Rockstar Consortium US LP et al v. Google Inc

Filing 263

RESPONSE in Opposition re 220 MOTION to Amend/Correct Invalidity Contentions filed by NetStar Technologies LLC, Rockstar Consortium US LP. (Attachments: # 1 Declaration of Meng Xi, # 2 Exhibit A - Google.com search re InfoSeek IPO filing, # 3 Exhibit B - Part 1 of 3 InfoSeek Corporation's S-1, # 4 Exhibit B - Part 2 of 3 InfoSeek Corporation's S-1, # 5 Exhibit B - Part 3 of 3 InfoSeek Corporation's S-1, # 6 Exhibit C - Zimmerman's Research Guide, # 7 Exhibit D - 11/5/2014 email between ThomsonReuters and Meng Xi, # 8 Exhibit E - 11/5/2014 email between Intelligize and Meng Xi, # 9 Text of Proposed Order)(Xi, Meng)

engine~ Ultraseek~ which the Company plans to release in the second half
of 1996. Ultraseek will enable the searching of a much greater number of
Web sites at even faster speeds with the same level of accuracy for which
Infoseek Guide is currently known.

Directory: Directory is a hierarchical listing of Web pages that have
been selected and abstracted by the Company and organized by category. As
of March 31. 1996, Directory consisted of over 25,000 abstracted entries.
Directory enables a user to click on a directory entry such as Arts &
Entertainment or Sports, and to look through a hierarchy of relevant
Internet sites for areas of interest. For example, under Sports, the user
can proceed from Baseball to Players, and finally, to Ken Griffey Jr.
Directory assists the user by providing abstracts of each directory
entry. In addition, the Company has entered into an agreement with HNC to
license certain technology from HNC which is intended to allow the
Company to enhance the Company 's Web Directory feature. Infoseek expects
to use this technology to automate the construction of Directory
categories, the assignment of Web pages to each Directory category and
the creation of abstracts for each Web page included in the Directory~ as
well as to increase the number of entries in the Directory.
iZone: iZones are special interest editorial features created
exclusively for Infoseek by leading third party content providers. In
response to specific user queries, Infoseek Guide displays a prompt to
link a user to context relevant iZones. For example, if the user effects
a golf-related query, the search response will provide an iZone button
that enables access to an
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iZone created by iGolf. Each ilone contains a short editorial on a
specific topic of interest and links to other relevant and related Web
sites. iZones provide sponsors with an opportunity to reach a community
of consumers having an interest in the sponsor's product, and creates a
pathway to the sponsor's editorials and Web page. The Company 's ilone
sponsors as of April 25. 1996 are:
[ Enlarge/Download Table]

S~N~R

Billboard Online/BPI Communications
campus concepts
Epicurious/Conde Nast Publications. Inc.
HomeArts/The Hearst Corporation
Hoover's Online/The Reference Press. Inc.
InterZine Productions
Imaging Publishing, Inc./The Net
Inc. Online
Inc. Online
Macworld Online/lOG
MoneyHunter/MoneyHunt Properties LLC
Next Generation Online/Imagine Publishing, Inc.
PC World Online/lOG
Quote. com
SportsLine USA
TVi/New Century Productions
Viewz
Women's Wire/Wire Networks/News Update

IZONE
The Front Row
campus Commons
The Dining Room
The Living Room
Company Profiles
iGolf
CyberArts
The Enterprise Zone
The Inc. see
Macintosh Shareware
Growth Capital
The Arcade
Silicon Alley
Stock Quotes
The Sports Arena
TV Times
Home Computing
Fashion Plate

DESCRIPTION
Pop music
Student life
Food and drink
Home and lifestyle
Company profiles
Golf
Fine art online
Small business information
Tips for small businesses
Shareware for Macs
Entrepreneurial information
Computer/video games
Personal computers
Stock quote lookups
Sports news
Television schedules
Computers for at-home use
Fashion trends

Toolbar: The Toolbar is a set of buttons available on the Infoseek user
interface that provide users simple and instantaneous access to certain
premier content providers in areas of general interest, such as news,
weather, stock prices and interactive shopping directories. For example,
the toolbar options Fast Facts and World News allow the user to directly
access such resources as Reuters world news, directories of email
addresses, phone numbers, and reference materials such as online
dictionaries and a thesaurus. The Toolbar also allows users direct access
to a listing of iZones and the ability to initiate new searches. The
following is an illustration of the Company 's current Toolbar:
Picture of current toolbox, including: Infoseek Guide Logo
and icons used to access new searches~
BigYellow~ World News, Fast Facts, The ilone.
Infoseek Guide operates with most popular Web browsers. Although browser
features vary by manufacturer and version~ Infoseek Guide automatically

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configures itself to conform to the specific features of each user's browser.
Where available, Infoseek Guide employs advanced features such as frames, which
organize the screen format into clickable areas to enhance the usability of the
service and the appeal to advertisers.
iSeek. Infoseek recently released iSeek, a new software program. iSeek is
an extension of the Infoseek Guide that can be downloaded directly onto the
user's desktop and makes it easier for the user to access Infoseek Guide. In its
first release in March 1996, iSeek consists of a collection of "hot buttons n
that connect users directly to Infoseek Guide. A user who clicks on "Stock
Quotes" or "HeadLine News, n for example, can be connected to a personalized
portfolio, or the latest headlines.
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Future Enhancements. The Company plans to continue to enhance the
attractiveness of its service to users through additional features and
functionality. Infoseek is currently developing several enhancements to Infoseek
Guide, which will allow for personalization of content and advertising according
to user interests. These enhancements are expected to be released by fall 1996,
and will allow users to create permanent filters for Internet-based information
such as newswires, stock quotes, USENET listings and other Internet resources.
Infoseek Professional. Infoseek Professional is a subscription-based
service targeted primarily to professional and business users of commercial
online data and content. Infoseek Professional provides access to multiple,
premium content databases in addition to the standard collections of Web pages,
USENET News, and wire services more widely available on the Internet. Infoseek
Professional provides a lower cost means to access a broad range of information
databases as compared to individual premium service subscriptions. Infoseek
Professional has not been a source of significant revenues to date for the
Company.
TECHNOLOGY

The Company believes it can differentiate itself by developing innovative
proprietary technology and integrating technology licensed from third parties
where appropriate. The Company 's strategy is to develop and license only
technologies that are able to scale with the growth in content on the Internet,
in order to enable the Company to cost-effectively adapt and grow with the
Internet.
Core Search Engine Technology
The Company 's current search engine technology is based upon technology
licensed perpetually from ACSIOM to the Company. The Company 's search engine has
won a number of industry awards, including nNumber 1 Rated Search Engine" (PC
Computing Sept 95), "Best of the Test" (Internet World May 96) and "MVP:
Internet Tools" (PC Computing Dec 95).
The Company 's search engine seeks to deliver high accuracy, which is
characterized by the level of precision and the level of recall. Precision and
recall are two criteria by which the effectiveness of a search engine technology
is often measured. Precision is a measure of how effectively a search engine
calculates the relevance of documents that match the query. Recall is a measure
of what percentage of the total number of relevant documents in the database are
found during the search. Together, these two measures of search engine
performance tend to be the most important factors to users in evaluating the
accuracy and usefulness of a search engine. For example, in a database of 100
documents with two documents that exactly match the desired query, the ideal
search engine would retrieve only the two matching documents, thereby achieving
both 10BX precision and 1~ recall.
In addition, due to the dynamic nature of the Internet, the retrieval of
up-to-date information has become another key factor for the evaluation of
Internet search services. To bring current information to the user, the
Company's technology refreshes its entire database of Web pages no less
frequently than every four weeks, while regularly updating with new Web pages.
This enables Infoseek Guide to deliver accurate, relevant and up-to-date search
results.
Infoseek's search engine is able to recognize proper nouns and analyze
keyword proximity. A request in Infoseek Guide for "Pete Rose" will return the
former baseball player and not a large selection of flowers or other persons
named "Pete," thereby retrieving more accurate results. In addition, the
technology is case-sensitive, so that it can distinguish between a search for
NNeXT," the computer company, and Nnext," the common word. Another key element
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inflections of a word (such as stop, stops, stopped and stopping) are considered
in the search. Stemming, improperly performed, results in the retrieval of large
volumes of irrelevant information. The technology also makes use of operators
that can filter documents by either requiring a specific term to appear in all
search results or rejecting any
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results containing a specific term. Field operators are also used so that a
search term may be linked to or excluded from a specific portion, or field, of a
document, such as the title of a document.
To facilitate the ease of use of the service, Infoseek Guide includes a
sophisticated technology to interpret NnaturaL Language N queries. Although most
current search engines also provide natural language capabilities, the results
achieved may differ dramatically. The Infoseek technology is based upon a
weighting of various factors such as the case of the words in the search phrase,
how common the words appear in usage, word proximity and how the words appear in
the pages searched. By using the stemming, case-sensitivity, word proximity,
operators and other algorithms in the search engine, Infoseek Guide is able to
retrieve highly accurate and relevant results.
The Company has also provided a proprietary Web spider which works in
conjunction with the original ACSIOM technology to enhance the performance of
the search engine. A Web spider is software that identifies and catalogs pages
on the Web. This catalog, when indexed with text retrieval software such as the
Company's search engine, can be quickly accessed by keyword or phrase. Together,
the search engine technology and the Web spider technology are used to index Web
pages, the Directory, iZone pages, and other sources of content. When the user
submits a query, such as NExpLain the Lyrics to Penny Lane N the engine searches
,
the Web index created by the Web spider, the indices for the iZone and other
content, to provide a list of 'hits' ordered by the relevance of the hits to the
user's query.
The Company is currently working on its next generation search engine,
Ultraseek, which the Company plans to release in the second half of 1996.
Ultraseek will enable the searching of a much greater number of Web sites at
even faster speeds with the same level of accuracy for which Infoseek Guide is
currently known.
To enhance the capabilities of Ultra seek, the Company has recently licensed
certain software technologies from XEROX for the linguistic analysis of document
content and search terms. The Company will pay a royalty to XEROX based on the
usage of the technology, an amount up to $200,000 per year in 1996 and 1997, and
$300,000 in 1998. After payment of such $799,000 in royalties, the Company will
have a fully paid, perpetual license to the technology. This technology will be
licensed to the Company on a partially exclusive basis for the first year and on
a nonexclusive basis thereafter.
In addition, the Company has entered into an agreement with HNC to license
certain technology from HNC that is intended to allow the Company to enhance the
Company's Web Directory feature. Infoseek expects to use this technology to
automate the construction of Directory categories, the assignment of Web pages
to each Directory category and the creation of abstracts for each Web page
included in the Directory. All of these processes are currently being performed
manually. Accordingly, the Company is depending upon the proposed technology to
reduce the cost of expanding its Directory feature. This technology will be
licensed to the Company for an initial five year term beginning upon the initial
acceptance of the software by the Company . There can be no assurance that the
HNC technology will function as anticipated or will provide the intended
benefits, and any such deficiency could require the Company to incur significant
increased costs to expand its Directory as planned. See N
Risk
Factors -- Dependence on TechnoLogy SuppLiers .Advertising Management
Infoseek has developed certain proprietary systems for the instantaneous
placement of advertisements with targeted audiences on appropriate Infoseek
Guide Web pages. Infoseek's advertising management systems are capable of
presenting in real-time advertising that corresponds to a user's inquiry. If
certain key words have been purchased by more than one advertiser, the system
automatically determines which advertisement is displayed based upon the number
of impressions under contract and delivered to date. As part of the Company 's
proprietary advertising management system, Infoseek also maintains a database
that tracks the number of searches of each word queried by Infoseek users, the
number of browses through each Directory category and the number of
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impressions of each advertisement. This system assists the Company in estimating
the number of expected impressions of specific advertisement options marketed by
the Company or otherwise sought by advertisers.
In April 1996, the Company licensed certain software technology from HNC.
The Company intends to utilize the software technology to develop an advertising
and audience management system to optimize the matching of advertisements with
the appropriate audience. The software will be modified according to the
Company's specifications to integrate it into the Company 's advertisement
placement system. This technology will be licensed to the Company for an initial
five year term beginning upon the initial acceptance of the software by the
Company. The Company expects that the proposed technology will provide
significant technological improvements to the Company 's advertising and audience
management systems. The Company expects the proposed technology to provide
significant technological improvements to the Company 's advertising and audience
management systems. There can be no assurance that such system will be
successfully developed. See nRisk Factors -- Dependence on TechnoLogy
SuDDL iers . "
ADVERTISING SALES
Infoseek derives substantially all of its revenues from the sale of
advertisements. These advertisements appear on the Infoseek Guide Web page when
a user enters the service~ performs a search~ or browses through the Directory
or Toolbar. Advertising revenues represented 82% and 96% of the Company 's total
revenues for fiscal 1995 and the first quarter of 1996~ respectively. The
Company believes it has been able to achieve its advertising revenues to date
primarily through the extensive knowledge and relationship-base of its
direct-sales force and through the products and technological advantages it can
offer advertisers.
Sales Force
As of March 31. 1996 ~ Infoseek's advertising sales staff consisted of 20
representatives located in Santa Clara~ New YorkJ San Francisco J Atlanta and
Boston. The staff collectively has advertising experience at media firms such as
Anderson Lembke J Datamation J Cahners Publishing J Foote Cone & Belding J Inc' J
Hachette FilipacchiJ Hearst New Media, US News & World Report, Inc., and Yankee
Publishing Inc. The Company believes that having an internal sales force with
significant prior experience will allow it to better understand and meet
advertisers' needs, increase its access to potential advertisers and maintain
strong relationships with its existing base of advertising clients. The Company
plans to increase its staff during the remainder of 1996. In Europe, Asia and
Latin America, the Company intends to establish working relationships with
international advertising representation firms. No definitive arrangement with
any international firms have been reached to date.
Advertising Products and Pricing
The Company offers advertisers four main advertising options that may be
purchased individually or in packages: general rotation, topic pages, keyword
and special placement. These options all contain hypertext links to the
advertiser's home page. To date, most of Infoseek's contracts with advertisers
have terms of three months or less.
General Rotation: General rotation advertisements rotate on a random basis
through Infoseek Guide on search result pages and pages accessed through
the Toolbar. General rotation advertising offers advertisers seeking to
establish brand recognition across the broad, general population the
broadest reach of Infoseek users. General rotation advertisements are
typically sold in blocks of one thousand impressions to be generated over a
four week period~ currently at a CPM (cost per thousand impressions) of $13
to $23 depending upon the number of impressions purchased. To date, most
general rotation advertisers have purchased blocks of one million
impressions, which are currently priced at a rate card CPM of $18.
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Topic Pages: Topic page advertisements appear when an Infoseek user
browses through Directory topic pages, such as Careers and Employment,
Stocks, and Health and Medicine. These advertisements allow advertisers to
target an audience with a specific area of interest. Like general rotation
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over a four week period. Because of the greater selectivity of the
audience~ current CPHs range from $19 to $39 with a rate card CPM of $25
for one million impressions.
Keyword: Keyword advertisements are displayed when an Infoseek user's
search contains a particular keyword selected by the advertiser. This
option offers the advertiser a highly targeted, self-selected audience.
Through its proprietary advertising management system, the Company tracks
every word that is queried by Infoseek users. From it, the Company has
identified approximately 299 keywords that are most frequently queried by
Infoseek users and requested by advertisers. The current four week rate
card CPM for a keyword is $59, with a $1,000 minimum.
Special Placement: Special placement advertisements are displayed on
special feature pages~ such as iZones and in other manners customized to
the needs or requests of the advertiser. Special placement advertisements
include advertisements placed on special editorial pages. For example~
Infoseek is offering special advertising placements within a series of
editorial features~ games and other items created by the Company revolving
around the 1996 Atlanta Games. The Company seeks to bundle these
advertising options to create packages that offer the greatest value to
advertisers. Pricing for special placements is determined on a case-by-case
basis.
Technological Advantages for Advertisers
The online medium offers advertisers the ability to NnarrowcQst" their
advertisements. For example, car manufacturers can display their advertisements
when a user executes a car-related search. Infoseek's technology additionally
enables clients to monitor the effectiveness of their advertisements by tracking
click-through rates (the number of viewers who click to an advertiser's site) to
learn more about their target audiences. Infoseek advertising sales
representatives work closely with advertisers to understand the data and
integrate it into their overall advertising strategy. The Company is exploring
new technologies to enhance user behavior tracking and advertising management
capabilities. See "Business -- TechnoLoay N and "Risk Factors -- TechnoLogicaL

Change and New Products. N

Major Advertisers
During the course of the first quarter of 1996, over 120 advertisers placed
advertisements on the Company 's service. The following is a list of the
Company's top advertisers for that quarter~ including the percentage of revenues
attributable to such advertiser for such quarter, as measured by net revenues.
Adaptec - - 3"
AT&T -- 3"

Cathay Pacific -- 2X
c/net -- 2"
Discovery Channel -- 4%
Free Ride Media -- 8X
GTE -- 1lI

Hearst New Media -- 2X
IBM -- 1lI

Intel - - 1"
Internet Shopping Network -- 8%
Marketplace Mel - - 2X
Microsoft -- 7%
Netscape -- 2%
Nissan -- 1"
NYNEX -- 2"

Roguewave Software -- 1X
SportsLine -- 3%

Starwave -- lX
Swatch -- lX
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MARKETING AND DISTRIBUTION OF THE INFOSEEK BRAND

Marketing
The Company 's strategy is to build brand for Infoseek through online and
trade advertising, trade shows, print media and promotions. The Company 's
current print media campaign includes aggressively marketing in publications
such as The Wall Street Journal, Internet World, WebWeek, Advertising Age and
Adweek Network. In addition, the Company cross-promotes with content providers
through advertising swaps both in online media and traditional print and
broadcast media.
In addition, the Company seeks to establish relationships with key
marketing partners. To that effect, the Company has entered into a co-marketing
relationship with Sun Microsystems, Inc. (nSunH) under which Infoseek has agreed
to use Sun equipment exclusively for use with an Ultra seek-branded search
service. In return, Infoseek will receive advantageous terms on its purchases of
certain Sun equipment and the two companies shall widely promote each other's
products and services.
Distribution
The Company seeks to form relationships that maX1m1ze audience reach and
create alternate distribution channels to the Company 's services. The Company
has developed the following significant distribution relationships:
Browser Vendors: The Cpmpany has relationships with Netscape, Microsoft,
Quarterdeck, NETCOM, NetManage and Freeloader. Each of these companies
distributes software to its customers which is used to navigate the Web.
Infoseek Guide is listed by each of these companies as a navigational service
available to their users. The terms of these relationships vary widely, both in
the prominence given to Infoseek Guide relative to other alternatives and the
compensation paid by Infoseek for the traffic. All of these companies feature
Infoseek Guide as a key navigational tool and engage in certain promotional
activities.
From March 1995 through March 1996, the Company 's service was listed as the
sole premier navigational service on the Netscape Web page accessible via the
HNet Search H button. As of March 31. 1996, approximately 85X of the traffic to
the Company 's Infoseek Guide service was derived through the Netscape Web page.
In March 1996, Infoseek entered into a new agreement with Netscape, which
provides that Infoseek will be listed as a premier provider of navigational
services on Netscape's Web page for the period April 19. 1996 to March 31. 1997 .
Currently, Netscape's Web page displays four additional premier providers.
During the 30 day period from April 11 through May 19. 1996, the Company 's
average daily traffic was approximately 47X of its average daily traffic for the
30 day period immediately prior to the change from being Netscape's sole premier
provider to one of five premier providers. There can be no assurance that the
Company will be able to maintain or increase its current level of traffic and
any failure to do so could materially and adversely impact advertising revenues.
In addition, the Company cannot anticipate the impact of any changes Netscape
may make to this service, to its Web page or its other services, on Infoseek
traffic, or the effect on advertising revenues that may be generated from such
traffic. Infoseek's agreement with Netscape provides for payments of up to an
aggregate of $5 million to Netscape over the term of the agreement. The Company
has the right to terminate the agreement at the end of six months, in which case
the payment to Netscape would be reduced to an aggregate of approximately $2.5
million. See H
Risk Factors -- Change in Netscape Rel.ationship and Dependence on
other Third Party Rel.ationshipsH.

Strategic Relationships: In March 1996, the Company and NYNEX entered into
a one year agreement, which provides that, beginning in May 1996, the Company
will prominently display the BigYellow logo, which represents NYNEX's
interactive shopping directory, as the exclusive comprehensive shopping
directory within Infoseek Guide. In exchange for such exclusivity, NYNEX will
pay to the Company up to an aggregate of $4.6 million in monthly payments, which
amount will be decreased proportionately if the number of impressions of the
BigYellow logo is below a specified number. NYNEX may extend the term of the
agreement for additional one year periods, with the fee to be determined based
upon Infoseek's then current advertising rate structure. See nB1iR
Factors -- Potential. FLuctuations in Future Resul.ts . H

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The Company has recently entered into a distribution agreement with Verity,
Inc. ("Verity") under which Verity will provide a link to Infoseek Guide on the

user interface of a new Verity product called Topics Search for Exchange, which
is designed for internal corporate use, often referred to as "intranets."
Infoseek Guide complements Verity's product by creating a gateway for intranet
users of Verity's product to access the Internet. Verity is a leading supplier
of corporate search and retrieval products and services for workgroups and local
area networks. The addition of the Infoseek Guide link will allow Verity's users
to search for information on their corporate network or across the Internet.
Infoseek will pay Verity a percentage of the advertising revenues derived from
such searches.
The Company has entered into a memorandum of understanding and a marketing
alliance agreement with Kanematsu Corporation ("KQnematsu")~ a large Japanese
trading company and a shareholder of the Company ~ to create a strategic
alliance. Under the initial phase of the alliance~ the parties will establish a
Japanese Internet search and retrieval service containing listings of Japanese
Web sites written in Japanese and a Japanese translation of the Infoseek Guide
Directory. A subsequent phase of the alliance is intended to create Infoseek
Japan~ a joint venture in Japan 40X owned by Infoseek and 68X owned by
Kanematsu. Under terms of the memorandum of understanding~ Kanematsu will
contribute capital and Infoseek will contribute certain technologies. Infoseek
Japan will be responsible for its own advertising marketing and sales.
Other Web Sites : Infoseek promotes the creation of hyperlinks between
Infoseek Guide and other Web sites . Approximately 3~000 sites on the Web
currently contain pointers to Infoseek Guide, often with the Infoseek logo
prominently displayed on their sites.
COMPETITION
The market for Internet products and services is highly competitive, with
no substantial barriers to entry, and the Company expects that competition will
continue to intensify. In addition, the market for the Company 's products and
services has only recently begun to develop, is rapidly evolving and is
characterized by an increasing number of market entrants with competing products
and services. The Company does not believe this market will support the
increasing number of competitors and their products and services. Although the
Company believes that the diverse segments of the Internet market may provide
opportunities for more than one supplier of products and services similar to
those of the Company, it is possible that a single supplier may dominate one or
more market segments. Accordingly, any failure of the Company to provide product
and service offerings that achieve success in the short-term could result in an
insurmountable loss in marketshare and brand acceptance, and could, therefore,
have a material adverse and long-term effect upon the Company 's business,
results of operations and financial condition.
A number of companies offer competitive products and services addressing
certain of the Company 's target markets. These companies include America Online,
Inc., Digital Equipment Corporation, Excite, Inc., Lycos, Inc., The McKinley
Group, Open Text Corporation, CompuServe Corporation, Prodigy Services Company
and Yahool Corporation. In addition, the Company competes with metasearch
services that allow a user to search the databases of several catalogs and
directories simultaneously. Th@ Company also competes indirectly with database
vendors that offer information search and retrieval capabilities with their core
database products. In the future J the Company may encounter competition from
providers of Web browser software, including Netscape and Microsoft, online
services and other providers of other Internet products and services who elect
to incorporate their own search and retrieval features into their offerings.
Many of the Company 's existing and potential competitors have significantly
greater financial, technical and marketing resources than the Company . The
Company may also be adversely affected by competition from licensees of its
products and technology, current and future advertisers, as well as from its
current, future and former content providers. There can be no assurance that the
Company's competitors will not develop Internet products and services that are
superior to those of
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the Company or that achieve greater market acceptance than the Company 's
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licensees and licensors have also established relationships with certain of the
Company's competitors and future advertising customers~ licensees and licensors
may establish similar relationships. In addition~ the Company competes with
online services and other Web site operators as well as traditional offline
media such as print and television for a share of advertisers' total advertising
budgets. 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.

RESEARCH AND DEVELOPMENT
During 1995 and the first quarter of 1996, the Company spent $1,174,849 and
$933,988, respectively, on research and development activities. As of March 31.
1996, the Company had a research and development staff of 26 full-time employees
located at the Company 's headquarters in Santa Clara, California.
The Company currently employs information retrieval technology licensed
from ACSIOM, an entity related to the University of Massachusetts, but is
developing a new search engine technology, Ultraseek, which is being designed to
significantly improve retrieval and Web page indexing capabilities beyond the
ACSIOM technology. The Company has also licensed certain software technologies
from XEROX, which the Company intends to use for the linguistic analysis of
search terms. This technology will be licensed to the Company on a partially
exclusive basis for the first year of the contract . Infoseek has entered into an
agreement with HNC to license certain technology from HNC to automate the
development of the Company 's Web Directory feature. Infoseek expects to use this
technology to enhance the Directory development process by automating the
creation of Directory entries, as well as the abstracts within the Directory
entries. In addition to these technologies and services under development, many
of the Cpmpany 's new products and product enhancements have been only recently
introduced and it is not yet clear that such products will achieve significant
market acceptance. See N
Risk Factors -- TechnoLogicaL Chanae and New Products
and Services . ..
INTELLECTUAL PROPERIY AND PROPRIETARY RIGHTS
The Company 's success depends significantly upon its proprietary
technology. The Company currently relies on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. The Company seeks to protect its
software, documentation and other written materials under trade secret~ patent
and copyright laws, which afford only limited protection. The Company currently
has six United States patent applications pending. There can be no assurance
that the pending applications will be approved, or that if issued, such patents
will not be challenged~ and if such challenges are brought, that such patents
will not be invalidated. There can be no assurance that the Company will develop
proprietary products or technologies that are patentable, that any issued patent
will provide the Company with any competitive advantages or will not be
challenged by third parties, or that the patents of others will not have a
material adverse effect on the Company 's ability to do business. The Company has
registered and applied for registration for certain service marks and
trademarks, and will continue to evaluate the registration of additional service
marks and trademarks, as appropriate. The Company generally enters into
confidentiality agreements with its employees and with its consultants and
customers. Litigation may be necessary to protect the Company 's proprietary
technology. Any such litigation may be time-consuming and costly. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of the Company 's products or services or to obtain and
use information that the Company regards as proprietary. In addition, the laws
of some foreign countries do not protect proprietary rights to as great an
extent as do the laws of the United States. There can be no assurance that the
Company's means of protecting
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its proprietary rights will be adequate or that the Company 's competitors will
not independently develop similar technology or duplicate the Company 's products
or design around patents issued to the Company or other intellectual property
rights of the Company .
There have been substantial amounts of litigation in the computer industry
regarding intellectual property rights. There can be no assurance that third
parties will not in the future claim infringement by the Cpmpany with respect to
current or future products, trademarks or other proprietary rights, or that the
Company will not counterclaim against any such parties in such actions. Any such
claims or counterclaims could be time-consuming, result in costly litigation,
cause product release delays, require the Company to redesign its products or

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require the Company to enter into royalty or licensing agreements, any of which
could have a material adverse effect upon the Company 's business, operating
results and financial condition. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all. See
"Risk Eqctors -- InteLLectugL Property and Prpprietary Rights ."
EMPLOYEES

As of March 31. 1996, the Company had 71 full-time employees, including 26
in research and development, 29 in sales and marketing and 16 in finance and
administration. The Company 's future performance depends in significant part
upon the continued service of Robert E.L. Johnson. III, the Company President
and Chief Executive Officer and Steven T. Kirsch, a founder and the Chairman of
the Board of the Company, as well as its other key technical and senior
management personnel. none of whom is bound by an employment agreement. The
Company provides incentives such as salary. benefits and option grants (which
are typically subject to vesting over four years) to attract and retain
qualified employees. The loss of the services of Mr. Johnson or Mr. Kirsch or
any of the Company 's officers or other key employees could have a material
adverse effect on the Company 's business, operating results and financial
condition. The Company 's future success also depends on its continuing ability
to attract and retain highly qualified technical and management personnel. See
"Risk Factors -- Management of Growth; Need to EstabLish Infrastructure; Recent
Management Changes N and R __ Dependence gn Key PersgnneL .N
FACILITIES

The Company 's principal administrative, sales, marketing, and research and
development facility is located in approximately 13,000 square feet of space in
Santa Clara, California. This facility is leased pursuant to multiple leases
through Spieker Properties, L.P. and Innovative Information Systems, Inc. with
the approval of Spieker Properties, L.P. The leases expire with respect to 2,976
square feet, 3,571 square feet, 1,072 square feet, 3,760 square feet and 1,777
square feet in June 1996. December 1997. February 1998. March 31. 1999 and
February 2000. respectively. The Company recently signed a lease for another
building in New York for office space. The lease for this second facility. which
totals approximately 3.376 square feet. expires in May 2001. The Company
believes that its existing facilities are adequate for its current needs and
that additional space will be available as needed. There can be no assurance
that a system failure at the Company 's principal location would not adversely
affect the performance of the Company 's products and services. See "Risk
Factors -- Capacity Constraints and System FaiLure ."
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
March 31, 1996, are as follows:
[ Enlarge/Download Table]
AGE

Steven T. Kirsch...................
Robert E. L. Johnson. III ..........
Leonard J. LeBlanc •••••••••••••••••

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55

Karl A, Spangenberg................
Andrew E. Newton...................
Craig I. Forman....................
James N. Desrosier.................
John S. Nauman.....................
Oliver D. Curme(2)
H DuBose Montgomery...............
Matthew J. Stover(1)(2)
John E, Zeisler(1)(2)..............

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POSITION

Chairman of the Board and Director
President. Chief Executive Officer and Director
Executive Vice president, Finance, Chief
Financial Officer and Assistant Secretary
Vice President. Worldwide Advertising
Vice president, General Counsel and Secretary
Vice President. Product Management and Editor
Vice President. Chief Marketing Officer
Vice President, Engineering
Director
Director
Director
Director

(1) Member of Audit Committee
(2) Member of Compensation Committee
Steven T. Kirsch, a founder of the Company, has been a director of the
Company since August 1993 and Chairman of the Board of Directors since December
1995. From September 1993 to November 1995. Mr. Kirsch also served as President

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and Chief Executive Officer of the Company . From January 1999 to December 1993~
Mr. Kirsch served as Vice President~ New Product Development at Frame Technology
Corporation~ a software engineering company which he co-founded. Mr. Kirsch
holds a B.S. degree in electrical engineering and an M.S. degree in computer
science from the Massachusetts Institute of Technology.
Robert E.L. Johnson. III joined the Company in November 1995 as President
and Chief Executive Officer~ and has served as a director of the Company since
November 1995. From November 1989 to November 1995~ Mr. Johnson served in
various capacities at Time Inc.~ a media company~ including Senior Vice
President~ Corporate Development and President~ Time Inc. Asia. Mr. Johnson
holds a B.S.E. degree in basic engineering from Princeton University.
Leonard J. LeBlanc joined the Company in March 1996 as Executive Vice
President and Chief Financial Officer and was appointed Assistant Secretary in
April 1996. From September 1993 to December 1994~ Mr. LeBlanc served as Senior
Vice President and Chief Financial Officer at GTECH Corporation, a computer
systems company. From January 1999 to December 1992~ Mr. LeBlanc was Executive
Vice President and Chief Financial Officer at Cadence Design Systems~ Inc., a
software company. Mr. LeBlanc holds B.S. and M.S. degrees in chemistry from
College of the Holy Cross and an M.S. degree in finance from George Washington
University.
Karl A. Spangenberg joined the Company in December 1995 as Vice President~
Worldwide Advertising. From March 1994 to November 1995, Mr. Spangenberg served
as Publisher for Datamation~ a trade magazine produced by Cahners Publishing.
Prior to that~ Mr. Spangenberg served in various capacities, including Group
Vice President~ Strategic Planning from March 1993 to February 1994 for the
Construction Information Group at McGraw-Hill~ a publishing company, and Senior
Vice President, Advertising for Business Week, from January 1991 to February
1993. Mr. Spangenberg holds a B.A. degree in English from Yale College and an
M.A. in English from the State University of New York at Buffalo.
Andrew E. Newton, a co-founder of the ComDany ~ has served as Vice President
and General Counsel since January 1994 and Secretary since March 1994. From
February 1999 to November 1993,
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Mr. Newton was Vice President and General Counsel of Frame Technology
Corporation, a software engineering company. Mr. Newton holds an A.B. degree in
English from Dartmouth College and a J.D. degree from Columbia University School
of Law. Mr. Newton is a member of the bar of the States of California, New York
and Massachusetts.
Craig I. Forman joined the Company in February 1996 as Vice President,
Product Management and Editor. From March 1995 to February 1996, Mr. Forman
served as Director and Editor~ Business Information Services International at
Dow Jones & Co., a business information company. Mr. Forman also served as Tokyo
Bureau Chief at The Wall Street Journal, a media company, from August 1993 to
March 1995 and as Deputy Bureau Chief and Foreign Correspondent, London from
September 1987 to August 1993, also at The Wall Street Journal. Mr. Forman holds
an A.B. degree in public and international affairs from Princeton University and
an M.S.L. in law studies from the Yale Law School.
James N. Desrosier joined thg Company in March 1996 as Vice President,
Chief Marketing Officer. From March 1999 to March 1996, Mr. Desrosier held a
number of positions including Senior Vice President, Global Brand Marketing,
Vice President, Debit Product Management and Marketing, and Vice President,
Advertising at MasterCard International Incorporated~ an electronic payments,
systems, and products company. Hr. Desrosier holds an A.B. degree in philosophy
from Kenyon College.
John S. Nauman joined the Company in February 1996 as Vice President,
Engineering. From November 1993 to February 1996, Mr. Nauman served as Vice
President, Engineering and then Vice President~ Development at NetFRAME Systems~
a hardware and software engineering company. From November 1989 to October 1993~
he was Senior Director of Networking and Communication Development and then
Business Unit Manager, Integrated Technologies at Apple Computer Inc. Hr. Nauman
holds a B.S. degree in mathematics from the University of Oklahoma, an M.B.A.
from the University of Santa Clara and an M.S. in electrical engineering from
Stanford University.
Oliver D. Curme has served as a director of thg Company since May 1995.
Since January 1988, Mr. Curme has been a General Partner of certain venture
capital funds associated with Battery Ventures III, L.P., a venture capital
firm. Mr. Curme also serves as a director of HNC Software Inc. as well as
several privately held technology companies. Mr. Curme holds a B.S. in

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biochemistry from Brown University and an M.B.A. from Harvard Business School.
H. Dubose Montgomery has served as a director of the Company since June
1994. Since 1976, Mr. Montgomery has been a General Partner at Menlo Ventures, a
group of venture capital funds, in Menlo Park, California. Mr. Montgomery also
serves as a director of Endovascular Technologies, Gilead Sciences, Matrix
Pharmaceuticals, and a number of privately held companies. Mr. Montgomery holds
a B.S. degree in management science and B.S. and M.S. degrees in electrical
engineering and computer science from the Massachusetts Institute of Technology
and an M.B.A. from Harvard Business School.
Matthew J. Stover has served as a director of the Company since March 1996.
Mr. Stover also serves as a director of a number of private companies. Since
January 1994, Mr. Stover has served as President and Chief Executive Officer of
NVNEX Information Resources Company, a Delaware corporation and international
marketing information services provider, and Chairman of the Board of NVNEX
Information Technologies Company, a wholly owned subsidiary of NYNEX Information
Resources Company. Prior to that, Mr. Stover served as President and Chief
Executive Officer of AGS Computers, Inc. from December 1992 to December 1993 and
as Vice President, Public Affairs and Corporate Communications of NVNEX
Corporation from May 1999 to December 1992. Mr. Stover holds a B.A. in English
language and literature from Yale University and a certificate from the
Executive Program of the University of Virginia, Colgate Darden School of
Business Administration.
John E. Zeisler has served as a director of the Company since May 1995.
Since July 1995, Mr. Zeisler has served as Senior Vice President, Marketing at
NETCOM, an internet company. From 1992 to 1994 he served as President and Chief
Executive Officer of Pensoft Corporation, a software
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From 1987 to 1991, Mr. Zeisler was a co-founder and Vice President,
Marketing at Claris Corporation, a software company. Mr. Zeisler holds a B.S.
degree in communications from Boston University.

~.

The Company currently has authorized six directors. Each director holds
office until the next annual meeting of shareholders or until his or her
successor is duly elected and qualified. Certain directors have been elected by
the holders of Preferred Stock pursuant to the Company 's Amended and Restated
Articles of Incorporation and a voting agreement contained in the Third Amended
and Restated Investors' Rights Agreement dated April 19. 1996 between the
Company and the Investors listed in Schedule A thereto. See nCertain
Transactions ." Except for grants of stock options pursuant to the Company 's
Stock Option Plan, directors of the Company do not receive compensation for
services provided as a director. The Company also does not pay compensation for
committee participation or special assignments of the Board of Directors. There
are no family relationships among any of the directors and executive officers of
the Company .
The Audit Committee will review and act on and report to the Board of
Directors with respect to various aUditing and accounting matters, including the
selection of the Company 's auditors, the scope of the annual audits, fees to be
paid to the auditors, the performance of the Company 's auditors and the
accounting practices of the Company .
The Compensation Committee will establish salaries, incentives and other
forms of compensation for officers and other employees of the Company and
administers the incentive compensation and benefit plans of the Company .
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company 's
current and former Chief Executive Officer and the two other most highly
compensated executive officers whose salary and bonus for 1995 were in excess of
$199,999 for services rendered in all capacities to the Company and its
subsidiaries for that fiscal year (collectively, the NNamed Qfficers"). No other
executive officer who held office at December 31. 1995 met the definition of a
"most highLy compensated executive officer n within the meaning of the SEC's
executive compensation rules for this period.
SUMMARY COMPENSATION TABLE

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LONG-TE~

CONPENSATION

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ANM.I4L COI'IPENSA TION
NAJfE AND PRESENT
PRINCIPAL POSITION

SAIARY(I)

Steven T. Kirsch(3) ••..............................
Former President and Chief Executive Officer
Robert E l Johnson. 111 (4) .......................
President and Chief Executive Officer
Andrew E. Newton...................................
Vice President, General Counsel and Secretary
Karl A. Spangenberg(5).............................
Vice President, Worldwide Advertising

8ONIJ5(1) (1)

$ 82,500

$

$ 12,179

$

$ 128,333

$ 49,999

$ 15,417

$

SECURITIES
UNDERL YING
OPTIONS
(1t)(2)

1,299,999

375,999

(1) Bonus earned in 1995 and paid in 1996.
(2) The options listed in the table were granted under the Company 's Stock
Option Plan. See 8
Manaaement -- Option Grants in Last FiscaL
Year -- Footnote 1 for a description of the terms of these options. The
option outstanding under the Stock Option Plan will be incorporated into
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the new 1996 Stock Option/Stock Issuance Plan, but will continue to be
governed by their existing terms. See 8
Management -- 1996 Stock Option/Stock
Issuance PLan . 8
(3) Mr. Kirsch served as President and Chief Executive Officer from January 1995
through November 1995.
(4) Mr. Johnson became President and Chief Executive Officer in December 1995.

In 1996, he will be compensated at an annual base salary rate of $200,000
and is eligible to earn a maximum bonus of $200,000.
(5) Karl A. Spangenberg joined the Company in December 1995 as Vice President,
Worldwide Advertising, is compensated at an annual rate of $125,999 and is
eligible for a maximum bonus of $490,000.
OPTION GRANTS IN LAST FISCAL YEAR

The following table contains information concerning stock option grants
made to each of the Named Officers for the 1995 fiscal year. No stock
appreciation rights were granted to these individuals during such year.
INDIVIDUAL GRANTS(l)

[ Enlarge/Download Table]

IUfBER OF
SECURITIES
UNDERLYING
X OF TOTAL
OPTIONS
OPTIONS GRANTED
GRANTED
TO EIfPLOYEES IN
(1t)(1)
FISCAL YEAR(2)

EXERCISE
PRICE
(I/SH)(3)

POTENTIAL
REALIZABLE
VALUE AT ASStflfED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
FOR OPTION TEM(.)
£XPIRATDON -----------------DATE
5X(I)
1",,(1)

Robert E.l. Johnson.
III ...................

1,288,888

Karl A. Spangenberg.....

375,999

34.9%
19.9%

$8.1334

12/18/82

$9.1334

11/39/92

$151,848
$ 47,459

(1) These options were granted under the Company 's Stock Option Plan. The grant
date for these options are as follows: Mr. Johnson: December 11. 1995 ; Mr.
Spangenberg: December 13. 1995 . Each option has a maximum term of seven
years measured from the grant date, subject to earlier termination upon the
optionee's cessation of service with the Company . 150,000 of Mr. Johnson's
option shares were fully vested and immediately exercisable on the date of
grant. Mr. Johnson will vest, and the option will become exercisable, with
respect to the remaining 1,050,000 option shares in a series of monthly
installments of 25,000 shares commencing on the date seven months from the
grant date. Mr. Spangenberg will vest, and his option will become
exercisable, as to 25% of the shares upon his completion of one year of
service measured from the grant date, and with respect to the balance of the
shares in a series of equal monthly installments over the 36 months of
service thereafter. These options will terminate in the event the Company is

acquired by merger or asset sale, unless these options are assumed by the
acquiring company. The options outstanding under the Stock Option Plan will
be incorporated into the new 1996 Stock Option/Stock Issuance Plan, but will
continue to be governed by their existing terms. See N
Mqnqqement -- 1996
Stock Option/Stock Issuance PLgn ."

(2) Th@ Company granted options to purchase 3,438,262 shares of Common Stock
during 1995.
(3) The exercise price may be paid in cash or in shares of the Company 's Common

Stock valued at fair market value on the exercise date. Th@ Company may also
finance the option exercise by loaning the optionee sufficient funds to pay
the exercise price for the purchased shares, together with any federal and
state income tax liability incurred by the optionee in connection with such
exercise.

(4) The 5X and leX assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There is no
assurance that the actual stock
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price appreciation over the 7-year option term will be at the assumed 5X and
levels or at any other defined level. Unless the market price of the
Common Stock appreciates over the option term, no value will be realized
from the option grants made to the executive officers.

lex

OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information concerning option exercises and
option holdings for the year ended pec@mb@r 31. 1995 with respect to each of the
Named Officers. No options were exercised by the Named Officers during such
year. No stock appreciation rights were exercised during such year or were
outstanding at the end of that year.
FISCAL YEAR-END OPTION VALUES
[ Enlarge/Download Table]
MllfBER OF
SECURITIES UNDERLYING
UNErERCISED OPT~

VALUE OF
UNErERCISED
IN-THE-/IIONEY OPTIONS

AT FY-EM> (')

AT fY-EM>($)(l)

NAlfE

ErERCISABLE

UNErERCISABLE

ErERCI5ABLE

UNEXERCISABLE

Robert E.L. Johnson. III """""".
Karl A. Spangenberg ................ "

150,000

1,050,000
375,000

$ 159,990

$ 1,119,930
$
399,975

$

(1) Based on the deemed fair market value of the Company 's Common Stock at
December 31. 1995, $1.20 per share (as determined by the Company 's Board of
Directors), less the exercise price payable for such shares, $0.1334.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Company 's Board was formed in April 1996
and is currently comprised of Messrs. Curme, Stover and Zeisler. None of these
individuals was at any time during the fiscal year ended pecember 31. 1995, or
at any other time, an officer or employee of the Company . No member of the
Compensation Committee of the Company serves as a member of the Board of
Directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company 's Board of Directors or Compensation
Committee.
1996 STOCK OPTION/STOCK ISSUANCE PLAN

)
The Company 's 1996 Stock Option/Stock Issuance Plan (the "1996 PLan N is
intended to serve as the successor equity incentive program to the Company 's
N The 1996 Plan was adopted by the
Stock Option Plan (the NPredecessor PLan ).
Board of Directors on April 10. 1996 and is subject to approval by shareholders.
5,625,000 shares of Common Stock have been authorized for issuance under the
1996 Plan. This share reserve is comprised of (i) the shares which remained
available for issuance under the Predecessor Plan, including the shares subject
to outstanding options thereunder and the shares otherwise available for future
grant, plus (ii) an additional increase of approximately 218,591 shares. The

outstanding options under the Predecessor Plan will be incorporated into the
1996 Plan at the time the Underwriting Agreement for this Offering is executed~
and no further option grants or share issuances will be made under the
Predecessor Plan. The incorporated options will continue to be governed by their
existing terms~ unless the Plan Administrator (with the consent of any optionee
whose rights are diminished) elects to extend one or more features of the 1996
Plan to those options. However~ except as otherwise noted below~ the outstanding
options under the Predecessor Plan contain substantially the same terms and
conditions summarized below for the Discretionary Option Grant Program in effect
under the 1996 Plan.
The 1996 Plan is divided into three separate components: (i) the
Discretionary Option Grant Program under which eligible individuals in the
Company's employ or service may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock at an exercise price not less
than 85% of their fair market value on the grant date, (ii) the Stock Issuance
Program under which such individuals may~ in the Plan Administrator's
discretion~ be issued shares of
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Common Stock directly~ through the purchase of such shares at a price not less
than 85% of their fair market value at the time of issuance or as a bonus tied
to the performance of services~ and (iii) the Automatic Option Grant Program
under which option grants will automatically be made at periodic intervals to
eligible non-employee Board members to purchase shares of Common Stock at an
exercise price equal to 18eX of their fair market value on the grant date.
The Discretionary Option Grant Program and the Stock Issuance Program will
be administered by the Compensation Committee of the Board. The Compensation
Committee as Plan Administrator will have complete discretion to determine which
eligible individuals are to receive option grants or stock issuances, the time
or times when such option grants or stock issuances are to be made, the number
of shares subject to each such grant or issuance, the status of any granted
option as either an incentive stock option or a non-statutory stock option under
the Federal tax laws, the vesting schedule to be in effect for the option grant
or stock issuance and the maximum term for which any granted option is to remain
outstanding. In no event, however, may anyone participant in the 1996 Plan
receive option grants or direct stock issuances for more than S99,999 shares per
calendar year.
In the event that the Company is acquired by merger or asset sale~ each
outstanding option under the Discretionary Option Grant Program~ which is not to
be assumed or replaced by the successor corporation, will automatically
accelerate in full, and all unvested shares under the Stock Issuance Program
will immediately vest~ except to the extent the Company 's repurchase rights with
respect to those shares are to be assigned to the successor corporation. The
Plan Administrator will have the authority under the Discretionary Option Grant
and Stock Issuance Programs to grant options and to structure repurchase rights
so that the shares subject to those options or repurchase rights will
automatically vest in the event the individual's service is terminated, whether
involuntarily or through a resignation for good reason, within 12 months
following (i) a merger or asset sale in which those options are assumed or those
repurchase rights are assigned or (ii) a change in control of the Company
effected by a successful tender offer for more than sex of the outstanding
voting stock or by proxy contest for the election of Board members. Options
currently outstanding under the Predecessor Plan will terminate upon an
acquisition of the Company by merger or asset sale, unless those options are
assumed or replaced by the acquiring entity. Outstanding options under the
Predecessor Plan that are assumed or replaced in the acquisition will not
accelerate upon the subsequent termination of the optionee's employment~ except
in the case of Messrs. LeBlanc and Derosier under certain circumstances. See
"EmpLoyment Contracts and Change of ControL Arrangements . N
The Plan Administrator will also have discretion to issue limited stock
appreciation rights under the Discretionary Option Grant Program which will
provide the holders with the right, upon the successful completion of a hostile
tender offer for more than sex of the Company 's outstanding voting securities~
to surrender their outstanding options for a cash distribution from the Company
in an amount per surrendered option share equal to the excess of (i) the highest
reported price per share paid in effecting the take-over (ii) the option
exercise price payable per share. No stock appreciation rights are outstanding
under the Predecessor Plan.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (including
options incorporated from the Predecessor Plan) in return for the grant of new
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Jyst 49th

per share based upon the fair market value of the Common Stock on the new grant
date.
Under the Automatic Option Grant Program~ eligible non-employee Board
members will receive a series of option grants over their period of Board
service. However, a non-employee Board member who is affiliated, whether as a
partner, principal, officer or employee, with an entity which owns 2% or more of
the shares of any class of the Company 's outstanding stock will not be eligible
to receive any automatic option grants under such program during his or her
period of Board service.
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Each individual who is first elected or appointed as an eligible non-employee
Board member on the date the Underwriting Agreement for this Offering is
executed will receive an option grant on such date for 7,599 shares of Common
Stock~ provided such individual has not otherwise been in the prior employ of
the Company and has not received any prior option grants from the Company . Each
otherwise eligible individual who first becomes a non-employee Board member at
any time thereafter will receive a similar 7~500 share option grant on the date
such individual joins the Board~ provided such individual has not been in the
prior employ of the Company . In addition~ on the date of each Annual
Stockholders Meeting, beginning with the Annual Meeting of Shareholders for the
1996 fiscal year, each eligible non-employee Board member who is to continue to
serve as a non-employee Board member will automatically be granted an option to
purchase 3~7S0 shares of Common Stock provided such individual has served on the
Board for at least six months. There will be no limit on the number of such
3,759 share option grants anyone eligible non-employee Board member may receive
over his or her period of continued Board service.
Each automatic grant will have a term of 10 years, subject to earlier
termination following the optionee's cessation of Board service. Each automatic
option will be immediately exercisable; however, any unvested shares so
purchased will be subject to repurchase should the optionee cease service as a
Board member prior to vesting in those shares. Each grant will vest in four
successive equal annual installments over the optionee's period of Board
service, with the first installment to vest upon the Board member's completion
of one year of Board service from the date of grant. However, each outstanding
option will immediately vest upon (i) certain changes in the ownership or
control of the Company or (ii) the optionee's death or disability while serving
as a Board member.
The Board may amend or modify the 1996 Plan at any time~ however, the
Automatic Option Grant Program cannot be amended more frequently than once every
six months. The 1996 Plan will terminate on April 9. 2996 ~ unless sooner
terminated by the Board.
EMPLOYEE STOCK PURCHASE PLAN

)
The Company 's Employee Stock Purchase Plan (the HPurchase PLan H was
adopted by the Board of Directors on April 19. 1996 and is subject to approval
by shareholders. The Purchase Plan is designed to allow eligible employees of
the Company and participating sybsidiaries to purchase shares of Common Stock,
at semi-annual intervals, through their periodic payroll deductions under the
Purchase Plan, and a reserve of 187,500 shares of Common Stock has been
established for this purpose.
The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration of 24 months. However, the initial
offering period will begin at the time the Underwriting Agreement is executed
and priced in connection with this Offering and will end on the last business
day in July 1998.
Individuals who are eligible employees on the start date of any offering
period may enter the Purchase Plan on that start date or on any subsequent
quarterly entry date (the first business day of February~ May~ August and
November each year). Individuals who first become eligible employees after the
start date of the offering period may join the Purchase Plan on any subsequent
quarterly entry date within that period.
Payroll deductions may not exceed 191 of base salary, and the accumulated
payroll deductions of each participant will be applied to the purchase of shares
on his or her behalf on each semi-annual purchase date (the last business day in
January and July) at a purchase price per share equal to 8SX of the lower of (i)
the fair market value of the Common Stock on the participant's entry date into
the offering period or (ii) the fair market value on the semi-annual purchase
date. In no event, however, may any participant purchase more than 500 shares on
anyone semi-annual purchase date.

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The Purchase Plan will terminate on the earlier of (1) the last business
day of July 2006, (ii) an earlier date determined by the Board or (iii) the date
all shares available for issuance have been sold.
EMPLOYJIIIENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS

None of the Named Officers have employment contracts with the Company, and
all Named Officers' employment is terminable at will. However, Messrs. Johnson,
LeBlanc, Spangenberg and Desrosier each have employment offer letters which
provide that they are entitled to receive certain severance payments if they are
terminated without cause. Mr. Johnson will be entitled to severance payments
equal to six months salary and continued participation in the Company 's medical
plans for six months if he is terminated without cause at any time. Messrs.
LeBlanc and Desrosier will be entitled to severance payments equal to six months
salary~ continued participation in the Company 's medical plans for six months~
and continued vesting in their stock options for six months (twelve months for
Mr. LeBlanc)~ if they are terminated without cause within two years of their
date of employment. Mr. LeBlanc will also be entitled to his severence benefits
if he voluntarily terminates his employment following certain changes in control
of the Company that result in diminished job responsibilities. In addition~ upon
certain changes in control of the Company during the period ending three years
from the commencement of Mr. Desrosier's employment~ Mr. Desrosier's vesting in
his stock options may be accelerated by twelve months. Mr. Spangenberg is
entitled to severance payments equal to four months compensation, and continued
participation in the Company 's medical plans for four months, if he is
terminated without cause within eighteen months of his date of employment.
In connection with an acquisition of the Company by merger or asset sale,
each outstanding option held by the Chief Executive Officer and the other
executive officers under the 1996 Plan will automatically accelerate in full and
all unvested shares of Common Stock held by such individuals subject to direct
issuances made under the 1996 Plan will immediately vest in full, except to the
extent such options are to be assumed by, and the Company 's repurchase rights
with respect to these shares are to be assigned to, the successor corporation.
In addition, the Compensation Committee as Plan Administrator of the 1996 Plan
will have the authority to provide for the accelerated vesting of the shares of
Common Stock subject to outstanding options held by the Chief Executive Officer
or any other executive officer or the shares of Common Stock subject to direct
issuances held by such individual, in connection with the termination of the
officer's employment following: (i) a merger or asset sale in which these
options are assumed or the Company 's repurchase rights with respect to unvested
shares are assigned or (ii) certain hostile changes in control of the Company .
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Th@ Company 's Amended and Restated Articl@s of Incorporation limit the
liability of directors to the maximum extent permitted by California law. Such
limitation of liability has no effect on the availability of equitable remedies,
such as injunctive relief or rescission.
Th@ Company 's ~ provide that the Cpmpany shall indemnify its directors
and officers and may indemnify its other employees and agents to the fullest
extent permitted by law. Th@ Cgmpany believes that indemnification under its
Bylaws covers at least negligence and gross negligence on the part of
indemnified parties. The Company 's Bylaws also permit the Company to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity~ regardless of
whether the Bylaws would permit indemnification.
The Company has entered~ or plans to enter, into agreements to indemnify
its directors and officers, in addition to the indemnification provided for in
the Company 's Bylaws . These agreements~ among other things~ indemnify the
Company's directors and executive officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in
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any action or proceeding~ including any action by or in the right of the
arising out of such person's services as a director or executive
officer of the Company ~ any subsidiary of the Company or any other company or
Company~

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enterprise to which the person provides services at the request of the Company .
The Company believes that these provisions and agreements are necessary to
attract and retain qualified directors and executive officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.
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CERTAIN TRANSACTIONS
Each of Steven T. Kirsch, Victoria J. Blakeslee, Ed R. Miller, Zara Tepper
Haimo, Todd Jonz, Andrew Bensky, James Roskind, and Andrew E. Newton
(collectively, the NFoundersR) was involved in the founding and organization of
the Company and may be considered a promoter of the Company . Described below are
items of value received by each of the founders in connection with services
provided to the Company .
In the Founders Agreement dated February 1. 1994 as amended on June 30.
1994 (the "Founders Agreement"), the Company issued an aggregate of 3,780,000
shares of Common Stock to the Founders at a purchase price of $0.01 per share,
which was paid in cash. The Company retained a right to repurchase the shares of
Common Stock sold pursuant to the Founders Agreement in the event that any
founder terminated his employment prior to completing a four-year vesting
period, as defined in the Founders Agreement. Each of the Founders,
individually, purchased the number of shares set forth immediately following his
or her name: Steven T. Kirsch (1,387,500); Victoria J. Blakeslee (637,500); Ed
R. Miller (405,000); Zara Tepper Haimo (375,000); Todd Jonz (375,000); Andrew
Bensky (225,000); James Roskind (225,000); and Andrew E. Newton (150,000). In
March 1995, the Company repurchased 154,688 unvested shares of Common Stock held
by James Roskind for $0.01 per share. In March 1996, the Company repurchased
179,688 unvested shares of Common Stock held by Todd Jonz for $0.01 per share.
The Founders, at the time of the issuance of Series A Preferred Stock,
individually, purchased the number of shares of Series A Preferred Stock set
forth immediately following his or her name: Steven T. Kirsch (4,500,000);
Victoria J. Blakeslee (187,500); Ed R. Miller (75,000); Zara Tepper Haimo
(300,000); Todd Jonz (300,000); James Roskind (300,000); and Andrew E. Newton
(225,000).

Since the Company 's inception in August 1993, the Company has issued, in
private placement transactions, the following shares of Preferred Stock:
7,385,864 shares of Series A Preferred Stock for an aggregate purchase price of
$984,782 on February 25. 1994, March 18. 1994, June 30. 1994 and July 22. 1994
(279,869 of which shares were forfeited back to the Company on March 18. 1995);
2,594,416 shares of Series B Preferred Stock for an aggregate purchase price of
$1,176,135 on June 30. 1994; 5,600,014 shares of Series C Preferred Stock for an
aggregate purchase price of $4,480,006 on May 4. 1995 and Jyne 30. 1995 ; and
2,267,251 shares of Series E Preferred Stock for an aggregate purchase price of
$18,137,964 on March 29. 1996, April 12. 1996 and April 19. 1996 . Each
outstanding share of Preferred Stock shall be converted into one share of Common
Stock upon the closing of this Offering. The following table summarizes
purchases, valued in excess of $60,000, of shares of Preferred Stock by
directors, executive officers, and five percent shareholders of the Company and
persons associated with them. No shares of Series D Preferred Stock were
purchased by any such persons or entities. The price per share paid by such
persons or entities was $0.133, $0.453, $0.80, and $8.00 for the Series A,
Series B, Series C and Series E Preferred Stock, respectively.
[ Enlarge/Download Table]
SHARES
INVESTOR(l)

SERIES A

Steven T. Kirsch(2) ...............
Menlo Ventures VI, L.P.(3) ........
Andrew E. Newton ••••••••••••••••••••••••••
Battery Ventures III. L.P.(4) .....••••••••
NVNEX Information Technologies
Company(S) ••••••••••••••••••••••••••••••
II II II II

IIIIIIII

SERIES B

SERIES C

2,238,972
133,426

2.500,008
138.116
2.500,008

4,588,888

(1) Shares held by affiliated persons and entities have been aggregated. See
N
PrincipaL SharehoLders . R

SERIES E

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(2) Steven T. Kirsch, the Chairman of the Board of the Company, has been elected
as a director of the Company by the holders of the Series A Preferred Stock
pursuant to the Company 's
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Amended and Restated Articles of Incorporation and a voting agreement
contained in the Third Amended and Restated Investors' Rights Agreement
dated April 19. 1996 between the Company and the Investors listed on
Schedule A thereto. The right of the Preferred Stock holders to designate a
director shall terminate upon the consummation of this Offering.
(3) H. DuBose Montgomery, a General Partner of Menlo Ventures, has been elected
as a director of the Company by the holders of the Series B Preferred Stock
pursuant to the Company 's Amended and Restated Articles of Incorporation and
a voting agreement contained in the Third Amended and Restated Investors'
Rights Agreement dated April 19. 1996 between the Company and the Investors
listed on Schedule A thereto. The right of preferred shareholders to
designate a director shall terminate upon the consummation of this Offering.
(4) Oliver D. Curme, a General Partner of Battery Ventures, has been elected as
a director of the Company by the holders of the Series C Preferred Stock
pursuant to the Company 's Amended and Restated Articles of Incorporation and
a voting agreement contained in the Third Amended and Restated Investors'
Rights Agreement dated April 19. 1996 between the Company and the Investors
listed on Schedule A thereto. The right of the Preferred Stock holders to
designate a director shall terminate upon the consummation of this Offering.
(5) Matthew J. Stover, Chairman of the Board of NYNEX Information Technologies
Company, has been elected as a director of the Company by the holders of the
Series E Preferred Stock pursuant to the Company 's Amended and Restated
Articles of Incorporation and a voting agreement contained in the Third
Amended and Restated Investors' Rights Agreement dated April 19. 1996
between the Company and the Investors listed on Schedule A thereto. The
right of the Preferred Stock holders to designate a director shall terminate
upon the consummation of this Offering.
Pursuant to the Redemption Agreement between the Company and NYNEX, dated
March 29. 1996, and the Redemption Agreement between the Company and Kanematsu,
dated April 12. 1996, the Company has granted to NYNEX and Kanematsu certain
rights to require the Company to redeem the Series E Preferred Stock held by
such entities at the lesser of the fair market value or $8.00 per share. The
Redemption Agreements terminate upon the conversion of the Series E Preferred
Stock pursuant to the Company 's initial public offering with aggregate proceeds
of at least $15 million.
The Company has entered into a Software License Agreement (the "LicenseR),
dated March 29. 1996 with NVNEX to allow NYNEX to use and reproduce certain
licensed software in any medium for NYNEX's internal use only. The license is
royalty-free during the initial trial term, but may be renewed either (i) for
subsequent annual terms for a specified percentage of collected revenues or an
annual minimum payment of $3 million or (ii) for a subsequent ten year term for
a lump sum payment of $4 million.
In March 1996, the Company and NYNEX entered into a one year agreement,
which provides that, beginning in May 1996, the Company will prominently display
the BigYellow logo, which represents NYNEX's interactive shopping directory, as
the exclusive comprehensive shopping directory within Infoseek Guide. In
exchange for such exclusivity, NYNEX will pay to the Company up to an aggregate
of $4.6 million in monthly payments, which amount will be decreased
proportionately if the number of impressions of the BigYellow logo is below a
specified number. NYNEX may extend the term of the agreement for additional one
year periods, with the fee to be determined based upon Infoseek's then current
advertising rate structure.
On May 4. 1995, the Company entered into an Amended and Restated Put Option
Agreement whereby the Company was granted the right to require certain
investors, including Menlo Ventures VI, L.P., to purchase shares of Series D
Preferred Stock at an aggregate price of up to $2,352,269.60 if the Company 's
total revenues exceed an aggregate of $8,000,eee during two consecutive fiscal
quarters. The Put Option shall terminate upon the earliest to occur of a
specified list of events, including an underwritten public offering of the
Company's Common Stock registered
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under the Securities Act of 1933 on Form S-l with aggregate gross proceeds of at
least $10,eee,eee at an offering price of not less than $1.80 per share.
The Company entered into four Stock Purchase Agreements on Janyary 24. 1996
with Robert E.L. Johnson III, an executive officer of the Company, whereby Mr.
Johnson purchased a total of 374,998 shares of the Company 's Common Stock at
$0.80 per share held in the names of IRA's for the benefit of Mr. Johnson and as
custodian for his minor children. On Janyary 39. 1996 the Company entered into
an Employee Stock Purchase Agreement with Mr. Johnson pursuant to which he
purchased 75,999 shares of Common Stock at $0.89 per share. Payment for the
shares purchased on January 39. 1996 was made with a Promissory Note.
The Company entered into a Stock Purchase Agreement on March 28. 1996 with
Leonard J. Le Blanc, an executive officer of the Company, for the purchase of
37,500 shares of the Company 's Common Stock at $4.00 per share. Payment for the
shares so purchased was made with a Promissory Note.
The Company entered into a Stock Purchase Agreement on March 9. 1996 with
John S. Nauman, an executive officer of the Company, for the purchase of 150,000
shares of the Company 's Common Stock at $1.33 per share. Payment for the shares
so purchased was made with a Promissory Note.
The Company entered into a Stock Purchase Agreement on March 7. 1996 with
Craig I. Forman, an executive officer of the Company, for the purchase of
150,000 shares of the Company 's Common Stock at $1.33 per share. Payment for the
shares so purchased was made with a Promissory Note.
The Company entered into the Internet Search Service Access Agreement
between the Cgmpany and NETCOM dated October 13. 1995 , as amended on March 29.
1996 . John E. Zeisler is a director of the Company and an officer of NETCOM.
The Company entered into a License and Software Distribution Agreement with
HNC on April 25. 1996 and a Software License Agreement with HNC on May 8. 1996 .
Oliver D. Curme is a director of both the Company and HNC Software Inc. In
addition, Battery Ventures, L.P., of which Mr. Curme is a General Partner of a
General Partner, has been a 19X shareholder of HNC.
The holders of shares of Common Stock issued upon conversion of the Series
A, Series B, Series C, and Series E Preferred Stock are entitled to certain
registration rights. See R
Descripti.on of CapitaL Stock -- Registration Rights ."
The Company has granted options to certain of its directors and executive
Optiqn Grants in Last FiscaL Year " and "PrjncipaL
officers. See "Management
SharehqLders . "

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal shareholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors on the Board of
Directors.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company 's Common Stock as of March 31. 1996 by (i) each person
who is known by the Company to own beneficially more than 5X of the Company 's
Common Stock, (ii) each of the Company 's directors, (iii) each of the Named
Officers, and (iv) all current officers and directors as a group.
[ Enlarge/Download Table]
SHARES
BENEFICIAL! Y

PERCENT BENEFICIALLY

_EO(1) (2) (3)

_EO(1) (2)
NAlfE AND ADDRESS OF BENEFICIAL OitINERS

Steven T. Kirsch(4) .............••••••••••...•...•......
Infoseek Corporation
2629 Augustine Drive, Suite 259
Santa Clara, CA 95954
Menlo Ventures VI, L.P(S)................................

MMBER

BEFORE
OFFERING

AFTER
OFFERING

6,912,593

27.41

24.'-"

4,815,997

21.91

19.31

Building 4~ Suite lee
3eee Sand Hill Road
Menlo park ~ &a ~
Battery Ventures III~ L.P ........••••••••••...•...•......
2ee Portland Street
B2ll.2n~ ~

le.ex

1~125~eee

5.11

4.51

638~542

2.91
2.71

2.OX
2.41

11.41
21.91
5.11

le.ex
19.31
4.51

72.61

63.BX

!WJ&

NYNEX Information Technologies Company ••••...............
35 village Road
Middleton~ MA e1946
Andrew E. Newton .................••••••••••...•...•......
Robert E.L. Johnson. 111(6) ••••••••••••••••••••••••••••••
John E. Zeisler ..................•••••••••...............
Oliv@r D. Curm@(7) ...............•••••••••...............
H. Dubose Montgomery(8) ••••••••••••••••••••••••••••••••••
Matthew J. Stover(9) .............•••••••••...............
Karl A. Spangenberg ••••••••••••••••••••••••••••••••••••••
All Directors and Executive Officers
as a group (12 persons)(10) ............................. .

*

11.41

599~998

12~5ee
2~5ee~eee
4~815~e97
1~125~eee

•

•

•

•

Less than lX.

(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws~ the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) The number of shares of Common Stock beneficially owned includes the shares
issuable pursuant to stock options that may be exercised within 60 days
after March 31. 1996 . Shares issuable pursuant to such options are deemed
outstanding for computing the percentage of the person holding such options
but are not deemed outstanding for computing the percentage of any other
person. For purposes of this table J the number of shares outstanding at
March 31. 1996 includes the issuance of I J 948 J 591 shares of Convertible
Preferred Stock in April 1996. The number of shares of Common Stock
outstanding after this Offering includes the 3,999,000 shares of Common
Stock being offered for sale by the Company in this Offering.
(3) Assumes no exercise of the Underwriters' over-allotment option. See
"Underllllri tinq • ..

(4) Includes 37,590 shares held by the Kirsch Family Trust, an aggregate of
87,503 shares held by the children of Mr. Kirsch, and 5,887,599 shares held
in the name of trusts for the benefit of Mr. Kirsch.
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(5) Includes 71,169 shares owned by Menlo Entrepreneurs Fund VI, L.P.
(6) Includes an aggregate of 299,436 held by Mr. Johnson in custody for his
children, and includes an aggregate of 165,562 shares held in two IRAs for
the benefit of Mr. Johnson. Also includes 159,990 shares issuable pursuant
to stock options that may be exercised within 69 days after March 31. 1996 .
(7) Represents 2,500 J 000 shares beneficially owned by Battery Ventures III,
L.P. Mr. Curme, a director of the Company is a General Partner of Battery
Partners, III, L.P., the general partner of Battery Ventures III, L.P., and
he disclaims beneficial ownership of these shares except to the extent of
his pecuniary interest therein.
(8)Includes 71,169 shares owned by Menlo Entrepreneurs Fund VI, L.P. and
4,743,937 shares owned by Menlo Ventures VI, L.P. Mr. Montgomery, a director
of the Company, is a general partner of Menlo Ventures Management VI, L.P.,
which is the general partner of each of the foregoing venture funds. Mr.
Montgomery disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein.
(9) Represents 1,125,000 shares beneficially owned by NVNEX Information
Technologies Company. Mr. Stover, a director of the Company is the Chairman
of the Board of NVNEX Information Technologies Company, an indirect wholly
owned subsidiary of NYNEX Corporation and he disclaims beneficial ownership
of these shares.
(19) Includes 159,999 shares subject to options, including those identified in
note (6).
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company upon the closing of this
Offering will consist of 69,ee9,999 shares of Common Stock, no par value, and
5,999,999 shares of Preferred Stock, no par value.
COMMON STOCK
As of March 31. 1996, and including the issuance of 1,048,591 shares of
Convertible Preferred Stock in April 1996, there were 21,946,228 shares of
Common Stock outstanding held of record by 51 shareholders. There will be
24,946,228 shares of Common Stock outstanding after giving effect to the sale of
the shares of Common Stock offered hereby.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend PoLicy ." In the event of the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable, and the
shares of Common Stock to be issued upon completion of this Offering will be
fully paid and nonassessable.
PREFERRED STOCK
The Company 's Articles of Incorporation authorize 5,999,eee shares of
Preferred Stock. The Board of Directors has the authority to issue the Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such series,
without further vote or action by the shareholders. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the shareholders and may
adversely affect the voting and other rights of the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Cornmon Stock, including the loss of
voting control to others. At present, the Company has no plans to issue any of
the Preferred Stock.
REGISTRATION RIGHTS
After this Offering, the holders of 21,579,512 shares of Common Stock and
holders of warrants and options to purchase 1,345,999 shares of Common Stock
will be entitled to certain rights with respect to the registration of such
shares under the Securities Act. Under the terms of the agreement between the
Company and the holders of such registrable securities, if the Company proposes
to register any of its securities under the Securities Act, either for its own
account or for the account of other security holders exercising registration
rights, such holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein. Certain of such
shareholders benefitting from these rights may also require the Company to file
a registration statement under the Securities Act at the Company 's expense with
respect to their shares of Common Stock, and the Company is required to use its
diligent reasonable efforts to effect such registration. Further, holders may
require the Company to file additional registration statements on Form S-3 at
the Holder's expense. These rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares included in such registration in certain circumstances.
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TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is First National
Bank of Boston, whose telephone number is (§l1 ) 575-2999.
5HARE5 ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Common Stock of

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Therefore~ future sales of substantial amounts of Common Stock in
market could adversely affect market prices prevailing from time to
time. Furthermore~ since only a limited number of shares will be available for
sale shortly after this Offering because of certain contractual and legal
restrictions on resale (as described below)~ sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.

Upon completion of this Offering, the Company will have outstanding an
aggregate of 24,946,228 shares of Common Stock. Of these outstanding shares of
Common Stock, the 3,000,0ee shares sold in this Offering will be freely
tradeable without restriction or further registration under the Securities Act,
unless purchased by an "affi.Liate" of the Company, as that term is defined in
Rule 144 under the Securities Act (an "Affiliate"). The remaining 21,946~228
shares of Common Stock existing are "restricted securities" as that term is
defined in Rule 144 under the Act ("Restricted Shares"). Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Section 4(1) Rules 1A4~ 144(k) or 701
promulgated under the Securities Act, which are summarized below. Sales of the
Restricted Shares in the public market~ or the availability of such shares for
sale~ could adversely affect the market price of the Common Stock.
All holders of Common Stock and options to purchase Common Stock have
agreed pursuant to certain "lockup" agreements that they will not, directly or
indirectly, offer, sell, pledge, contract to sell, grant any option to purchase,
grant a security interest in, hypothecate or otherwise sell or dispose of the
shares of Common Stock owned by them or that could be purchased by them through
the exercise of options to purchase Common Stock of the Cpmpany for a period of
180 days after the date of this Prospectus, which lock-ups may not be released
without the prior written consent of Alex. Brown & Sons Incorporated. As a
result of these contractual restrictions, notwithstanding possible earlier
eligibility for sale under the provisions of Section 4(1) or Rules 144, 1A4(k)
and 701, shares subject to lock-up agreements will not be saleable until the
agreements expire. The number of outstanding shares (based on shares outstanding
at March 31. 1996 and including the issuance of 1,048,501 shares of Convertible
Preferred Stock in April 1996) that will be available for sale in the public
market, after giving effect to lock-up agreements, will be as follows: (i) no
shares of Common Stock will be eligible for sale as of the date of this
Prospectus, (ii) 13~514,626 shares of Common Stock will be eligible for sale
beginning 180 days after the date of this Prospectus, subject in some cases to
certain volume and other limitations, and (iii) the approximately 8,433~477
remaining Restricted Shares will not be eligible for sale pursuant to Rule 144
until the expiration of their two-year holding periods.
In general, under Rule 144 as currently in effect~ beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least two years (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstandingj or (ii) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about the Company . Under Rule 144(k), a person who is not deemed to
have been an Affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially
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owned the shares proposed to be sold for at least three years (including the
holding period of any prior owner except an Affiliate)~ is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144j therefore~ unless otherwise
restricted, "l44(k) shares" may therefore be sold immediately upon the
completion of this Offering.
In addition, any employee, officer or director of or consultant to the
Company who purchased his or her shares pursuant to a written compensatory plan
or contract may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits such a holder to sell his or her Rule 701 shares under Rule 144
without complying with the holding period requirements of Rule 144. Rule 701
further provides that non-affiliates may sell such shares in reliance on Rule
144 without having to comply with the public information, volume limitation or
notice provisions of Rule 144. In both cases, a holder of Rule 701 shares is
required to wait until 90 days after the date of this Prospectus before selling
such shares. The Company 's Stock Option Plan requires that the holders of shares

Just 69th

issued upon exercise of options under such plan will not offer~ sell contract to
sell or grant any option to sell or grant any option to purchase or otherwise
dispose of the shares of Common Stock owned by them for a period of 180 days
after the effective date of this Offering.
The Company has agreed not to offer~ sell~ contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or any rights to acquire Common
Stock for a period 180 days after the date of this Prospectus~ without the prior
written consent of the Representatives of the Underwriters~ subject to certain
limited exceptions.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock subject to
outstanding stock options and Common Stock issued or issuable pursuant to the
Company's 1996 Stock Option/Stock Issuance Plan and Common Stock issuable
pursuant to the Company 's Employee Stock Purchase Plan. See n
MQnaqement -- 1996
Stock Option/Stock Issuance PLan ." and
EmpLoyee Stock Purchase PLan . n
Accordingly~ shares registered under such registration statements will~ subject
to Rule 144 volume limitations applicable to an Affiliate and the lapsing of the
Company's repurchase options~ be available for sale in the open market~ except
to the extent that such shares are subject to vesting restrictions with the
Company or the contractual restrictions described above.
N __

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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement ~ the
Underwriters named below (the "Underwritersn)~ through their Representatives~
Alex. Brown & Sons Incorporated and Merrill Lynch, Pierce~ Fenner & Smith
Incorporated, have severally agreed to purchase from the Company the following
respective number of shares of Common Stock at the initial public offering price
less the underwriting discounts and commissions set forth on the cover page of
this Prospectus:
[ Enlarge/Oownload Table]
UMJEIOiRITER

MlfBER OF
SHARES

Alex. Brown 8. Sons Incorporated ......................••••••••............
Merrill Lynch, Pierce~ Fenner & Smith
Incorporated ............................••••••••............
Total................................... ••••••••............

3~eee~999

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.
The Company has been advised by the Representatives of the Underwriters
that the Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $
per share. The Underwriters may allow, and such dealer may reallow~ a
concession not in excess of $
per share to certain other dealers. After the
initial public offering~ the offering price and other selling terms may be
changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option~ exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 450~000~ and the Company will be obligated~
pursuant to the option~ to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 3~ee0,000 shares are being offered.
The Company has agreed to indemnify the Underwriters against certain

liabilities~

including liabilities under the Securities Act of

1933~

as amended.

All shareholders of the Company have agreed not to offer~ sell or otherwise
dispose of any shares of Common Stock for a period of 180 days after the date of
this Prospectus~ which agreements may not be released without the prior consent
of Alex. Brown & Sons Incorporated. See nShqres ELigibLe fpr Future SgLe. n
Reuters NewMedia Inc.~ a shareholder of the Company, may purchase up to
454,546 shares in the Offering (assuming an initial public offering price of
$11.00 per share), for investment purposes only, and with no present intention
to resell the shares. Upon such purchase, Reuters NewMedia Inc. will hold
approximately 2X of the outstanding capital stock of the Company.
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
Prior to this Offering~ there has been no public market for the Common
Stock of the Company . Consequently~ the initial public offering price for the
Common Stock has been determined by negotiation between the Company and the
Representatives of the Underwriters. Among the factors considered in such
negotiations were prevailing market conditions~ the results of operations of the
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Company in recent periods~ the market capitalizations and stages of development
of other companies which the Company and the Representatives of the Underwriters
believed to be comparable to the Company ~ estimates of the business potential of
the Company, the present state of the Company 's development and other factors
deemed relevant.
LEGAL MITERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Brobeck, Phleger & Harrison LLP, Palo
Alto, California. Certain legal matters in connection with this Offering will be
passed upon for the Underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS

The financial statements of Infoseek Corporation at December 31. 1994 and
1995 and for the period from August 30. 1993 (inception) through December 31.
1993 and the years ended December 31. 1994 and 1995 appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors~ as set forth in their report thereon appearing elsewhere herein~ and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
ADDITIONAL INFORI'IATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-l under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules to the Registration Statement. For further
information with respect to the Company and such Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed as a part of the Registration Statement. Statements contained in this
Prospectus concerning the contents of any contract or any other document
referred to are not necessarily complete; reference is made in each instance to
the copy of such contract or document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference to
such exhibit. The Registration Statement~ including exhibits and schedules
thereto~ may be inspected without charge at the Securities and Exchange
Commission's principal office in Washington~ D.C. 20549~ and copies of all or
any part thereof may be obtained from such office after payment of fees
prescribed by the Securities and Exchange Commission.
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INFOSEEK CORPORATION

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INDEX TO FINANCIAL STATEMENTS
[ Enlarg@/Download Tabl@]
PAGE

Infos@@k Corporation:
Report of Independent Auditors .......................••••••••....................
Balance Sheets •••....................................••••••••....................
Statements of op@rations •••••••••••••••••••••••••••••••••••••••••••••••••••••••••
Statements of Shareholders' Equity (Deficit ). ........••••••••....................
Statements of Cash Flows ...........................•.••••••••...•...•...•........
Notes to Financial Statements ••••••••••••••••••••••••••••••••••••••••••••••••••••

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REPORT OF ERNST I. YOUNG LLP .. INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Infoseek Corporation
We have audited the accompanying balance sheets of Infoseek Corporation as
of December 31. 1994 and 1995 J and the related statements of operations J
shareholders' equity (deficit)J and cash flows for the period from August
39 J1993 (inception) through December 31. 1993 and for the years ended December
31. 1994 and 1995 . These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management J as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion J the financial statements referred to above present fairlYJ
in all material respects J the financial position of Infoseek Corporation at
December 31. 1994 and 1995 J and the results of its operations and its cash flows
for the period from August 39. 1993 (inception) through December 31. 1993 and
for the years ended December 31. 1994 and 1995 J in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
San Jose, California
February 27. 1996,
except as to Note 19, as to which
the date is May 15. 1996
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INFOSEEK CORPORATION
BALANCE SHEETS
[ Enlarg@/Download Tabl@]
DECE18E1t

I"..
-----------

31~

I995
-----------

IMItCH 31~
1996

-----------

PlIO FQIIIIM
SlWtEHOI.DEItS •

....

EIJUITY
IWICII 31,

(fMAJJDITEO)

(UllAWITEIJ)
ASSETS

Current assets:
Cash and cash equivillents •••..••••.••••.••••.•••••.••••.••••..••• $
Shorot-terlll investlllents.. ••••.. ••••. ••••. ••••. •••••. ••••. ••••.. •••
Accounts receivable, less allowance for doubtful accounts of
$41,588 in 1995 lind $49,387 in 1996 ........................... .

568,128

$ 1,129,896
496,871

$18,114,823

498,567

8511,239

Other current assets •••.••••..••••.••••.••••.•••••.•••••••••..•••
Total current assets •..••••.••••.••••.•••••.•••••••••..•••
Property and equiplllent:
Computer and office equipment .••••.••••.••••.•••••.•••••••••..•••
Furniture and fixtures •.••••..••••.••••.••••.•••••.•••••••••..•••
Leasehold improvements •.••••..••••.••••.••••.•••••.•••••••••..•••
Less accumulated depreciation and amortization ••••.••••.••••..•••

----------- ----------587,423
2,235,435

19,383

118,981

383,357
11,275,619

367,423
8,125
5,927

3,le2,894
85,212
22,82e

4,281,851
154,919
22,828

397,569

4,457,998
692,336

----------- ----------381,475
3,218,126
189,819

-----------

-----------

271,656

2,812,557
74,632

3,765,654
37,316
668,359

859,e79

$ 5,122,624

$15,746,948

11,394
4,eee

$ 1,222,5115
78,7611
35,736
575,767
238,453

$ 1,IJ40,757
264,e95
9111,895
1,ee7,l99
913,931

687,596
158,eee

2,489,833
158,eee

Net property and equiplllent ••..••••.••••.••••.•••••.••••.••••..•••
Purchased technology, net of accumulated amortization ••••.••••..•••
Deposits ..••••..•••..••••.••••..••••.••••.••••.•••••.••••.••••..•••
Total assets ••••.••••..••••.••••.••••.•••••.••••.••••..••• $
LIABILITIES All) SHAREHOLDERS' EClUITY
Current liabilities:
Accounts payable •..••••.••••..••••.••••.••••.•••••.•••••••••..••• $
Accrued payroll and payroll related expenses .................... .
Accrued royalties ............................................... .
Other accrued liabilities ....................................... .
Short-term obliptions .......................................... .

Total current liabilities ................................ .
Lone-term oblieations ............................................. .
Maintenance fees due third parties ............................... ..
COlllllitments
Redeemable convertible preferred stock, no par value:
Authorized shares -- included in convertible preferred stock
authorized
Issued and outstanding shares -- 1,125,eee in 1996, and none pro
forma, aggregate redemption value of $12,375,eee; aggregate
liquidation preference of $9,eee,eee in 1996 ••••.••••.••••..•••
Shareholders' equity:
Preferred stock, no par value:
Authorized shares -- 5,eee,8ee pro forma
Issued and outstanding shares -- none pro forma •.••••.••••..•••
Convertible preferred stock, no par value:
Authorized shares -- 27,898,378 in 1996.
Issued and outstanding shares -- 9,421J,541 in 1994, 15,588,294
in 1995, 15,394,175 in 1996, and none pro fOr'lla, aggrelate
liquidation preference of $7,321,277 in 1996 ••.••••.••••..•••
COIIIIIon stock, no par value:
Authorized shares -- 45,eee,eee in 1996
Issued and outstanding shares -- 3,782,1112 in 1994, 4,0ee,811
in 1995, 4,378,552 in 1996, and 20,897,727 pro fOr'lla ....... ..
Accumulated deficit ............................................. .
Deferred compensation ........................................... .
Notes receivable from shareholders .............................. .

113,627
129,821

----------- ----------2,143,399
4,144,877

210,eee

8,953,846

2,iJ19,549

6,694,544

37,1138
(1,537,321)

2,418,333
(4,1133,0811)
(2,888,398)
(49,858)

$

6,3119,813
(11,408,5e9)
(4,795,858)
(625,768)

Total shareholders' equity ............................... .

520,858

----------- ----------2,141,719
11,392

Total liabilities and shareholders' equity ................ $

859,e79

$ 5,122,624

22,784,357
(11,488,5e9)
(4,795,1158)
(625,768)

-----------

$ 11,962,238
==..........=...

$15,746,948

See accompanying notes.
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INFOSEEK CORPORATION
STATEMENTS OF OPERATIONS
[ Enlarge/pgwnlpad Table ]
PERIOD FROIf
AUGUST 38, 1993
(INCEPTION) TO

THREE JIIONTHS ENDED
IlfARCH 31"

YEARS ENDED DECEMBER 31"

DECElfBER 31"

19. .

1993

1995

1995

1996

(LWAWITED)

Revenues:
Advertising""" ••••..
Subscription"""", ..

$

$

848,650
183,640

5,402

$ 1,655.691
75.214

$

-----------

8,290
19,045

-----------

---------

-----------

-----------

Total revenues"", ••••..
Cost of revenues •••••••••
Gross profit •••••••••••..
Operating expenses:
Research and
development •••••••••
Sales and marketing ••..
General and
administrative ••••••

$

-----------

---------

-----------

1.062.915
96.704

1,174,849
1,488,492

176,357
77,218

933.988
2,756.579

360.676

-----------

1,032,290
614,622
417,668

5,402
79,292

(73,890)

1,147,587

98,121

-----------

---------

1,730.905
689.480
1,041.425

860.111

-----------

Just 66th

Total operating
expenses •••••••••••••..

27~335

Operating loss •••••••••..
Interest income
(expense) :
Interest income ••••••..
Interest expense •••••..

(27,335)

1~52e~295

3~81e~848

----------(1~52e~295)
15~e89

(17~196)

-----------

----------$(1,509,986)

----------$ (3~295~687)

$ (27,335)

"''''''''''''''''''''''

Pro forma net loss per
share ...•••••••••••••..

3~574

---------

97 ~493

"'''''''''''''''''''''''''''''''

3,544

(0.13)

"'''''''''''''''''''''''''

(0.02)

$

"'========='"

"'======='"

25~862~923

Shares used in computing
pro forma net loss per
share ••••••••••••••••••

-----------

(58,248)

--------- ----------$ (422,042) $(3,567, SOl)

"'''''''''''''''''''''''''''''''

$

6~247

(64~495)

(30)

-----------

le~309

4~55e~678

--------- ----------(425,586)
(3~5e9~253)

114~689

(4~78e)

Net loss ..•••••••••••••..

351~696

----------(3~393~18e)

"'''''''''''''''''''''''''''''''

$

(0.14)

========== ..

25~966~848

See accompanying notes.
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INFOSEEK CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
[ Enlarge/Download Table ]
NtfTES

COINEItTIBLE
PIIEFERIIED STOCIC

Balance at August
~

.........

Net 1055 ••••••••

Balance at

;

----------

M:C/IOItATED
DEFICIT

;

Balance at
Deceillber" 31,
1994 ••••••••••••
Issuance of
Series A
preferred
stock for"
purchased
technology ••••
Repurchase of
COllllllOn stock
frail!
founder .......
Issuance of
Series C
conver1:1ble
preferred
stock for
cash. net of
issuance
costs •••••••••

;
(27.335 )

-----------

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

l!i:nmtlil: ;n
1m............
Issuance of
COllllllOn stock
to founder"s •••
Issuance of
Series A
conver1:ible
preferred
stock for" cash
and conver"sion
of note
payable. oet
of issuance
costs .........
Issuance of
Series B
conver1:1ble
preferred
stock for"
cash. net of
issuance
costs •••••••••
Exercise of
COllllllOn stock
options •••••••
Net loss ••••••••

DEFEItltED
ctII<PEftSATIIW

;

.....ES

.....ES

(27.335 )

--

3.788,888

37.888

ItECEIVAilLE
FRDIf
SHAltEHOLDERS

;

"'TAL

SHAltEHOLDE#tS •
EQUITY
(DEFICIT)

;
(27.335)

-----------

(27,335)
37,888

6,826,125

899.452

899,452

2,594,416

1,128.897

1,128,897
2,812

----------

2,819.549

559,739

223,895

3,782,812

4,438.188

37,838

(1,537.321 )

,.

(1.589,986)

-----------

528,858

223,1195

(154,61111)

5,688,814

(1,589.986 )

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

-----------

9.428,541

,.

(1,547)

(1,547)

4,438,188

Issuance of
warr-ants for
shares of
Series C
convertible
preferred
stock ••••..•••
Issuance of
comlllOn stock
to elllployee
for note
receivable .•••
Unearned
cOlllpensation
related to
stock
options ••..•••
AIIortization of
unearned
compensation
related to
stock
options .......
Fair value
ISsilned to
services
provided by
Netscape ......
Net loss ........
Balance at
P!cember 31

J.l!l!:i ............
Cancellation of
Series A
preferred
stock issued
for purchased
technololY
(unaudited) •••
Unearned
cOlllpensation
related to
stock options
(unaudited) •••
AIIortlzation of
unearned
compensation
related to
stock options
(unaudited) ...
Issuance of
Series E
convertible
preferred
stock for
cash. net of
issuance costs
(unaudited) •••
Repurchases of
comlllOn stock
(unaudited) •••
Issuance of
COllllllOn stock
to officer
(unaudited) •••
Issuance of
comlllOn stock
to officers
for notes
receivable
(unaudited) ...
Exercise of
comlllOn stock
options
(unaudited) ...
Cancelation of
note
receivable and
return of
unvested
shares by
employee
(unaudited) •••
Net loss
(unaudited) •••
Balance at .tliI:m

21.8ee

Zl.eee

371,887

49,858

(49,858)

2.124,2ee

(2.124,298 )

43,998

43,988

208,880

----------

-----------

15,588,294

6,694.544

2ee,eee
(3,295,687)

(3,295.687

---------- ----------- ----------4,880,811

2.418,333

(4,833.888 )

(2.88e,388 )

----------(49,858)

2,141,719

(279,869)

3,182,298

(3.102,298 )

386,658

93,758

746,154

746.154

(179,688)

(1,797)

374,999

610,880

26,404

(1,797)

388,880

412,499

3,167

(255,673)

----------

386,658

388,eee

(610,880)

3,167

(34,898)

34,898
(3,567.581 )

-----------

(3,567,581)

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

-----------

1l.....ll!n

(unaudited) ..•••

15,394,175

..........

$ 7,44e, 698 4,378,552

...........

$6,389,813

$(8,4e8,509)

$(4,795,850

.......... ........... ...........

$ (625,768)

$

8,392
...........

See accompanying notes.
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INFOSEEK CORPORATION
STATEMENTS OF CASH FLOWS
[ Enlarge/Download Table ]
PEIlIOD FItOIf
"§lIST

3fI

THREE JIIOIITHS EMJED

.I.W

....

(ItKEPTIOII) TO

IMRCH 31.

YEAIIS ENDED DECEttaElI 32,

DECElBEII 32,

(IMAUDITED)

OPERATING ACTIVITIES
Net loss ••..•••..••••.••••..••••.••••.••••.•••
Adjustments to reconcile net loss to net cash
used in operatinB activities:
Depreciation and alllOrtization •.••••.••••.•••
Amortization of' unearned compensation
related to stock options ................. .
Amortization of' warrants issued in
connection lIIith term loan ................ .
Fair value assigned to services provided by
Netscape ................................. .
Chances in operatinc assets and lbbilities:
Accounts receivable ...................... .
other current assets ••..••••.••••.••••.•••
Accounts payable •.••••..••••.••••.••••.•••
Accrued payroll ••.••••..••••.••••.••••.•••
Accrued royalties .••••..••••.••••.••••.•••
other accrued liabilities •••.••••.••••.•••
Maintenance fees due third parties ••••.•••

$(27,335)

$(1,589,986)

189,1119

$(3,295,687)

$(422,842)

437,813

$(3,567,581)

69,597

332,883

43 ....

3116,658

21,eea
2BB,eea

58,547
(57,234)
4,ee8

(69.858)
68.628

113,627
218,ee8

-----------

Net cash used in operating activities .••••.•••
INVESTING ACTIVITIES
Purchase of' short-tel'lll investments •••.••••.•••
Proceeds from sales and IIIiIturities of'
available-for-sale investments .••••.••••.•••
Purchase of' property and equipMent •••.••••.•••

(28,557)

Net cash used in investinc activities .••••.•••
FINMCING ACTIVITIES
Term loan •..•••..••••.••••..••••.••••.••••.•••
Repayments of term loan •••..••••.••••.••••.•••
Issuance of' note payable ..................... .
Pl)'IHnt of' deposit on terll loan .............. .
Repayment of' note payable .................... .
Proceeds from sale of' convertible preferred
stock, net of' issuance costs ............... .
Proceeds from sale of' redeemable convertible
preferred stock, net of issuance costs ••.•••
Proceeds from sale of' COlIIM)n stock •••.••••.•••
Repurchase of common stock ..••••.••••.••••.•••

(71,129)

(318,346)

277.151

(498,567)
(91,598)
1,211,191
66,768
35,736
462,148
(6e,eea)

(4.088)
(3.592)
19.377

42.484
(78.088)

(1.468.184)

(368.176)

-----------

(359,672)
(192.456)
(181.828)
193.327
883.159
431.432

-----------

388.ge8

Net cash provided by financinll activities •.•••
Net increase (decrease) in cash and cash
equivalents ••..••••.••••..••••.••••.••••.•••
Cash and cash equivalents at beginning of
period ••..•••..••••.••••..••••.••••.••••.•••
Cash and cash equivalents at end of period .•••

(l,e79,227)

(2.874.886)

(2.483.811)

(71,129)

(318,346)

-----------

1.986.148
(2.828,651)

(47.511)

(3.325,522)

(47.511)

-----------

965,858
(39,811)

496.871
(1.247,864)

-----------

(75e,993)
2,572,749
(95,834)
(6611,359)

(57.151)
1,419.549

4.43e.199

746,154
8.953,846
383,167
(1,797)

37.838
(1.547)

277.151

----------- ----------1.788.228
5.354.5B2
----------- -----------

177.465

----------11.818,726
-----------

398.655

569.976

(415.687)

8.984.927

177.465

568.128

568.128

1.129.896

........... ...........

$ 152.433

----------$177.465

$

568.128

-----------

$ 1.129.66

-----------

...........
$18.114.823

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Unearned compensation related to stock options amounted to $2,124,200 and
$3,102.200 for the year ended December 31. 1995 and the three months ended March
31. 1996. respectively.
See accompanying notes.
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INFOSEEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31. 1996 AND RELATING TO THE
THREE MONTHS ENDED MARCH 31. 1995 AND 199& IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Infoseek Corporation (the "~ ") was formed in August 1993 to develop
and provide branded. comprehensive Web-based navigational services that help
users access and personalize the vast resources of the Internet. The Company 's

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primary service offering~ Infoseek
individual users.

Guide~

is a free service targeted at

Cash J Cash Equivalents and Short-Term Investments
Cash and Cash Equivalents -- The Company considers all highly liquid debt
instruments which are purchased with a maturity of three months or less to be
cash equivalents. Through March 31. 1996 ~ the Company has invested cash in
excess of operating requirements in high-quality investments~ primarily U.S.
treasury securities~ at prevailing market interest rates at the time of
purchase.
Short-Term Investments -- The Company accounts for investments in
accordance with Statement of Financial Accounting Standards No. 115~ NAccounting
fOr Certain Investments in Debt and Equity Securities N (FAS IlS). Management
determines the appropriate classification of debt securities at the time of
purchase and reevaluates such designation as of each balance sheet date. The
Company's short-term investments, which consist primarily of U.S. treasury
securities with maturities of one year or less~ are classified as
available-for-sale, and as such, are carried at fair value with the unrealized
gains and losses, net of tax~ reported in a separate component of shareholders'
equity. The amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization, as well as any interest on the securities~ is included in interest
income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in interest
income (expense). The cost of securities sold is based on the specific
identification method. The Company had no investments in equity securities at
December 31. 1994 and l222 or March 31. 1996 .
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
The Company depreciates property and equipment using the straight-line method
over the estimated useful lives of three to five years. Leasehold improvements
are amortized using the straight-line method over the shorter of the life of the
related asset or the term of the lease.
Research and Development
Research and development expenditures are generally charged to operations
as incurred. Statement of Financial Accounting Standards No. 86, DAccounting for
the Costs of Computer Software to be SoLd, Leased or otherwise Marketed,D
requires the capitalization of certain software development costs subsequent to
the establishment of technological feasibility. In the Company 's case,
capitalization would begin upon completion of a working model as the Company
does not prepare detail program designs as part of the development process. As
of pecember 31. 1995 and March 31. 1996, such capitalizable costs were
insignificant. Accordingly, the Company has charged all such costs to research
and development expense in the accompanying statements of operations, and such
costs have been immaterial to date.
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INFOSEEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

(CONTINUED)

Stock-Based Compensation
The Company has chosen not to adopt the accounting provisions under
Statement of Financial Accounting Standards No. 123, NAccounting for Stock-Based
Compensation" (FAS 123L and therefore the effect of adopting the disclosure
standards required by FAS 123 has not had any effect on the Company 's financial
position or results of operations.
Long-Lived Assets
In 1995, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (FAS 121). FAS
121 requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. FAS 121 has not had a material impact on the
financial statements of the Company .
ft

Revenue Recognition

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Th@ Company 's advertising revenues are derived principally from short-term
advertising contracts in which the Company guarantees a minimum number of
impressions for a fixed fee. Advertising revenues are recognized ratably over
the term of the contract provided that the monthly minimum impressions are met~
the Company does not have any remaining significant obligations~ and collection
of the resulting receivable is probable.
Also included in advertising revenues is the exchange by the Company of
advertising space on the Company 's Web sit@s for reciprocal advertising space in
other media publications or other Web sit@s or receipt of applicable goods and
services. Revenues from these exchange transactions are recorded as advertising
revenue at the estimated fair value of the goods and services received and are
recognized when both the Company 's advertisements and the reciprocal
advertisements are run~ or goods or services are received. For the three months
ended March 31. 1996, advertising revenues recognized under these trading
activities amounted to $55,509.
The Company has also derived revenues during 1995 and the first quarter of
1996 from fees related to a premium subscription service offered to business and
professional users. Revenues from this service are recognized over the period
the services are provided.
Advertising Costs
Advertising costs are recorded as an expense the first time an
advertisement appears. Advertising costs amounted to $367~319 for the three
months ended March 31. 1996 . There were no advertising expenses during the
period from Aygyst 39. 1993 (inception) to D@c@mb@r 31. 1993 and for the years
ended D@c@mb@r 31. 1994 and 1222.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents, short-term
investments, and trade receivables. The Company places its cash equivalents and
short-term investments with high-quality financial institutions. Through ~
31. 1996 the Company invested its excess cash in collateralized funds of U.S.
government entities. The Company operates in one business segment and sells
advertising to various companies across several industries. The Company
generally does not require collateral. The Company maintains reserves for credit
losses~ and such losses have been within management's expectations. For the year
ended December 31. 1995 ~ one customer accounted for 13% of revenues.
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INFOSEEK CORPORATION
NOTES TO FINANCIAL STATEMENTS

(CONTINUED)

Net Loss Per Share
Net loss per share is computed using the weighted average number of common
shares outstanding. Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletins, convertible preferred stock, redeemable convertible
preferred stock, common stock and common equivalent shares (options and
warrants) issued by the Company at prices below the assumed public offering
price during the twelve-month period prior to the proposed offering have been
included in the calculation as if they were outstanding for all periods
presented regardless of whether they are antidilutive (using the treasury stock
method at an assumed public offering price of $11.99).
Net loss per share calculated on this basis for the period from August 30.
1993 (inception) to December 31. 1993 and for the years ended December 31. 1994
and 1995 ~ and for the three months ended March 31. 1995 and 1996 was ($9.90)~
($0.10)~ ($9.29), ($9.03) and ($0.22), respectively, based upon 12~482~827~
15,791~265~ 16~162,515~ 16~265~640 and 16~214~999 shares~ respectively.
Pro Forma Net Loss Per Share and Unaudited Pro Forma Shareholders' Equity
Pro forma net loss per share has been computed as described above and also
gives effect, even if antidilutive, to common equivalent shares from preferred
stock that will automatically convert upon the closing of the Company 's initial
public offering (using the as-if-converted method). If the offering contemplated
by this Prospectus is consummated, all of the convertible preferred stock
outstanding as of the closing date will automatically be converted into an
aggregate of approximately 16,519,175 shares of common stock based on the shares
of convertible preferred stock outstanding at March 31. 1996. Unaudited pro
forma shareholders' equity at March 31. 1996, as adjusted for the conversion of

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preferred stock is disclosed on the balance sheet.
Interim Financial Statements
In the opinion of management, the unaudited interim financial statements at
March 31. 1996 and for the three months ended March 31. 1995 and l222 include
all adjustments, consisting only of normal recurring accruals, necessary to
present fairly the Company 's financial position at March 31. 1996, and results
of operations and cash flows for the three months ended March 31. 1995 and l222.
Results for the three months ended March 31. 1996 are not necessarily indicative
of the results to be expected for the entire year.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenue and expenses during the
reporting period. Actual results inevitably will differ from those estimates,
and such differences may be material to the financial statements.
2. PURCHASED TECHNOLOGY
The Company exchanged 559,739 shares of its Series A convertible preferred
stock to license certain technology from ACSIOM under an amended July 1994
Software Development and Licensing Master Agreement (NACSIOH Agreement"). In
March 1996, 279,869 shares of the previously issued Series A convertible
preferred stock were cancelled under terms contained in the ACSIOM Agreement.
The value assigned to the Series A convertible preferred stock of $223,895 is
being amortized over 18 months ending Jyne 39. 1996 . Amortization expense for
the year ended
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INFOSEEK CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31. 1995 and the three months ended March 31. 1996 was $149,263 and
$37,316, respectively.
3. OBLIGATIONS
In October 1995 and February 1996, the Company entered into term loan
agreements with Venture Lending and Leasing, Inc. ("Venture N ) under which the
Company borrowed approximately $3,500,000 to finance the purchase of equipment.
Borrowings made under this agreement are due over 37 months, bear interest which
ranges from 15.S0X to 16.39X, and are secured by certain assets of the Company .
In connection with the October 1995 loan agreement, the Company issued warrants
to purchase 100,000 shares of Series C convertible preferred stock (see Note 5).
In connection with the February 1996 loan agreement, the Company paid a cash
deposit of $668,359 to Venture.
Maturities under this agreement as of pecembgr 31. 1995 and March 31. 1996
are as follows:
[Download Table]
DECEMBER 31,

~CH 31~

1995

1996 •.•......•.•••••••••........••••••••........••••••••.
1997 .................................................... .
1998 •.•......•.•••••••••........••••••••........••••••••.
1999 •.•......•.•••••••••........••••••••........••••••••.

1995

$193,453
280,045
407,551

$ 913,931
1,033,742
1,388,329
67,762

$881,049

During 1994, the Company repaid a $657,151 note payable to a founder
through the issuance of 6,000,000 shares of Series A preferred stock and the
payment of $57,151 in cash.
4. COMMITMENTS
The Company leases its facilities under operating lease agreements which

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