<PAGE> 1
As filed with the Securities and Exchange Commission on May 20, 1997
REGISTRATION NO. 333-26139
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
EXCITE, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0378215
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
----------------------
555 BROADWAY
REDWOOD CITY, CALIFORNIA 94063
(415) 568-6000
(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.
555 BROADWAY
REDWOOD CITY, CALIFORNIA 94063
(415) 568-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copies to:
MARK C. STEVENS, ESQ.
JEFFREY R. VETTER, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO
TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT UNTIL
MARCH 27, 1999 OR UNTIL THE EARLIER SALE OF ALL SHARES REGISTERED HEREUNDER.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]_____________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]_____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
3,280,330 SHARES
EXCITE, INC.
COMMON STOCK
----------------------
All of the shares of Common Stock offered hereby are being sold by
America Online, Inc. ("AOL"). Such shares are being offered on a continuous
basis pursuant to Rule 415 under the Securities Act of 1933, as amended, during
up to four "permitted windows" which can occur during a period which will
commence on the date on which the Registration Statement of which this
Prospectus forms a part becomes effective and will end on March 27, 1999 or
such earlier date when all of the securities offered hereby have been sold.
See "Plan of Distribution." No underwriting discounts or commissions are
payable or applicable in connection with the sale of such shares. The Common
Stock of Excite, Inc. (the "Company") is quoted on the Nasdaq National Market
("NNM") under the symbol "XCIT." The shares of Common Stock offered hereby
will be sold from time to time at then prevailing market prices, at prices
related to prevailing market prices or at negotiated prices. On April 25,
1997, the closing price of the Common Stock on the NNM was $7.88 per share.
The shares of Common Stock offered hereby are issuable (i) upon
conversion of 1,950,000 shares of Preferred Stock issued by the Company to AOL
in connection with an asset acquisition transaction which was consummated on
March 27, 1997 (the "Acquisition") pursuant to which the Company acquired
certain assets relating to AOL's WebCrawler World Wide Web search and retrieval
service and AOL provided certain related services to the Company, (ii) upon
conversion of 680,330 shares of Preferred Stock issued in exchange for an
equivalent number of shares of Common Stock held by AOL Ventures, Inc., a
wholly-owned subsidiary of AOL ("AOL Ventures") pursuant to an exchange right
exercisable until June 25, 1997 granted in connection with the Acquisition and a
distribution agreement, and (iii) upon conversion of 650,000 shares of Preferred
Stock issuable upon exercise of a warrant. The shares of Common Stock offered
hereby represent approximately 21.9% of the Company's outstanding Common Stock
(based on shares outstanding at March 31, 1997 and assuming conversion of all
outstanding shares of Preferred Stock).
----------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 4.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO THE UNDERWRITING PROCEEDS TO SELLING
PUBLIC (1) DISCOUNT COMPANY SHAREHOLDER(1)
---------- -------- ------- --------------
<S> <C> <C> <C> <C>
PER SHARE . . . . . see text above none none see text above
TOTAL . . . . . . . see text above none none see text above
</TABLE>
___________
(1) THE SHARES OF COMMON STOCK OFFERED HEREBY WILL BE SOLD FROM TIME TO TIME
AT THE THEN PREVAILING MARKET PRICES, AT PRICES RELATING TO PREVAILING
MARKET PRICES OR AT NEGOTIATED PRICES. THE COMPANY WILL PAY UP TO
$50,000 IN EXPENSES RELATING TO THE INITIAL ISSUANCE OF THE PREFERRED
STOCK AND THE REGISTRATION OF THE SHARES OFFERED HEREBY, ESTIMATED AT
$30,000. ANY SUCH REMAINING EXPENSES SHALL BE BORNE BY AOL. SEE "PLAN
OF DISTRIBUTION.
THE DATE OF THIS PROSPECTUS IS _________, 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company can be inspected
and copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a World Wide Web site (located at
http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding the Company. The Company's Common Stock is quoted
for trading on the NNM, and reports, proxy statements and other information
concerning the Company may be inspected at the offices of the National
Association of Securities Dealers, Inc., 9513 Key West Avenue, Rockville,
Maryland 20850.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto. For further information with respect to the Company
and the Common Stock offered hereby, reference is made to the Registration
Statement and the exhibits filed therewith or incorporated therein by
reference. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or incorporated therein by
reference, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected, without
charge, at the offices of the Commission in Washington, D.C. and copies of all
or any part of the Registration Statement may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon the payment of the fees prescribed
by the Commission.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or any Selling Stockholder. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any of the securities offered hereby in any jurisdiction to any person
to whom it is unlawful to make such offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that the information herein is
correct as of any time subsequent to the date hereof or that there has been no
change in the affairs of the Company since such date.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) The Company's annual report on Form 10-K, as amended by Form 10-K/A
filed with the Commission for the fiscal year ended December 31, 1996.
(b) The Company's current report on Form 8-K filed with the Commission on
April 2, 1997.
(c) All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act following the fiscal year ended
December 31, 1996 and prior to the termination of the offering
contemplated hereby.
(d) The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed with the Commission
under the Exchange Act, including any amendments or reports filed for
the purpose of updating such description.
The Company hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom this Prospectus is delivered,
upon written or oral request of such person, a copy of any and all of the
information that has been incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests should be directed to Robert C.
Hood, Executive Vice President, Chief Administrative Officer and Chief
Financial Officer, Excite, Inc., 555 Broadway, Redwood City, California 94063;
telephone number (415) 568-6000.
THE COMPANY
The principal executive offices of the Company are located at
555 Broadway, Redwood City, California 94063, and its telephone number is (415)
568-6000. In this Prospectus, the term "Excite" or the "Company" refers to
Excite, Inc., a California corporation and its subsidiaries, unless the context
otherwise requires.
3
<PAGE> 5
RISK FACTORS
In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
presented in this Prospectus.
EXTREMELY LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT AND ANTICIPATION OF
CONTINUED LOSSES
The Company was founded in June 1994 and commenced offering Excite
services in October 1995. The McKinley Group, Inc. ("McKinley"), which was
acquired by the Company in August 1996, originally began operations in December
1993 and generated only limited revenues prior to 1996. Accordingly, the
Company has an extremely limited operating history upon which an evaluation of
the Company and its current business can be based. The Company's business must
be considered in light of the risks, expenses and problems frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as the Web and Web-based
advertising markets. Specifically, such risks include, without limitation, the
failure of the Company to maintain premier positions on certain high traffic
Web access points such as those maintained by 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 March 31, 1997, the Company had an accumulated deficit of
approximately $59.0 million. The Company has also experienced significant
increases in operating losses on an annual and quarterly bases since inception.
Although the Company has experienced significant revenue growth during 1996,
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 the Company is unable
to adjust operating expense levels accordingly, the Company's business, results
of operations and financial condition will be materially and adversely
affected. Given the level of planned expenditures, the Company anticipates
that it will continue to incur operating losses through at least the end of
1997. The extent of these losses will be contingent on the amount of growth in
the Company's advertising revenues which in turn depends on the factors noted
above. Although the Company does not anticipate that its operating loss will
continue to increase, there can be no assurance that operating losses will not
increase in the future or that the Company will ever achieve or sustain
profitability.
4
<PAGE> 6
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 World Wide Web (the "Web") as an
advertising medium, and the failure to do so would have a materially adverse
effect on the Company's business, results of operations and financial
condition. In addition, the Company derives substantially all of its revenues
from the sale of advertising pursuant to short-term advertising contracts. As a
result, quarterly sales and operating results are entirely dependent on
advertising revenues received within the quarter, which are difficult to
forecast, and are also dependent on the Company's ability to adjust spending in
a timely manner to compensate for any unexpected revenue shortfall. The
cancellation or deferral of a small number of existing advertising contracts 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."
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 Communications Corporation
("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
5
<PAGE> 7
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."
DEPENDENCE ON NETSCAPE AND AOL
The Company entered into agreements with Netscape in April 1996 pursuant to
which the Company's Excite and McKinley brands were each one of the five
"Premier Providers" on Netscape's "Net Search" page for a one year period 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. In
March 1997, the Company entered into new agreements with Netscape which
commence in May 1997 whereby the Excite brand will be one of four "Premier
Providers" and the Company's WebCrawler brand will be one of several "Marquee
Providers" of search and navigation services accessible from Netscape's "Net
Search" page. Under the terms of these new agreements, the Company is
committed to make minimum aggregate payments of $8.25 million in cash and
advertising services over the one year term of the agreements. If the Company
were not able to enter into replacement agreements with Netscape with respect
to its "Premier Provider" or "Marquee Provider" arrangements at the end of the
term, the Excite Network could lose a significant portion of its traffic, and
as a result, advertising revenues would be materially and adversely affected.
In addition, if any replacement agreements with Netscape are on materially
worse terms than those of the Company's current Premier Provider Agreement or
Marquee Provider Agreement, there would be a material adverse effect on the
Company's business, results of operations and financial condition.
The Company has also entered into a five-year distribution agreement with AOL
pursuant to which a co-branded version of 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 co-branded service hosted on AOL.
After the expiration of this initial two year exclusivity period, the parties
can extend the exclusive arrangement only by mutual agreement. If the
exclusivity period does not extend beyond the initial two year term, the
co-branded service would become the "default" search and directory service on
AOL, however, AOL could enter into a strategic relationship with a competitor
of the Company or offer its own competing services. In such an event, the
amount of the Company's advertising revenues could be materially and adversely
affected. In addition, if the Company fails to satisfy certain technical,
product feature and editorial criteria during the term of the agreement, if the
Company and AOL fail to renew this agreement upon the expiration of the five
year term, or if any renewal is on materially worse terms than the initial
agreement with AOL, there could be a material adverse effect on the Company's
business, results of operations and financial condition. As a result of its
implementation of a flat- rate pricing program, there have been numerous
reports in the press and potential litigation regarding, among other things,
AOL's capacity to handle a large number of subscribers. There can be no
assurance that AOL will not experience a decline in the number of its
subscribers as a result of these reports or as a result of the problems
reported. The Company's operating results could be adversely affected if AOL,
for any reason, were to lose significant market share, experience a significant
decrease in the number of its subscribers, or a significant decrease in the
number of its subscribers utilizing AOL for their Web search and retrieval
needs. In addition, any decline in the number of AOL subscribers could
adversely affect the amount of traffic on the Excite Network. See " --
Acquisition Strategy; Integration of Past and Future Acquisitions."
RELIANCE ON ADVERTISING REVENUES
There is a lack of proven business models for companies like Excite which
rely substantially upon the sale of advertisements on the Web. The Company's
current business model, which evolves as the Web develops, is based on deriving
substantially all of its revenues from selling advertising space on its
6
<PAGE> 8
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 will increase as
competition increases. In addition, there is intense competition in the sale of
advertising on the Web, resulting in a wide range of rates quoted and a variety
of pricing models offered by different vendors for a variety of advertising
services which makes it difficult to project future levels of advertising
revenues and rates. It is also difficult to predict which pricing models will
be adopted by the industry or advertisers. For example, advertising rates based
on the number of "click throughs" from the Company's network to the
advertiser's pages, instead of rates based solely on the number of impressions,
would materially adversely affect the Company's revenues. Moreover, "filter"
software programs that limit or remove advertising from a Web user's desktop
are available. Widespread adoption of such software by users could have a
material adverse effect upon the viability of advertising on the Web.
Accordingly, there can be no assurance that the Company will be successful in
generating significant future advertising revenues, and a failure to do so
would have a material adverse effect on the Company's business, results of
operations and financial condition. See "-- Developing Market; Validation of
the Web as an Effective Advertising Medium," "-- Intense Competition" and
"--Technological Change; Dependence on New and Enhanced Services; Risk of
Delays."
ACQUISITION STRATEGY; INTEGRATION OF PAST AND FUTURE ACQUISITIONS
The Company has in the past and may, in the future, acquire businesses,
technologies, services, product lines, content databases, or access to content
databases that are complementary to the Company's business. In August 1997,
the Company completed the acquisition of McKinley and in March 1997, the
Company closed the acquisition of the WebCrawler Assets from AOL (the
"Acquisition").
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.
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
7
<PAGE> 9
the increased use of the Web for information, publication, distribution and
commerce and the emergence of the Web as an effective advertising medium. Many
of the Company's advertisers have only limited experience with the Web as an
advertising medium, have not yet devoted a significant portion of their
advertising expenditures to Web-based advertising, and may not find such
advertising to be effective for promoting their products and services relative
to traditional print and broadcast media. For instance, advertisers of consumer
products have not yet engaged in significant advertising on the Web and may not
do so in the future. No standards have been widely accepted for the measurement
of the effectiveness of Web-based advertising, and there can be no assurance
that such standards will develop sufficiently to support the Web as an
effective advertising medium. Moreover, critical issues concerning the
commercial use of the Web (including security, reliability, cost, ease of use,
access, quality of service and acceptance of advertising) remain unresolved and
may impact the growth of Web use or the placement of advertisements on the Web.
If widespread commercial use of the Web does not develop, or if the Web does
not develop as an effective advertising medium, the Company's business, results
of operations and financial condition will be materially and adversely
affected. See " -- Reliance on Advertising Revenues," "-- Risk of Capacity
Constraints; Dependence on Computer Infrastructure" and " -- Dependence on the
Web Infrastructure."
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. Companies offering
advertising-supported services on the Web have also begun to compete with other
providers of Web content and services for user traffic and the number of page
views on their Web sites. As a result, many providers of Web services have
been entering into distribution arrangements, co-branding arrangements, content
arrangement and other strategic partnering arrangements with ISPs, OSPs, Web
browsers, operators of high traffic Web sites and other businesses in an
attempt to increase traffic and page views, and thereby making their Web sites
more attractive to Web advertisers. To the extent that direct competitors or
other Web site operators are able to enter into successful strategic
relationships, these competitors and Web sites could experience increases in
traffic and page views, which could have the effect of making these Web sites
appear more attractive to advertisers, which could materially and adversely
affect the amount of advertisements sold on the Company's network and the
Company's business, results of operations and financial condition would be
materially and adversely affected.
8
<PAGE> 10
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 their advertising budget to the Web. See " -- Reliance
on Advertising Revenues" and " -- Developing Market; Validation of the Web as
an Effective Advertising Medium."
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,
9
<PAGE> 11
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 March 31, 1997, the Company had grown to 206
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 be no assurance that the Company's
systems, procedures or controls will be adequate to support the Company's
operations or that Company management will be able to achieve the rapid
execution necessary to successfully offer its services and implement its
business plan. The Company's future operating results will also depend on its
ability to expand its sales and marketing organization and expand its support
organization commensurate with the growth of its business and the Web. If the
Company is unable to manage growth effectively, the Company's business, results
of operations and financial condition will be materially and adversely
affected.
DEPENDENCE ON THIRD-PARTY RELATIONSHIPS
The Company is currently and will be in the future significantly dependent on
a number of third-party relationships to create traffic, 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
10
<PAGE> 12
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."
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 experienced significant outages in the
past, for access to its network, and consumers have experienced difficulties
due to system failures unrelated to the Company's systems and services.
Additional difficulties could also materially and adversely affect consumer and
advertiser satisfaction. The Company is also dependent on hardware suppliers
for prompt delivery, installation and service of servers and other equipment
and services used to provide its services. In addition, in order to improve
performance, the Company may have to make substantial investments to deploy one
or more copies of its Web sites in order to mirror its online resources. To the
extent that the capacity restraints described above are not effectively
addressed by the Company, such constraints would have a material adverse effect
on the Company's business, results of operations and financial condition.
Substantially all of the Company's communications hardware and certain of its
computer hardware operations are located at leased facilities in Redwood City,
California, an area susceptible to earthquakes. The Company has experienced
system failures or outages from time to time in the past, which have disrupted
the operation of the Excite Network. There can be no assurance that a system
failure at 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,
11
<PAGE> 13
break-ins or other problems caused by third parties could lead to
interruptions, delays or cessations in service to users of the Excite Network.
The occurrence of any of these risks could have a material adverse effect on
the Company's business, results of operations and financial condition.
DEPENDENCE ON THE WEB INFRASTRUCTURE
The success of the Excite Network will depend in large part upon the
development of a Web infrastructure, such as a reliable network backbone with
the necessary speed, data capacity and security, or timely development of
complementary products such as high speed modems, for providing reliable Web
access and services. Because global commerce and online exchange of information
on the Web and other similar open wide area networks are new and evolving, it
is difficult to predict with any assurance whether the Web will prove to be a
viable commercial marketplace. The Web has experienced, and is expected to
continue to experience, significant growth in the number of users and amount of
traffic. To the extent that the Web continues to experience increased numbers
of users, frequency of use or increased bandwidth requirements of users, there
can be no assurance that the Web infrastructure will continue to be able to
support the demands placed on it by this continued growth or that the
performance or reliability of the Web will not be adversely affected by this
continued growth. 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.
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
12
<PAGE> 14
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.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock is highly volatile and is
subject to wide fluctuations (for example, during the past six months, the high
and low closing prices of the Common Stock were $21.13 and $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. Upon the effectiveness of the Registration Statement of which this
Prospectus is a part there will be a significantly larger number of shares
available for public resale, which could exert downward pressure on the trading
price of the Common Stock. In addition, the stock market has experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many high technology companies and that
often have been unrelated to the operating performance of such companies. In
the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted
against such a company. If brought, such litigation could result in substantial
costs and a diversion of management's attention and resources, which would have
a material adverse effect on the Company's business, results of operations and
financial condition. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock.
13
<PAGE> 15
SELLING SHAREHOLDERS
The following table sets forth certain information known to the
Company with respect to the beneficial ownership of the Company's Common Stock
as of March 31, 1997 by AOL. AOL acquired beneficial ownership of the shares
of Common Stock offered hereby in connection with the Acquisition and in
connection with a distribution agreement. Except as described below, AOL has
not had any position, office or other material relationship with the Company
within the past three years. The following table assumes that AOL sells all of
the shares held by it in this offering. The Company is unable to determine the
exact number of shares that will actually be sold.
Certain assignees of AOL, if any, who acquire shares of Common Stock
of the Company from AOL and satisfy certain conditions are entitled to the same
registration rights as AOL. If any such assignee wishes to sell shares
hereunder, this Prospectus will be amended or supplemented to name such
assignee as a selling shareholder.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Offering Owned After Offering
----------------------- --------------------
Shares Being
Name Number Percent Offered Number Percent
- ---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
America Online, Inc. (1) 3,280,330 21.9% 3,280,330 0 *
</TABLE>
_________________
(1) Includes (i) 1,250,000 and 700,000 shares of Series E-1 and E-2 Preferred
Stock, respectively, issued to AOL in connection with the Acquisition, (ii)
680,330 shares of Series E-4 Preferred Stock to be issued to AOL Ventures
upon exercise of its right, for a period of 90 days following the closing of
the Acquisition, 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 a warrant (the "AOL Warrant") held by AOL Ventures. 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 " -- Voting Trust." Mr.
Case, a director of the Company, is the President, Chief Executive Officer
and a director of AOL. Mr. Case's and AOL's address is 22000 AOL Way,
Dulles, Virginia 20166.
The Company believes AOL has sole voting and sole investment power
with respect to all shares beneficially owned by it. Shares of Common Stock
subject to warrants or Preferred Stock that are currently exercisable or
convertible or are exercisable or convertible within 60 days of March 31, 1997
are deemed to be outstanding and beneficially owned by AOL for the purpose of
computing the percentage ownership of AOL in the above table.
On March 8, 1996, the Company sold shares of its Series D Preferred
Stock to AOL, which shares were subsequently converted into 621,506 shares of
Common Stock, for an aggregate purchase price of $5.0 million. As a result of
the issuance of the Series D Preferred Stock, the Company believes that AOL
became an affiliate of the Company. In connection with the purchase of Series D
Preferred Stock, AOL 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 a warrant which was exercisable into 650,000 shares of Common Stock at
an exercise price of $8.00 per share, which has since been amended to be
exercisable into an equivalent number of shares of Series E-3 Preferred Stock.
AOL purchased an aggregate of 58,824 shares of Common Stock in the Company's
initial public offering.
14
<PAGE> 16
On November 25, 1996, the Company, AOL and 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.
The closing under the Acquisition Agreement occurred in March 1997. 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 and the rendering of certain services to the
Company the Company issued 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 has the right, for a 90-day period following March 27, 1997,
to have the 680,330 shares of Common Stock beneficially owned by AOL canceled
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, was amended to become
exercisable into 650,000 shares of Series E-3 Preferred Stock at the same
exercise price per share. In addition, the expiration date of the AOL Warrant
was amended so that the expiration date with respect to 325,000 shares of the
Series E-3 Preferred Stock, will be September 30, 1997 and the expiration date
for the remaining shares will remain March 8, 2001.
The Acquisition was recorded by the Company 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, a co-branded version of Excite's search and directory service will
be the "default" search and directory service for 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 "Risk Factors -- Acquisition Strategy;
Integration of Past and Future Acquisitions."
So long as AOL holds at least 1,315,165 shares of Series E Preferred
Stock, AOL shall be entitled to elect one member of the Board.
In connection with the Acquisition and the Distribution Agreement, 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"). The
Registration Statement, of which this Prospectus is a part, represents the
"shelf" registration statement (the effectiveness of which must be maintained
for up to two years) and provides for the resale by AOL of all of the
securities during certain "permitted windows" of all of the Common Stock
beneficially owned by AOL and 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 such 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. See "Plan of Distribution."
15
<PAGE> 17
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 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 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 such securities beneficially
owned by AOL will terminate upon the earlier of (i) the time that all such
securities have been registered and sold or (ii) such time as all such
securities held by AOL may be sold within a three month period under Rule 144.
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 a 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., 555 Broadway,
Redwood City, California 94063. 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.
16
<PAGE> 18
PLAN OF DISTRIBUTION
In connection with the Acquisition and the Distribution Agreement, AOL
entered into a Registration Rights Agreement (the "Agreement") with the
Company. The Registration Statement of which this Prospectus forms a part has
been filed pursuant to the Agreement. To the Company's knowledge, AOL has not
entered into any agreement, arrangement or understanding with any particular
broker or market maker with respect to the shares offered hereby, nor does the
Company know the identity of the brokers or market makers that will participate
in the offering.
The shares of Common Stock covered hereby may be offered and sold from
time to time by AOL during one of four "Permitted Windows." A "Permitted
Window" is a period of 30 consecutive calendar days commencing upon receipt by
AOL of Excite's written confirmation to AOL in response to AOL's written notice
to the Company of its intention to sell under this Prospectus (a "Notice of
Resale") that this Prospectus may be used for resales. There must be a 90 day
interval between any two Permitted Windows. Under certain circumstances, the
Company has the ability to suspend the use of this Prospectus during any
Permitted Window. AOL will act independently of the Company in making
decisions with respect to the timing, manner and size of each sale. Such sales
may be made over the NNM or otherwise, at then prevailing market prices, at
prices related to prevailing market prices or at negotiated prices. The shares
may be sold by one or more of the following: (a) a block trade in which the
broker-dealer engaged by AOL will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by the broker-dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; and (c) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers. The Company has been advised by AOL that they have not, as of the
date hereof, entered into any arrangement with a broker-dealer for the sale of
shares through a block trade, special offering, or secondary distribution of a
purchase by a broker-dealer. In effecting sales, broker-dealers engaged by AOL
may arrange for other broker-dealers to participate. Broker-dealers will
receive commissions or discounts from AOL in amounts to be negotiated
immediately prior to the sale.
In connection with distributions of the shares or otherwise, AOL may
enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of the shares registered
hereunder in the course of hedging the positions they assume with AOL. AOL may
also sell shares short and redeliver the shares to close out such short
positions. AOL may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the shares
registered hereunder, which the broker-dealer may resell or otherwise transfer
pursuant to this Prospectus. AOL may also loan or pledge the shares registered
hereunder to a broker-dealer and the broker-dealer may sell the shares so
loaned or upon a default the broker-dealer may effect sales of the pledged
shares pursuant to this Prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from AOL in amounts to be negotiated in
connection with the sale. Such broker-dealers and any other participating
broker-dealers may be deemed to be "underwriters" within the meaning of the
Securities Act, in connection with such sales and any such commission, discount
or concession may be deemed to be underwriting discounts or commissions under
the Securities Act. In addition, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus.
The first $50,000 of costs, expenses and fees in connection with the
fairness hearing previously held by the California Department of Corporations,
the preparation and filing of the Registration Statement of which this
Prospectus is a part and in connection with each Permitted Window will be borne
by the Company. Thereafter, all such costs, expenses and fees will be borne by
AOL. Commissions and discounts, if any, attributable to the sales of the
shares will be borne by AOL. AOL
17
<PAGE> 19
may agree to indemnify any broker-dealer or agent that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. Under the Agreement,
the Company and AOL have agreed to indemnify each other and certain other
persons against certain liabilities in connection with the offering of the
shares, including liabilities arising under the Securities Act.
AOL has advised the Company that, during such time as they may be
engaged in a distribution of the shares of Common Stock included herein, they
will comply with the applicable provisions under Regulation M under the
Securities Exchange Act of 1934, as amended ("Regulation M") and, in connection
therewith, AOL has agreed not to engage in any stabilization activity in
connection with any securities of the Company, to furnish copies of this
Prospectus to each broker-dealer through which the shares of Common Stock
included herein may be offered, and not to bid for or purchase any securities
of the Company or attempt to induce any person to purchase any securities of
the Company except as permitted under Regulation M. AOL has also agreed to
inform the Company and broker-dealers through whom sales may be made hereunder
when the distribution of the shares is completed.
Rules 102 and 103 under the Exchange Act prohibits participants in a
distribution from bidding for or purchasing for an account in which the
participant has a beneficial interest, any of the securities that are the
subject of the distribution. Rule 104 under the Regulation M governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
This offering will terminate on the earlier of (a) the period
described in the previous paragraph during which the Company is required to
maintain the effectiveness of the Registration Statement of which this
Prospectus forms a part; or (b) the date on which all shares offered hereby
have been sold by AOL. There can be no assurance that AOL will sell any or all
of the shares of Common Stock offered hereby.
Upon the occurrence of any of the following events, this Prospectus
will be amended to include additional disclosure before offers and sales of the
securities in question are made: (a) to the extent the securities are sold at
a fixed price or at a price other than the prevailing market price, such price
would be set forth in the Prospectus, (b) if the securities are sold in block
transactions and the purchaser acting in the capacity of an underwriter wishes
to resell, such arrangements would be described in the Prospectus, (c) if AOL
sells to a broker-dealer acting in the capacity as an underwriter, such
broker-dealer will be identified in the Prospectus and (d) if the compensation
paid to broker-dealers is other than usual and customary discounts, concessions
or commissions, disclosure of the terms of the transaction would be included in
the Prospectus.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California 94306. Members of the firm of Fenwick & West
LLP own an aggregate of 20,588 shares of Common Stock of the Company.
EXPERTS
The consolidated financial statements of Excite, Inc. incorporated by
reference in the annual report (Form 10-K, as amended by Form 10-K/A) of Excite,
Inc. for the year ended December 31, 1996, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. The report as to the years 1995
and 1994 is based in part on the report of Price Waterhouse LLP, independent
accountants. The financial statements referred to above are incorporated herein
by reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
18
<PAGE> 20
The financial statements of The McKinley Group, Inc. for the years
ended December 31, 1995 and 1994, not separately presented in Excite's Annual
Report on Form 10-K, as amended by Form 10-K/A, have been audited by Price
Waterhouse LLP, independent accountants, whose report thereon appears therein.
Such financial statements, to the extent they have been included in the
consolidated financial statements of Excite, Inc., have been so included in
reliance on their report given on the authority of said firm as experts in
auditing and accounting.
19
<PAGE> 21
================================================================================
EXCITE, INC.
3,280,330 Shares of
Common Stock
____________________
PROSPECTUS
____________________
================================================================================
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The aggregate estimated expenses to be paid by the Registrant and AOL
in connection with this offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee . . . . . . $ 8,076.57
Accounting fees and expenses . . . . . . . . . . . . . . . . . 7,500.00
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . 10,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 4,423.43
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $30,000.00
==========
</TABLE>
ITEM 15. 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
II-1
<PAGE> 23
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 certain
circumstances for liabilities (including reimbursement of expenses incurred)
arising 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.
II-2
<PAGE> 24
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
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)
4.01 -- Form of Specimen Certificate for Registrant's Common Stock.(2)
4.02 -- Restated and Amended Investors' Rights Agreement.(2)
4.03 -- Amendment to Restated and Amended Investors' Rights Agreement dated as of August 1, 1996.(3)
4.04 -- Amendment to Restated and Amended Investors' Rights Agreement dated as of November 25, 1996.(4)
4.05 -- Registration Rights Agreement dated as of November 25, 1996 by and among the
Registrant, America Online, Inc. and AOL Ventures, Inc.(3)
4.06 -- Voting Agreement dated as of November 25, 1996 by and among the Registrant and
certain shareholders.(4)
4.07 -- Letter Agreement dated as of November 25, 1996 by and among certain shareholders
of Excite, Inc.(4)
5.01 -- Opinion of Fenwick & West LLP regarding the legality of the securities being issued.
23.01 -- Consent of Ernst & Young LLP, Independent Auditors.
23.02 -- Consent of Price Waterhouse LLP, Independent Accountants.
23.03 -- Consent of Fenwick & West LLP (included in Exhibit 5.01).
24.01 -- Power of Attorney (see page II-6).
</TABLE>
________________
(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 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)
(3) Previously filed with the Commission on March 3, 1997, as an exhibit to
the Registrant's Registration Statement on Form S-1 (File No. 333- 22669).
(4) Previously filed with the Commission on March 31, 1997, as an exhibit to
the Registrant's Form 10-K (File No. 0-28064).
II-3
<PAGE> 25
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement: (i)
to include any prospectus required by Section 10(a)(3) of the Securities Act of
1933 (the "Securities Act"); (ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that sections (i) and (ii) do not
apply if the information required to be included in a post-effective amendment
by this section (iii) is contained in periodic reports filed with or furnished
to the Securities and Exchange Commission by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each post-effective amendment shall be deemed a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under
the Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all for the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Redwood City, State of California, on the 19th day
of May, 1997.
EXCITE INC.
By: /s/ ROBERT C. HOOD
__________________________________
Robert C. Hood
Executive Vice President, Chief
Administrative and Chief Financial
Officer
II-5
<PAGE> 27
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ GEORGE BELL President, Chief Executive May 19, 1997
- ---------------------------------- Officer and Director
George Bell
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
/s/ ROBERT C. HOOD Executive Vice President, Chief May 19, 1997
- ---------------------------------- Administrative Officer and
Robert C. Hood Chief Financial Officer
ADDITIONAL DIRECTORS:
* Senior Vice President and May 19, 1997
- ---------------------------------- Director
Joseph R. Kraus
Director
- ----------------------------------
Vinod Khosla
* Director May 19, 1997
- ----------------------------------
Donn Davis
Director
- ----------------------------------
Geoffrey Y. Yang
* Director May 19, 1997
- ----------------------------------
Stephen M. Case
*/s/ Robert C. Hood Attorney-in-Fact May 19, 1997
- ----------------------------------
Robert C. Hood
</TABLE>
II-6
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
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)
4.01 -- Form of Specimen Certificate for Registrant's Common Stock.(2)
4.02 -- Restated and Amended Investors' Rights Agreement.(2)
4.03 -- Amendment to Restated and Amended Investors' Rights Agreement dated as of August 1, 1996.(3)
4.04 -- Amendment to Restated and Amended Investors' Rights Agreement dated as of November 25, 1996.(4)
4.05 -- Registration Rights Agreement dated as of November 25, 1996 by and among the
Registrant, America Online, Inc. and AOL Ventures, Inc.(3)
4.06 -- Voting Agreement dated as of November 25, 1996 by and among the Registrant and
certain shareholders.(4)
4.07 -- Letter Agreement dated as of November 25, 1996 by and among certain shareholders
of Excite, Inc.(4)
5.01 -- Opinion of Fenwick & West LLP regarding the legality of the securities being issued.
23.01 -- Consent of Ernst & Young LLP, Independent Auditors.
23.02 -- Consent of Price Waterhouse LLP, Independent Accountants.
23.03 -- Consent of Fenwick & West LLP (included in Exhibit 5.01).
24.01 -- Power of Attorney (see page II-6).
</TABLE>
________________
(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 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)
(3) Previously filed with the Commission on March 3, 1997, as an exhibit to
the Registrant's Registration Statement on Form S-1 (File No. 333- 22669).
(4) Previously filed with the Commission on March 31, 1997, as an exhibit to
the Registrant's Form 10-K (File No. 0-28064).
<PAGE> 1
EXHIBIT 5.01
May 19, 1997
Excite, Inc.
555 Broadway
Redwood City, California 94063
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form
S-3 (the "Registration Statement") originally filed by you with the Securities
and Exchange Commission on April 29, 1997 in connection with the registration
under the Securities Act of 1933, as amended, of an aggregate of 3,280,330
shares of your Common Stock (the "Stock"), all of which are issuable upon
conversion of Preferred Stock issued or issuable upon exercise of warrants
(collectively, the "Preferred Stock") and beneficially owned by America Online,
Inc. ("AOL") which will be sold by AOL.
In rendering this opinion, we have examined the following:
(1) the Registration Statement, together with the exhibits filed
as a part thereof, including, without limitation, the
Prospectus associated therewith;
(2) the minutes of meetings and actions by written consent of the
Board of Directors relating to the Acquisition Agreement, and
the issuance of the Preferred Stock or warrants to purchase
Preferred Stock to AOL;
(3) The acquisition agreement dated as of November 25, 1996 among
the Company, AOL and Global Navigator, Inc. (the "Acquisition
Agreement");
(4) The Warrant to purchase 650,000 shares of the Company's Series
E-3 Preferred Stock dated March 8, 1996 issued by the Company
to AOL, as amended;
(5) a list of shareholders provided by First Boston EquiServe LLC,
dated March 31, 1997 and a list of option and warrant holders
dated March 31, 1997, provided by you;
(6) the Articles of Incorporation of Excite, Inc. ("Excite") as
amended through April 10, 1996 and the Bylaws of Excite both
certified by Excite on May 19, 1997; and
(7) a Management Certificate of even date herewith in which you
have given us certain factual representations.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to the legal capacity of all natural persons,
the genuineness of all signatures on original documents, the authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as copies, the lack of any undisclosed terminations,
modifications, waivers or amendments to any documents reviewed by us and the due
execution and delivery of all documents where due execution and delivery are
prerequisites to the effectiveness thereof.
<PAGE> 2
Page 2
As to matters of fact relevant to this opinion, we have relied solely
upon our examination of the documents referred to above and have assumed the
current accuracy and completeness of the information included in the documents
referred to above. We have made no independent investigation or other attempt to
verify the accuracy of any of such information or to determine the existence or
non-existence of any other factual matters; however, we are not aware of any
facts that would lead us to believe that the opinion expressed herein is not
accurate.
Based upon the foregoing, it is our opinion that the 3,280,300 shares
of Common Stock issued by you and in the manner referred to in the Prospectus
associated with the Registration Statement, and, in the case of shares of Stock
issuable upon exercise of an exchange right or the Warrant, the Acquisition
Agreement or the warrant, as applicable, issued thereunder, will be legally
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and is intended solely for the
your use as an exhibit to the Registration Statement for the purpose of the
above sale of the Stock and is not to be relied upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
<PAGE> 1
EXHIBIT 23.01
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) of Excite, Inc. for the registration of
3,280,330 shares of its common stock and to the incorporation by reference
therein of our report dated January 29, 1997, with respect to the consolidated
financial statements of Excite, Inc. included in its annual report on Form
10-K, as amended by Form 10-K/A, for the year ended December 31, 1996, filed
with the Securities and Exchange Commission.
Palo Alto, California ERNST & YOUNG LLP
May 15, 1997
2
<PAGE> 1
EXHIBIT 23.02
CONSENT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form S-3 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
May 15, 1997
