPON CERTAIN
CONSENTS OF THE HOLDERS OF THE COMPANY'S SERIES E PREFERRED STOCK,
ALL PURSUANT TO AND UPON THE TERMS AND CONDITIONS SPECIFIED IN THE
COMPANY'S ARTICLES OF INCORPORATION. A COPY OF SUCH ARTICLES OF
INCORPORATION MAY BE OBTAINED, WITHOUT CHARGE, AT THE COMPANY'S
PRINCIPAL OFFICE.
(ii) The Excite Preferred Shares and the shares of Excite Common
Stock into which such Excite Preferred Share may be converted
shall bear the following legends:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD
-14-
<PAGE> 15
BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
5.17 BROKERAGE AND FINDER'S FEES. Neither AOL nor any of its affiliates
has employed any broker, finder or agent, or agreed to pay or incurred any
brokerage fee, finder's fee or commission with respect to the transactions
contemplated by this Agreement, or dealt with anyone purporting to act in the
capacity of a broker, finder or agent with respect thereto as a result of which
any claim for a fee can be asserted against Excite.
6. COVENANTS OF EXCITE.
Excite covenants and agrees with AOL as follows:
6.1 CONFIDENTIAL INFORMATION. All copies of financial information,
marketing and sales information, pricing, marketing plans, business plans,
financial and business projections, manufacturing processes and procedures,
formulae, methodologies, inventions, product designs, product specifications and
drawings, and other confidential and/or proprietary information of AOL disclosed
to Excite in connection with the transactions contemplated by this Agreement
("AOL CONFIDENTIAL INFORMATION") will be held in confidence and not used or
disclosed by Excite or any of its employees, affiliates or stockholders for a
period of three (3) years from the Effective Date and will be promptly destroyed
by Excite or returned to AOL, upon AOL's written request to Excite; provided,
however that from and after the Closing, the foregoing covenant shall not be
applicable to any AOL Confidential Information related to the WC Business that
is included in the WC Assets. Excite's employees, affiliates and stockholders
will not be given access to AOL Confidential Information from and after the
Closing other than AOL Confidential Information related to the WC Business that
is included in the WC Assets, except on a "need to know" basis. It is agreed
that AOL Confidential Information will not include information that: (a) is
proven to have been known to Excite prior to receipt of such information from
AOL; (b) is disclosed by a third party having the legal right to disclose such
information and who owes no obligation of confidence to AOL; (c) is now, or
later becomes part of the general public knowledge or literature in the art,
other than as a result of a breach of this Agreement by Excite; or (d) is
independently developed by Excite without the use of any AOL Confidential
Information. The provisions of this Section 6.1 and of Section 7.5 supersede any
existing non-disclosure agreements entered into between the parties with respect
to AOL Confidential Information and Excite Confidential Information, provided
however that existing non-disclosure agreements entered into between the parties
with respect to confidential information that does not constitute AOL
Confidential Information or Excite Confidential Information as defined herein
shall not be affected by this Section 6.1 or Section 7.5.
6.2 HART-SCOTT-RODINO COMPLIANCE. Promptly after execution of this
Agreement, Excite shall cooperate with AOL to prepare and file such
notifications as are required pursuant to
-15-
<PAGE> 16
the Hart-Scott-Rodino Pre-Merger Notification Act of 1976 (the "HSR ACT").
Excite and AOL shall share the filing fees of such filings equally.
6.3 FAIRNESS HEARING. Excite shall request the Department of
Corporations to conduct a Fairness Hearing and upon agreement of the Department
of Corporations to do so, make all necessary filings in a timely manner and take
all necessary measures as soon as practicable to facilitate the granting by the
Department of Corporations of the California Permit. If Excite is unable to
obtain, for whatever reason, the California Permit or if existing law is
interpreted to the effect that the California Permit does not provide an
exemption from registration under the 1933 Act, Excite shall file a shelf
registration statement on Form S-3 with respect to the shares of Excite Common
Stock into which the Transaction Shares are convertible, in the time period and
as further provided in the Registration Rights Agreement. All of the shares of
Excite Common Stock into which the Transaction Shares are convertible shall be
entitled to certain demand and piggyback registration rights as further provided
in the Registration Rights Agreement.
6.4 SATISFACTION OF CLOSING CONDITIONS. Excite shall use reasonable
best efforts to satisfy the conditions to AOL's obligations set forth in
Sections 8.1 and 8.3 prior to December 31, 1996, provided however that Excite's
failure to satisfy such conditions shall not be deemed a breach of this
Agreement.
6.5 ELECTION OF AOL REPRESENTATIVE TO BOARD. Excite will use all
reasonable efforts to have the holders of a sufficient number of the voting
shares of Excite stock execute a voting agreement (or provide another instrument
with the same effect) to ensure the election of a representative of AOL to the
Board of Directors of Excite for so long as AOL holds at least 1,315,165 shares
of Excite Common Stock on an as converted to Common Stock basis and as adjusted
for stock splits, reclassifications, recapitalizations and similar events.
6.6 SURVIVAL OF COVENANTS. The covenants set forth in Section 6.2 shall
survive the Closing. The covenants set forth in Section 6.1 above shall survive
the termination of this Agreement for any reason.
7. COVENANTS OF AOL.
AOL covenants and agrees with Excite as follows:
7.1 ACCESS TO INFORMATION. From the date hereof to the Closing Date,
AOL will afford to the representatives of Excite, including its counsel and
auditors, during normal business hours, access to any and all of the WC Assets
and information with respect to the WC Business to the end that Excite may have
a reasonable opportunity to make such a full investigation of the WC Assets and
of the WC Business in advance of the Closing Date as it shall reasonably desire,
and the officers of AOL will confer with representatives of Excite and will
furnish to Excite, either orally or by means of such records, documents, and
memoranda as are available or reasonably capable of preparation, such
information as Excite may reasonably request, and AOL will furnish to Excite's
auditors all consents and authority that they may reasonably request in
connection with any examination of Excite. In addition, AOL will afford the
Excite's
-16-
<PAGE> 17
representatives, including its counsel and auditors, reasonable access to the
Facilities and all WC Assets located at the Facilities at reasonable times.
7.2 CONSENT OF THIRD PARTIES. Prior to the Closing Date, AOL shall
obtain the consent in writing of all persons necessary to permit AOL to assign
and transfer all of the WC Assets (including but not limited to the WC
Contracts) to Excite, free and clear of all liens, security interests,
restrictions, claims and encumbrances (other than the Assumed Liabilities) and
to perform its obligations under, and to conclude the transactions contemplated
by, this Agreement in order that the performance hereof will not result in the
termination of, or any violation, breach or default under, any WC Contracts or
any material contracts, loans, notes, agreements, obligations, leases, permits
or licenses to which AOL is a party or by which any of AOL's property is bound.
Notwithstanding the foregoing, AOL shall only be required to use all reasonable
efforts to obtain the rights for Excite to use the PLS licenses covering all
existing service and development hardware for the CPL text retrieval engine,
indexer and summarizer and for PLweb, provided that the scope of such rights
shall be as reasonably requested by Excite.
7.3 FURTHER ASSURANCES. From and after the Closing Date, AOL shall
promptly execute and deliver to Excite any and all such further assignments,
licenses, endorsements and other documents as Excite may reasonably request for
the purpose of effecting the transfer of AOL's title to the WC Assets to Excite
and/or carrying out the provisions of this Agreement and the Ancillary
Agreements, including, but not limited to, granting Excite a non-exclusive,
world-wide, perpetual, transferable, irrevocable and royalty-free license to
make use of any and all AOL Intellectual Property not included in the WC Assets
to the extent necessary or desirable to allow Excite to fully exploit the WC
Assets and the WC Business.
7.4 USE OF NAME "WEBCRAWLER". Subject to AOL's rights (if any) under
the Operating Agreement, after the Closing Date, AOL shall cease to use the
trademark and trade name "WebCrawler" or any similar name, without the prior
written consent of Excite. AOL hereby grants Excite the rights to use the
WebCrawler trademark and tradename after the date hereof and until the Closing.
7.5 CONFIDENTIAL INFORMATION. All copies of financial information,
marketing and sales information, pricing, marketing plans, business plans,
financial and business projections, manufacturing processes and procedures,
formulae, methodologies, inventions, product designs, product specifications and
drawings, and other confidential and/or proprietary information of Excite
disclosed to AOL in connection with the transactions contemplated by this
Agreement ("EXCITE CONFIDENTIAL INFORMATION") will be held in confidence and not
used or disclosed by AOL or any of its employees, affiliates or stockholders for
a period of three (3) years from the Effective Date and will be promptly
destroyed by AOL or returned to Excite, upon Excite's written request to AOL.
AOL's employees, affiliates and stockholders will not be given access to Excite
Confidential Information except on a "need to know" basis. It is agreed that
Excite Confidential Information will not include information that: (a) is proven
to have been known to AOL prior to receipt of such information from the Excite;
(b) is disclosed by a third party having the legal right to disclose such
information and who owes no obligation of confidence to the Excite; (c) is now,
or later becomes part of the general public knowledge or literature in the art,
-17-
<PAGE> 18
other than as a result of a breach of this Agreement by AOL; or (d) is
independently developed by AOL without the use of any Excite Confidential
Information.
7.6 EMPLOYEES. At Excite's request, AOL shall cooperate with Excite in
identifying those of AOL's employees that are currently employed in connection
with the WC Business that Excite may wish to hire either as employees or
consultants (including, but not limited to, Brian Pinkerton and Adam Hertz) and
in facilitating the employment or the engagement as consultants by Excite, after
the Closing Date, of such individuals (including any employees who become such
after the Effective Date), which Excite elects to employ or engage as a
consultant, including permitting Excite to interview and offer employment or
consulting agreements to such employees. The parties hereby acknowledge that
Excite is under no obligation whatsoever to employ any current or future
employees of AOL or any of its affiliates and that AOL and its affiliates alone
remain responsible for all obligations and liabilities, whether arising under
statute, regulation or contract, to present and future employees of AOL and its
affiliates arising out of their employment (or the termination of their
employment) with AOL or any of AOL's affiliates, including but not limited to
any obligations and liabilities arising under or from any existing or future
Employee Plans or other employee benefit plans of AOL or any of its affiliates,
any present or future obligations or liabilities of AOL or any of its affiliates
to existing or future employees of AOL under COBRA or WARN or any severance pay
obligations of AOL or any of its affiliates.
7.7 HART-SCOTT-RODINO COMPLIANCE. Promptly after execution of this
Agreement, AOL shall cooperate with Excite to prepare and file such
notifications as are required pursuant to the HSR Act. Excite and AOL shall
share the filing fees of such filings equally.
7.8 SATISFACTION OF CLOSING CONDITIONS. AOL shall use reasonable best
efforts to satisfy the conditions to Excite's obligations set forth in Sections
8.1 and 8.2 prior to December 31, 1996, provided however that AOL's failure to
satisfy such conditions shall not be deemed a breach of this Agreement.
7.9 UPDATE OF SCHEDULES 1.2(A) AND 5.7. Within fourteen days of the
date hereof, AOL shall deliver to Excite revised Schedules 1.2(a) and 5.7 that
will contain all contracts, agreements, understandings and commitments of AOL
directly related to the WC Business, whether written or oral, and all Material
WC Contracts, that were not included on the Schedule 1.2(a) and 5.7,
respectively, delivered to Excite and in its possession as of November 4, 1996.
7.10 CONSENTS OF GNN. Prior to the Closing, AOL will cause GNN to
execute and deliver all necessary consents and approvals necessary to effectuate
the transactions contemplated hereby.
7.11 SURVIVAL OF COVENANTS. Each of the covenants set forth in Sections
7.3, 7.4, 7.6 and this Section 7.11 shall survive the Closing. The covenants set
forth in Section 7.5 above shall survive the termination of this Agreement for
any reason. The remaining covenants of this Section 7 shall expire at the
Closing or other termination of this Agreement.
-18-
<PAGE> 19
8. CONDITIONS TO CLOSING.
8.1 CONDITION TO EXCITE'S AND AOL'S OBLIGATIONS. The obligations of
each of Excite and AOL hereunder shall be subject to the satisfaction and
fulfillment of each of the following conditions, except as either party may
expressly waive in writing (but only with respect to such party's own
obligations hereunder):
(a) Hart-Scott-Rodino Compliance. All applicable waiting periods
under the HSR Act shall have expired or early termination shall have been
granted by both the Federal Trade Commission and the United States Department of
Justice.
(b) Certificate of Determination. The Certificate of Determination
shall have been filed with and accepted by the Secretary of State of the State
of California.
(c) Ancillary Agreements. Excite and AOL shall have each executed
and delivered the Commercial Agreement, Operating Agreement, Registration Rights
Agreement and Voting Trust Agreement.
(d) Commercial Agreement. The Commercial Agreement shall be in
effect. The Closing shall be delayed if (i) either party has committed a
material breach of its material covenants, obligations, representations or
warranties under the Commercial Agreement (a "MATERIAL BREACH") and the
non-breaching party has given notice of its intent to terminate the Commercial
Agreement as the result of such Material Breach, until such time as the Material
Breach is cured, but only if the Material Breach is cured within the cure period
provided for in Section 12.2 of the Commercial Agreement, (ii) there is a
dispute as to whether a Material Breach has occurred or whether such Material
Breach has been cured, until such time as the dispute is resolved pursuant to
the dispute resolution procedures set forth in Section 16 of the Commercial
Agreement.
8.2 CONDITIONS TO EXCITE'S OBLIGATIONS. The obligations of Excite
hereunder shall be subject to the satisfaction and fulfillment of each of the
following conditions, except as Excite may expressly waive the same in writing:
(a) Conduct of WC Business. From the date hereof to the Closing
Date, AOL shall have faithfully performed its obligations under the Operating
Agreement in all material respects. With respect to matters not contemplated by
the Operating Agreement, this Agreement, and the Ancillary Agreements, AOL shall
have conducted the WC Business only in the ordinary course, consistent with
AOL's past practices, or as may be consented to by Excite in writing.
(b) Accuracy of Representations and Warranties on Closing Date. The
representations and warranties made herein by AOL in Section 5 (as qualified by
the AOL Disclosure Letter) shall be true and correct in all material respects,
and not misleading in any material respect, on and as of the date given, and on
and as of the Closing Date with the same force and effect as though such
representations and warranties were made on and as of the Closing Date, provided
however, that the representations and warranties made by AOL in Section 5.10 on
and as of the Closing Date shall not be deemed to be qualified by the AOL
-19-
<PAGE> 20
Disclosure Letter, and provided further, that it shall not be a condition to
Excite's obligations that certain representations and warranties made herein by
AOL in Section 5 (as qualified by the AOL Disclosure Letter) and which are
specifically identified on Exhibit H shall be true and correct in all material
respects, and not misleading in any material respect, on and as of the Closing
Date with the same force and effect as though such representations and
warranties were made on and as of the Closing Date, if the reason why such
representations and warranties can not be reasserted as of the Closing Date is
because Excite has assumed the operation of the WC Business after the date
hereof.
(c) Compliance. As of the Closing Date, AOL shall have complied in
all material respects with, and shall have fully performed, in all material
respects, all conditions, covenants and obligations of this Agreement imposed on
AOL and required to be performed or complied with by AOL at, or prior to, the
Closing Date.
(d) Officer's Certificate. AOL shall deliver a certificate signed
by a duly authorized officer of AOL certifying that the conditions set forth in
Section 8.2(a), (b) and (c) have been fully complied with.
(e) Delivery of WC Assets. AOL shall have delivered, and Excite
shall have received, the WC Assets.
(f) Opinion of AOL's Counsel. Excite shall have received an opinion
of Piper & Marbury L.L.P., counsel for AOL, dated the Closing Date and
containing the customary provisions for a transaction of the type contemplated
herein.
(g) AOL's Consents Obtained. All consents required to be obtained
by AOL pursuant to Section 7.2 shall have been obtained.
(h) Certificate of Corporate Proceedings. AOL shall deliver a
certified copy of the resolutions of the Board of Directors of AOL authorizing
the execution and delivery by AOL of this Agreement, and all related agreements,
and the consummation of the transactions contemplated hereby and thereby;
(i) Further Documents. AOL shall deliver such further certificates
and documents, including any specific assignments and other instruments of
conveyance as Excite and/or Excite's counsel may reasonably request.
(j) Bill of Sale. AOL shall have executed and delivered the Bill of
Sale.
8.3 CONDITIONS TO AOL'S OBLIGATIONS. The obligations of AOL hereunder
shall be subject to the satisfaction and fulfillment of each of the following
conditions, except as AOL may expressly waive the same in writing:
(a) Accuracy of Representations and Warranties on Closing Date. The
representations and warranties made herein by Excite in Section 4 hereof (as
qualified by the Excite's Disclosure Letter) shall be true and correct in all
material respects, and not misleading in any material respect, on and as of the
date given, and on and as of the Closing Date with the same
-20-
<PAGE> 21
force and effect as though such representations and warranties were made on and
as of the Closing Date.
(b) Compliance. As of the Closing Date, Excite shall have complied
in all material respects with, and shall have fully performed, the terms,
conditions, covenants and obligations of this Agreement imposed thereon to be
performed or complied with by Excite at, or prior to, the Closing Date.
(c) Officer's Certificate. Excite shall deliver a certificate
signed by a duly authorized officer of Excite certifying that the conditions set
forth in Section 8.3(a) and (b) have been fully complied with.
(d) Opinion of Excite's Counsel. AOL shall have received an opinion
of Fenwick & West LLP, counsel for Excite, dated the Closing Date and containing
the customary provisions for a transaction of the type contemplated herein.
(e) Assumption of Liabilities. Excite shall have executed and
delivered the Assumption of Liabilities in the form of Exhibit L with respect to
the Assumed Liabilities.
(f) Certificate of Corporate Proceedings. Excite shall deliver a
certified copy of the resolutions of the Board of Directors of Excite
authorizing the execution and delivery by Excite of this Agreement, and all
related agreements, and the consummation of the transactions contemplated hereby
and thereby.
(g) Further Documents. Excite shall deliver such further
certificates and documents as AOL and/or AOL's counsel may reasonably request.
(h) AOL Board Representation. A voting agreement (or other
instrument with the same effect) shall have been executed by the holders of a
sufficient number of shares of Excite stock to ensure the election of a
representative of AOL to the Board of Directors of Excite for so long as AOL
holds at least 1,315,165 shares of Excite Common Stock on an as converted to
Common Stock basis and as adjusted for stock splits, reclassifications,
recapitalizations and similar events.
9. INDEMNIFICATION.
9.1 SURVIVAL OF WARRANTIES. All representations and warranties made by
AOL or Excite herein, or in any certificate, schedule or exhibit delivered
pursuant hereto, shall survive the Closing for a period of one (1) year after
December 31, 1996; provided however, that the representations and warranties
made by AOL in Sections 5.7, 5.8 and 5.9 shall survive the Closing for a period
of two (2) years after December 31, 1996 and provided further that
representations, warranties and covenants involving intentional fraud or willful
misconduct shall survive the Closing until the applicable statute of limitations
has expired.
9.2 INDEMNIFIED LOSSES. For the purpose of this Section 9.2 and when
used elsewhere in this agreement, "LOSS" shall mean and include any and all
liability, loss, damage, claim, expense, cost, fine, fee, penalty, obligation or
injury including, without limitation, those
-21-
<PAGE> 22
resulting from any and all actions, suits, proceedings, demands, assessments,
judgments, award or arbitration, together with reasonable costs and expenses
including the reasonable attorneys' fees and other legal costs and expenses
relating thereto; provided, however, that Loss shall not include punitive or
exemplary damages.
9.3 INDEMNIFICATION BY AOL. Subject to the provisions and limitations
set forth in this Section 9, AOL agrees to defend, indemnify and hold harmless
Excite, any parent, subsidiary or affiliate of Excite and any director, officer,
employee, stockholder, agent or attorney of Excite or of any parent, subsidiary
or affiliate of Excite (collectively, the "EXCITE INDEMNITEES") from and against
any Loss which arises out of or results from:
(a) any breach of any covenant, or the inaccuracy or untruth of any
representation or warranty of AOL made herein;
(b) taxes, assessments and other governmental charges of any kind
or nature whatsoever, including without limitation any sales or use tax
applicable to the transfer of the WC Assets payable by AOL pursuant to Section
2.3, any withholding, social security or unemployment levies, arising out of, or
payable with respect to, the WC Business through the Closing Date, except for
such liabilities as are specifically and expressly assumed by Excite in Section
3.1 hereof;
(c) liability for noncompliance with any bulk sales, bulk transfer
or similar laws applicable to the transactions contemplated by this Agreement or
any claims asserting that any transactions contemplated by this Agreement
constitute a fraudulent conveyance or similar claim;
(d) any Excluded Liability and any other demand, claim, debt, suit,
cause of action, arbitration or other proceeding (including, but not limited to,
a warranty claim, a strict product liability claim or any other claim) that is
made or asserted by any third party that relates to any product or service that
was sold, licensed or otherwise provided by AOL to any customer;
(e) any demand, claim, debt, suit, cause of action or proceeding
made or asserted by any employee or independent contractor or any former
employee or independent contractor of AOL, that relates in any manner to any
termination by AOL of its employment or the services of such employee or
independent contractor or any other matter relating to AOL's employment of such
employee or independent contractor.
9.4 INDEMNIFICATION BY EXCITE. Subject to the provisions and
limitations set forth in this Section 9, Excite agrees to defend, indemnify and
hold harmless AOL, any parent, subsidiary or affiliate of AOL and any director,
officer, employee, stockholder, agent or attorney of AOL or of any parent,
subsidiary or affiliate of AOL (collectively, the "AOL INDEMNITEES") from and
against and in respect of any Loss which arises out of or results from:
(a) any breach by Excite of any covenant, or the inaccuracy or
untruth of any representation or warranty of Excite made herein;
-22-
<PAGE> 23
(b) the failure of Excite to timely pay or perform any of the
Assumed Liabilities;
(c) the failure of Excite to timely pay any sales or use tax
applicable to the transfer of the WC Assets payable by Excite pursuant to
Section 2.3.
provided however, that nothing in this Section 9.4 shall impose on Excite any
duty to indemnify AOL for any Excluded Liabilities.
9.5 MINIMUM AND MAXIMUM DAMAGES.
(a) The indemnification provided for subsections 9.3 and 9.4 shall
not apply unless and until aggregate Losses for which one or more indemnified
party seeks indemnification under this section, exclusive of legal fees, exceeds
$125,000.00 (the "BASKET") and then only to the extent that aggregate Losses
exceed the Basket. Excite and AOL will each use its best efforts to obtain
recoveries under all applicable insurance policies for all Losses.
(b) The maximum damages for which Excite is indemnified pursuant to
Section 9.3 (i) for Losses suffered as the result of breaches of the
representations and warranties contained in Sections 5.7, 5.8 and 5.9 shall be
equal to (A) the average of the Excite closing price on the Nasdaq National
Market System for the ten (10) day period ending on the date hereof (the "EXCITE
AVERAGE PRICE"), multiplied by (B) the number of Transaction Shares (such
product is referred to as the "TRANSACTION VALUE"); (ii) shall be unlimited with
respect to Losses suffered as the result of intentional fraud or willful
misconduct, and (iii) shall be twenty-five percent (25%) of the Transaction
Value with respect to all other Losses.
(c) The maximum damages for which AOL is indemnified pursuant to
Section 9.4 shall be equal to the Transaction Value, except with respect to
Losses suffered as the result of intentional fraud or willful misconduct for
which such indemnification shall be unlimited.
9.6 PROCEDURES FOR INDEMNIFICATION. If any action, suit or proceeding
shall be commenced against, or any claim or demand be asserted against, AOL or
Excite, as the case may be, in respect of which AOL or Excite is entitled to
demand indemnification under Section 9 of this Agreement, then as a condition
precedent thereto, the party seeking indemnification ("INDEMNITEE") shall
promptly notify the other party ("INDEMNITOR") in writing to that effect, and
with reasonable particularity and with reference to the applicable provision(s)
of this Agreement. The Indemnitor shall have the right to assume the entire
control of the defense, compromise or settlement of such action, suit,
proceeding or claim and including the selection of counsel, subject to the right
of the Indemnitee to participate (at its expense and with counsel of its choice)
in the defense, compromise or settlement of such action, suit, proceeding, claim
or demand, and in connection therewith, the Indemnitee shall cooperate fully in
all respects with the Indemnitor in any such defense, compromise or settlement.
The Indemnitor will not compromise or settle any such action, suit, proceeding,
claim or demand without the prior written consent of the Indemnitee, which
consent will not be unreasonably withheld or delayed. So long as the Indemnitor
is defending in good faith any such action, suit, proceeding, claim or demand
asserted by a third party against the Indemnitee, the Indemnitee shall not
settle or compromise such
-23-
<PAGE> 24
action, suit, proceeding, claim or demand without the prior written consent of
the Indemnitor, which consent will not be unreasonably withheld or delayed. The
Indemnitee shall make available to the Indemnitor or its agents all records and
other materials in the Indemnitee's possession reasonably required for
contesting any third party claim or demand. If the Indemnitor shall fail to
promptly and adequately defend any such action, suit, proceeding, claim or
demand, then the Indemnitee may defend, through counsel of its own choosing,
such action, suit, proceeding, claim or demand and (so long as Indemnitee gives
the Indemnitor at least ten (10) days' notice of the terms of the proposed
settlement thereof and permits the Indemnitor to then undertake the defense
thereof if Indemnitor objects to the proposed settlement) to settle such action,
suit, proceeding, claim or demand and to recover from the Indemnitor the amount
of such Losses.
9.7 PERIOD FOR MAKING CLAIMS. A claim or claims for
indemnification under this Section 9 must be brought, if at all, at any time
within one (1) year after December 31, 1996, provided however, that any claim or
claims for indemnification for breaches of the representations and warranties
made by AOL in Sections 5.7, 5.8 and 5.9 may be brought at any time within two
(2) years after December 31, 1996, and any claim or claims for indemnification
resulting from breaches of the representations, warranties and covenants made
herein involving intentional fraud or willful misconduct may be brought at any
time until the applicable statute of limitations (including extensions) has
expired.
9.8 INDEMNIFICATION PAYMENTS.
(a) Payments made by AOL to Excite in satisfaction of its
indemnification obligations under this Section 9 shall, at the option of AOL, be
made either (a) in cash or (b) in shares of Excite Common Stock, with each share
valued at the Excite Average Price.
(b) Payments made by Excite to AOL in satisfaction of its
indemnification obligations under this Section 9 shall, at the option of Excite,
be made either (a) in cash or (b) by adjusting the Conversion Price, as defined
in the Certificate of Determination, so that upon conversion of the Excite
Preferred Shares into shares of Excite Common Stock, AOL will receive an
additional number of shares of Excite Common Stock, with each share valued at
the Excite Average Price, that have a value equal to the amount of the
indemnification payments due to AOL from Excite.
9.9 SOLE REMEDY. Except with respect to the covenants contained in
Sections 6.1, 7.3 and 7.5, for which injunctive relief shall be available, the
indemnification provided for in this Section 9 shall be the sole remedy with
respect to any claims arising under this Agreement.
10. TERMINATION OF AGREEMENT
10.1 PRIOR TO CLOSING.
(a) This Agreement may be terminated at any time prior to the
Closing by the mutual written consent of each of the parties hereto.
-24-
<PAGE> 25
(b) Unless otherwise agreed by the parties hereto, this Agreement
will be terminated if the Closing shall not have occurred on or before March 31,
1997.
10.2 AT THE CLOSING. At the Closing, this Agreement may be terminated
and abandoned:
(a) By Excite if any of the conditions precedent to Excite's
obligations set forth in Section 8.1 or 8.2 above have not been fulfilled or
waived at and as of the Closing; or
(b) By AOL if any of the conditions precedent to AOL's obligations
set forth in Section 8.1 or 8.3 above have not been fulfilled or waived at and
as of the Closing.
Any termination of this Agreement under this Section 10.2 will be effective by
the delivery of notice of the terminating party to the other party hereto.
11. AMENDMENT OF STANDSTILL PROVISIONS. Effective upon the Closing,
Section 9 of the Series D Preferred Stock Purchase Agreement (the "PURCHASE
AGREEMENT") shall be amended as follows:
11.1 STANDSTILL PERCENTAGE. The first sentence of Section 9 of the
Purchase Agreement shall be amended in its entirety as follows:
Without the written consent of the Company, AOL Ventures, Inc., Tribune
Company, and their respective affiliates (collectively, the "Standstill
Investors"), each agrees not to acquire any additional shares of the
Company's Voting Securities (as defined below) in the open market or
otherwise if and to the extent such acquisition results in (i) Tribune
Company and its affiliates holding greater than 20% of the total Voting
Securities or (ii) AOL Ventures, Inc. and its affiliates holding
greater than 25% of the total Voting Securities. Each such percentage
limitation is referred to in this Section 9 as the "Standstill
Percentage."
11.2 CONTROL TRANSACTION. The first sentence of Section 9(a) of
the Purchase Agreement shall be amended in its entirety as follows:
To the extent not prohibited by a nondisclosure agreement, the Company
shall promptly notify each Standstill Investor in the event that the
Company enters into any bona fide discussions with any third party
which the Company reasonably believes will result in a Control
Transaction (as defined below). Notwithstanding the foregoing, the
Company will provide notice to each Standstill Investor at least five
calendar days prior to entering into a binding definitive agreement
with respect to a Control Transaction, and will further notify each
Standstill Investor after such discussions terminate.
11.3 THIRD PARTY OFFER. Section 9(c) of the Purchase Agreement
shall be amended in its entirety as follows:
-25-
<PAGE> 26
Each Standstill Investor's obligations shall terminate upon the making
of a bona fide offer by any third party or group (within the meaning of
Rule 13d-5 under the Securities Exchange Act of 1934, as amended) of an
intention to acquire Voting Securities of the Company which, if
successful, would not be covered under (b) above and would result in
such party or group owning or having the right to acquire beneficial
ownership of more than twenty percent (20%) of the Company's Voting
Securities.
11.4 DEFINITION OF VOTING SECURITIES. The definition of "Voting
Securities" set forth in Section 9 of the Purchase Agreement shall be amended in
its entirety as follows:
"Voting Securities" shall mean the shares of Common Stock and Preferred
Stock of the Company and in addition, any other securities of the
Company convertible into or exerciseable for Common Stock which have a
conversion or exercise price less than the market price of the
Company's Common Stock at the time any additional share of Common Stock
or other Company securities are acquired, but shall not include options
exerciseable for Common Stock held by employees of the Company.
Except as expressly amended hereby, all other terms and conditions of
the Purchase Agreement shall remain in full force and effect.
12. MISCELLANEOUS.
12.1 EXPENSES. Each of the parties hereto shall bear its own expenses
(including without limitation attorneys' fees) in connection with the
negotiation and consummation of the transactions contemplated hereby.
12.2 NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be personally or sent by certified or
registered United States mail, postage prepaid, or sent by nationally recognized
overnight express courier and addressed as follows:
(a) if to Excite, at:
Excite, Inc.
1091 N. Shoreline Blvd., Suite 200
Mountain View, CA 94043
Attention: President
Facsimile: 415/943-2888
-26-
<PAGE> 27
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 9306
Attention: Mark C. Stevens
Facsimile: 415/494-0674
(b) If to AOL:
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
Attention: General Counsel
Facsimile: 703/265-2208
with a copy to:
Piper & Marbury L.L.P.
1200 Nineteenth Street, NW
Washington, DC. 20036-2430
Attention: Edwin M. Martin
Facsimile; 202/223-2085
12.3 ENTIRE AGREEMENT; CAPTIONS. This Agreement, the Schedules hereto
(which are incorporated herein by reference) and the agreements to be executed
and delivered in connection herewith, together constitute the entire agreement
and understanding between the parties and there are no agreements or commitments
with respect to the transactions contemplated herein except as set forth in this
Agreement. This Agreement supersedes any prior offer, agreement or understanding
between the parties with respect to the transactions contemplated hereby. The
captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this
Agreement.
12.4 AMENDMENT; WAIVER. Any term or provision of this Agreement may be
amended only by a writing signed by AOL and Excite. The observance of any term
or provision of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a writing
signed by the party to be bound by such waiver. No waiver by a party of any
breach of this Agreement will be deemed to constitute a waiver of any other
breach or any succeeding breach.
12.5 NO THIRD PARTY BENEFICIARIES. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or to give any
person, firm or corporation, other than the parties hereto, any rights or
remedies under or by reason of this Agreement.
12.6 EXECUTION IN COUNTERPARTS. For the convenience of the parties,
this Agreement may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.
-27-
<PAGE> 28
12.7 ASSIGNMENT. These rights and obligations of the parties to this
Agreement may not be delegated or assigned by any party hereto without the prior
written consent of the other party and any such attempted delegation or
assignment shall be void.
12.8 BENEFIT AND BURDEN. This Agreement shall be binding upon, shall
inure to the benefit of, and be enforceable by and against, the parties hereto
and their respective successors and permitted assigns.
12.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California (excluding
application of any choice of law doctrines that would make applicable the law of
any other state or jurisdiction) and, where appropriate, applicable federal law.
12.10 SEVERABILITY. If any provision of this Agreement is for any
reason and to any extent deemed to be invalid or unenforceable, then such
provision shall not be voided but rather shall be enforced to the maximum extent
then permissible under then applicable law and so as to reasonably effect the
intent of the parties hereto, and the remainder of this Agreement will remain in
full force and effect.
12.11 ATTORNEYS' FEES. Should a suit or arbitration be brought to
enforce or interpret any provision of this Agreement, the prevailing party shall
be entitled to recover reasonable attorneys' fees to be fixed in amount by the
Court or the Arbitrator(s) (including without limitation costs, expenses and
fees on any appeal). The prevailing party will be entitled to recover its costs
of suit or arbitration, as applicable, regardless of whether such suit or
arbitration proceeds to a final judgment or award.
12.12 SECTIONS AND EXHIBITS. Except as otherwise indicated, all
references in this Agreement to "Section(s)" and "Exhibit(s)" are intended to
refer to Section(s) to this Agreement and Exhibit(s) to this Agreement,
respectively.
12.13 DISPUTE RESOLUTION. All disputes arising under this Agreement
shall be resolved pursuant to the dispute resolution procedures set forth in the
Commercial Agreement.
12.14 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof will
not be construed for or against either party.
12.15 PUBLIC ANNOUNCEMENT. Upon execution of the Agreement by both
parties, and until the Closing, all press releases and other public and private
communications shall be made by the parties only with the mutual written consent
of AOL and Excite, except that each party may make such disclosures as are
required by applicable law, provided, however, that a copy of such disclosure
shall first be submitted to the other party within a reasonable time period
prior to the dissemination thereof.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
-28-
<PAGE> 29
IN WITNESS WHEREOF, Excite and AOL executed and delivered this
Agreement by their duly authorized representatives as of the Effective Date.
AMERICA ONLINE, INC.: EXCITE, INC.:
By: /s/ Miles Gilburne By: /s/ George Bell
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Its: Its:
------------------------------- -------------------------------
GLOBAL NETWORK NAVIGATOR, INC.:
By: /s/ Ted Leodris
--------------------------------
Name:
------------------------------
Its:
-------------------------------
WITH RESPECT TO SECTION 11 ONLY:
AOL VENTURES, INC.: TRIBUNE COMPANY:
By: /s/ Miles Gilburne By: /s/ David Hiller
-------------------------------- --------------------------------
Name: Name: David Hiller
------------------------------ ------------------------------
Its: Its: Sr. Vice President
------------------------------- -------------------------------
-29-
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 11.01
EXCITE, INC.
STATEMENT OF LOSS PER SHARE
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1995 1996
- ------------------------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Shares used in computation of net loss per share:
PRIMARY:
Average common shares outstanding during the
period........................................... 903 1,397 9,400
Shares relating to SAB No. 64 and 83................ 9,673 9,673 2,418
------ ------ -------
Shares used in computing per share amounts.......... 10,576 11,070 11,818
====== ====== =======
Net loss.............................................. $ (650) $ (6,435) $(43,117)
====== ====== =======
NET LOSS PER SHARE:
Primary............................................. $ (0.06) $ (0.58) $ (3.65)
====== ====== =======
</TABLE>
Fully diluted net loss per share is the same as primary net loss per share
because the Company is in a loss position for all years presented.
<PAGE> 1
EXHIBIT 21.01
LIST OF SUBSIDIARIES
NAME JURISDICTION OF INCORPORATION
- ------------------------------ -----------------------------------------
The McKinley Group Delaware, USA
Excite UK Limited United Kingdom
<PAGE> 1
EXHIBIT 23.02
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated January 29, 1997, in the Registration
Statement (Form S-1) and related Prospectus of Excite, Inc. dated March 3,
1997.
ERNST & YOUNG LLP
Palo Alto, California
March 2, 1997
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated August 6, 1996, relating
to the financial statements of The McKinley Group, Inc., which do not appear in
this Prospectus. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Jose, California
February 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM EXCITE, INC.'S REPORT ON FORM S-1 FOR
THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,971
<SECURITIES> 18,359
<RECEIVABLES> 3,765
<ALLOWANCES> (425)
<INVENTORY> 0
<CURRENT-ASSETS> 26,740
<PP&E> 10,586
<DEPRECIATION> (2,392)
<TOTAL-ASSETS> 47,698
<CURRENT-LIABILITIES> 18,616
<BONDS> 0
0
15,816
<COMMON> 59,999
<OTHER-SE> (50,718)
<TOTAL-LIABILITY-AND-EQUITY> 47,698
<SALES> 0
<TOTAL-REVENUES> 14,030
<CGS> 0
<TOTAL-COSTS> 4,149
<OTHER-EXPENSES> 53,427
<LOSS-PROVISION> 1,299
<INTEREST-EXPENSE> 409
<INCOME-PRETAX> (43,117)
<INCOME-TAX> 0
<INCOME-CONTINUING> (43,117)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,117)
<EPS-PRIMARY> (3.65)
<EPS-DILUTED> (3.65)
</TABLE>
