<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EXCITE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 77-0378215
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
------------------------
555 BROADWAY
REDWOOD CITY, CALIFORNIA 94063
(650) 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
(650) 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.
MICHAEL J. MCADAM, 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
the 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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
<S> <C> <C> <C> <C>
AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF REGISTERED(1) OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED SHARE PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value, 423,079 shares
issuable upon exercise of
warrants..................... $59.0906 $25,000,000 $ 7,375.00(2)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value,
issuable upon exercise of
warrants.................... $25,000,000 $ 7,375.00(3)
- ------------------------------------------------------------------------------------------------------------------------------
Total......................... $50,000,000 $14,750.00
==============================================================================================================================
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act, this Registration Statement
also includes an indeterminant number of additional shares of Common Stock
which may become issuable pursuant to anti-dilution provisions of warrants.
(2) Registration fee calculated pursuant to Rule 457(g)(1) under the Securities
Act.
(3) Registration fee calculated pursuant to Rule 457(a) under the Securities
Act.
------------------------
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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- MAY 19, 1998
423,079 SHARES OF COMMON STOCK
SHARES OF COMMON STOCK HAVING AN AGGREGATE MARKET PRICE OF UP TO $25,000,000
EXCITE, INC.
COMMON STOCK
------------------------
All of the shares of Common Stock, no par value ("Common Stock") of Excite,
Inc. (the "Company") offered hereby (the "Shares") are being sold by Netscape
Communications Corporation ("Netscape") and may be offered for sale from time to
time by and for the account of Netscape as more fully described herein. All of
these Shares are issuable upon exercise of warrants (the "Warrants"). The
Company will not receive any proceeds from the sale of Shares offered hereby by
Netscape. See "Use of Proceeds," "Selling Shareholder" and "Plan of
Distribution." The Shares are being offered on a continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"),
during a period of time commencing on the effective date of the Registration
Statement of which this Prospectus forms a part and ending on the earlier of (a)
the date on which all of the Shares offered hereby have been sold or (b) such
date on which all of the Shares may be immediately sold during any three-month
period pursuant to Rule 144 under the Securities Act.
The Common Stock is listed on the Nasdaq National Market 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 May 15, 1998, the closing price per share of the
Common Stock on the Nasdaq National Market was $59 15/16.
All of the shares of Common Stock offered hereby are issuable upon exercise
of two Warrants originally issued by the Company pursuant to a Warrant Agreement
dated as of April 29, 1998. The shares of Common Stock offered hereby represent
less than 5% of the outstanding shares of the Company's Common Stock as of the
date of this Prospectus. Netscape, directly, through agents designated from time
to time, or through dealers or underwriters also to be designated, may sell the
Shares from time to time on terms to be determined at the time of sale. To the
extent required, the specific Shares to be sold, the public offering price, the
names of any such agent, dealer or underwriter and any applicable commission or
discount will be set forth in an accompanying supplement to this Prospectus (a
"Prospectus Supplement"). See "Selling Shareholder" and "Plan of Distribution."
Netscape reserves the sole right to accept or reject, in whole or in part, any
proposed purchase of the Shares to be made in the manner set forth above.
The distribution of the Shares by Netscape may be effected from time to
time in one or more transactions in the over-the-counter market, on the Nasdaq
National Market or in privately negotiated transactions directly with the
purchasers, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Any underwriters,
dealers or agents that participate in the distribution of the Shares may be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any profit on the sale of the Shares by them and any
discounts, concessions or commissions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. See "Plan of Distribution" for indemnification arrangements
between the Company and the Selling Shareholder.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 4 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO THE UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC(1) DISCOUNT COMPANY SHAREHOLDER(1)
-------------- ------------ ----------- -------------------
<S> <C> <C> <C> <C>
Per Share............................... see text above none none see text above
Total................................... see text above none none see text above
</TABLE>
- ---------------
(1) The shares of Common Stock 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 expenses of
registration estimated at $60,000.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
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 THE SELLING SHAREHOLDER. 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.
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 materials can also be
obtained from the Public Reference Section of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition,
the Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding the Company. The address
of the Commission's Web site is http://www.sec.gov. The Company's Common Stock
is quoted for trading on the Nasdaq National Market, and reports, proxy
statements and other information concerning the Company may be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
ADDITIONAL INFORMATION
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 Commission's
principal office 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company
are hereby incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December 31,
1997.
(b) The Company's Quarterly Report on Form 10-Q for the three months ended March
31, 1998.
(c) The Company's Current Report on Form 8-K/A filed with the Commission on
April 1, 1998 and the Company's Current Reports on Form 8-K filed with the
Commission on April 17, 1998, May 11, 1998, May 15, 1998 (which report
includes the Company's Supplemental Consolidated Financial Statements which
give effect to the merger of the Company and MatchLogic, Inc. in a
transaction accounted for as a pooling of interests) and May 19, 1998.
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<PAGE> 4
(d) The Company's definitive Proxy Statement filed April 30, 1998 in connection
with the Company's 1998 Annual Meeting of Shareholders.
(e) All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering contemplated hereby.
(f) The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission under Section
12 of the Exchange Act, including any amendments or reports filed for the
purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering covered by this Prospectus shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein (solely with
respect to statements incorporated by reference herein from a document that was
filed prior to the date of this Prospectus), or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
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 for copies of such information should be
directed to Investor Relations, Excite, Inc., 555 Broadway, Redwood City,
California 94063; telephone number (650) 568-6000.
THE COMPANY
Excite is a global Internet media company offering consumers and
advertisers comprehensive Internet navigation services with extensive
personalization capabilities. The Excite Network consists of the Excite and
WebCrawler brands. Excite offers, either independently or in conjunction with
local content providers, localized versions of the Excite service in Australia,
France, Germany, Japan, the Netherlands, Sweden and the United Kingdom. The
Company was incorporated in June 1994. The principal executive offices of the
Company are located at 555 Broadway, Redwood City, California 94063, and its
telephone number is (650) 568-6000. In this Prospectus, the term "Excite" or the
"Company" refers to Excite, Inc., a California corporation and its wholly-owned
subsidiaries, unless the context otherwise requires.
3
<PAGE> 5
RISK FACTORS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in such forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in the Prospectus. In addition to the other information in or incorporated by
reference in this Prospectus, the following risk factors should be considered
carefully in evaluating the Company and its business before purchasing the
Common Stock offered by this Prospectus.
LIMITED OPERATING HISTORY; NO ASSURANCE OF PROFITABILITY; CERTAIN
FORWARD-LOOKING STATEMENTS
The Company was founded in June 1994 and generated only limited revenues
prior to 1996. Accordingly, the Company has a limited operating history upon
which an evaluation of the Company and its current business can be based. In
addition, the Company's business model is evolving and relies substantially upon
the sale of advertising on the Web. The Company's business must be considered in
light of the risks, expenses and problems frequently encountered by companies in
their early stages of development, particularly companies in new and rapidly
evolving markets such as the Web and Web-based advertising. Specifically, such
risks include, without limitation, the inability of the Company to maintain
premier positions on high traffic Web access points or to maintain or enter into
additional distribution relationships with Internet Service Providers ("ISPs")
or Online Service Providers ("OSPs"); the inability of the Company to maintain
and increase levels of traffic on the Excite Network; the inability of the
Company to derive revenues from Netscape's Netcenter service in excess of the
$70 million cash prepayment (the "Cash Payment") made to Netscape, the value of
two warrants (the "Warrants") issued to Netscape, and the additional costs the
Company expects to incur in order to perform its obligations under an agreement
entered into in April 1998 between the Company and Netscape (the "Netcenter
Agreement"); the inability of the Company to effectively integrate the
technology and operations of acquired businesses or technologies with its
operations, including, without limitation, those of Classifieds2000, Inc.
("Classifieds2000"); increased operating expenses as a result of the Company's
recent acquisitions, particularly increased costs the Company expects to incur
in maintaining MatchLogic, Inc. ("MatchLogic") as an independent entity; the
inability of the Company to expand its international operations, particularly in
light of the Company's limited operating experience in the international market;
the failure by the Company to continue to develop and extend the Excite and
WebCrawler brands; the inability of the Company to successfully integrate
sponsored services or to meet minimum guaranteed impressions under sponsorship
agreements; the inability of the Company to develop or acquire content for its
services; the failure of consumers to accept the Company's personalized Web
services, such as My Excite Channel, email services or chatroom services; the
inability of the Company to generate commerce-related revenues; the failure of
the Company to anticipate and adapt to a developing market; the introduction and
development of equal or superior services or products by competitors,
particularly in light of the fact that Microsoft and Netscape, operators of two
of the most heavily-trafficked Web sites, have announced that they will be
offering competitive services; the failure of the market to adopt the Web as an
advertising and commercial medium; reductions in market prices for Web-based
advertising as a result of competition or otherwise; the inability of the
Company to achieve higher cost per thousand impressions ("CPM") rates for
targeted advertising or to increase the percentage of its advertising inventory
sold; the inability of the Company to identify, attract, retain and motivate
qualified personnel; and general economic conditions. There can be no assurance
that the Company will be successful in addressing such risks, and any failure to
do so could have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company has incurred significant operating losses since inception, and
as of March 31, 1998, the Company had an accumulated deficit of approximately
$103.1 million. Although the Company experienced significant revenue growth
during 1996, 1997 and the first quarter of 1998, there can be no assurance that
this growth rate will be sustained or that revenues will continue to grow or
that historical operating results will be indicative of future operating
results. During the second quarter of 1998, the Company expects to incur charges
of approximately $16.2 million for purchased in-process technology as a result
of an asset acquisition by the Company in April 1998 and charges of
approximately $56.8 million related to the Netcenter Agreement. The Company may
record additional charges, which may be significant, related to the Netcenter
Agreement in the second quarter of 1998 and future periods under certain
circumstances. As a result of these
4
<PAGE> 6
charges, the Company expects that it will incur a net loss for the second
quarter of 1998 and for the entire year. In addition, as the Company has grown,
its operating expenses have increased, and the Company expects that its
operating expenses will continue to increase as a result of its acquisitions and
the performance of its obligations under the Netcenter Agreement, its increased
sales and marketing efforts, its increased funding for development activities
and the increased general and administrative staff needed to support the
Company's growth. 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.
There can be no assurance that in the future the Company will be profitable on a
quarterly or annual basis.
Certain executive officers of the company have made certain forward-looking
statements regarding the Company's future prospects, which statements have been
published in a variety of news articles. These statements include statements
regarding the Company's prospects for increased revenues and profitability in
the future, the amount of revenues that may be generated by MatchLogic and
Classifieds2000, which the Company acquired in February 1998 and April 1998,
respectively, the rate at which the Company's revenues will increase and the
ability of the Company to increase its advertising rates. The occurrence or
achievement of any of the events described in these statements is subject to
numerous risks and uncertainties. In particular, risks and uncertainties
relating to forward-looking statements as to the Company's revenues,
profitability and advertising rates include, without limitation: the need for
continued increases in the number of companies advertising on the Excite Network
as well as on the Web generally; the Netcenter Agreement, particularly in light
of the substantial prepayment made to Netscape and the significant additional
costs that the Company expects to incur in order to perform its obligations
under the Netcenter Agreement; the Company's ability to increase sales of
targeted advertisements and advertisers' willingness to pay higher CPM rates for
advertisements on the Excite Network; the ability of the Company to realize
substantial revenues from its relationship with Netscape; the increasingly
competitive environment for Web advertising sales; the need for increases in the
amount of traffic on the Excite Network; the increased amount of expenses and
negative cash flows resulting from the Company's acquisitions of
Classifieds2000, MatchLogic and Netbot, Inc. ("Netbot"); the Company's
dependence on third parties to attract traffic to the Excite Network, including
payments for distribution fees; the ability of the Company to develop and
achieve consumer and advertiser acceptance for the Excite Network in the
international market; general economic conditions; and the risks relating to the
acquisition of MatchLogic described below.
Risks and uncertainties relating to forward-looking statements regarding
MatchLogic's contribution to revenues and other operating results of Excite in
1998 include without limitation: risks involved in assimilating MatchLogic while
maintaining MatchLogic as a separate operating unit; risks that MatchLogic
personnel, who are not subject to noncompetition agreements, will leave
MatchLogic; risks inherent in MatchLogic's business, including privacy concerns
arising out of MatchLogic's database marketing activities, which account for a
majority of MatchLogic's revenues; risks in the extremely limited operating
history of MatchLogic on which to base any revenue projections; the likely
fluctuations in operating results of MatchLogic due to factors beyond
MatchLogic's or Excite's control; reliance by MatchLogic on a very limited
number of customers for a substantial percentage of its projected revenues; the
acceptance by MatchLogic's advertising customers of MatchLogic being owned by
Excite (one of the Web sites from which MatchLogic purchases advertising); and
the willingness by other Web sites from which MatchLogic purchases advertising
(particularly those which are direct competitors of Excite) to accept future
advertising placements from MatchLogic as a result of the acquisition by Excite.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; UNPREDICTABILITY OF FUTURE REVENUES
As a result of the Company's limited operating history, the evolving nature
of its business and its acquisitions, the Company has limited 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. The Company
expects in the future to derive revenue from a mix of advertising sales
(including banner advertisements and sponsorships), commerce transactions and
direct and database marketing activities. To date, the Company has not received
any material
5
<PAGE> 7
amounts of revenue from commerce transactions, and the Company only recently
acquired MatchLogic, which the Company expects to be its primary source of
revenues from database and direct marketing activities. There can be no
assurance that the Company will be successful in deriving substantial revenues
from these areas. There can also 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 advertisements, the
Company's limited operating history and the uncertainty as to the viability of
the Web as an advertising medium. The failure by the Company to accurately make
such predictions would have a materially adverse effect on the Company's
business, results of operations and financial condition. In addition, the
Company derives a significant portion of its revenues from the sale of
advertising under short-term advertising contracts. The cancellation or deferral
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 that quarter.
Furthermore, the Company derives banner advertising revenue and believes it
attracts sponsors and advertisers 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 a material adverse effect on the
Company's business, results of operations and financial condition.
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 but not limited to: 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 Netcenter Agreement,
including those related to the Warrants, and the Company's distribution
relationships with Netscape and other ISPs and 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 new or existing
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; mix of types of advertisements sold, such as the amount of targeted
advertising, which generally has higher CPM rates, sold as a percentage of total
advertising sold; capacity constraints of and dependencies on computer
infrastructure; and general economic conditions.
During its limited operating history, the Company has experienced seasonal
fluctuations in the amount of banner advertisements purchased on its network,
with advertisers historically purchasing fewer advertisements in the first
calendar quarter of each year. Because the market for Web advertising is an
emerging market, additional seasonal patterns in Web advertising may develop in
the future as the market matures.
Due to all of the foregoing factors, the Company's quarterly revenues and
operating results are difficult to forecast. 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. Also, it is likely that in some future quarter or quarters the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would be materially and adversely affected. See "--Volatility of Stock Price."
RISKS RELATED TO NETCENTER AGREEMENT
In April 1998, the Company and Netscape entered into the Netcenter
Agreement. See "Selling Shareholder." This agreement subjects the Company to
numerous and substantial risks and uncertainties, including, without limitation,
those discussed below.
Under the Netcenter Agreement, the Company will recognize all revenues
generated from certain co-branded services (the "Co-Branded Services") and will
not receive revenues directly from any other part of Netcenter. The Company will
pay Netscape a percentage of revenues generated from the Co-Branded Services
(the "Netscape Revenues"), provided that the Company will not be required to
make any payments to Netscape until it has recouped a substantial portion of the
Cash Payment from amounts which would otherwise have been payable as Netscape
Revenues. There are no minimum guaranteed revenues under the
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Netcenter Agreement, and there can be no assurance as to the level of revenues
that the Company will generate from the Co-Branded Services. The level of
advertising revenues generated by the Company from the Co-Branded Services is
subject to a number of risks and uncertainties, many of which are beyond the
Company's control. These include, without limitation, general risks associated
with providing an advertising-supported Web service (as discussed elsewhere in
this Prospectus); uncertainty as to whether the Company can increase its sales
and marketing capabilities in order to sell sufficient advertising on the
Co-Branded Services; pricing competition from Netscape as a result of
advertising sold on parts of Netcenter other than the Co-Branded Services; and
risks that channels on Netcenter other than the channels which are part of the
Co-Branded Services (such as a business channel and a sports channel) may be
potentially more attractive to advertisers than channels on the Co-Branded
Services. In addition, the Company expects to incur significant costs to
develop, host and sell advertising on the Co-Branded Services, including the
costs of hiring a significant number of additional technical and sales
personnel. The Company will not be reimbursed for these costs. The failure to
generate sufficient revenues from the Co-Branded Services to recoup a
significant portion of the Cash Payment and these costs would have a material
adverse effect on the Company's business, results of operations and financial
condition.
The success of Netcenter, and the Co-Branded Services in particular, will
be substantially dependent on the amount of traffic on Netcenter. Although
Netscape has made certain exposure guarantees to the Company over the term of
the Netcenter Agreement, there can be no assurance that these guarantees will be
fulfilled. There is intense competition for attracting Web users, which
competition may be exacerbated by the upcoming release of Microsoft's Windows 98
operating system. Furthermore, many current Web users may not choose to utilize
Netcenter over other available Internet services. Any failure of Netcenter to
attract substantial user traffic would materially and adversely affect the
Company's business, results of operations and financial condition. Additionally,
the Netcenter Agreement provides that all page views generated from the
Co-Branded Services shall be deemed to be traffic attributable to Netscape. As a
result, the Company may not receive credit, under certain audience measurement
statistics which are commonly used by advertisers in making their advertising
placements, for traffic generated through the Co-Branded Services.
As part of the Netcenter Agreement, the Excite Network will also be
featured as a "premier provider" on Netscape's Net Search page, and will be
similarly featured on the "Netcenter Widget" tool which will be accessible from
Netcenter. Because Netscape only guarantees a specified number of impressions
from its Net Search page (as compared to a number of users who "click through"
to the Excite Network), there can be no assurance that this new "premier
provider" arrangement will result in significant increases in traffic on the
Excite Network. Although Netscape has guaranteed a minimum number of users who
"click through" to the Excite Network from the Netcenter Widget, Netscape is not
obligated to keep this tool on Netcenter after the first six months of the term
of the Netcenter Agreement. Accordingly, there can also be no assurance that
this tool will provide the Excite Network with significant amounts of traffic.
Upon the termination of the Netcenter Agreement (other than a termination
in connection with certain acquisitions of or by Netscape), Netscape will have a
perpetual, irrevocable license to utilize certain technology used by Excite to
provide the Co-Branded Services. Netscape will also have the right to sublicense
this technology to third parties. As a result, upon termination of the Netcenter
Agreement, Netscape will be able to operate Netcenter independently, without any
significant royalty or payment obligations to Excite. In addition, if Netscape
sublicenses this technology to a third party, the Excite Network could face
additional competition, which could have a material adverse effect on the
Company's business, results of operations and financial condition.
The Netcenter Agreement is subject to termination if the Company materially
breaches its obligations under the Netcenter Agreement. In addition, if Netscape
believes that the Company's Excite service or that the content provided by
Excite for the Netcenter service contains any content that Netscape deems likely
to cause it material harm, Netscape may terminate the Netcenter Agreement if the
Company has not revised such objectionable content within five days after notice
from Netscape. In the event of such terminations, Netscape will not be obligated
to refund any portion of the amounts prepaid by the Company and the Company will
not be entitled to receive any reimbursement for its costs incurred in
performing its obligations under the Netcenter Agreement. Moreover, many of the
Company's obligations to be performed under the
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Netcenter Agreement must be performed according to standards determined by
Netscape at its sole discretion.
Many of the services to be offered by Netcenter will compete directly with
those offered by the Excite Network. There can be no assurance that this
increased competition for Web users or advertisers will not have a material
adverse effect on the Company's business, results of operations and financial
condition.
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. Since August 1996,
the Company has made a number of acquisitions. The Company acquired
Classifieds2000 in April 1998, MatchLogic in February 1998, Netbot in November
1997, the assets relating to the WebCrawler service in December 1996 and The
McKinley Group, Inc. ("McKinley") in August 1996. In addition, in April 1998 the
Company purchased certain assets of a small company. Acquisitions involve a
number of special risks, including, among other things, the difficulty of
assimilating the technologies, operations and personnel of acquired companies
with those of the Company, the potential disruption of the Company's business,
the diversion of resources, the incurrence of acquisition-related expenses, the
write-off or amortization of intangible assets, the assumption of unknown
liabilities, the inability to maintain uniform standards, controls, procedures
and policies and the impairment of relationships with employees and strategic
partners as a result of such acquisitions or the integration of new personnel.
For example, the assimilation of prior acquisitions required, among other
things, the integration of service offerings, coordination of the research and
development and sales and marketing efforts, the assumption by the Company of
liabilities under distribution agreements and loan agreements, and the addition
of a significant number of additional personnel. The Company could face similar
integration issues with respect to its recent or future acquisitions, and there
can be no assurance that the Company will be successful in addressing these
risks. Any failure to successfully address these acquisition-related risks could
have a material adverse effect on the Company's business, results of operations
and financial condition.
INTENSE COMPETITION
The market for Web services and Web advertising is intensely competitive.
There are no substantial barriers to entry in this market and the Company
expects competition to intensify. 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.
The Company's primary competitors are Web search and retrieval companies
such as Infoseek Corporation, Lycos, Inc. and Yahoo!, Inc. and services and
products offered by other companies, including Digital Equipment Corporation's
Alta Vista, HotWired Ventures and Inktomi's HotBot, CNET Inc.'s search.com and
Northern Light Technology LLC's Northern Light search service. 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 and other companies that offer information search and
retrieval capabilities with their core database products. As the Company
increases the content offerings and services on the Excite Network, it will
increasingly face competition from a large number of businesses which offer Web
services such as email, stock quotes, news and chat features and who publish
information and content on the Web, including large OSPs such as America Online
and the Microsoft Network.
The Company also expects to compete with 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. These potential competitors could take actions that make
it more difficult for consumers to find and use the Excite Network. For example,
Netscape has announced the introduction of Netcenter, which is expected to
compete directly with the Excite Network for traffic and advertisers. See
"--Risks Related to Netcenter Agreement." Microsoft has announced that it will
offer Internet search engine services provided by Inktomi in the Microsoft
Network and other Microsoft online properties and has
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announced that it will offer personalized Web services through its Start
service. Such search services could be tightly integrated into Microsoft's
operating systems, Internet Explorer Web browser and other software
applications, and Microsoft may promote such services within the Microsoft
Network or through other end-user services such as WebTV. Insofar as Microsoft's
search services may be more conveniently accessed, this may provide Microsoft
with significant competitive advantages that could have a material adverse
effect on the Company's user traffic. In addition, Microsoft and Netscape, both
of which have significantly greater financial, technical and marketing resources
than the Company, have announced an intention to introduce Web sites offering
services which are similar to those currently offered by the Company. Even
though the Company has entered into a strategic relationship with Netscape with
respect to the new Netcenter service, the Excite Network will compete with
Netcenter for traffic and advertisers. Many large media companies have announced
that they are contemplating developing Internet navigation services and are
attempting to become "gateway" sites for Web users. For example, both Time Inc.
and CBS have announced initiatives to develop Web services in order to have
their Web sites become the starting point for users navigating the Web. In the
event such companies develop such "gateway" sites, the Company could lose a
substantial portion of its user traffic, which would have a material adverse
effect on the Company's advertising revenues and on its business, results of
operations and financial condition.
Many providers of Web services have been entering into distribution
arrangements, co-branding arrangements, content arrangements and other strategic
partnering arrangements with ISPs, OSPs, providers of Web browsers, operators of
high traffic Web sites and other businesses in an attempt to increase traffic
and page views, thereby making their Web sites more attractive to Web
advertisers while also making it more difficult for consumers to utilize the
Company's services. For example, Yahoo! and MCI have entered into an agreement
to offer an online service to be called "Yahoo! Online powered by MCI Internet"
under which Yahoo's services will be made easily available to MCI Internet
customers. To the extent that the Company's 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,
or the Company's traffic and page views could remain constant or decline, either
of which could have the effect of making these Web sites appear more attractive
to advertisers and therefore could have a material adverse effect on the
Company's business, results of operations and financial condition.
As a result of its recent acquisition of MatchLogic, the Company expects
that a portion of its revenues will be derived from providing advertisers and
advertising agencies with services designed to manage targeted Internet
advertising campaigns. This market is also a new and evolving market which is
increasingly competitive and in which there are no substantial barriers to
entry. The Company competes in this area primarily with IMGIS, Inc., and
competes indirectly in this area with DoubleClick Inc., which offers Internet
advertising solutions for advertisers and Web sites, and NetGravity, Inc., which
provides advertising management software. The Company expects to face
competition in this area from additional companies in the future.
Many of the Company's existing competitors, as well as a number of
potential new competitors, have longer operating histories in the Web market,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. Such competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to potential
employees, distribution partners, advertisers and content providers. Further,
there can be no assurance that the Company's competitors will not develop Web
search and retrieval services or other online services that are equal or
superior to those of the Company or that achieve greater market acceptance than
the Company's offerings.
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
perceived as an effective advertising medium, advertisers may be reluctant to
devote a significant portion of their advertising budgets to Web-based
advertising. As a result of the foregoing factors, there can 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.
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RISKS RELATED TO SPONSORSHIPS
The Company has recently entered into, and derives a substantial portion of
revenues, from sponsorship arrangements with third parties to provide sponsored
services and placements on the Excite Network in addition to traditional banner
advertising. In connection with these arrangements, the Company may receive
sponsorship fees, and in connection with certain of its more recent arrangements
it may receive a portion of transaction revenues received by such third party
sponsors from users originated through the Excite Network. These arrangements
expose the Company to potentially significant financial risks, including the
risk that the Company fails to deliver required minimum levels of user
impressions (in which case, these agreements are typically subject to
termination) and that third party sponsors do not renew the agreements at the
end of their term. These arrangements also require the Company to integrate
sponsors' content with the Company's services, which can require the dedication
of resources and significant programming and design efforts to accomplish. There
can be no assurance that the Company will be able to attract additional sponsors
or that it will be able to renew existing sponsorship arrangements when they
expire. In addition, the Company has granted exclusivity provisions to certain
of its sponsors, and may in the future grant additional exclusivity provisions.
Such exclusivity provisions may have the effect of preventing the Company, for
the duration of such exclusivity arrangements, from accepting advertising or
sponsorship arrangements within a particular subject matter with respect to
portions of a channel or service, an entire channel, across an entire service or
over the entire Excite Network. The inability of the Company to enter into
further sponsorship or advertising arrangements as a result of its exclusivity
arrangements could have a material adverse effect on the Company's business,
results of operations and financial condition.
RISKS ASSOCIATED WITH BANNER ADVERTISING
The Company derives a substantial portion of its revenues from the sale of
banner advertisements on the Excite Network. A majority of the Company's
customers purchasing banner advertisements purchase these advertisements on a
short-term basis, and many of these customers may terminate their advertising
commitments at any time without penalty. Consequently, there can be no assurance
that these customers will continue or increase their level of advertising on the
Excite Network or that these customers will not move their advertising to
competing Web sites or to other traditional media. Therefore, there can be no
assurance that the Company will be successful in maintaining or increasing the
amount of banner advertising on the Excite Network, and the failure to do so
would have a material adverse effect on the Company's business, results of
operations and financial condition.
DEVELOPING MARKET; DEPENDENCE ON CONTINUED GROWTH IN USE OF THE WEB
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.
The Company is highly dependent upon the increased use of the Web for
information, publication, distribution and commerce, and there can be no
assurance that the use of the Web for these purposes will continue to grow at
its current rate or at all. The growth of the use of the Web may be inhibited
for a number of reasons, including, but not limited to, potentially inadequate
development of network infrastructure, security concerns, inconsistent quality
of service and lack of availability of cost-effective, high-speed service. To
the extent that use of the Web continues to grow, there can be no assurance that
the Internet infrastructure will continue to support the demands placed on it by
such growth or that the performance or reliability of the Internet will not be
adversely affected. In addition, the Web as an advertising medium has not been
available for a sufficient period of time to gauge its effectiveness as compared
with traditional advertising media, and therefore the Web is an unproven medium
for advertising-supported services. Accordingly, the Company's future operating
results will depend substantially upon the increased use of the Web for
information, publication, distribution and commerce and the emergence of the Web
as an effective advertising medium.
The Company's ability to generate significant advertising revenues will
also depend on, among other things, the development of a large base of users of
the Company's services possessing demographic characteristics attractive to
advertisers, the ability of the Company to accurately measure its user base and
the ability of the Company to develop or acquire effective advertising delivery
and measurement systems. Many of
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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. The adoption of Web advertising,
particularly by those entities that have historically relied upon traditional
media for advertising, requires the acceptance of a new way of conducting
business and exchanging information. Entities that already have invested
substantial resources in other methods of conducting business may be reluctant
to adopt a new strategy that may limit or compete with their existing efforts.
There can be no assurance that the market for Web advertising will continue to
emerge or become sustainable. If the market fails to develop or develops more
slowly than expected, the Company's business, results of operations and
financial condition could be materially and adversely affected. 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. There can be
no assurance that advertisers will continue to accept the Company's or other
third-party measurements of impressions, or that such measurements will not
contain errors. In such event, the Company's advertising revenues could be
materially adversely affected, which would have a material adverse effect on the
Company's business, results of operations and financial condition.
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," or user requests for additional information made by clicking on the
advertisement from the Company's network to the advertiser's Web pages, instead
of rates based solely on the number of impressions displayed on users' computer
screens, would materially adversely affect the Company's revenues. As a result
of these risks, there can be no assurance that the Company will be successful in
generating significant future advertising revenues from Web-based advertising,
and the failure to do so would have a material adverse effect on the Company's
business, results of operations and financial condition.
Further, there can be no assurance that advertisers will determine that
banner advertising, the delivery of which currently comprises a substantial
portion of the Company's revenues, is an effective or attractive advertising
medium, and there can be no assurance that the Company will effectively
transition to any other forms of Web advertising should they develop and achieve
market acceptance. Moreover, "filter" software programs that limit or prevent
advertising from being delivered to a Web user's computer are available.
Widespread adoption of such software by users could have a material adverse
effect upon the commercial viability of Web advertising, which would have a
material adverse effect on the Company's business, results of operations and
financial condition.
DEPENDENCE ON THIRD-PARTY RELATIONSHIPS
The Company is currently, and will be in the future, dependent on a number
of third-party relationships for user traffic and to 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,
agreements with ISPs and OSPs such as AOL and Microsoft and arrangements for
providing content for the Excite Network such as stock quotes and news stories.
The termination of, or the failure of the Company to renew on reasonable terms,
its position on a Web browser or its relationship with an ISP, OSP or key
content provider could significantly reduce traffic on the Excite Network or
could otherwise adversely affect the Company's advertising revenues, which would
also have a material adverse effect on the Company's business, results of
operations and financial condition. The Company could also incur expenses
relating to distribution license fees as a result of a new agreement with a
third party. These distribution license fees could have a material adverse
effect on the Company's business, results of operations and financial condition.
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 provide access or links to the Excite Network or
to provide content to the Company, are often not exclusive and are often
short-term or may be terminated at the convenience of the other party. There can
be no assurance that these third parties
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regard their relationship with the Company as important to their own respective
businesses and operations, that they will not reassess their commitment to the
Excite Network at any time in the future, or that they will not develop their
own competitive services or products. Further, there can be no assurance that
the services of those companies that provide access to the Excite Network will
achieve market acceptance or commercial success and therefore there can be no
assurance that any significant amount of traffic will be directed to the Excite
Network as a result of these third party relationships. Accordingly, there can
be no assurance that the Company's existing relationships will result in
sustained business partnerships, successful service offerings, the generation of
significant traffic on the Excite Network or significant revenues for the
Company.
The Company also has a five-year distribution agreement with AOL which
expires in November 2001 under which a co-branded version of the Excite search
and directory service is designated as the exclusive Web search and directory
service for the AOL service for an initial two-year period ending in November
1998. If the exclusivity period is not extended by AOL, the co-branded service
would become the "default" search and directory service of AOL. However, AOL
could enter into a strategic relationship with a competitor of the Company or
offer its own competing services, which could have a material adverse effect on
the Company's business, results of operations and financial condition.
PRIVACY CONCERNS
The Company's services and those of MatchLogic use "cookies" to deliver
targeted advertising, help compile demographic information about users and limit
the frequency with which an ad is shown to the user. Cookies are bits of
information keyed to a specific drive and passed to a Web site server through
the user's browser software. Cookies are placed on the user's hard drive without
the user's knowledge or consent, but can be removed by the user at any time
through the modification of the user's browser settings. Due to privacy
concerns, some Internet commentators, advocates and governmental bodies have
suggested that the use of cookies be limited or eliminated. In addition, certain
currently available Web browsers allow a user to delete cookies or prevent
cookies from being stored on the user's hard drive. Any reduction or limitation
in the use of cookies could limit the effectiveness of the Company's ad
targeting which could result in the Company experiencing lower CPM rates for its
advertisements, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
UNCERTAIN MAINTENANCE AND STRENGTHENING OF THE COMPANY'S BRANDS
The Company believes that maintaining and strengthening its brands is
critical to achieving widespread acceptance of the Excite Network, particularly
in light of the competitive nature of the Company's market. Promoting and
positioning its brands will depend largely on the success of the Company's
marketing efforts and the ability of the Company to provide high quality
services. In order to promote its brands, the Company may find it necessary to
increase its marketing budget or otherwise increase its financial commitment to
creating and maintaining brand loyalty among customers. If the Company fails to
promote and maintain its brands or incurs excessive expenses in an attempt to
promote and maintain its brands or if the Company's existing or future strategic
relationships fail to promote the Company's brands or increase brand awareness,
the Company's business, results of operations and financial condition could be
materially adversely affected. One of the benefits the Company hopes to obtain
from the Netcenter Agreement is increased brand awareness for the Excite name
and a larger audience reach. If the Co-Branded Services are successful, it is
possible that Netcenter will receive greater brand awareness and consumer
loyalty among Web users than the Excite Network and that upon the expiration of
the term of the Netcenter Agreement, these users will continue to utilize
Netcenter rather than the Excite Network. In such event, the Company's business,
results of operations and financial condition could be materially and adversely
affected.
SECURITY RISKS
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. There can
be no assurance that advances in computer capabilities, new discoveries in the
field of cryptography or other events or developments will not result in
compromises or breaches of the security systems used by the Company or other Web
sites to protect proprietary information. If any well-publicized compromises of
security were to occur it could have the effect
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of substantially reducing the use of the Web for commerce and communications,
which would have a material adverse effect on the Company's business, results of
operations and financial condition. A party who is able to circumvent the
Company's security measures could misappropriate proprietary information or
cause interruptions in the Company's services or operations. The Company may be
required to expend significant capital and other resources to protect against
the threat of such security breaches or to alleviate problems caused by such
breaches. To the extent that activities of the Company or sponsors of the
Company's services involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could expose the
Company to a risk of loss or litigation and possible liability. There can be no
assurance that the Company's security measures will prevent security breaches or
that the failure to prevent such breaches would not have a material adverse
effect on the Company's business, results of operations and financial condition.
RAPID TECHNOLOGICAL CHANGE
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, to adapt
its services to evolving standards and to continually improve the performance,
features and reliability of its network in response to competitive service and
product offerings and evolving demands of the marketplace. The failure of the
Company to adapt to such changes and evolution would have a material adverse
effect on the Company's business, results of operations and financial condition.
In addition, the widespread adoption of new Internet, networking or
telecommunications technologies or other technological changes could require
substantial expenditures by the Company to modify or adapt its services or
infrastructure which could have a material adverse effect on the Company's
business, results of operations and financial condition.
DEPENDENCE ON NEW AND ENHANCED SERVICES
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 currently offers a variety of Web-related services, including its
email, Excite NewsTracker, chat and instant paging services, and the Company
intends to introduce additional services in the future. Any new service launched
by the Company that is not favorably received by consumers could adversely
affect the Company's reputation or brand name and could also adversely affect
the Company's user traffic. There can also 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 achieve any degree of significant market
acceptance. Furthermore, existing services or new releases by the Company,
whether improved versions of existing services or introductions of new services,
may contain undetected errors that require significant design modifications.
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, 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 could be materially and
adversely affected.
MANAGEMENT OF GROWTH
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, 1998, the Company had grown to 455
employees from 188 employees at December 31, 1996. Further, as the number of the
Company's users, advertisers and other business partners has grown, the Company
has been required to scale its operations and 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 strategic relationships or sponsorship arrangements.
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
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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.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
A key component of the Company's strategy is to expand its international
operations and its international sales and marketing activities by offering
localized versions of the Excite Network. Expansion into these markets has
required and will continue to require management attention and resources. The
Company has limited experience in localizing its services and many of the
Company's competitors are also undertaking to expand into foreign markets. There
can be no assurance that the Company will be successful in expanding into
international markets. In addition to the uncertainty regarding the Company's
ability to generate revenues from foreign operations and expand its
international presence, there are certain risks inherent in doing business on an
international basis, including, among others, regulatory requirements, legal
uncertainty regarding liability, tariffs and other trade barriers, difficulties
in staffing and managing foreign operations, longer payment cycles, different
accounting practices, problems in collecting accounts receivable, political
instability, seasonal reductions in business activity and potentially adverse
tax consequences, any of which could adversely affect the success of the
Company's international operations. To the extent the Company expands its
international operations and has additional portions of its international
revenues denominated in foreign currencies, the Company could become subject to
increased risks relating to foreign currency exchange rate fluctuations. There
can be no assurance that one or more of the factors discussed above will not
have a material adverse effect on the Company's future international operations
and, consequently, on the Company's business, results of operations and
financial condition.
RISK OF CAPACITY CONSTRAINTS; SYSTEM FAILURES
The Company is dependent on its ability to generate a 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 Excite Network. Any system failure that causes
interruptions in the availability of or that 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 on the Company's services increases, there can be no assurance that the
Excite Network will be able to scale proportionately. The Company is also
dependent upon timely fees and downloads of information from content providers
and providers of Web browsers and on ISPs, OSPs and other Web site operators,
which have experienced significant outages in the past, for access to its
network, and Web consumers have experienced outages, delays and other
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. To the extent that the capacity
constraints described above are not effectively addressed by the Company, such
constraints would have a material adverse effect on the Company's business,
results of operations and financial condition.
Substantially all of the Company's communications hardware and certain of
its computer hardware operations are located at leased facilities in Redwood
City, California, an area susceptible to earthquakes. The Company has
experienced system failures or outages from time to time in the past, which have
disrupted the operation of the Excite Network. There can be no assurance that a
system failure at this location would not adversely affect the performance of
the Excite Network. These systems are also vulnerable to damage from fire,
floods, earthquakes, power loss, telecommunications failures, break-ins and
similar events. The Company does not presently have a formal disaster recovery
plan. In the event that the Company seeks to replicate its systems at other
locations, it would face a number of technical challenges, particularly with
respect to database replication and the need to constantly update distributed
databases, and there can be no assurance
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<PAGE> 16
that the Company would be able to successfully address these challenges.
Although the Company carries property and business interruption insurance, its
low coverage limits likely will not be adequate to compensate the Company for
all losses that may occur. The Company's servers are also vulnerable to computer
viruses, physical or electronic break-ins and similar disruptive problems.
Computer viruses, break-ins or other problems caused by third parties could lead
to interruptions, delays or cessations in service to users of the Excite
Network. The occurrence of any of these risks could have a material adverse
effect on the Company's business, results of operations and financial condition.
DEPENDENCE ON THE WEB INFRASTRUCTURE
The success of the Excite Network will depend in large part upon the
development and maintenance of the 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.
Furthermore, the Web has experienced a variety of outages and other delays as a
result of damage to portions of its infrastructure, and could face such outages
and delays in the future, including outages and delays resulting from the
inability of certain computers or software to distinguish dates in the 21st
century from dates in the 20th century. See "--Year 2000 Implications." These
outages and delays could adversely affect the level of Web usage and also the
level of traffic on the Excite Network. In addition, the Web could lose its
viability due to delays in the development or adoption of new standards and
protocols (for example, the next-generation Internet Protocol) to handle
increased levels of activity or due to increased governmental regulation. There
can be no assurance that the infrastructure or complementary products or
services necessary to make the Web a viable commercial marketplace will be
developed, or, if they are developed, that the Web will become a viable
commercial marketplace for services such as those offered by the Company. If the
necessary infrastructure, standards or protocols or complementary products,
services or facilities are not developed, or if the Web does not become a viable
commercial marketplace, the Company's business, results of operations and
financial condition will be materially and adversely affected. Even if such
infrastructure, standards or protocols or complementary products, services or
facilities are developed and the Web becomes a viable commercial marketplace,
there can be no assurance that the Company will not be required to incur
substantial expenditures in order to adapt its services to changing Web
technologies, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to access to or commerce
on the Web. However, due to the increasing popularity and use of the Web, it is
possible that a number of laws and regulations may be adopted with respect to
the Web, covering issues such as user privacy, pricing, characteristics and
quality of products and services. For example, although it was held
unconstitutional, the Telecommunications Act of 1996 prohibited the transmission
over the Internet of certain types of information and content, and 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. In addition, because the growing
popularity and use of the Web has burdened the existing telecommunications
infrastructure and many areas with high Web use have begun to experience
interruptions in phone service, local telephone carriers, such as Pacific Bell,
have petitioned the FCC to regulate ISPs and OSPs in a manner similar to long
distance telephone carriers and to impose access fees on the ISPs and OSPs. If
any such petition is granted, or the relief sought therein is otherwise granted,
the costs of communicating on the Web
15
<PAGE> 17
could increase substantially, potentially slowing the growth in use of the Web,
which could in turn decrease the demand for the Company's services. The adoption
of any additional laws or regulations may also decrease the growth of the Web,
which could in turn decrease the demand for the Excite Network or could increase
the Company's cost of doing business. 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.
The Company's contests may be subject to state and federal laws governing
lotteries and gambling. Although the Company seeks to design its contest rules
to fall within exemptions from such laws, there can be no assurance that these
contests will be exempt from such laws or that the applicability of such laws
will not 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 originated 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 laws or that such laws will not be modified, or new
laws enacted, in the future. Although there has been recently introduced the
proposed Internet Tax Freedom Act, which, if adopted, will place a temporary ban
on states and localities from passing new tax laws aimed at online transactions,
it is possible that, in the future, states or foreign countries may seek to
impose sales taxes on out of state companies that engage in commerce over the
Web or otherwise require the Company to qualify to do business in such
jurisdictions, with the failure to so qualify subjecting the Company to taxes or
penalties. In the event that states or foreign countries succeed in imposing
sales or other taxes on Web commerce, the growth of the use of the Web for
commerce could slow substantially. 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 contained on the Web may be accessed 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. In
addition, the Company could be exposed to liability with respect to the
selection of listings that may be accessible through the Company's services and
through content and materials that may be posted by users in classifieds,
bulletin board and chat room services offered by the Company. Such claims might
include, among others, that by providing hypertext links to Web sites operated
by third parties, the Company is liable for copyright or trademark infringement
or other wrongful actions by such third parties through such Web sites. It is
possible that if any information provided through the Company's services, such
as stock quotes, analyst estimates or other trading information, contains
errors, third parties could make claims against the Company for losses incurred
in reliance on such information. The Company recently began offering Web-based
email services, which expose the Company to potential risks, such as liabilities
or claims resulting from unsolicited email (spamming), lost or misdirected
messages, illegal or fraudulent use of email or interruptions or delays in email
service.
Certain of the Company's newer sponsorship relationships contain provisions
under which the Company is entitled to receive a share of revenue from the
purchase of goods and services by users of the Company's services. Such
arrangements may expose the Company to additional legal risks and uncertainties,
including, without limitation, potential liabilities to consumers of such
products and services. 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.
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<PAGE> 18
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance of
its executive officers and other key employees, many of whom have worked
together for only a short period of time. Given the Company's relatively early
stage of development, the Company is dependent on its ability to attract, train,
retain and motivate high quality personnel, especially its management and
engineering and development teams. The Company does not have "key person" life
insurance policies on any of its employees. The Company's future success also
depends on its continuing ability to attract, train, retain and motivate other
highly qualified technical and managerial personnel. Competition for such
personnel is intense, particularly in the San Francisco Bay Area, and there can
be no assurance that the Company will be able to attract, train, retain or
motivate other highly qualified technical and managerial personnel in the
future. The loss of the services of any of the Company's executive officers or
other key employees or the failure of the Company to attract, integrate,
motivate and retain additional key employees could have a material adverse
effect on the Company's business, results of operations and financial condition.
PROPRIETARY TECHNOLOGY; POTENTIAL LITIGATION
The Company regards its technology as proprietary and attempts to protect
it with copyrights, trademarks, trade secret laws, restrictions on disclosure
and transferring title and other methods, and has been issued a patent with
respect to certain aspects of its searching and indexing technology. The Company
has filed two patent applications with respect to other aspects of its
technology. There can be no assurance that the patent that has been issued is,
or that any patents that may issue from these pending applications will be,
sufficiently broad to protect the Company's technology. In addition, there can
be no assurance that any patents that have been issued or that may be issued
will not be challenged, invalidated or circumvented, or that any rights granted
thereunder would provide proprietary protection to the Company. The failure of
any patents to protect the Company's technology may make it easier for the
Company's competitors to offer technology equivalent to or superior to the
Company's technology. The Company also generally enters into confidentiality or
license agreements with its employees and consultants, and generally controls
access to and distribution of its documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use the Company's services or technology without
authorization, or to develop similar technology independently. In addition,
effective copyright, trademark and trade secret protection may be unavailable or
limited in certain foreign countries, and the global nature of the Web makes it
virtually impossible to control the ultimate destination of the Company's
products. Policing unauthorized use of the Company's technology is difficult.
There can be no assurance that the steps taken by the Company will prevent
misappropriation or infringement of its technology. In addition, litigation may
be necessary in the future to enforce the Company's intellectual property
rights, to protect the Company's trade secrets or to determine the validity and
scope of the proprietary rights of others. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on the Company's business, results of operations and financial condition.
Many parties, including competitors of the Company, are actively developing
search, indexing and related Web technologies. Some of these parties have taken,
and the Company believes that others will take, steps to protect these
technologies, including seeking patent protection. As a result, the Company
believes that disputes regarding the ownership of such technologies are likely
to arise in the future. In May 1998, one of the Company's competitors was issued
a patent with respect to certain aspects of its search technology. Although the
Company has not received any correspondence with regard to this patent, this
competitor has publicly stated that it intends to vigorously pursue entities it
believes may infringe this patent. The Company is currently reviewing this
patent with its patent counsel in order to determine whether the Company could
be subject to any potential claims. There can be no assurance that this
competitor will not initiate a lawsuit against the Company asserting patent
infringement. There can also be no assurance that the Company can defend
successfully any such litigation either on the grounds that such patent invalid
or that the Company's search technology does not infringe such patent. Even if
the Company is successful, there can be no assurance that the costs and
resources required to defend any such litigation will not have a material
adverse effect on the Company's business, results of operations or financial
condition. In addition, from time to time, the Company has received, and may
receive in the future, notice of claims of infringement of other parties'
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<PAGE> 19
proprietary rights, including claims for infringement resulting from the
downloading of materials by the service operated by the Company. Although the
Company investigates claims and responds as it deems appropriate, there can be
no assurance that infringement or invalidity claims (or claims for
indemnification resulting from infringement claims) will not be asserted or
prosecuted against the Company or that any assertions or prosecutions will not
materially and adversely affect the Company's business, results of operations
and financial condition. Irrespective of the validity or the successful
assertion of such claims, the Company would incur significant costs and
diversion of resources with respect to the defense thereof, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. If any claims or actions were asserted against the Company,
the Company might seek to obtain a license under a third party's intellectual
property rights. There can be no assurance, however, that under such
circumstances a license would be available on commercially reasonable terms, or
at all.
The Company currently owns and also licenses from third parties certain of
its technologies. As it continues to introduce new services that incorporate new
technologies, it anticipates that it may be required to license additional
technology from others. There can be no assurance that these third-party
technology licenses will be available to the Company on commercially reasonable
terms, if at all. The inability of the Company to obtain any of these technology
licenses could result in delays or reductions in the introduction of new
services or could materially and adversely affect the performance of its
services until equivalent technology could be identified, licensed and
integrated. Any such delays or reductions in the introduction of services or
adverse impact on service quality could materially and adversely affect the
Company's business, results of operations and financial condition.
CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN SHAREHOLDERS
The present directors and executive officers and certain shareholders of
the Company and their respective affiliates, in the aggregate, beneficially own
approximately 13,362,502 shares of the outstanding Common Stock. As a result,
these shareholders possess significant influence over the Company, giving them
the ability, among other things, to elect a significant portion of the Company's
Board of Directors (or the entire Board of Directors when and if cumulative
voting is eliminated upon the proposed reincorporation of the Company into
Delaware) and approve significant corporate transactions. In particular, AOL and
Intuit Inc. beneficially own approximately 2,464,356 and 2,900,000 shares,
respectively, of the outstanding Common Stock. Such concentration of share
ownership may also have the effect of delaying or preventing a change in control
of the Company, impede a merger, consolidation, takeover or other business
combination involving the Company or discourage a potential acquiror from making
a tender offer or otherwise attempting to obtain control of the Company.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock is highly volatile and is
subject to wide fluctuations in response to a wide variety of factors, including
quarterly variations in operating results, announcements of technological
innovations or new services by the Company or its competitors, conditions
affecting the Internet industry, changes in financial estimates by securities
analysts, or other events or factors. For example, since December 31, 1996, the
Company's Common Stock closed as low as $7 7/8 and as high as $91 1/8 per share.
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. These broad market fluctuations
may adversely affect the market price of the Company's Common Stock. 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 against the Company, 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.
FUTURE CAPITAL NEEDS
The Company currently anticipates that its available funds will be
sufficient to meet its anticipated needs for working capital, capital
expenditures and business expansion through at least the remainder of 1998.
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<PAGE> 20
Thereafter, the Company may need to raise additional funds. The Company may need
to raise additional funds sooner in order to fund more rapid expansion, to
develop new or enhanced services or products, to respond to competitive
pressures or to acquire complementary products, businesses or technologies. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of the shareholders of the Company will be
reduced, shareholders may experience additional dilution and such securities may
have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available on terms favorable to the Company, or at all. If adequate funds are
not available or are not available on acceptable terms, the Company may not be
able to fund its expansion, take advantage of unanticipated acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures. Such inability could have a material adverse effect on the Company's
business, results of operations and financial condition.
SHARES ELIGIBLE FOR FUTURE SALE; SHELF REGISTRATION STATEMENTS AND REGISTRATION
RIGHTS
Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the
Company's Common Stock. The number of shares of Common Stock available for sale
in the public market is limited by restrictions under the Securities Act of
1933, as amended (the "Securities Act"). Excluding the shares of Common Stock
offered hereby, as of April 30, 1998, the Company had outstanding approximately
23,439,519 shares of Common Stock, options to purchase a total of approximately
5,304,289 shares of Common Stock, 473,883 shares of Common Stock reserved for
future issuance under the Company's stock option and stock purchase plans,
warrants to purchase 497,070 shares of Common Stock and a warrant to purchase
325,000 shares of the Company's Series E-3 Preferred Stock. The Company has in
effect three shelf Registration Statements with respect to the 2,789,356 shares
(as of April 30, 1998) of Common Stock held by AOL (or issuable to AOL upon
conversion of convertible preferred stock issuable upon exercise of a warrant),
with respect to the 2,900,000 shares of Common Stock held by Intuit and with
respect to 2,992,522 shares (as of April 30, 1998) held by, or issuable upon
exercise of assumed warrants to, the former stockholders and warrant holders of
MatchLogic and Netbot. The Company will also be required to file an additional
shelf registration statement with respect to the 1,065,337 shares of Common
Stock held by, or issuable upon exercise of assumed warrants or convertible debt
to, the former securityholders of Classifieds2000 and a company from which
Excite purchased certain assets in April 1998. Holders of an additional
4,591,144 shares of Common Stock have certain rights to require the Company to
register those shares of Common Stock for offer and sale to the public. If such
holders, by exercising their registration rights or selling their shares of
Common Stock pursuant to an existing registration statement, cause a large
number of shares to be registered and sold in the public market, such sales
could have a material adverse effect on the market price for the Company's
Common Stock.
YEAR 2000 IMPLICATIONS
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field and cannot distinguish
21st century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements. The Company has reviewed its
internal programs, and has determined that there are no significant Year 2000
issues within the Company's systems or services. However, although the Company
believes that its systems are Year 2000 compliant, the Company utilizes
third-party equipment and software that may not be Year 2000 compliant. Failure
of such third-party equipment or software to operate properly with regard to the
year 2000 and thereafter could require the Company to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
the Company's business, results of operations and financial condition.
Furthermore, the purchasing patterns of advertisers may be affected by Year 2000
issues as companies expend significant resources to correct their current
systems for Year 2000 compliance. These expenditures may result in reduced funds
available for Web advertising or sponsorship of Web services, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
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PROPOSED REINCORPORATION; CERTAIN ANTI-TAKEOVER PROVISIONS
The Company intends to submit to its shareholders at its 1998 annual
meeting to be held in June 1998 a proposal to change the state of incorporation
of the Company from California to Delaware. If the Company's shareholders
approve this proposal, then upon the reincorporation of the Company into
Delaware, the Company's Certificate of Incorporation, like its current Articles
of Incorporation, will permit the Company's Board of Directors to issue up to
4,000,000 shares of Preferred Stock in one or more series and to determine the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions therefor. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing flexibility in
connection with possible financings, acquisitions or other corporate purposes,
may have the effect of delaying, deferring or preventing a change in control of
the Company, may discourage bids for the Company's Common Stock at a premium
over the market price of the Common Stock, and may adversely affect the market
price of, and the voting and other rights of the holders of, the Common Stock.
Other than shares issuable upon exercise of an outstanding warrant to purchase
up to 325,000 shares of Series E-3 Preferred Stock, the Company has no current
plans to issue shares of Preferred Stock. In addition, the Netcenter Agreement
is subject to termination in the event of an acquisition of the Company by
certain specified companies or in the event the Company acquires certain
specified companies. Such provisions may have the effect of delaying, deferring
or preventing a change in control of the Company and may also have the effect of
preventing the Company from pursuing certain acquisitions which the Company may
regard as strategic.
Certain material differences exist between the rights of the Company's
shareholders under California law and the Company's Articles of Incorporation
and Bylaws, and such rights as they will exist under Delaware law and the
Company's Certificate of Incorporation and Bylaws, if the reincorporation
proposal is approved. These material differences include, but are not limited
to, the loss of the ability of shareholders to act by written consent, the loss
of cumulative voting rights, limitations on the availability of appraisal rights
with respect to certain reorganizations, more limited standing to bring
shareholder derivative actions, restrictions on the ability of shareholders to
submit proposals for annual meetings and the loss of the ability to call special
shareholder meetings. As a result of such material differences, the rights of
holders of the Company's capital stock will generally become more limited after
the proposed reincorporation.
In addition, if this reincorporation is approved by the Company's
shareholders, certain provisions of the Company's Certificate of Incorporation
and Bylaws will have the effect of delaying, deferring or preventing a change in
control of the Company. These provisions will provide, among other things, that
stockholders may not take action by written consent or call special meetings,
and that the ability of stockholders to submit proposals at stockholder meetings
will be restricted. In addition, the Company will be subject to the anti-
takeover provisions of Section 203 of the Delaware General Corporation Law,
which will prohibit the Company from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The Company's
Certificate of Incorporation and Bylaws will provide that the Company will
indemnify officers and directors against losses that they may incur in
investigations and legal proceedings resulting from their services to the
Company, which may be broad enough to include services in connection with
takeover defense measures. All of the foregoing provisions may have the effect
of preventing changes in the management of, or deferring or preventing a change
of control in, the Company.
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SELLING SHAREHOLDER
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
April 30, 1998 by the Selling Shareholder named below. Except as set forth
below, the Selling Shareholder has not had any position, office or other
material relationship with the Company within the past three years. The
following table assumes that in this offering the Selling Shareholder sells all
of the Shares offered hereby. However, the Company is unable to determine the
exact number of shares that will actually be sold or when or if such sales will
occur. The Company will not receive the proceeds of any shares of Common Stock
sold pursuant to this Prospectus.
The two Warrants were issued to Netscape pursuant to a Warrant Agreement
dated as of April 29, 1998 between the Company and Netscape (the "Warrant
Agreement"). The Warrant Agreement was entered into in connection with an
agreement with respect to Netscape's recently-announced "Netcenter" service (the
"Netcenter Agreement").
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING OWNED AFTER OFFERING
--------------------- --------------------
NAME NUMBER PERCENT NUMBER PERCENT
---- -------- --------- -------- --------
<S> <C> <C> <C> <C>
NETSCAPE COMMUNICATIONS CORPORATION.............. 423,079 1.8 -- --
</TABLE>
The shares in the above table represent shares of Common Stock issuable
upon exercise of an immediately exercisable Warrant (the "Initial Warrant") at a
price per share of $59.0906. The Initial Warrant will expire on April 30, 2000.
In addition, Netscape was issued pursuant to the Warrant Agreement an additional
Warrant (the "Subsequent Warrant") which does not become exercisable until April
30, 1999 and which will expire on April 30, 2000. The Subsequent Warrant will
entitle Netscape to purchase up to a number of shares of Common Stock (which
shares are also the subject of this Prospectus) as is determined by dividing
$25.0 million by the average closing sale price of one share of Common Stock, as
reported on the Nasdaq National Market, for the thirty (30) most recent trading
days ending on the third trading day preceding April 30, 1999, subject to
appropriate adjustments to reflect stock splits, stock dividends,
reclassifications or similar events. Such $25.0 million amount is subject to
reduction in the event that Netscape does not enter into a marketing services
agreement with a term of at least two years with MatchLogic on or before May 22,
1998 providing for certain minimum payments to MatchLogic.
The Subsequent Warrant may become exercisable prior to April 30, 1999 in
the event of a "Corporate Transaction," which is defined to include: (i) a
merger or consolidation in which the Company is not the surviving entity, and
where the shareholders of the Company immediately prior to such merger or
consolidation do not own, immediately after such merger or consolidation, by
virtue of securities of the surviving entity issued in respect of their shares
of Common Stock (or other securities) of the Company, Common Stock (or other
securities) of the surviving entity representing more than fifty percent (50%)
of the combined voting power of the outstanding securities of the purchasing
entity; (ii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company, where the shareholders of the Company immediately
prior to such sale, transfer or other disposition do not own, immediately after
such sale, transfer or other disposition, by virtue of securities of the
purchasing entity issued in respect of their shares of Common Stock (or other
securities) of the Company, Common Stock (or other securities) of the purchasing
entity representing more than fifty percent (50%) of the combined voting power
of the outstanding securities of the purchasing entity; or (iii) any reverse
merger in which the Company is the surviving entity but in which the
shareholders of the Company immediately prior to such merger do not continue to
own, immediately after such merger, by virtue of their shares of Common Stock
(or other securities) of the Company owned immediately prior to such merger,
Common Stock (or other securities) of the Company representing more than fifty
percent (50%) of the combined voting power of the outstanding securities of the
Company.
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<PAGE> 23
In April 1998, the Company and Netscape entered into the Netcenter
Agreement, a two-year strategic relationship under which the Company will, among
other things, provide, host and sell advertising for certain co-branded channels
(the "Co-Branded Channels"), a co-branded Web search service (the "Co-Branded
Search Service") and a co-branded directory service (the "Co-Branded Directory
Service" and, collectively, the "Co-Branded Services"), for Netscape's
Netcenter. The Company will be responsible for developing, programming, hosting
and advertising sales for the Co-Branded Services. In connection with the
Netcenter Agreement, the Company has paid to Netscape $50.0 million, and is
obligated to pay by June 30, 1998 an additional $20.0 million (together, the
"Cash Payment"). The Company will recognize all revenues generated from the
Co-Branded Services and will pay to Netscape a percentage of revenues generated
from the Co-Branded Services (the "Netscape Revenues"), provided that Excite
will not be required to make any payment to Netscape until it has recouped a
substantial portion of the Cash Payment from amounts which would otherwise have
been payable as Netscape Revenues. There can be no assurance as to the level of
revenues to be generated by the Company from the Co-Branded Services, and such
revenues are subject to numerous risks. Also in connection with the Netcenter
Agreement, the Company has issued to Netscape the Warrants. In addition to the
potential revenues to the Company associated with the Netcenter Agreement, the
Company believes that the potential benefits of the Netcenter Agreement include
the opportunity to increase the Company's brand awareness, strengthen its market
position among consumers and advertisers, share certain user registration data
with Netscape and reduce exposure on Netscape's Web site for the Company's
competitors.
Netcenter is expected to feature a variety of topical channels, including
the nine Co-Branded Channels (Education, Games, Lifestyle, Autos, Health, Arts &
Leisure, Real Estate, Auctions and Shopping) which will be provided by Excite
and co-branded with Netscape, and additional channels which will be provided by
Netscape (the "Netscape Channels"). Netcenter will also include the Co-Branded
Search Service and the Co-Branded Directory Service which will be developed and
operated by the Company (subject to Netscape's right to assume responsibility
for programming all or part of the Co-Branded Directory Service). Furthermore,
the Company's Classifieds2000 service will be featured as the provider of
classified advertising, excluding career-related advertising, throughout
Netcenter. The Company will continue to be featured as a "premier provider" on
Netscape's Net Search page and will be similarly featured on the "Netcenter
Widget" tool which will be accessible from Netcenter.
The initial access page to Netcenter will be Netscape-branded only, and
along with the Netscape Channels, will be programmed by Netscape and reside on a
Netscape server. The Company will be responsible for developing, programming and
hosting the Co-Branded Services. The Company will also be responsible for
selling advertising on the Co-Branded Services. The Company will bear all costs
incurred by it in connection with the Netcenter Agreement, without a right of
reimbursement.
Upon the termination of the Netcenter Agreement (other than a termination
in connection with certain acquisitions of or by Netscape), the Company will be
obligated to deliver to Netscape one copy of certain technology used in
connection with the operation, production, development, management and support
of the Co-Branded Services for which the Company has granted Netscape a license
(the "Licensed Technology"). This license is a perpetual, royalty-free license,
including the right to sublicense the Licensed Technology. The Company will be
required to provide Netscape certain limited engineering support with respect to
the Licensed Technology. The Netcenter Agreement is subject to termination in
the event of certain acquisitions of or by the Company or Netscape, in which
event Netscape will be obligated to repay a portion of the Prepayment and to
reimburse the Company for certain costs and expenses. In addition, if Netscape
believes that the Company's own service, or the content provided by Excite for
the Netcenter service, contains material that Netscape deems likely to cause it
material harm, and if the Company does not timely revise such objectionable
content, Netscape may terminate the Netcenter Agreement with no obligation to
repay any portion of the Prepayment or to reimburse the Company for any costs or
expenses.
In March 1996, the Company entered into an agreement (the "Net Search
Agreement") with Netscape whereby the Company was designated as one of five
"premier providers" of search and navigation service accessible from the "Net
Search" button from the Netscape home page. Prior to entering into the Net
Search Agreement, from December 1995 to March 1996, the Company had a similar
agreement with Netscape. The
22
<PAGE> 24
Net Search Agreement provided that such "premier provider" status was
established for one year and required the Company to make payments to Netscape
of $5 million over the term of the agreement. McKinley entered into a similar
agreement with Netscape which required McKinley to make payments to Netscape of
$5 million over the term of the agreement.
In March 1997, the Company entered into one-year replacement agreements
with Netscape which commenced in May 1997 whereby the Excite brand was
designated as one of four "premier providers" and the Company's Web Center brand
as designated as one of several "marquee providers" of search and navigation
services accessible from Netscape's "Net Search" page. Under the terms of these
agreements, the Company was required to make minimum aggregate payments of $8.25
million in cash and advertising services.
23
<PAGE> 25
PLAN OF DISTRIBUTION
The Warrant Agreement contains provisions regarding the registration under
the Securities Act of the Shares of Common Stock issuable upon exercise of the
Warrants. The Registration Statement of which this Prospectus forms a part has
been filed pursuant to the Warrant Agreement. To the Company's knowledge,
Netscape 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 covered hereby may be offered and sold from time to time by
Netscape or by permitted pledgees, donees, transferees and other successors in
interest; provided however, that Netscape has agreed with the Company that it
will not, except for under very limited circumstances, sell or dispose of the
Warrants without obtaining the Company's prior written consent. Netscape 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 Nasdaq National
Market 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 Netscape 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 Netscape that it has 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 Netscape may arrange for other
broker-dealers to participate. Broker-dealers will receive commissions or
discounts from Netscape in amounts to be negotiated immediately prior to the
sale.
In connection with distributions of the Shares or otherwise, Netscape 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 Netscape.
Netscape may also sell Shares short and redeliver the Shares to close out such
short positions. Netscape 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. Netscape 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 Netscape 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 under the Securities Act may be sold under
Rule 144 rather than pursuant to this Prospectus.
All costs, expenses and fees in connection with the registration of the
Shares will be borne by the Company. Commissions and discounts, if any,
attributable to the sales of the Shares will be borne by Netscape. Netscape 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 Warrant Agreement, the Company and
Netscape 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.
The Company has advised Netscape that the anti-manipulation rules under the
Exchange Act may apply to sales of Shares in the market and to the activities of
Netscape and its affiliates. Netscape has advised the Company that during such
time as it may be engaged in the attempt to sell Shares registered hereunder, it
will: (i) not engage in any stabilization activity in connection with any of the
Company's securities; (ii) not bid for or purchase any of the Company's
securities or any rights to acquire the Company's securities, or
24
<PAGE> 26
attempt to induce any person to purchase any of the Company's securities or
rights to acquire the Company's securities, other than as permitted under the
Exchange Act; (iii) not effect any sale or distribution of the Shares until
after the Prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof; and (iv) effect all sales of Shares in
broker's transactions through broker-dealers acting as agents, in transactions
directly with market makers or in privately negotiated transactions where no
broker or other third party (other than the purchaser) is involved.
Under certain circumstances, the Company has the ability to suspend the use
of this Prospectus if, in the good faith judgment of the Chief Executive Officer
of Excite, (A) compliance by the Company with its disclosure obligations in
connection with the registration statement of which this Prospectus forms a part
would be seriously detrimental to the Company and its shareholders, or (B) the
Company then is unable to comply with its disclosure obligations or Commission
requirements in connection with such registration statement.
This offering will terminate on the earlier of (a) the date on which all
Shares offered hereby have been sold or (b) the date on which all of the Shares
may be immediately sold to the public without restriction or registration
pursuant to Rule 144 under the Securities Act within a single three-month
period. There can be no assurance that Netscape 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 or supplemented 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
Netscape 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 Fenwick & West LLP own an aggregate of
8,605 shares of Common Stock of the Company.
EXPERTS
The consolidated financial statements of Excite, Inc. appearing in Excite's
Annual Report (Form 10-K) for the year ended December 31, 1997 and the
supplemental consolidated financial statements of Excite, Inc. appearing in
Excite's Report on Form 8-K dated May 15, 1998, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference. Such report, as to the year ended
December 31, 1995, is based in part on the report of Price Waterhouse LLP,
independent accountants. Such consolidated financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
The financial statements of The McKinley Group, Inc. for the year ended
December 31, 1995, not separately presented in this Prospectus, have been
audited by Price Waterhouse LLP, independent accountants, whose report thereon
appears herein. Such financial statements, to the extent they have been included
in the consolidated financial statements and supplemental 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.
25
<PAGE> 27
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 in connection
with this offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $14,750.00
Accounting fees and expenses................................ 10,000.00
Legal fees and expenses..................................... 30,000.00
Miscellaneous............................................... 5,250.00
----------
Total............................................. $60,000.00
==========
</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 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
II-1
<PAGE> 28
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.
ITEM 16. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
pursuant to this Registration Statement, 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 (notwithstanding the foregoing, any
increase or decrease in volume or securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement); and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-effective
amendment by paragraphs (1)(i) or (1)(ii) is contained in any periodic
report 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 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to 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 herein, 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-2
<PAGE> 29
ITEM 17. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <C> <S>
3.01 -- Amended and Restated Articles of Incorporation of
Registrant, as amended.(1)
4.01 -- Form of Specimen Certificate for Registrant's Common
Stock.(2)
4.02 -- Bylaws of Registrant, as amended.(3)
4.03 -- Warrant Agreement, dated as of April 29, 1998, by and
between the Registrant and Netscape Communications
Corporation.*
5.01 -- Opinion of Fenwick & West LLP.*
23.01 -- Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 -- Consent of Ernst & Young LLP, Independent Auditors.
23.03 -- Consent of Price Waterhouse LLP, Independent Accountants.
24.01 -- Power of Attorney (see page II-5).
</TABLE>
- ---------------
* To be filed by amendment.
(1) Previously filed with the Commission on March 31, 1998 as an exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1997.
(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 11, 1996 as an exhibit to the
Registrant's Registration Statement on Form SB-2 (File No. 333-2328-LA).
II-3
<PAGE> 30
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, 1998.
EXCITE, INC.
By: /s/ ROBERT C. HOOD
------------------------------------
Robert C. Hood
Executive Vice President, Chief
Administrative and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Robert C. Hood and Chris Vail, and each of them,
his attorneys-in-fact and agents, each with the power of substitution, for him
and in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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
--------- ----- ----
<C> <C> <S>
PRINCIPAL EXECUTIVE OFFICER:
/s/ GEORGE BELL President, Chief Executive Officer May 19, 1998
- --------------------------------------------------- and Director
George Bell
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ ROBERT C. HOOD Executive Vice President, May 19, 1998
- --------------------------------------------------- Chief Administrative Officer
Robert C. Hood and Chief Financial Officer
ADDITIONAL DIRECTORS:
/s/ JOSEPH R. KRAUS Senior Vice President and Director May 19, 1998
- ---------------------------------------------------
Joseph R. Kraus
/s/ VINOD KHOSLA Director May 19, 1998
- ---------------------------------------------------
Vinod Khosla
/s/ GEOFFREY Y. YANG Director May 19, 1998
- ---------------------------------------------------
Geoffrey Y. Yang
</TABLE>
II-4
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <C> <S>
3.01 -- Amended and Restated Articles of Incorporation of
Registrant, as amended.(1)
4.01 -- Form of Specimen Certificate for Registrant's Common
Stock.(2)
4.02 -- Bylaws of Registrant, as amended.(3)
4.03 -- Warrant Agreement, dated as of April 29, 1998, by and
between the Registrant and Netscape Communications
Corporation.*
5.01 -- Opinion of Fenwick & West LLP.*
23.01 -- Consent of Fenwick & West LLP (included in Exhibit 5.01).*
23.02 -- Consent of Ernst & Young LLP, Independent Auditors.
23.03 -- Consent of Price Waterhouse LLP, Independent Accountants.
24.01 -- Power of Attorney (see page II-5).
</TABLE>
- ---------------
* To be filed by amendment.
(1) Previously filed with the Commission on March 31, 1998 as an exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1997.
(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 11, 1996 as an exhibit to the
Registrant's Registration Statement on Form SB-2 (File No. 333-2328-LA).
<PAGE> 1
EXHIBIT 23.02
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) and related Prospectus of Excite, Inc. for the
registration of shares of its common stock and to the incorporation by reference
therein of our report dated January 22, 1998, with respect to the Consolidated
Financial Statements of Excite, Inc. included in its Annual Report on Form 10-K
for the year ended December 31, 1997 and our report dated January 22, 1998,
except for Note 14 as to which the date is February 2, 1998, with respect to the
Supplemental Consolidated Financial Statements of Excite Inc. included in its
Current Report on Form 8-K dated May 15, 1998, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
--------------------------------------
Ernst & Young LLP
Palo Alto, California
May 19, 1998
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
August 6, 1996, which appears on page 42 of the 1996 Annual Report on Form
10-K/A of Excite, Inc. relating to the financial statements of The McKinley
Group, Inc., which do not appear in such Annual Report on Form 10-K/A. We also
consent to the reference to us under the headings "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
--------------------------------------
PRICE WATERHOUSE LLP
San Jose, California
May 19, 1998
