<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1996
REGISTRATION NO. 333-05901
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CONNECT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 7375 77-0431045
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NUMBER)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
CONNECT, INC.
515 ELLIS STREET MOUNTAIN VIEW, CA 94043-2242
(415) 254-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THOMAS P. KEHLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER CONNECT, INC. 515 ELLIS STREET MOUNTAIN
VIEW, CA 94043-2242 (415) 254-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
DONALD M. KELLER, JR. CARLA S. NEWELL
MARK L. SILVERMAN ANTHONY M. ALLEN
EDWARD Y. KIM CRAIG M. SCHMITZ
VENTURE LAW GROUP GUNDERSON DETTMER
A PROFESSIONAL CORPORATION STOUGH VILLENEUVE
2800 SAND HILL ROAD FRANKLIN & HACHIGIAN, LLP
MENLO PARK, CA 94025 600 HANSEN WAY
(415) 854-4488 PALO ALTO, CA 943040
(415) 843-050
----------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
The purpose of this Amendment No. 1 is solely to file certain exhibits to the
Registration Statement, as set forth below in Item 16(a) of Part II.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Form of Agreement and Plan of Merger between the Registrant and
Connect, Inc., a California corporation.
3.1+ Certificate of Incorporation of the Registrant.
3.2+ Bylaws of the Registrant.
3.3+ Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed prior to completion of the offering.
4.1* Form of the Registrant's Common Stock Certificate.
5.1+ Opinion of Venture Law Group, a Professional Corporation.
9.1+ Amended Stockholders Agreement dated December 27, 1995 by and among
the Registrant and certain holders of the Registrant's securities.
10.1+ Form of Indemnification Agreement.
10.2+ 1989 Stock Option Plan, as amended, and form of stock option
agreement.
10.3 1996 Stock Option Plan and form of stock option agreement.
10.4+ 1996 Employee Stock Purchase Plan and form of subscription
agreement.
10.5+ 1996 Directors' Stock Option Plan and form of stock option
agreement.
10.6+ Amended and Restated Registration Rights Agreement dated December
27, 1995 between the Registrant and certain holders of the
Registrant's securities.
10.7+ Lease Agreement dated September 19, 1994 between the Registrant and
BRE Properties, Inc.
10.8+ Master Equipment Lease dated January 19, 1995 between the
Registrant and Phoenix Leasing Incorporated.
10.9D Software License Agreement dated February 5, 1996 between the
Registrant and Entex Information Services Inc.
10.10D Software License Agreement dated March 26, 1996 between the
Registrant and Union Underwear Company, Inc.
10.11D Software License Agreement dated November 7, 1995 between the
Registrant and PhotoDisc, Inc.
10.12D Amendment to Software License Agreement dated March 29, 1996
between the Registrant and PhotoDisc, Inc.
10.13D Software Development and Distribution License Agreement dated
September 16, 1994 between the Registrant and Fulcrum Technologies
Inc. and related Amending Agreement, Amending Agreement No. 2 and
Amending Agreement No. 3.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.14D OEM Master License Agreement dated June 30, 1995 between the
Registrant and RSA Data Security, Inc.
10.15+ Letter Agreement dated May 10, 1995 between the Registrant and
Hambrecht & Quist Incorporated and related mutual release dated
June 6, 1996.
10.16 Option agreement dated January 16, 1996 between the Registrant and
Thomas P. Kehler.
10.17 Option agreement dated January 16, 1996 between the Registrant and
Gordon J. Bridge.
10.18 Option agreement dated April 24, 1996 between the Registrant and
Gordon J. Bridge.
10.19 Letter agreement dated October 19, 1995 between the Registrant and
Gordon J. Bridge, and related interpretive letter.
10.20+ Consulting Agreement dated March 9, 1992 between the Registrant
and Quaestus Limited Partnership.
10.21+ Form of Common Stock Warrant issued to Hambrecht & Quist LLC and
Volpe, Welty & Company on December 27, 1995.
10.22D Business Alliance Program Agreement dated June 11, 1996 between
the Registrant and Oracle Corporation and related Runtime
Sublicense Addendum, and Amendments One and Two to Runtime
Sublicense Addendum.
10.23 Agreement and Mutual Release dated May 24, 1996 between the
Registrant and Henry V. Morgan.
10.24D Development and License Agreement dated March 29, 1996 between the
Registrant and Time Warner Cable.
11.1+ Statement Regarding Computation of Per Share Earnings.
23.1+ Consent of Independent Auditors.
23.2+ Consent of Counsel (included in Exhibit 5.1).
24.1+ Power of Attorney.
27+ Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
+ Previously filed.
D Confidential treatment requested.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE UNDERSIGNED
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT
ON FORM S-1 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF MOUNTAIN VIEW, STATE OF CALIFORNIA, ON JUNE 19,
1996.
CONNECT, INC.
/s/ Thomas P. Kehler
By: __________________________________
THOMAS P. KEHLER, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gordon J. Bridge* Chairman of the June 19, 1996
- ------------------------------------ Board, Director
(GORDON J. BRIDGE)
/s/ Thomas P. Kehler President, Chief
- ------------------------------------ Executive Officer June 19, 1996
(THOMAS P. KEHLER) and Director
(Principal Executive
Officer)
/s/ Joseph G. Girata* Vice President of
- ------------------------------------ Finance and June 19, 1996
(JOSEPH G. GIRATA) Administration and
Secretary (Principal
Financial Officer)
/s/ Promod Haque* Director June 19, 1996
- ------------------------------------
(PROMOD HAQUE)
/s/ Rory T. O'Driscoll* Director June 19, 1996
- ------------------------------------
(RORY T. O'DRISCOLL)
/s/ Richard W. Weening* Director
- ------------------------------------ June 19, 1996
(RICHARD W. WEENING)
/s/ William B. Welty* Director
- ------------------------------------ June 19, 1996
(WILLIAM B. WELTY)
*By: /s/ Thomas P. Kehler
- ------------------------------------
(Attorney-in-fact)
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
2.1 Form of Agreement and Plan of Merger between the
Registrant and Connect, Inc., a California corporation.
3.1+ Certificate of Incorporation of the Registrant.
3.2+ Bylaws of the Registrant.
3.3+ Form of Amended and Restated Certificate of
Incorporation of the Registrant, to be filed prior to
completion of the offering.
4.1* Form of the Registrant's Common Stock Certificate.
5.1+ Opinion of Venture Law Group, a Professional
Corporation.
9.1+ Amended Stockholders Agreement dated December 27, 1995
by and among the Registrant and certain holders of the
Registrant's securities.
10.1+ Form of Indemnification Agreement.
10.2+ 1989 Stock Option Plan, as amended, and form of stock
option agreement.
10.3 1996 Stock Option Plan and form of stock option
agreement.
10.4+ 1996 Employee Stock Purchase Plan and form of
subscription agreement.
10.5+ 1996 Directors' Stock Option Plan and form of stock
option agreement.
10.6+ Amended and Restated Registration Rights Agreement
dated December 27, 1995 between the Registrant and
certain holders of the Registrant's securities.
10.7+ Lease Agreement dated September 19, 1994 between the
Registrant and BRE Properties, Inc.
10.8+ Master Equipment Lease dated January 19, 1995 between
the Registrant and Phoenix Leasing Incorporated.
10.9D Software License Agreement dated February 5, 1996
between the Registrant and Entex Information Services
Inc.
10.10D Software License Agreement dated March 26, 1996 between
the Registrant and Union Underwear Company, Inc.
10.11D Software License Agreement dated November 7, 1995
between the Registrant and PhotoDisc, Inc.
10.12D Amendment to Software License Agreement dated March 29,
1996 between the Registrant and PhotoDisc, Inc.
10.13D Software Development and Distribution License Agreement
dated September 16, 1994 between the Registrant and
Fulcrum Technologies Inc. and related Amending
Agreement, Amending Agreement No. 2 and Amending
Agreement No. 3.
10.14D OEM Master License Agreement dated June 30, 1995
between the Registrant and RSA Data Security, Inc.
10.15+ Letter Agreement dated May 10, 1995 between the
Registrant and Hambrecht & Quist Incorporated and
related mutual release dated June 6, 1996.
10.16 Option agreement dated January 16, 1996 between the
Registrant and Thomas P. Kehler.
10.17 Option agreement dated January 16, 1996 between the
Registrant and Gordon J. Bridge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
------- ------------
<C> <S> <C>
10.18 Option agreement dated April 24, 1996 between the
Registrant and Gordon J. Bridge.
10.19 Letter agreement dated October 19, 1995 between the
Registrant and Gordon J. Bridge, and related
interpretive letter.
10.20+ Consulting Agreement dated March 9, 1992 between the
Registrant and Quaestus Limited Partnership.
10.21+ Form of Common Stock Warrant issued to Hambrecht &
Quist LLC and Volpe, Welty & Company on December 27,
1995.
10.22D Business Alliance Program Agreement dated June 11, 1996
between the Registrant and Oracle Corporation and
related Runtime Sublicense Addendum, and Amendments One
and Two to Runtime Sublicense Addendum.
10.23 Agreement and Mutual Release dated May 24, 1996 between
the Registrant and Henry V. Morgan.
10.24D Development and License Agreement dated March 29, 1996
between the Registrant and Time Warner Cable.
11.1+ Statement Regarding Computation of Per Share Earnings.
23.1+ Consent of Independent Auditors.
23.2+ Consent of Counsel (included in Exhibit 5.1).
24.1+ Power of Attorney.
27+ Financial Data Schedule
</TABLE>
- --------
* To be supplied by amendment.
+ Previously filed
D Confidential treatment requested.
<PAGE>
EXHIBIT 1.1
2,500,000 Shares
CONNECT, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
July __, 1996
LEHMAN BROTHERS INC.
VOLPE, WELTY & COMPANY
UBS SECURITIES LLC
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
CONNECT, INC., a Delaware corporation (the "Company"), proposes to
sell an aggregate of 2,500,000 shares (the "Firm Stock") of the Company's common
stock, par value $.001 per share (the "Common Stock"). In addition, the Company
proposes to grant to the Underwriters named in Schedule 1 hereto (the
"Underwriters") an option to purchase up to an additional 375,000 shares of the
Common Stock on the terms and for the purposes set forth in Section 2 (the
"Option Stock"). The Firm Stock and the Option Stock, if purchased, are
hereinafter collectively called the "Stock." This is to confirm the agreement
concerning the purchase of the Stock from the Company by the Underwriters named
in Schedule 1 hereto (the "Underwriters").
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-1, and amendments thereto,
with respect to the Stock has (i) been prepared by the Company in
conformity with the requirements of the United States Securities Act
of 1933 (the "Securities Act") and the rules and regulations (the
"Rule and Regulations") of the United States Securities and Exchange
Commission (the "Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) become effective under
the Securities Act. Copies of such registration statement and the
amendment thereto have been delivered by the Company to you as the
representatives (the "Representatives") of the Underwriters. As used
in this Agreement, "Effective Time" means the date and the time as of
which such registration statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission;
"Effective Date" means the date of the
<PAGE>
Effective Time; "Preliminary Prospectus" means each prospectus
included in such registration statement, or amendments thereof, before
it became effective under the Securities Act and any prospectus filed
with the Commission by the Company with the consent of the
Representatives pursuant to Rule 424(a) of the Rules and Regulations;
"Registration Statement" means such registration statement, as amended
at the Effective Time, including all information contained in the
final prospectus filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations in accordance with Section 5 hereof and
deemed to be a part of the registration statement as of the Effective
Time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations; and "Prospectus" means such final prospectus, as first
filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus.
(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the
requirements of the Securities Act and the Rules and Regulations and
do not and will not, as of the applicable effective date (as to the
Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that
no representation or warranty is made as to information contained in
or omitted from the Registration Statement or the Prospectus in
reliance upon and in conformity with written information furnished to
the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the conduct of its
business requires such qualification, and has all power and authority
necessary to own or hold its properties and to conduct the business in
which it is engaged; and the Company has no subsidiaries.
(d) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus.
(e) The unissued shares of the Stock to be issued and sold by the
Company to the Underwriters hereunder have been duly and validly
authorized and, when issued and delivered against payment therefor as
provided herein, will
2
<PAGE>
be duly and validly issued, fully paid and non-assessable; and the
Stock will conform to the description thereof contained in the
Prospectus.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated
hereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company is
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties or
assets; and except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state securities laws in connection with the
purchase and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated
hereby.
(h) There are no contracts, agreements or understandings between
the Company and any person granting such person the right (other than
rights that have been waived or satisfied) to require the Company to
file a registration statement under the Securities Act with respect to
any securities of the Company owned or to be owned by such person or
to require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Company under the Securities Act.
(i) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to
Rule 144A under, or Regulations D or S of, the Securities Act, other
than shares issued pursuant to employee benefit plans, qualified stock
options plans or other employee compensation plans or pursuant to the
exercise of outstanding options, rights or warrants.
(j) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included in the Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
3
<PAGE>
contemplated in the Prospectus; and, since such date, there has not
been any change in the capital stock or long-term debt of the Company
or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or
results of operations of the Company, otherwise than as set forth or
contemplated in the Prospectus.
(k) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby,
at the dates and for the periods indicated, and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved.
(l) Ernst & Young LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and
who have delivered the initial letter referred to in Section 7(g)
hereof, are independent public accountants as required by the
Securities Act and the Rules and Regulations.
(m) The Company has good and marketable title in fee simple to
all real property and good and marketable title to all personal
property owned by it, in each case free and clear of all liens,
encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and all real
property and buildings held under lease by the Company are held under
valid, subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company.
(n) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties and as is customary for
companies engaged in similar businesses in similar industries.
(o) The Company owns or possesses adequate rights to use all
material patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations,
copyrights and licenses necessary for the conduct of its business and
has no reason to believe that the conduct of its business will
conflict with, and have not received any notice of any claim of
conflict with, any such rights of others.
(p) There are no legal or governmental proceedings pending to
which the Company is a party or of which any property or assets of the
Company is the subject which, if determined adversely to the Company,
might have a material adverse effect on the consolidated financial
position, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries; and to
4
<PAGE>
the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others.
(q) There are no contracts or other documents that are required
to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations that have not been described in the Prospectus or filed as
exhibits to the Registration Statement or incorporated therein by
reference as permitted by the Rules and Regulations.
(r) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
that is required to be described in the Prospectus that is not so
described.
(s) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, that would cause the loss of
such qualification.
(t) The Company has filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof and
has paid all taxes due thereon, and no tax deficiency has been
determined adversely to the Company that has had (nor does the Company
have any knowledge of any tax deficiency that, if determined adversely
to the Company, might have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company.
(u) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Prospectus, the Company has not (i) issued or granted
any securities, (ii) incurred any liability or obligation, direct or
contingent, other than liabilities and obligations that were incurred
in the ordinary course of business, (iii) entered into any transaction
not in the ordinary course of business or (iv) declared or paid any
dividend on its capital stock.
5
<PAGE>
(v) The Company (i) makes and keeps accurate books and records
and (ii) maintains internal accounting controls that provide
reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing
assets at reasonable intervals.
(w) The Company (i) is not in violation of its charter or by-
laws, (ii) is not in default in any material respect, and no event has
occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term,
covenant or condition contained in any material indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties or assets is subject or (iii) is not in violation in any
material respect of any law, ordinance, governmental rule, regulation
or court decree to which it or its property or assets may be subject
or has failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit necessary to
the ownership of its property or to the conduct of its business.
(x) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes,
medical wastes, hazardous wastes or hazardous substances by the
Company or any of its subsidiaries (or, to the knowledge of the
Company, any of their predecessors in interest) at, upon or from any
of the property now or previously owned or leased by the Company or
its subsidiaries in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or
remedial action which would not have, or could not be reasonably
likely to have, singularly or in the aggregate with all such
violations and remedial actions, a material adverse effect on the
general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries; there
has been no material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to
or caused by the Company or any of its subsidiaries or with respect to
which the Company or any of its subsidiaries have knowledge, except
for any such spill, discharge, leak, emission, injection, escape,
dumping or release which would not have or would not be reasonably
likely to have, singularly or in the aggregate with all such spills,
discharges, leaks, emissions, injections, escapes, dumpings and
releases, a material adverse effect on the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and the terms
"hazardous wastes", "toxic wastes", "hazardous substances" and
"medical wastes" shall have the meanings specified in
6
<PAGE>
any applicable local, state, federal and foreign laws or regulations
with respect to environmental protection.
(y) The Company is not an "investment company" within the meaning
of such term under the Investment Company Act of 1940 and the rules
and regulations of the Commission thereunder.
2. Purchase of the Stock by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 2,500,000 shares of
the Firm Stock, severally and not jointly, to the several Underwriters and each
of the Underwriters, severally and not jointly, agrees to purchase the number of
shares of the Firm Stock set opposite that Underwriter's name in Schedule 1
hereto. The respective purchase obligations of the Underwriters with respect to
the Firm Stock shall be rounded among the Underwriters to avoid fractional
shares, as the Representatives may determine.
In addition, the Company grants to the Underwriters an option to
purchase up to 375,000 shares of Option Stock. Such option is granted solely
for the purpose of covering over-allotments in the sale of Firm Stock and is
exercisable as provided in Section 4 hereof. Shares of Option Stock shall be
purchased severally for the account of the Underwriters in proportion to the
number of shares of Firm Stock set opposite the name of such Underwriters in
Schedule 1 hereto. The respective purchase obligations of each Underwriter with
respect to the Option Stock shall be adjusted by the Representatives so that no
Underwriter shall be obligated to purchase Option Stock other than in 100 share
amounts. The price of both the Firm Stock and any Option Stock shall be $_____
per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein.
3. Offering of Stock by the Underwriters.
Upon authorization by the Representatives of the release of the Firm
Stock, the several Underwriters propose to offer the Firm Stock for sale upon
the terms and conditions set forth in the Prospectus.
It is understood that [_______] shares of the Firm Stock will
initially be reserved by the several Underwriters for offer and sale upon the
terms and conditions set forth in the Prospectus and in accordance with the
rules and regulations of the National Association of Securities Dealers, Inc. to
employees and persons having business relationships with the Company and its
subsidiaries who have heretofore delivered to the Representatives offers or
indications of interest to purchase shares of Firm Stock in form satisfactory to
the Representatives, and that any allocation of such Firm Stock among such
persons will be made in accordance with timely directions received by the
Representatives from the Company; provided, that under no circumstances will the
Representatives or any Underwriter be liable to the Company or to any such
person for any action taken or omitted in good faith in connection with such
offering to
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employees and persons having business relationships with the Company
and its subsidiaries. It is further understood that any shares of such Firm
Stock that are not purchased by such persons will be offered by the Underwriters
to the public upon the terms and conditions set forth in the Prospectus.
4. Delivery of and Payment for the Stock. Delivery of and payment
for the Firm Stock shall be made at the office of Lehman Brothers Inc., at 10:00
A.M., New York City time, on the [fourth] full business day following the date
of this Agreement or at such other date or place as shall be determined by
agreement between the Representatives and the Company. This date and time are
sometimes referred to as the "First Delivery Date." On the First Delivery Date,
the Company shall deliver or cause to be delivered certificates representing the
Firm Stock to the Representatives for the account of each Underwriter against
payment to or upon the order of the Company of the purchase price by certified
or official bank check or checks payable in immediately available funds;
provided, that the amount of such payment shall be reduced by one days' interest
on the amount of gross proceeds at the Underwriters' cost of borrowing such
funds plus any other expenses associated with such payment of immediately
available funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Firm Stock shall
be registered in such names and in such denominations as the Representatives
shall request in writing not less than two full business days prior to the First
Delivery Date. For the purpose of expediting the checking and packaging of the
certificates for the Firm Stock, the Company shall make the certificates
representing the Firm Stock available for inspection by the Representatives in
New York, New York, not later than 2:00 P.M., New York City time, on the
business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representatives, when the shares of Option
Stock are to be delivered; provided, however, that this date and time shall not
be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the
fifth business day after the date on which the option shall have been exercised.
The date and time the shares of Option Stock are delivered are sometimes
referred to as the "Second Delivery Date" and the First Delivery Date and the
Second Delivery Date are sometimes each referred to as a "Delivery Date".
Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by certified or official bank
check or checks payable in immediately available funds; provided, that the
amount of such payment shall be reduced by one
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days' interest on the amount of gross proceeds at the Underwriters' cost of
borrowing such funds plus any other expenses associated with such payment of
immediately available funds. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligation of each Underwriter hereunder. Upon delivery, the Option Stock
shall be registered in such names and in such denominations as the
Representatives shall request in the aforesaid written notice. For the purpose
of expediting the checking and packaging of the certificates for the Option
Stock, the Company shall make the certificates representing the Option Stock
available for inspection by the Representatives in New York, New York, not later
than 2:00 P.M., New York City time, on the business day prior to the Second
Delivery Date.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than Commission's close of business
on the second business day following the execution and delivery of
this Agreement or, if applicable, such earlier time as may be required
by Rule 430A(a)(3) under the Securities Act; to make no further
amendment or any supplement to the Registration Statement or to the
Prospectus except as permitted herein; to advise the Representatives,
promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with
copies thereof; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Stock for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its
withdrawal;
(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration
Statement as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith;
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request:
(i) conformed copies of the Registration Statement as originally filed
with the Commission and each amendment thereto (in each case excluding
exhibits other than this Agreement and the computation of per share
earnings) and (ii) each Preliminary Prospectus, the Prospectus and any
amended or supplemented Prospectus; and, if the delivery of a
prospectus is required at any time after the
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Effective Time in connection with the offering or sale of the Stock or
any other securities relating thereto and if at such time any events
shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary to amend
or supplement the Prospectus in order to comply with the Securities
Act, to notify the Representatives and, upon their request, to prepare
and furnish without charge to each Underwriter and to any dealer in
securities as many copies as the Representatives may from time to time
reasonably request of an amended or supplemented Prospectus which will
correct such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the
Representatives, be required by the Securities Act or requested by the
Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any
Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Representatives and counsel for the
Underwriters and obtain the consent of the Representatives to the
filing;
(f) As soon as practicable after the Effective Date (it being
understood that the Company shall have until at least 410 days after
the end of the Company's current fiscal quarter), to make generally
available to the Company's security holders and to deliver to the
Representatives an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Securities Act and the Rules and Regulations (including, at the
option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by
the Company to its shareholders and all public reports and all reports
and financial statements furnished by the Company to the principal
national securities exchange upon which the Common Stock may be listed
pursuant to requirements of or agreements with such exchange or to the
Commission pursuant to the Exchange Act or any rule or regulation of
the Commission thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Stock;
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<PAGE>
(i) For a period of 180 days from the date of the Prospectus, not
to, directly or indirectly, offer for sale, sell or otherwise dispose
of (or enter into any transaction or device that is designed to, or
could be expected to, result in the disposition by any person at any
time in the future of) any shares of Common Stock (other than the
Stock and shares issued pursuant to employee benefit plans, qualified
stock option plans or other employee compensation plans existing on
the date hereof or pursuant to currently outstanding options, warrants
or rights), or sell or grant options, rights or warrants with respect
to any shares of Common Stock (other than the grant of options
pursuant to option plans existing on the date hereof), without the
prior written consent of Lehman Brothers Inc.; and to cause each
officer and director of the Company to furnish to the Representatives,
prior to the First Delivery Date, a letter or letters, in form and
substance satisfactory to counsel for the Underwriters, pursuant to
which each such person shall agree not to, directly or indirectly,
offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to,
result in the disposition by any person at any time in the future of)
any shares of Common Stock for a period of 180 days from the date of
the Prospectus, without the prior written consent of Lehman Brothers
Inc.;
(j) Prior to the Effective Date, to apply for the listing of the
Stock on the Nasdaq National Market System and to use its best efforts
to complete that listing, subject only to official notice of issuance,
prior to the First Delivery Date;
(k) Prior to filing with the Commission any reports on Form SR
pursuant to Rule 463 of the Rules and Regulations, to furnish a copy
thereof to the counsel for the Underwriters and receive and consider
its comments thereon, and to deliver promptly to the Representatives a
signed copy of each report on Form SR filed by it with the Commission;
and
(l) To apply the net proceeds from the sale of the Stock being
sold by the Company as set forth in the Prospectus.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of producing and distributing this Agreement and
any other related documents in connection with the offering, purchase, sale and
delivery of the Stock; (e) the filing fees incident to securing any required
review by the National Association of Securities Dealers, Inc. of the terms of
sale of the Stock; (f) any applicable listing or other fees; (g) the fees and
expenses of qualifying the Stock under the securities laws of the several
jurisdictions as provided in Section 5(h) and of preparing, printing and
distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Underwriters); (h) all fees and expenses of an
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<PAGE>
independent underwriter; (i) all costs and expenses of the Underwriters,
including the fees and disbursements of counsel for the Underwriters, incident
to the offer and sale of shares of the Stock by the Underwriters to employees
and persons having business relationships with the Company and its subsidiaries,
as described in Section 3; and (j) all other costs and expenses incident to the
performance of the obligations of the Company under this Agreement; provided
that, except as provided in this Section 6 and in Section 11 the Underwriters
shall pay their own costs and expenses, including the costs and expenses of
their counsel, any transfer taxes on the Stock that they may sell and the
expenses of advertising any offering of the Stock made by the Underwriters.
7. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 5; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied
with.
(b) No Underwriter shall have discovered and disclosed to the
Company on or prior to such Delivery Date that the Registration
Statement or the Prospectus or any amendment or supplement thereto
contains an untrue statement of a fact which, in the opinion of
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel
for the Underwriters, is material or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Stock, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory in all material respects to counsel
for the Underwriters, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request
to enable them to pass upon such matters.
(d) Venture Law Group shall have furnished to the Representatives
its written opinion, as counsel to the Company, addressed to the
Underwriters and dated such Delivery Date, in form and substance
reasonably satisfactory to the Representatives, to the effect that:
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<PAGE>
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the conduct of its
business requires such qualification and has all power and authority
necessary to own or hold its properties and to conduct the business in
which it is engaged; and the Company has no subsidiaries;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company (including the shares of Stock being delivered on such
Delivery Date) have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof
contained in the Prospectus;
(iii) There are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or transfer
of, any shares of the Stock pursuant to the Company's charter or by-
laws or any agreement or other instrument known to such counsel;
(iv) All real property and buildings held under lease by the
Company are held under valid, subsisting and enforceable leases, with
such exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the
Company;
(v) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property or assets of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, might have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(vi) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such opinion,
the Prospectus was filed with the Commission pursuant to the
subparagraph of Rule 424(b) of the Rules and Regulations specified in
such opinion on the date specified therein and no stop order
suspending the effectiveness of the Registration Statement has been
issued and, to the knowledge of such counsel, no proceeding for that
purpose is pending or threatened by the Commission;
(vii) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to
such Delivery Date (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
comply as to form in all material
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<PAGE>
respects with the requirements of the Securities Act and the Rules and
Regulations;
(viii) To the best of such counsel's knowledge, there are
no contracts or other documents that are required to be described in
the Prospectus or filed as exhibits to the Registration Statement by
the Securities Act or by the Rules and Regulations that have not been
described or filed as exhibits to the Registration Statement or
incorporated therein by reference as permitted by the Rules and
Regulations;
(ix) This Agreement has been duly authorized, executed and
delivered by the Company; and constitutes a valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) or an implied covenant of good faith and fair dealing;
(x) The issue and sale of the shares of Stock being
delivered on such Delivery Date by the Company and the compliance by
the Company with all of the provisions of this Agreement and the
consummation of the transactions contemplated hereby will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known
to such counsel to which the Company is a party or by which the
Company is bound or to which any of the property or assets of the
Company is subject, nor will such actions result in any violation of
the provisions of the charter or by-laws of the Company or any statute
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or
any of their properties or assets; and, except for the registration of
the Stock under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Stock by the
Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby; and
(xi) To the best of such counsel's knowledge, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right (other than rights which have
been waived or satisfied) to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities
14
<PAGE>
being registered pursuant to any other registration statement filed by
the Company under the Securities Act.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by the Federal laws of the
United States of America, the laws of the State of California and the
General Corporation Law of the State of Delaware. Such counsel shall
also have furnished to the Representatives a written statement,
addressed to the Underwriters and dated such Delivery Date, in form
and substance satisfactory to the Representatives, to the effect that
no facts have come to the attention of such counsel which lead it to
believe that the Registration Statement, as of the Effective Date,
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to
make the statements therein not misleading, or that the Prospectus
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading when they were filed with the
Commission contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus
except for the statements made in the Prospectus under the captions
"Description of Capital Stock," "Management," "Certain Transactions"
and "Shares Eligible for Future Sale," insofar as such statements
relate to the Stock and concern legal matters.
(e) Townsend and Townsend and Crew, LLP, patent counsel for the
Company, shall have furnished to the Representatives its written
opinion, addressed to the Underwriters and dated the First Delivery
Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that such counsel is familiar with the
technology used by the Company in its business and the manner of its
use thereof and has read the Registration Statement and the
Prospectus, including particularly the portions of the Registration
Statement and the Prospectus referring to patents, trade secrets,
trademarks, and service marks, and:
(i) The statements in the Registration Statement and the
Prospectus under the captions "Risk Factors-Dependence on Certain
Licenses," "Risk Factors-Dependence on Proprietary Rights; Risks of
Infringement," and "Business--Proprietary Rights," to the best of such
counsel's knowledge, are accurate and complete statements or summaries
of the matters therein set forth and nothing has come to such
counsel's attention that causes such counsel to believe that the
above-described portions of the Registration Statement and the
Prospectus contain any untrue statement of a material fact or omit to
state a material fact
15
<PAGE>
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
(ii) to the best of such counsel's knowledge and except as
set forth in the Prospectus under the captions "Risk Factors-
Dependence on Certain Licenses," "Risk Factors-Dependence on
Proprietary Rights; Risks of Infringement," and "Business--Proprietary
Rights," there are no legal or governmental proceedings pending
relating to patent rights, trade secrets, trademarks, service marks or
other proprietary information or materials of the Company, and to the
best of such counsel's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or others;
(iii) such counsel does not know of any contracts or other
documents relating to the Company's patents, trade secrets,
trademarks, or service marks of a character required to be filed as an
exhibit to the Registration Statement or required to be described in
the Registration Statement or the Prospectus that are not filed or
described as required; and
(iv) except as set forth in the Prospectus, to the best of
such counsel's knowledge, the Company is not infringing or otherwise
violating any patents, trade secrets, trademarks, or service marks of
others, and, to the best of such counsel's knowledge, there are no
infringements by others of any of the Company's patents, trade
secrets, trademarks, or service marks, which in the judgment of such
counsel could affect materially the use thereof by the Company.
(f) The Representatives shall have received from Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel for the
Underwriters, such opinion or opinions, dated such Delivery Date, with
respect to the issuance and sale of the Stock, the Registration
Statement, the Prospectus and other related matters as the
Representatives may reasonably require, and the Company shall have
furnished to such counsel such documents as they reasonably request
for the purpose of enabling them to pass upon such matters.
(g) At the time of execution of this Agreement, the
Representatives shall have received from Ernst & Young, LLP a letter,
in form and substance satisfactory to the Representatives, addressed
to the Underwriters and dated the date hereof (i) confirming that they
are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date hereof
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Prospectus, as of a date not more than five days prior to
the date hereof), the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings.
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(h) With respect to the letter of Ernst & Young, LLP referred to
in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial
letter"), the Company shall have furnished to the Representatives a
letter (the "bring-down letter") of such accountants, addressed to the
Underwriters and dated such Delivery Date (i) confirming that they are
independent public accountants within the meaning of the Securities
Act and are in compliance with the applicable requirements relating to
the qualification of accountants under Rule 2-01 of Regulation S-X of
the Commission, (ii) stating, as of the date of the bring-down letter
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Prospectus, as of a date not more than five days prior to
the date of the bring-down letter), the conclusions and findings of
such firm with respect to the financial information and other matters
covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.
(i) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its Chairman of the Board,
its President or a Vice President and its chief financial officer
stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery Date;
the Company has complied with all its agreements contained herein; and
the conditions set forth in Section 7(a) have been fulfilled; and
(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion (A) as of the Effective Date,
the Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statement or the Prospectus.
(j) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus or (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus, the effect of which, in any
such case described in clause (i) or (ii), is, in the judgment of the
Representatives, so material and adverse as to make it impracticable
or inadvisable to proceed with the
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<PAGE>
public offering or the delivery of the Stock being delivered on such
Delivery Date on the terms and in the manner contemplated in the
Prospectus.
(k) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter
market, shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of a
majority in interest of the several Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of the
Stock being delivered on such Delivery Date on the terms and in the
manner contemplated in the Prospectus.
(l) The Nasdaq National Market System shall have approved the
Stock for listing, subject only to official notice of issuance and
evidence of satisfactory distribution.
All opinions, letters, evidence and certificates mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance
with the provisions hereof only if they are in form and substance
reasonably satisfactory to counsel for the Underwriters.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
Underwriter (including any Underwriter in its role as qualified
independent underwriter pursuant to the rules of the National
Association of Securities Dealers, Inc.), its officers and employees
and each person, if any, who controls any Underwriter within the
meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of Stock), to
which that Underwriter, officer, employee or controlling person may
become subject, under the Securities Act or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or
supplement thereto or (B) in any blue sky application or other
18
<PAGE>
document prepared or executed by the Company (or based upon any
written information furnished by the Company) specifically for the
purpose of qualifying any or all of the Stock under the securities
laws of any state or other jurisdiction (any such application,
document or information being hereinafter called a "Blue Sky
Application"), (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement or the Prospectus,
or in any amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein or
necessary to make the statements therein not misleading or (iii) any
act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the
Stock or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon matters covered by clause (i) or (ii)
above (provided that the Company shall not be liable under this clause
(iii) to the extent that it is determined in a final judgment by a
court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures
to act undertaken or omitted to be taken by such Underwriter through
its gross negligence or willful misconduct), and shall reimburse each
Underwriter and each such officer, employee or controlling person
promptly upon demand for any legal or other expenses reasonably
incurred by that Underwriter, officer, employee or controlling person
in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any such amendment or supplement,
or in any Blue Sky Application, in reliance upon and in conformity
with written information concerning such Underwriter furnished to the
Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein. The foregoing indemnity agreement
is in addition to any liability which the Company may otherwise have
to any Underwriter or to any officer, employee or controlling person
of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify
and hold harmless the Company, its officers and employees, each of its
directors, and each person, if any, who controls the Company within
the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect
thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or (B) in any Blue Sky Application or
(ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any
19
<PAGE>
amendment or supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with
written information concerning such Underwriter furnished to the
Company through the Representatives by or on behalf of that
Underwriter specifically for inclusion therein, and shall reimburse
the Company and any such director, officer or controlling person for
any legal or other expenses reasonably incurred by the Company or any
such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to the Company or
any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for
any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the Representatives
shall have the right to employ counsel to represent jointly the
Representatives and those other Underwriters and their respective
officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may
be sought by the Underwriters against the Company under this Section 8
if, in the reasonable judgment of the Representatives, it is advisable
for the Representatives and those Underwriters, officers, employees
and controlling persons to be jointly represented by separate counsel,
and in that event the fees and expenses of such separate counsel shall
be paid by the Company. No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent shall
not be unreasonably withheld), settle or compromise or consent to the
entry of any judgment with
20
<PAGE>
respect to any pending or threatened claim, action, suit or proceeding
in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim,
action, suit or proceeding, or (ii) be liable for any settlement of
any such action effected without its written consent (which consent
shall not be unreasonably withheld), but if settled with the consent
of the indemnifying party or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the
other from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and the Underwriters on the other with
respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the
other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Stock
purchased under this Agreement (before deducting expenses) received by
the Company, on the one hand, and the total underwriting discounts and
commissions received by the Underwriters with respect to the shares of
the Stock purchased under this Agreement, on the other hand, bear to
the total gross proceeds from the offering of the shares of the Stock
under this Agreement, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined
by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters,
the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this Section 8 were to
be determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result
21
<PAGE>
of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8 shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 8(d), no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Stock underwritten by it and distributed to the public was offered to
the public exceeds the amount of any damages which such Underwriter
has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
8(d) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this Section
8(d) are several in proportion to their respective underwriting
obligations and not joint.
(e) The Underwriters severally confirm and the Company
acknowledges that the statements with respect to the public offering
of the Stock by the Underwriters set forth on the cover page of, the
legend concerning over-allotments on the inside front cover page of
and the concession and reallowance figures appearing under the caption
"Underwriting" in, the Prospectus are correct and constitute the only
information concerning such Underwriters furnished in writing to the
Company by or on behalf of the Underwriters specifically for inclusion
in the Registration Statement and the Prospectus.
9. Defaulting Underwriters.
If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining non-
defaulting Underwriters shall be obligated to purchase the Stock that the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions which the number of shares of the Firm Stock set
opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Stock on such Delivery Date if the total number
of shares of the Stock that the defaulting Underwriter or Underwriters agreed
but failed to purchase on such date exceeds 9.09% of the total number of shares
of the Stock to be purchased on such Delivery Date, and any remaining non-
defaulting Underwriter shall not be obligated to purchase more than 110% of the
number of shares of the Stock which it agreed to purchase on such Delivery Date
pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the
remaining non-defaulting Underwriters, or those other underwriters satisfactory
to the Representatives who so agree, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them, all
the Stock to be purchased on such Delivery Date. If the remaining Underwriters
or other underwriters satisfactory to the Representatives do not elect to
purchase the shares that the defaulting Underwriter or Underwriters agreed but
failed to purchase on such Delivery Date, this Agreement (or, with
22
<PAGE>
respect to the Second Delivery Date, the obligation of the Underwriters to
purchase, and of the Company to sell, the Option Stock) shall terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
that the Company will continue to be liable for the payment of expenses to the
extent set forth in Sections 6 and 11. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to
this Section 9, purchases Firm Stock which a defaulting Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Stock of a defaulting
or withdrawing Underwriter, either the Representatives or the Company may
postpone the Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
10. Termination. The obligations of the Underwriters hereunder may
be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 7(k) or 7(l), shall have occurred
or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the Company
shall fail to tender the Stock for delivery to the Underwriters by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled, the Company will reimburse the Underwriters for all reasonable
out-of-pocket expenses (including fees and disbursements of counsel) incurred by
the Underwriters in connection with this Agreement and the proposed purchase of
the Stock, and upon demand the Company shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 9 by
reason of the default of one or more Underwriters, be obligated to reimburse any
defaulting Underwriter on account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-526-6588), with a copy, in the case of any notice
pursuant to Section 8(c), to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., 3 World Financial Center, 10th
Floor, New York, NY 10285;
(b) if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to the address of the Company set forth in
the Registration Statement, Attention: Thomas Kehler (Fax: 415-254-
4800);
23
<PAGE>
provided, however, that any notice to an Underwriter pursuant to
Section 8(c) shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its
acceptance telex to the Representatives, which address will be
supplied to any other party hereto by the Representatives upon
request. Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. The Company shall be
entitled to act and rely upon any request, consent, notice or
agreement given or made on behalf of the Underwriters by Lehman
Brothers Inc.
13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company, and
their respective successors. This Agreement and the terms and provisions hereof
are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control any Underwriter within the meaning of Section 15 of
the Securities Act and (B) the indemnity agreement of the Underwriters contained
in Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors of the Company, officers of the Company who have signed the
Registration Statement and any person controlling the Company within the meaning
of Section 15 of the Securities Act. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 13, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
14. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Stock and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.
15. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of New York.
17. Consent to Jurisdiction. Each party irrevocably agrees that any
legal suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated hereby ("Related Proceedings") may be instituted
in the federal courts of the United States of America located in the City of New
York or the courts of the State of New York in each case located in the Borough
of Manhattan in the City of New York (collectively, the "Specified Courts"), and
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. The parties further agree that
service of any process, summons, notice or document by mail to such
24
<PAGE>
party's address set forth above shall be effective service of process for any
lawsuit, action or other proceeding brought in any such court. The parties
hereby irrevocably and unconditionally waive any objection to the laying of
venue of any lawsuit, action or other proceeding in the Specified Courts, and
hereby further irrevocably and unconditionally waive and agree not to plead or
claim in any such court that any such lawsuit, action or other proceeding
brought in any such court has been brought in an inconvenient forum.
18. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
19. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the
Company and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
CONNECT, INC.
By:_____________________________________
Thomas P. Kehler
President and Chief Executive Officer
Accepted:
LEHMAN BROTHERS INC.
By:_____________________________________
Authorized Representative
For itself and as Representative of the several
Underwriters named in Schedule 1 hereto
25
<PAGE>
SCHEDULE 1
<TABLE>
<S> <C>
Underwriters Number of Shares
- ------------ ----------------
Lehman Brothers Inc................. __________
Volpe, Welty & Company.............. __________
UBS Securities LLC.................. __________
Total............................. __________
</TABLE>
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
OF CONNECT, INC.,
A DELAWARE CORPORATION,
AND
CONNECT, INC.,
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of ___________________ _____,
1996 (the "Agreement"') is between Connect, Inc., a California corporation
("Connect California"'), and Connect, Inc., a Delaware corporation and a wholly-
owned subsidiary of Connect California ("Connect Delaware"). Connect Delaware
and Connect California are sometimes referred to herein as the "Constituent
Corporations."
RECITALS
A. Connect Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 101,280,996
shares, $0.001 par value, 50,000,000 of which are designated "Common Stock," and
51,280,996 of which are designated "Preferred Stock." Of such authorized shares
of Preferred Stock, 2,240,130 shares are designated "Series C Preferred Stock,"
2,921,266 shares are designated "Series D Preferred Stock," 1,757,144 shares are
designated "Series E Preferred Stock," 22,181,228 shares are designated "Series
F Preferred Stock" and 22,181,228 shares are designated "Series F-a Preferred
Stock." As of________________ _____, 1996, 100 shares of Connect Delaware
Common Stock were issued and outstanding, all of which are held by Connect
California, and no shares of Preferred Stock were issued and outstanding.
B. Connect California is a corporation duly organized and existing under
the laws of the State of California and has an authorized capital of 105,544,540
shares, 50,000,000 of which are designated "'Common Stock," and 55,544,540 of
which are designated "Preferred Stock." Of such authorized shares of Preferred
Stock, 2,240,130 shares are designated "Series C Preferred Stock," 2,921,266
shares are designated "Series D Preferred Stock," 1,757,144 shares are
designated "Series E Preferred Stock," 24,313,000 shares are designated Series F
Preferred Stock and 24,313,000 shares are designated Series F-a Preferred Stock.
C. The Board of Directors of Connect California has determined that, for
the purpose of effecting the reincorporation of Connect California in the State
of Delaware, it is advisable and in the best interests of Connect California and
its shareholders that Connect California merge with and into Connect Delaware
upon the terms and conditions herein provided.
D. The respective Boards of Directors of Connect Delaware and Connect
California, the shareholders of Connect California and the sole shareholder of
Connect Delaware have approved this Agreement and have directed that this
Agreement be executed by the undersigned officers.
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Connect Delaware and Connect California hereby agree, subject to
the terms and conditions hereinafter set forth, as follows:
I.
MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
------
Delaware General Corporation Law and the California General Corporation Law,
Connect California shall be merged with and into Connect Delaware (the
"Merger"), the separate existence of Connect California shall cease and Connect
Delaware shall be, and is herein sometimes referred to as, the "Surviving
Corporation," and the name of the Surviving Corporation shall be Connect, Inc.
1.2 Filing and Effectiveness. The Merger shall become effective when the
------------------------
following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved
by the shareholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California General
Corporation Law;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed counterpart of
this Agreement meeting the requirements of the Delaware General Corporation Law
shall have been filed with the Secretary of State of the State of Delaware; and
(d) An executed Certificate of Merger or an executed counterpart of
this Agreement meeting the requirements of the California General Corporation
Law shall have been filed with the Secretary of State of the State of
California.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
--------------------
separate existence of Connect California shall cease and Connect Delaware, as
the Surviving Corporation, (a) shall continue to possess all of its assets,
rights, powers and property as constituted immediately prior to the Effective
Date of the Merger, (b) shall be subject to all actions previously taken by its
and Connect California's Boards of Directors, (c) shall succeed, without other
transfer, to all of the assets, rights, powers and property of Connect
California in the manner as more fully set forth in Section 259 of the Delaware
General Corporation Law, (d) shall continue to be subject to all of its debts,
liabilities and obligations as constituted immediately prior to the Effective
Date of the Merger, and (e) shall succeed, without other transfer, to all of the
debts, liabilities and obligations of Connect California in the same manner as
if Connect Delaware had
-2-
<PAGE>
itself incurred them, all as more fully provided under the applicable provisions
of the Delaware General Corporation Law and the California General Corporation
Law.
II.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
----------------------------
Connect Delaware shall be the Certificate of Incorporation of the Surviving
Corporation until duly amended in accordance with the provisions thereof and
applicable law.
2.2 Bylaws. The Bylaws of Connect Delaware as in effect immediately prior
------
to the Effective Date of the Merger shall continue in full force and effect as
the Bylaws of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of Connect
----------------------
Delaware immediately prior to the Effective Date of the Merger shall be the
directors and officers of the Surviving Corporation until their successors shall
have been duly elected and qualified or until as otherwise provided by law, the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
III.
MANNER OF CONVERSION OF STOCK
3.1 Connect California Common Stock. Upon the Effective Date of the
-------------------------------
Merger, each share of Connect California Common Stock issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by the Constituent Corporations, the holder of such share or any other person,
be converted into and exchanged for one fully paid and nonassessable share of
Common Stock, $0.001 par value, of the Surviving Corporation.
3.2 Connect California Preferred Stock. Upon the Effective Date of the
----------------------------------
Merger, each of Connect California Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Series F Preferred Stock and Series F-a Preferred
Stock issued and outstanding immediately prior thereto shall, by virtue of the
Merger and without any action by the Constituent Corporations, the holder of
such shares or any other person, be converted into and exchanged for one fully
paid and nonassessable share of Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock and Series F-a
Preferred Stock of the Surviving Corporation, $0.001 par value, respectively,
having such rights, preferences and privileges as set forth in the Certification
of Incorporation of the Surviving Corporation, which shares of Preferred Stock
shall be convertible into shares of the Surviving Corporation's Common Stock,
$.001 par value, on a one-for-one basis, subject to adjustment pursuant to the
terms of the Certificate of Incorporation of the Surviving Corporation.
3.3 Connect California Options, Stock Purchase Rights, Convertible
--------------------------------------------------------------
Securities and Warrants. Upon the Effective Date of the Merger, the Surviving
- -----------------------
Corporation shall assume the obligations of Connect California under Connect
California's 1989 Stock Option Plan, 1996 Stock
-3-
<PAGE>
Option Plan and all other employee benefit plans of Connect California,
including outstanding stock options of Connect California (including options
outstanding under Connect California's 1989 Stock Option Plan and 1996 Stock
Option Plan). Each outstanding and unexercised option, other right to purchase
or security convertible into Connect California Common Stock or Preferred Stock
or warrant to purchase Connect California Common Stock or Preferred Stock shall
become an option, right to purchase, security convertible into or warrant to
purchase the Surviving Corporation's Common Stock or Preferred Stock,
respectively, on the basis of one share of the Surviving Corporation's Common
Stock or Preferred Stock, for each one share of Connect California Common Stock
or Preferred Stock, respectively, issuable pursuant to any such option, stock
purchase right, convertible security or warrant, on the same terms and
conditions and at an exercise price per share equal to the exercise price
applicable to any such Connect California option, stock purchase right, other
convertible security or warrant at the Effective Date of the Merger.
A number of shares of the Surviving Corporation's Common Stock and
Preferred Stock shall be reserved for issuance upon the exercise of options,
stock purchase rights, convertible securities and warrants (including Preferred
Stock) on the basis of one share of Connect Delaware Common Stock and Preferred
Stock for each share of Connect California Common Stock and Preferred Stock so
reserved immediately prior to the Effective Date of the Merger.
3.4 Connect Delaware Common Stock. Upon the Effective Date of the Merger,
-----------------------------
each share of Common Stock, $0.001 par value, of Connect Delaware issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by Connect Delaware, the holder of such shares or any other person,
be canceled and returned to the status of authorized but unissued shares.
3.5 Exchange of Certificates. After the Effective Date of the Merger,
------------------------
each holder of an outstanding certificate representing shares of Connect
California Common Stock or Preferred Stock may, at such stockholder's option,
surrender the same for cancellation to the transfer agent and registrar for the
Common Stock of the Surviving Corporation, as exchange agent (the "Exchange
Agent"), and each such holder shall be entitled to receive in exchange therefor
a certificate or certificates representing the number of shares of the
appropriate class and series of the Surviving Corporation's capital stock into
which the surrendered shares were converted as herein provided. Until so
surrendered, each outstanding certificate theretofore representing shares of
Connect California capital stock shall be deemed for all purposes to represent
the number of whole shares of the appropriate class and series of the Surviving
Corporation's capital stock into which such shares of Connect California capital
stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or the Exchange Agent, have and be
entitled to exercise any voting and other rights with respect to and to receive
dividends and other distributions upon the shares of capital stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
-4-
<PAGE>
Each certificate representing capital stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Connect California so
converted and given in exchange therefor, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
If any certificate for shares of Connect Delaware stock is to be issued in
a name other than that in which the certificate surrendered in exchange therefor
is registered, it shall be a condition of issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay to the Exchange Agent any transfer or other taxes payable by
reason of the issuance of such new certificate in a name other than that of the
registered holder of the certificate surrendered or establish to the
satisfaction of Connect Delaware that such tax has been paid or is not payable.
IV.
GENERAL
4.1 Covenants of Connect Delaware. Connect Delaware covenants and agrees
-----------------------------
that it will, on or before the Effective Date of the Merger:
(a) File any and all documents with the California Franchise Tax Board
necessary for the assumption by Connect Delaware of all of the franchise tax
liabilities of Connect California; and
(b) Take such other actions as may be required by the California
General Corporation Law.
4.2 Further Assurances. From time to time, as and when required by
------------------
Connect Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Connect California such deeds and other instruments, and
there shall be taken or caused to be taken by Connect Delaware and Connect
California such further and other actions as shall be appropriate or necessary
in order to vest or perfect in or conform of record or otherwise by Connect
Delaware the title to and possession of all the property, interests, assets,
rights, privileges, immunities, powers, franchises and authority of Connect
California and otherwise to carry out the purposes of this Agreement, and the
officers and directors of Connect Delaware are fully authorized in the name and
on behalf of Connect California or otherwise to take any and all such action and
to execute and deliver any and all such deeds and other instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger,
-----------
this Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Connect California or Connect
Delaware, or both, notwithstanding the approval of this Agreement by the
shareholders of Connect California or by the sole shareholder of Connect
Delaware, or by both.
-5-
<PAGE>
4.4 Amendment. The Boards of Directors of the Constituent Corporations
---------
may amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretaries of State of the States of
California and Delaware, provided that an amendment made subsequent to the
adoption of this Agreement by the shareholders of either Constituent Corporation
shall not: (a) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such Constituent
Corporation, (b) alter or change any term of the Certificate of Incorporation of
the Surviving Corporation to be effected by the Merger, or (c) alter or change
any of the terms and conditions of this Agreement if such alteration or change
would adversely affect the holders of any class of shares or series of capital
stock of such Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving Corporation
-----------------
in the State of Delaware is located at The Prentice-Hall Corporation System,
Inc., 1013 Centre Road, in the City of Wilmington, Delaware 19801, County of New
Castle, and The Prentice-Hall Corporation System is the registered agent of the
Surviving Corporation at such address.
4.6 FIRPTA Notification.
-------------------
(a) On or before the Effective Date of the Merger, Connect California
shall deliver to Connect Delaware, as agent for the shareholders of Connect
California, a properly executed statement in such form as reasonably requested
by counsel for Connect California and conforming to the requirements of Treasury
Regulation Section 1.897-2(h)(1)(i) (the "Statement"). Connect Delaware shall,
upon request, provide a copy thereof to any person that was a shareholder of
Connect California immediately prior to the Merger. In consequence of the
approval of the Merger by the shareholders of Connect California, as provided in
Recital D hereof, (i) such shareholders shall be considered to have requested
that the Statement be delivered to Connect Delaware as their agent and (ii)
Connect Delaware shall be considered to have received a copy of the Statement at
the request of the Connect California shareholders for purposes of satisfying
Connect Delaware's obligations under Treasury Regulation Section 1.1445-2(c)(3).
(b) Connect California shall deliver to the Internal Revenue Service a
notice regarding the Statement in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2).
4.7 Expenses. Each party to the transactions contemplated by this
--------
Agreement (including, without limitation, Connect California, Connect Delaware
and their respective shareholders) shall pay its own expenses, if any, incurred
in connection with such transactions.
4.8 Tax Opinion a Condition Precedent. The Merger shall not be
---------------------------------
consummated unless, on or prior to the Effective Date of the Merger, Connect
California receives from Venture Law Group, A Professional Corporation ("VLG"),
a written opinion that the Merger will qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Such opinion shall be contingent on receipt by VLG of (a) certain
representations from Connect California and Connect Delaware requested by VLG
and (b) delivery by Connect
-6-
<PAGE>
California's shareholders as shall be designated by VLG of "Shareholder
Continuity of Interest Certificates" in such form as requested by VLG.
4.9 Agreement. Executed copies of this Agreement will be on file at the
---------
principal place of business of the Surviving Corporation at 515 Ellis Street,
Mountain View, California 94043 and copies thereof will be furnished to any
shareholder of either Constituent Corporation, upon request and without cost.
4.10 Governing Law. This Agreement shall in all respects be construed,
-------------
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.11 Counterparts. In order to facilitate the filing and recording of
------------
this Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolutions of the Boards of Directors of Connect Delaware and Connect
California, is hereby executed on behalf of each of such two corporations and
attested by their respective officers thereunto duly authorized.
CONNECT, INC.
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
ATTEST:
____________________________________
Joseph G. Girata, Secretary
CONNECT, INC.
a California corporation
By:______________________________
Name:____________________________
Title:_____________________________
ATTEST:
Joseph G. Girata, Secretary
-8-
<PAGE>
CONNECT, INC.
(California Corporation)
OFFICERS' CERTIFICATE
Thomas P. Kehler and Joseph G. Girata certify that:
1. They are the President and Chief Executive Officer and the Secretary,
respectively, of Connect, Inc., a corporation organized under the laws of the
State of California.
2. The corporation has authorized two classes of stock, designated "Common
Stock" and "Preferred Stock." Five series of Preferred Stock have been
authorized, designated "Series C Preferred," "Series D Preferred," "Series E
Preferred Stock," "Series F Preferred Stock" and "Series F-a Preferred Stock."
3. There were _____________ shares of Common Stock, 2,240,130 shares of
Series C Preferred Stock, 2,921,266 shares of Series D Preferred Stock,
1,757,144 shares of Series E Preferred Stock, 24,313,000 shares of Series F
Preferred Stock and 24,313,000 shares of Series F-a Preferred Stock, outstanding
as of the record date (the "Record Date") of the shareholders' meeting at which
the Agreement and Plan of Merger attached hereto (the "Merger Agreement") was
approved.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class and series of
stock which equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the votes entitled to
be cast by holders of Common Stock and Preferred Stock outstanding as of the
Record Date, voting together as a single class.
Thomas P. Kehler and Joseph G. Girata further declare under penalty of
perjury under the laws of the State of California that each has read the
foregoing certificate and knows the contents thereof and that the same is true
of their own knowledge.
Executed in Mountain View, California on ___________________________ ,
1996.
--------------------------------------
Thomas P. Kehler, President and
Chief Executive Officer
--------------------------------------
Joseph G. Girata, Secretary
<PAGE>
CONNECT, INC.
(Surviving Corporation)
OFFICERS' CERTIFICATE
1. They are the President and Chief Executive Officer and the Secretary,
respectively, of Connect, Inc., a corporation organized under the laws of the
State of Delaware.
2. The corporation has authorized two classes of stock, designated
"Common Stock" and "Preferred Stock."
3. There are 100 shares of Common Stock outstanding and entitled to vote
on the Agreement and Plan of Merger attached hereto (the "Merger Agreement").
There are no shares of Preferred Stock outstanding.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class and series of
stock which equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the votes entitled to
be cast by holders of outstanding shares of Common Stock.
Thomas P. Kehler and Joseph G. Girata further declare under penalty of
perjury under the laws of the State of Delaware that each has read the foregoing
certificate and knows the contents thereof and that the same is true of their
own knowledge.
Executed in Mountain View, California on _____________________ _____ , 1996.
____________________________________
Thomas P. Kehler, President and
Chief Executive Officer
____________________________________
Joseph G. Girata, Secretary
<PAGE>
EXHIBIT 10.3
CONNECT, INC.
1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options (as
defined under Section 422 of the Code) or Nonstatutory Stock Options, at the
discretion of the Board and as reflected in the terms of the written option
agreement.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" shall mean the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Affiliate" shall mean an entity other than a Subsidiary (as
---------
defined below) in which the Company owns an equity interest.
(c) "Applicable Laws" shall have the meaning set forth in Section
---------------
4(a) below.
(d) "Board" shall mean the Board of Directors of the Company.
-----
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(f) "Committee" shall mean the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan, if one is appointed.
(g) "Common Stock" shall mean the Common Stock of the Company.
------------
(h) "Company" shall mean Connect, Inc., a California corporation.
-------
(i) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(j) "Continuous Status as an Employee or Consultant" shall mean the
----------------------------------------------
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator; provided that once the
--------
<PAGE>
Company registers any class of any equity security pursuant to Section 12 of the
Exchange Act, such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute. For purposes of this Plan, a change in status from an Employee to a
Consultant or from a Consultant to an Employee will not constitute a termination
of employment.
(k) "Director" shall mean a member of the Board.
--------
(l) "Employee" shall mean any person (including any Named Executive,
--------
Officer or Director) employed by the Company or any Parent, Subsidiary or
Affiliate of the Company. The payment by the Company of a director's fee to a
Director shall not be sufficient to constitute "employment" of such Director by
the Company.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock as quoted on such system on the date of determination (if
for a given day no sales were reported, the closing bid on that day shall be
used), as such price is reported in The Wall Street Journal or such other source
as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the bid and asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" shall mean an Option intended to qualify
----------------------
as an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(p) "Named Executive" shall mean any individual who, on the last day
---------------
of the Company's fiscal year, is the chief executive officer of the Company (or
is acting in such capacity) or among the four highest compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(q) "Nonstatutory Stock Option" shall mean an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
-2-
<PAGE>
(r) "Officer" shall mean a person who is an officer of the Company
-------
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" shall mean a stock option granted pursuant to the Plan.
------
(t) "Optioned Stock" shall mean the Common Stock subject to an
--------------
Option.
(u) "Optionee" shall mean an Employee or Consultant who receives an
--------
Option.
(v) "Parent" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(w) "Plan" shall mean this 1996 Stock Option Plan.
----
(x) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
----------
Act as the same may be amended from time to time, or any successor provision.
(y) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 14 of the Plan.
(z) "Subsidiary" shall mean a "subsidiary corporation," whether now
----------
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of
-------------------------
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 5,000,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares that were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. Notwithstanding any other provision of the Plan, shares
issued under the Plan and later repurchased by the Company shall not become
available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Composition of Administrator.
----------------------------
(i) Multiple Administrative Bodies. If permitted by
------------------------------
Rule 16b-3, and by the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable securities laws and the Code
(collectively, the "Applicable Laws"), the Plan may (but need not) be
---------------
administered by different administrative bodies with respect to Directors,
Officers who are not directors and Employees who are neither Directors nor
Officers.
(ii) Administration with respect to Directors and Officers. With
-----------------------------------------------------
respect to grants of Options to Employees or Consultants who are also Officers
or Directors of the Company, the Plan shall be administered by (A) the Board, if
the Board may administer the
-3-
<PAGE>
Plan in compliance with Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary plan and Section 162(m) of the Code as it applies
so as to qualify grants of Options to Named Executives as performance-based
compensation, or (B) a Committee designated by the Board to administer the Plan,
which Committee shall be constituted in such a manner as to permit the Plan to
comply with Rule 16b-3 as it applies to a plan intended to qualify thereunder as
a discretionary plan, to qualify grants of Options to Named Executives as
performance-based compensation under Section 162(m) of the Code and otherwise so
as to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons. With respect
--------------------------------------------
to grants of Options to Employees or Consultants who are neither Directors nor
Officers of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws.
(iv) General. If a Committee has been appointed pursuant to
-------
subsection (ii) or (iii) of this Section 4(a), such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of any Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies (however caused) and remove
all members of a Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws and, in the case of a Committee
appointed under subsection (ii), to the extent permitted by Rule 16b-3 as it
applies to a plan intended to qualify thereunder as a discretionary plan, and to
the extent required under Section 162(m) of the Code to qualify grants of
Options to Named Executives as performance-based compensation.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;
(ii) to select the Employees and Consultants to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder;
-4-
<PAGE>
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Recipients of Grants. Nonstatutory Stock Options may be granted
--------------------
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees, provided, however, that Employees of an Affiliate shall not be
-------- -------
eligible to receive Incentive Stock Options. An Employee or Consultant who has
been granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options.
(b) Type of Option. Each Option shall be designated in the written
--------------
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(c) No Employment Rights. The Plan shall not confer upon any Optionee
--------------------
any right with respect to continuation of employment or consulting relationship
with the Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 20 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 16 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that in the case of an Incentive Stock
-------- -------
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
-5-
<PAGE>
8. Limitation on Grants to Employees. Subject to adjustment as provided
---------------------------------
in this Plan, the maximum number of Shares which may be subject to options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 2,000,000.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant; or
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to an Employee who, at the time of the grant of
such Nonstatutory Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant; or
(B) granted to a person who, at the time of the grant of such
Option, is a Named Executive of the Company, the per share Exercise Price shall
be no less than 100% of the Fair Market Value on the date of grant; or
(C) granted to any person other than a Named Executive, the
per Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.
(iii) Notwithstanding anything to the contrary in subsections
9(a)(i) or 9(a)(ii) above, in the case of an Option granted on or after the
effective date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after the
termination of such registration, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(b) Permissible Consideration. The consideration to be paid for the
-------------------------
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash, (2) check, (3) promissory note, (4) other Shares that (x) in the case
of Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six months on the date of surrender or were not acquired,
directly or
-6-
<PAGE>
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to deliver promptly to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) any combination of the foregoing methods
of payment, or (8) such other consideration and method of payment for the
issuance of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 14 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee or Consultant. In the event
--------------------------------------------------
of termination of an Optionee's Continuous Status as an Employee or Consultant,
such Optionee may, but only within one (1) month (or such other period of time,
not exceeding three (3) months in the case of an Incentive Stock Option or six
(6) months in the case of a Nonstatutory Stock Option, as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) after the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the
-7-
<PAGE>
Option Agreement), exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the optionee does not exercise such Option (which he or she
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding Section 10(b) above, in
----------------------
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her disability, he or she may, but only within
twelve (12) months from the date of such termination (but in no event later than
the date of expiration of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent he or she was entitled to
exercise it at the date of such termination. To the extent that he or she was
not entitled to exercise the Option at the date of termination, or if he does
not exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
-----------------
(i) during the term of the Option who is at the time of his death
an Employee or Consultant of the Company and who shall have been in Continuous
Status as an Employee or Consultant since the date of grant of the Option, the
Option may be exercised, at any time within twelve (12) months (or such other
period of time, not exceeding twelve (12) months, as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) following the date of death (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance but only to
the extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or Consultant
three (3) months (or such other period of time as is determined by the
Administrator as provided above) after the date of death, subject to the
limitation set forth in Section 5(b); or
(ii) within one (1) month (or such other period of time not
exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the termination of Continuous Status as an Employee
or Consultant, the Option may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement), by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
11. Withholding Taxes. As a condition to the exercise of Options granted
-----------------
hereunder, the Optionee shall make such arrangements as the Administrator may
require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that may arise in connection with
-8-
<PAGE>
the exercise, receipt or vesting of such Option. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, or (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option that number of Shares having
a fair market value equal to the amount required to be withheld. For this
purpose, the fair market value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined (the "Tax
---
Date").
- ----
Any surrender by an Officer or Director of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the Optionee is an Officer or Director, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to
-9-
<PAGE>
which the Option is exercised but such Optionee shall be unconditionally
obligated to tender back to the Company the proper number of Shares on the Tax
Date.
13. Non-Transferability of Options. The Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution. The designation of a
beneficiary by an Optionee will not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 13.
14. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the shareholders of
----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of shares of Common Stock that have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, the maximum number of shares of Common Stock for which Options may be
granted to any employee under Section 8 of the Plan, and the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Corporate Transactions. In the event of the proposed dissolution
----------------------
or liquidation of the Company, the Option will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Administrator. The Administrator may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a date fixed by
the Administrator and give each Optionee the right to exercise his or her Option
as to all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Administrator
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to some or all of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable. If the Administrator makes an
Option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option shall be exercisable for a period of fifteen (15) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
-10-
<PAGE>
15. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
16. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 20 of the
Plan:
(i) any increase in the number of Shares subject to
the Plan, other than an adjustment under Section 14 of the
Plan;
(ii) any change in the designation of the class of persons
eligible to be granted Options;
(iii) any change in the limitation on grants to employees as
described in Section 8 of the Plan or other changes which would
require shareholder approval to qualify options granted hereunder as
performance-based compensation under Section 162(m) of the Code; or
(iv) any revision or amendment requiring shareholder approval in
order to preserve the qualification of the Plan under Rule 16b-3.
(b) Shareholder Approval. If any amendment requiring shareholder
--------------------
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 20 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
17. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
-11-
<PAGE>
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
20. Shareholder Approval.
--------------------
(a) Shareholder approval of the Plan shall be obtained within twelve
(12) months before or after the date the Plan is adopted, provided that neither
the grant nor the exercise of Options hereunder shall be contingent on obtaining
such approval. In the event shareholder approval is not obtained in accordance
with this Section 20(a), Options designated as Incentive Stock Options shall
instead be treated as Nonstatutory Stock Options. Shareholder approval shall be
obtained in the manner and to the degree required under applicable federal and
state law and the rules of any stock exchange upon which the Shares are listed.
(b) In the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the shareholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan itself or
of any amendment thereto is solicited at any time otherwise than in the manner
described in Section 20(b) hereof, then the Company shall, at or prior to the
first annual meeting of shareholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to vote for the
Plan substantially the same information that would be required (if proxies to be
voted with respect to approval or disapproval of the Plan or amendment were then
being solicited) by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished; and
-12-
<PAGE>
(ii) file with, or mail for filing to, the Securities and
Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to shareholders.
21. Information to Optionees. The Company shall provide
------------------------
financial statements at least annually to each Optionee during the period such
Optionee has one or more Options outstanding, and in the case of an individual
who acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of Options under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.
-13-
<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR
RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
CONNECT, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
CONNECT, Inc. (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. Definitions:
------------
(a) "Optionee" shall be (Optionee).
(b) "Date of Option Grant" shall mean (Date of Grant).
(c) "Number of Option Shares" shall mean (Number of Shares) shares of
common stock of the Company as adjusted from time to time pursuant to
paragraph 9 below.
(d) "Exercise Price" shall mean (Exercise Price) per share as adjusted
from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring one (1) year
after (Date of Grant).
(g) Determination of "Vested Ratio".
<PAGE>
Vested Ratio
------------
On date of Option Grant 0
On Initial Vesting Date, provided the 12/48
Optionee is continuously employed by a
Participating Company from the Date of
Option Grant until the Initial Vesting
Date
Plus
----
For the last day of each full calendar 1/48
month of the Optionee's continuous
employment by a Participating Company
from the Initial Vesting Date
In no event shall the Vested Ratio
exceed 1/1.
(h) "Option Term Date" shall mean ten (10) years after the Date of
Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Connect, Inc., a California corporation, and
any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in Sections 425(e) and 425(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Connect, Inc. 1996 Stock Option Plan.
2. Status of the Option. This Option is intended to be an incentive
--------------------
stock option as described in Section 422A of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income
-2-
<PAGE>
tax treatment under Section 422A of the Code, including, but not limited to,
holding period requirements.
3. Administration. All questions of interpretation concerning this Option
--------------
Agreement shall be determined by the Board of Directors of the Company (the
"Board") and/or by a duly appointed committee of the Board having such powers as
shall be specified by the Board. Any subsequent references herein to the Board
shall also mean the committee if such committee has been appointed and, unless
the powers of the committee have been specifically limited, the committee shall
have all of the powers of the Board granted in the Plan, including, without
limitation, the power to terminate or amend the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law. All
determinations by the Board shall be final and binding upon all persons having
an interest in the Option. Any officer of a Participating Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated to
the Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
4. Exercise of the Option.
----------------------
(a) Right to Exercise. The Option shall be immediately exercisable in
-----------------
its entirety on and after the Initial Exercise Date subject to the Optionee's
agreement that any shares purchased upon exercise are subject to the Company's
repurchase rights set forth in paragraph 11 and paragraph 12 below.
Notwithstanding the foregoing, except as provided in paragraph 16 below, the
aggregate fair market value of the stock with respect to which the Optionee may
exercise the Option for the first time during any calendar year, together with
any other incentive stock options which are exercisable for the first time
during any such year, as determined in accordance with Section 422A(d) of the
Code, shall not exceed One Hundred Thousand Dollars ($100,000). Such limitation
on exercise described in Section 422A(d) of the Code shall be referred to in
this Option Agreement as the "$100,000 Exercise Limitation." Notwithstanding the
foregoing, the Option may not be exercised more frequently than twice in any
continuous twelve (12) month period; provided, however, that the foregoing
restriction shall not apply so as to prevent an exercise (i) following the
Optionee's termination of employment as set forth in paragraph 7 below or (ii)
during the thirty (30) day periods immediately preceding and following an
Ownership Change as defined in paragraph 8 below.
(b) Method of Exercise. The Option shall be exercisable by written
------------------
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of joint escrow instructions
referenced below.
-3-
<PAGE>
(c) Form of Payment of Option Price. Such payment shall be made in
-------------------------------
cash, by check, or cash equivalent.
(d) Withholding. At the time the Option is exercised, in whole or in
-----------
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired on exercise of the Option, or (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired on exercise of the Option.
(e) Certificate Registration. The certificate or certificates for the
------------------------
shares as to which the Option shall be exercised shall be registered in the name
of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of Shares. The
----------------------------------------------------------
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES. Section 260.141.11 of the Rules of
the Commissioner of Corporations of the State of California is set forth in
paragraph 17 herein. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
(g) Fractional Shares. The Company shall not be required to issue
-----------------
fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised during
---------------------------------
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
-4-
<PAGE>
6. Termination of the Option. The Option shall terminate and may no
-------------------------
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. Termination of Employment.
-------------------------
(a) Termination of the Option. If the Optionee ceases to be an
-------------------------
employee of the Participating Company Group for any reason except death or
disability within the meaning of Section 422A(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within one
(1) month after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death of the Optionee or disability of
the Optionee, the Option may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve (12) months
from the date the Optionee's employment terminated, but in any event no later
than the Option Term Date. The Optionee's employment shall be deemed to have
terminated on account of death if the Optionee dies within one (1) month after
the Optionee's termination of employment. Notwithstanding the provisions of
this paragraph 7(a), the Option may not be exercised after the Optionee's
termination of employment if the shares acquired on exercise of the Option would
be Unvested Shares as that term is defined in paragraph 11 below.
(b) Termination of Employment Defined. For purposes of this paragraph
---------------------------------
7, the Optionee's employment shall be deemed to have terminated either upon an
actual termination of employment or upon the Optionee's employer ceasing to be a
Participating Company.
(c) Exercise Prevented by Law. Except as provided in this paragraph
-------------------------
7, the Option shall terminate and may not be exercised after the Optionee's
employment with the Participating Company Group terminates unless the exercise
of the Option in accordance with this paragraph 7 is prevented by the provisions
of paragraph 4(f) above. If the exercise of the Option is so prevented, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date. The Company makes no representation
as to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise.
(d) Optionee Subject to Section 16(b). Notwithstanding the foregoing,
---------------------------------
if the exercise of the Option within the applicable time periods set forth above
would subject the Optionee to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which the Optionee would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee's termination of
employment, or (iii) the Option Term Date. The Company makes no representation
as to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise.
-5-
<PAGE>
(e) Leave of Absence. For purposes hereof, the Optionee's employment
----------------
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
8. Ownership Change and Transfer of Control. For purposes hereof, the
----------------------------------------
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the shareholders of the
Control Company of all or substantially all of the stock of the Control Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the shareholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's stock
for the Option. In the event the Acquiring Corporation elects not to assume the
Company's rights and obligations under this Option Agreement or substitute for
the Option in connection with a Transfer of Control involving an Ownership
Change described in (b) or (c) above, the Board shall provide that all shares
acquired on exercise of the Option become Vested Shares for purposes of
paragraph 11 below effective upon the Transfer of Control. The Option shall
terminate effective as of the date of the Transfer of Control to the extent that
the Option is neither assumed by the Acquiring Corporation nor exercised as of
the date of the Transfer of Control.
9. Effect of Change in Stock Subject to the Option. Appropriate
-----------------------------------------------
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event
-6-
<PAGE>
of a stock dividend, stock split, reverse stock split, combination,
reclassification, or like change in the capital structure of the Company. In the
event a majority of the shares which are of the same class as the shares that
are subject to the Option are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change) shares of another corporation
(the "New Shares"), the Company may unilaterally amend the Option to provide
that the Option is exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price shall be adjusted in a
fair and equitable manner.
10. Rights as a Shareholder or Employee. The Optionee shall have no
-----------------------------------
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. Unvested Share Repurchase Option.
--------------------------------
(a) Unvested Share Repurchase Option. In the event the Optionee's
--------------------------------
employment with the Participating Company Group is terminated for any reason,
with or without cause, or if the Optionee or the Optionee's legal representative
attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other
than pursuant to an Ownership Change) any shares acquired upon exercise of the
Option which exceed the Optionee's Vested Shares as defined in paragraph 11(b)
below (the "Unvested Shares"), the Company shall have the right to repurchase
the Unvested Shares under the terms and subject to the conditions set forth in
this paragraph 11 (the "Unvested Share Repurchase Option").
(b) Vested Shares and Unvested Shares Defined. The total number of
-----------------------------------------
Option Shares multiplied by the Vested Ratio as set forth in paragraph 1 above
are Vested Shares. For purposes of this paragraph 11, the Unvested Shares are
the number of shares acquired upon exercise of the Option in excess of the
Vested Shares. Any additional shares acquired by the Optionee on exercise of
this Option would also be Unvested Shares.
(c) Exercise of Unvested Share Repurchase Option. The Company may
--------------------------------------------
exercise the Unvested Share Repurchase Option by written notice to the Optionee
within sixty (60) days after (i) such termination of employment (or exercise of
the Option, if later) or (ii) the Company has received notice of the attempted
disposition. If the Company fails to give notice within such sixty (60) day
period, the Unvested Share Repurchase Option shall terminate unless the Company
and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if
at all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the Company
---------------------------------------
to the Optionee shall be made in cash within thirty (30) days after the date of
the mailing of the written notice of exercise of the Unvested Share Repurchase
Option. For purposes of the foregoing,
-7-
<PAGE>
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled. The purchase price per share being
repurchased by the Company shall be an amount equal to the Optionee's original
cost per share, as adjusted pursuant to paragraph 9 above. The shares being
repurchased shall be delivered to the Company by the Optionee at the same time
as the delivery of the purchase price to the Optionee.
(e) Assignment of Unvested Share Repurchase Option. The Company shall
----------------------------------------------
have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such Option is then exercisable, to one (1) or more persons as
may be selected by the Company.
(f) Ownership Change. In the event of an Ownership Change, the
----------------
Unvested Share Repurchase Option shall continue in full force and effect;
provided, however, that "employment with the Participating Company Group" for
purposes of this paragraph 11 shall include all service with any corporation
which was a Participating Company at the time the services were rendered,
whether or not the corporation was included within such term both before and
after the event constituting the Ownership Change.
12. Right of First Refusal.
----------------------
(a) Right of First Refusal. In the event the Optionee proposes to
----------------------
sell, pledge, or otherwise transfer any Vested Shares (the "Transfer Shares") to
any person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
paragraph 12 (the "Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed transfer of
---------------------------
the Transfer Shares, the Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price. In the event of a bona fide gift or involuntary transfer, the proposed
transfer price shall be deemed to be the fair market value of the Transfer
Shares as determined by the Company in good faith. In the event the Optionee
proposes to transfer any Vested Shares to more than one (1) Proposed Transferee,
the Optionee shall provide a separate Transfer Notice for the proposed transfer
to each Proposed Transferee. The Transfer Notice shall be signed by both the
Optionee and the Proposed Transferee and must constitute a binding commitment of
the Optionee and the Proposed Transferee for the transfer of the Transfer Shares
to the Proposed Transferee subject only to the Right of First Refusal.
(c) Bona Fide Transfer. Within ten (10) days after receipt of the
------------------
Transfer Notice, the Company shall determine the bona fide nature of the
proposed voluntary transfer and give the Optionee written notice of the
Company's determination. If the proposed transfer is deemed not to be bona
fide, the Optionee shall be responsible for providing additional information to
the Company to show the bona fide nature of the proposed transfer. The Company
shall have the right to demand further assurances from the Optionee and the
Proposed Transferee (in a form satisfactory to the Company) that the Transfer
Notice fully and accurately sets forth all of the
-8-
<PAGE>
terms and conditions of the proposed transfer, including, without limitation,
assurance that the Transfer Notice fully and accurately sets forth the
consideration actually paid for the Transfer Shares and all transactions,
directly or indirectly, between the parties which may have affected the price
the Proposed Transferee was willing to pay for the Transfer Shares.
(d) Exercise of the Right of First Refusal. In the event the proposed
--------------------------------------
transfer is deemed to be bona fide, the Company shall have the right to purchase
all, but not less than all, of the Transfer Shares at the purchase price and on
the terms set forth in the Transfer Notice by delivery to the Optionee of a
notice of exercise of the Right of First Refusal within thirty (30) days after
the date the Transfer Notice is delivered to the Company or ten (10) days after
the Company has approved the proposed transfer as bona fide, whichever is later.
The Company's exercise or failure to exercise the Right of First Refusal with
respect to any proposed transfer described in a Transfer Notice shall not affect
the Company's ability to exercise the Right of First Refusal with respect to any
proposed transfer described in any other Transfer Notice, whether or not such
other Transfer Notice is issued by the Optionee or issued by a person other than
the Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the Company
and the Optionee shall thereupon consummate the sale of the Transfer Shares to
the Company on the terms set forth in the Transfer Notice; provided, however,
that in the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for the
Transfer Shares by the discounted cash equivalent of the consideration described
in the Transfer Notice as reasonably determined by the Company. For purposes of
the foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to the
extent of the unpaid principal and any accrued interest canceled.
(e) Failure to Exercise Right of First Refusal. If the Company fails
------------------------------------------
to exercise the Right of First Refusal in full within the period specified in
paragraph 12(d) above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than one hundred twenty
(120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide,
pursuant to paragraph 12(c) above. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this paragraph 12.
(f) Transferees of the Transfer Shares. All transferees of the
----------------------------------
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 12
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any
-9-
<PAGE>
shares acquired upon exercise of the Option shall be void unless the provisions
of this paragraph 12 are met.
(g) Transfers Not Subject to the Right of First Refusal. The Right of
---------------------------------------------------
First Refusal shall not apply to any transfer or exchange of the shares acquired
pursuant to the exercise of the Option if such transfer is in connection with an
Ownership Change. If the consideration received pursuant to such transfer or
exchange consists of stock of a Participating Company, such consideration shall
remain subject to the Right of First Refusal unless the provisions of paragraph
12(i) below result in a termination of the Right of First Refusal.
(h) Assignment of the Right of First Refusal. The Company shall have
----------------------------------------
the right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer to one (1) or more persons as may be selected
by the Company.
(i) Early Termination of the Right of First Refusal. The other
-----------------------------------------------
provision of this paragraph 12 notwithstanding the Right of First Refusal shall
terminate, and be of no further force and effect upon (i) the occurrence of a
Transfer of Control, unless the surviving, continuing, successor, or purchasing
corporation, as the case may be, assumes the Company's rights and obligations
under the Plan, or (ii) the existence of a public market for the class of shares
subject to the Right of First Refusal. A "public market" shall be deemed to
exist if (x) such stock is listed on a national securities exchange (as that
term is used in the Exchange Act) or (y) such stock is traded on the over-the-
counter market and prices therefor are published daily on business days in a
recognized financial journal.
13. Escrow.
------
(a) Establishment of Escrow. To insure shares subject to the Unvested
-----------------------
Share Repurchase Option and the Right of First Refusal will be available for
repurchase, the Company may require the Optionee to deposit the certificate or
certificates evidencing the shares which the Optionee purchases upon exercise of
the Option with an escrow agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does
not require such deposit as a condition of exercise of the Option, the Company
reserves the right at any time to require the Optionee to so deposit the
certificate or certificates in escrow. The Company shall bear the expenses of
the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable after the
------------------------------
expiration of the Unvested Share Repurchase Option and the Right of First
Refusal, but not more frequently than twice each calendar year, the escrow agent
shall deliver to the Optionee the shares no longer subject to such restrictions.
(c) Notices and Payments. In the event the shares held in escrow are
--------------------
subject to the Company's exercise of the Unvested Share Repurchase Option or the
Right of First Refusal, the notices required to be given to the Optionee shall
be given to the escrow agent and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares which the
-10-
<PAGE>
Company has purchased to the Company and shall deliver the payment received from
the Company to the Optionee.
14. Stock Dividends Subject to Option Agreement. If, from time to time,
-------------------------------------------
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Unvested Share Repurchase Option
and the Right of First Refusal with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and the Right of First Refusal
immediately before such event.
15. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
----------------------------------------------
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired pursuant to
the Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At the time during the one-year or two-
year periods set forth above, the Company may place a legend or legends on any
certificate or certificates representing shares acquired pursuant to the Option
requesting the transfer agent for the Company's stock to notify the Company of
any such transfers for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate or certificates pursuant to the preceding sentence.
16. Exception to $100,000 Exercise Limitation. Notwithstanding any other
-----------------------------------------
provision of this Option Agreement, if compliance with the $100,000 Exercise
Limitation as set forth in paragraph 4(a) above will result in the
exercisability of any Vested Shares (as defined in paragraph 11(b) above) being
delayed more than thirty (30) days beyond the vesting date for such shares, the
Option shall be deemed to be two (2) options. The first option shall be for the
maximum number of shares subject to the Option that can comply with the $100,000
Exercise Limitation without causing the Option to be unexercisable as to Vested
Shares. The second option, which shall not be treated as an incentive stock
option as described in Section 422A(b) of the Code, shall be for the balance of
the shares subject to the Option and shall be exercisable on the same terms and
at the same time as set forth in this Option Agreement, provided, however, that
(a) the second sentence of paragraph 4(a) above shall not apply to the second
option and (b) such shares shall become Vested Shares on the same date or dates
as set forth in this Option Agreement without regard to this paragraph. Unless
the Optionee specifically elects to the contrary in the Optionee's written
notice of exercise, the first option shall be deemed to be exercised first to
the maximum possible extent and then the second option shall be deemed to be
exercised.
-11-
<PAGE>
17. Rules of the Commissioner of Corporations. The Optionee is hereby
-----------------------------------------
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following
text are references to the California Corporations Code.
260.141.11. Restriction on Transfer.
-----------------------
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificates evidencing the security is
delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of the rules) except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants, or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
-12-
<PAGE>
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this Section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend prominently stamped or printed
thereon in capital letters of not less than 10-point size reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
18. Legends. The Company may at any time place legends referencing the
-------
Unvested Share Repurchase Option set forth in paragraph 11 above, the Right of
First Refusal set forth in paragraph 12 above and any applicable federal or
state securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to
-13-
<PAGE>
effectuate the provisions of this paragraph. Unless otherwise specified by the
Company, legends placed on such certificates may include, but shall not be
limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
(d) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
19. Initial Public Offering. The Optionee hereby agrees that in the event
-----------------------
of an initial public offering of stock made by the Company under the Securities
Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate,
grant any option to purchase or make any short sale of, or otherwise dispose of
any shares of stock of the Company or any rights to acquire stock of the Company
for such period of time as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such initial public offering. The
foregoing limitation shall not apply to shares registered under the Securities
Act and shall cease to apply once a registration statement is effective covering
shares issuable pursuant to options granted pursuant to the Plan, whether or not
such registration statement applies to any of the shares issued or issuable
pursuant to the Option.
20. Binding Effect. This Option Agreement shall inure to the benefit of
--------------
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
-14-
<PAGE>
21. Termination or Amendment. The Board, including any duly appointed
------------------------
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee unless such amendment is required to enable the Option to qualify as an
Incentive Stock Option.
22. Integrated Agreement. This Option Agreement constitutes the entire
--------------------
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
23. Applicable Law. This Option Agreement shall be governed by the laws
--------------
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
24. Tax Consequences. The Optionee understands that any of the foregoing
----------------
references to taxation are based on federal income tax laws and regulations now
in effect. The Optionee has reviewed with the Optionee's own tax advisors the
federal, state, local and foreign tax consequences of the transactions
contemplated by this Agreement. The Optionee is relying solely on such advisors
and not on any statements or representations of the Company or any of its
agents. The Optionee understands that the Optionee (and not the Company) shall
be responsible for the Optionee's own tax liability that may arise as a result
of the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, the Optionee further agrees that the filing of
elections under Section 83(b) of the Code shall be the responsibility of the
Optionee, and shall not be the Company's responsibility.
CONNECT, INC.
By:
---------------------------------
Title:
------------------------------
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<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION l(g) HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS OPTION, THE COMPANY'S PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 11 and the Right of First Refusal set forth in
paragraph 12 and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California regarding restriction on transfer.
Dated:
------------------
---------------------------------------
(Optionee), Optionee
Residence Address:
---------------------
---------------------------------------
---------------------------------------
---------------------------------------
Social Security No.
--------------------
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<PAGE>
CONNECT, INC.
SOFTWARE LICENSE AGREEMENT
This Software License Agreement ("AGREEMENT") is entered into as of February 5,
1996 (the "EFFECTIVE DATE"), by and between Connect, Inc., a California
corporation, with principal offices at 515 Ellis Street, Mountain View, CA
94043-2242 ("CONNECT") and Entex Information Services Inc., a Delaware
Corporation, with principal offices at Six International Drive, Ryebrook, NY
10573 ("CUSTOMER").
CONNECT and Customer have entered into a Software License Agreement for CONNECT
to license its OneServer/TM/ Software and OneManager/TM/ Software to Customer
and to sub-license certain third-party-owned software to Customer. In addition,
Customer may request CONNECT to provide additional Customer Application Software
for use with the OneServer Software, as defined in any Exhibit B (Scope of Work)
attached to this Agreement, with Supplemental Terms and Conditions applying only
to such Customer Application Software and Maintenance Services defined in
Exhibit C, with supplemental terms and conditions applying only to such
services.
CONNECT and Customer, therefore, agree as follows:
SECTION 1 - DEFINITIONS
The following defined terms shall govern the interpretation of this Agreement:
1.1 "CONNECT SOFTWARE" means the OneServer Software and the OneManager
Software.
1.2 "DESIGNATED PLATFORM" means the computer central processing unit ("CPU")
and operating system software located at the installed location designated on
EXHIBIT A to this Agreement or at any other single location, which will be the
only CPU and operating system on which, and the only location at which, the
Licensed Software is licensed for installation and use under this Agreement.
1.3 "DOCUMENTATION" means any user documentation provided by CONNECT to
Customer for use in connection with the Licensed Software.
1.4 "LICENSED SOFTWARE" means the CONNECT SOFTWARE and the THIRD PARTY
SOFTWARE.
1.5 "SOFTWARE" means the Licensed Software, the Customer Application Software.
1.6 "TERRITORY" means the United States of America and its territories and
possessions.
1.7 "THIRD PARTY SOFTWARE" means the number of copies of the third party owned
software sublicensed to Customer by CONNECT as specified in Exhibit A.
1.8 "CUSTOMER APPLICATION SOFTWARE" means software provided by CONNECT to
Customer pursuant to this Agreement and in conformance with a mutually agreed
Scope of Work outlined in Exhibit B, and supplemental terms and conditions
solely relating to such services.
SECTION 2 - LICENSE GRANTS AND OWNERSHIP
2.1 CONNECT SOFTWARE LICENSE. Subject to the terms and conditions of this
Agreement, CONNECT grants Customer (1) a non-exclusive, non-transferable
perpetual license, (subject only to the provisions of sections 10.3 and 5
below), without right of sublicense, to install and execute and use the CONNECT
Software in object code format, solely on the Designated Platform or other
single comparable CPU solely for remote access and use by the Customer and end
users. (2) If Customer has requested Customer Application Software as defined
in Exhibit B, CONNECT hereby grants Customer (a) as to all portions of the
Customer Application software not uniquely applicable to Customer Application
Software, and defined herein as Exhibit D a non-exclusive, non-transferable,
non-sublicensable perpetual license to install, execute and use the Customer
Application Software in object code format solely on the designated platform or
other single comparable CPU solely for remote access by Customer and end users,
and (b) to those portions of the Customer Application Software uniquely
applicable to Customer's application and as defined in Exhibit D, an
Page 1
<PAGE>
exclusive non transferable license to install and execute the Customer
Application Software in object code format solely on the designated platform or
other single comparable CPU solely for remote access and use for Customer and
end users. Such exhibit will be mutually agreed upon and attached hereto no
later than sixty (60) days after the Effective Date of this Agreement.
2.2 CONNECT SOFTWARE SOURCE CODE LICENSE. To the extent that CONNECT at
CONNECT's sole discretion provides Customer with any source code for use with
the CONNECT Software or Customer Application Software, CONNECT grants Customer,
subject to this Section and a separate Source Code License Agreement, a non-
exclusive, non-transferable license, to use the source code solely for purposes
of customizing or servicing certain features of the CONNECT Software pursuant to
the license granted in section 2.1. Customer shall not under any circumstances
copy, duplicate or otherwise reproduce the source code in any manner other than
to read the machine-readable source code into computer memory for the purposes
authorized in the Source Code Agreement. Unless otherwise specified in this
Agreement, CONNECT shall have no obligation to support or maintain such source
code. Customer shall not permit the source code to leave Customer's premises at
the location of Customer set forth on Exhibit A. Connect agrees to place the
source code of the Connect Software in escrow within 90 days of full payment by
Customer for the License fees for such Software. Customer agrees to pay for the
escrow fees for implementing and maintaining such an Agreement.
2.3 THIRD PARTY SOFTWARE LICENSE. Subject to the terms and conditions of this
Agreement, CONNECT grants to Customer a non-exclusive, non-transferable license,
without right of sublicense, to use Third Party Software, solely on the
Designated Platform or sole other CPU as outlined in Exhibit A. Customer may
not make any use of the Third Party Software on its own or with any other
program besides the CONNECT Software except as otherwise permitted under
separate license agreements. Customer acknowledges and agrees that CONNECT's
licensors for such Third Party Software are intended third party beneficiaries
of the terms of this Agreement relating to Customer's use of the Third Party
Software and as such have the right to enforce such terms directly against
Customer in their own names.
2.4 DOCUMENTATION LICENSE. Subject to the terms and conditions of this
Agreement, CONNECT grants Customer the right to copy and distribute six (6)
copies of the User Documentation for each copy of the OneServer software
licensed to Customer. Further User Documentation reproduction rights may be
negotiated. Customer may request Documentation in electronic format subject to
current availability from CONNECT.
2.5 ARCHIVAL COPIES; COPYING; MARKINGS. Customer may make one (1) copy of the
Licensed Software or Customer Application Software for archival purposes. Each
copy of the Licensed Software and User Documentation is subject to the
provisions of this Agreement. Customer may not copy the User Documentation
except as stated in Section 2.4 or to replace lost or destroyed copies.
Additional copies of the User Documentation are available from CONNECT for a
separate fee. All titles, trademarks, copyright notices and other proprietary
markings must be reproduced on all permitted copies of the Licensed Software and
User Documentation, in whatever format, and Customer will not cause or permit
the removal of same.
2.6. OWNERSHIP OF LICENSED SOFTWARE. Except for the limited licenses and
rights granted herein, all rights, title, and interest in the Licensed Software,
Third Party Software and User Documentation, including without limitation all
patent, rights, copyrights, trade secrets, know-how, and other intellectual
property rights, will remain the property of CONNECT or CONNECT's licensors.
All aspects of the Licensed Software and Third Party Software, including without
limitation programs, methods of processing, specific design and structure of
individual programs and their interaction and unique programming techniques
employed therein, as well as screen formats, will remain the sole and exclusive
property of CONNECT or its licensors. Customer may not rent, lease, loan, sell
or otherwise distribute the Licensed Software, Third Party Software, User
Documentation. Customer has been advised that the Licensed Software, Third
Party Software and User Documentation are proprietary and contain confidential
and valuable information identified as trade secrets by CONNECT and its
licensors, which Customer agrees to safeguard as provided for under Section 10.1
Confidentiality, below.
2.7 OWNERSHIP OF CUSTOMER APPLICATION SOFTWARE. SUBJECT TO THE PROVISIONS OF
Section 2.1 above, CONNECT shall own and hold title to the Customer Application
Software and all reproductions, modifications or derivative works of the
Customer Application Software made by any person, including without limitation
all patent rights, copyrights, trade secrets, know-how and other intellectual
property rights.
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2.8 REVERSE ENGINEERING. As to all Licensed Software provided to Customer in
object code format only, Customer agrees not to (i) reverse engineer, decompile,
or otherwise attempt to obtain the source code corresponding to such object
code, or (ii) modify or create derivative works of the Licensed Software except
as specifically permitted by CONNECT.
2.9 COMPETITIVE PRODUCTS. Nothing herein shall be construed to prevent either
party from developing or marketing other applications, software, or components
thereof, either alone or with others, which are comparable to or competitive
with those licensed under this Agreement, provided that such development and
marketing does not infringe the Proprietary Rights of the other party or the
rights granted under this Agreement and does not involve any unauthorized use of
any Confidential Information of the other party under this Agreement that has
been reduced to writing in a mutually agreed upon non-disclosure agreement.
2.10 BACKUP HARDWARE. Customer may use a single back-up or replacement CPU as
a substitute for a Designated Platform server at any time, provided that
Customer provides CONNECT with written notice of such hardware substitution,
including the information required for the Designated Platform CPU in Exhibit A
within three (3) business days of such substitution.
SECTION 3 - SOFTWARE MAINTENANCE/UPDATES
3.1 LICENSED SOFTWARE TECHNICAL AND CUSTOMER SUPPORT. Customer, at its sole
option, may order yearly maintenance services with respect to the Licensed
Software pursuant to any supplemental terms and conditions of CONNECT's standard
Software Maintenance Exhibit executed and attached hereto as Exhibit C. The
yearly fees for maintenance services, if elected by Customer, are set forth in
Exhibit A. Such fees shall include the right to updates of the Licensed
Software
SECTION 4 - PAYMENT
4.1 LICENSE FEES. The fees and fee payment schedule for the licenses and other
services granted under this Agreement are set forth on Exhibit A to this
Agreement. Such fees and charges will accrue upon execution by Customer of this
Agreement and the payment schedule. All such fees and charges will be invoiced
by CONNECT to Customer and must be paid in full within thirty (30) days after
the invoice date or as otherwise specified on EXHIBIT A to this Agreement. All
payments are due in United States dollars. CONNECT also reserves the right, upon
30 days written notice to Customer, to discontinue or suspend any services to
Customer, including the termination of this Agreement for Customer's failure to
make timely payment of applicable fees or charges. The parties specifically
agree that termination of this Agreement will not occur in the event of a good
faith dispute regarding payment of fees or other charges.
4.2 TAXES. All sales, use, value-added, personal property, and other taxes
(other than CONNECT income tax), customs and duties arising out of the licenses
granted or services provided under this Agreement will be paid by Customer, or,
if CONNECT is required or chooses to pay any of the same, will be reimbursed to
CONNECT by Customer.
4.3 AUDIT. During the term of this Agreement, and for a period of one (1) year
thereafter, Customer will maintain books and records in connection with its use
and distribution of the Licensed Software pursuant to this Agreement in
sufficient detail to permit CONNECT to verify Customer's compliance with the
terms and conditions of this Agreement. CONNECT will have the right upon ten
(10) business days prior written notice through its independent auditors to
inspect Customer's and records to verify compliance with the terms and
conditions of this Agreement, including the amount of license fees, and other
amounts payable to CONNECT hereunder. Any such audit will be conducted during
regular business hours at Customer's offices and will not interfere unreasonably
with Customer's business activities. Audits will be made no more than once
annually. If an audit reveals that Customer has underpaid fees and/or charges
to CONNECT in excess of five percent (5%), then Customer will pay CONNECT's
reasonable costs of conducting the audit.
SECTION 5 - TERM AND TERMINATION
5.1 TERM AND TERMINATION. This Agreement is effective until terminated. Upon
prior written notice, either party may terminate this Agreement if the other
party becomes insolvent, ceases doing business in the regular course, files a
petition in bankruptcy or is subject to the filing of an involuntary petition
for bankruptcy which is not rescinded
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within a period of forty-five (45) days, or fails to cure a breach of any term
or condition of this Agreement within thirty (30) days of receipt of written
notice specifying such breach. In addition, Licensee may terminate this
Agreement upon ninety (90) days prior written notice to CONNECT.
5.2 EFFECT OF TERMINATION. Termination of this Agreement or any license
granted hereunder will not limit either party from pursuing any other remedies
available to it, including injunctive relief, nor will termination relieve
Customer of its obligation to pay all undisputed fees and charges that accrued
prior to the effective date of termination. The following provisions will
survive any termination of this Agreement: Sections, 5.2, 7.4, 8, 9, and
sections 10.1 through 10.12, inclusive.
5.3 RETURN OF LICENSED SOFTWARE. Except in the event of a termination due to
breach, bankruptcy or default by Connect of its obligations under this
Agreement, upon termination of this Agreement or any license granted hereunder,
Customer will make no further use of the applicable Licensed Software and
Documentation. Within thirty (30) days after such termination, Customer will
either destroy or return to CONNECT the originals and all copies of the
applicable Licensed Software and Documentation and any source code owned by
Connect in the possession or under the control of Customer and will certify to
CONNECT that Customer has complied with the foregoing requirements.
SECTION 6 - DELIVERY, TESTING, ACCEPTANCE
6.1 LICENSED SOFTWARE
6.1(a) DELIVERY. All initial deliverables of Licensed Software and
Documentation are listed in Exhibit A of this Agreement and will be delivered to
the shipping destination on the date specified in Exhibit A. CONNECT's failure
to deliver the Software or Documentation within thirty (30) business days of the
date specified on Exhibit A will constitute a default and terminate this
Agreement at Customer's sole option entitling Customer to a refund of all fees
and charges paid to date. CONNECT will deliver one copy of the Licensed Software
for each Designated Platform specified on Exhibit A to this Agreement in the
form of a tape containing the Licensed Software and related User Documentation.
Shipment will be F.O.B. CONNECT's facilities. Customer will have 15 days from
final acceptance of the system as specified in the attached Project Schedule to
verify that all deliverables have been received.
6.1(b) ACCEPTANCE. Licensed Software will be accepted by Customer if it
performs substantially as described in its then current applicable User
Documentation.
6.2 CUSTOMER APPLICATION SOFTWARE
6.2(a) If Customer has requested that CONNECT provide Customer Application
Software. CONNECT will provide such software as defined in accordance with any
executed Scope of Work and Supplemental Terms and Conditions relating to
testing, acceptance, and delivery outlined in any executed Exhibit B, applicable
only to such Customer Application Software.
SECTION 7 - LIMITED WARRANTY (LICENSED SOFTWARE ONLY)
7.1 RIGHT TO LICENSE. CONNECT warrants that it has full power and authority to
grant the rights granted by this Agreement to Customer with respect to the
Software and Documentation without the consent of any other person; and that
neither the performance of the Services by Licensor nor the license to and use
by the Customer of the Software and Documentation (including the copying
thereof) will in any way constitute an infringement or other violation of any
copyright, trade secret, trademark, patent, invention, proprietary information,
nondisclosure or other rights of any third party, and that Software, its license
to and use by Customer, and the performance by Licensor of the Services, shall
be in compliance with all applicable laws, rules and regulations.
7.2 LICENSED SOFTWARE. WARRANTY OBLIGATIONS CONNECT warrants (1) that, during
the period of ninety (90) days following completed delivery of the Customer
Application Software (the "WARRANTY PERIOD"), the Licensed Software (other than
as modified by Customer) will perform substantially in accordance with CONNECT's
then current applicable Documentation, when properly installed and used on the
applicable Designated Platform, and (2) CONNECT will replace without charge
tapes, diskettes or other media embodying the Licensed Software that are
defective under normal use, and (3) This warranty shall not be affected by
Customer's modification of the Software as
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long as Licensor can discharge any warranty obligations, notwithstanding such
modifications or following their removal by Customer.
7.3 LIMITED WARRANTY. OTHER THAN THE WARRANTIES EXPRESSLY STATED ABOVE, THERE
ARE NO EXPRESS OR IMPLIED WARRANTIES RELATING TO THE LICENSED SOFTWARE, THE
DOCUMENTATION OR THE SERVICES COVERED BY THIS AGREEMENT, AND CONNECT EXPRESSLY
DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE.
SECTION 8 - INDEMNIFICATION (INTELLECTUAL PROPERTY RIGHTS)
8.1 INFRINGEMENT INDEMNIFICATION BY CONNECT. Notwithstanding the provisions of
Section 7.1 above, CONNECT agrees to indemnify and hold harmless (including but
not limited to payment of all costs, expenses and reasonable attorney's fees)
the Customer, its corporate affiliates and any employee, officer, director or
agent thereof, against all liability to third parties which arise from or are
related to any claim or suit based on a claim that the Licensed Software, Custom
Application Software, services or documentation furnished and used within the
scope of the licenses or other rights granted under this Agreement infringes a
United States patent, copyright, trademark or trade secret or other proprietary
right of any third party; provided that (i) Customer shall give CONNECT in
writing within fifteen (15) days of being made aware of the claim or suit giving
rise to such infringement action; provided, however, that CONNECT's obligation
to indemnify Customer shall be excused hereunder only to the extent that CONNECT
was prejudiced by Customer's failure to provide timely notice, (ii) CONNECT has
sole control of the defense of such action and all related settlement
negotiations, and (iii) Customer provides CONNECT with all reasonable
assistance, information and authority necessary to carry forth such defense and
settlement negotiations, at CONNECT's expense.
8.2 LIMITATION OF LIABILITY. CONNECT will have no liability with respect to
any claim of infringement arising out of (i) any modification of the Licensed
Software or Documentation by Customer unless Connect can discharge its warranty
obligations notwithstanding such modifications or after their removal by
Customer, or to the extent any claim arises from any use of the Software or
Documentation in combination with other software or equipment not provided or
specified in writing by CONNECT provided, however, that Connect represents that
the Software will be compatible with the hardware and software currently in use
by Customer, or (ii) any markings or branding placed on Licensed Software or
Documentation by, or at the request of Customer.
8.3 CONNECT OPTIONS. In the event that any such final judgment of infringement
is entered, or CONNECT believes is likely to be entered, CONNECT may at its sole
option and expense: (i) modify the Licensed Software and/or Documentation to be
non-infringing, (ii) obtain for Customer the right to continue using the
Software and/or Documentation provided that in either case the Software
continues to be compatible and functionally equivalent with the original
Software or (iii) terminate the applicable license and refund the unamortized
portion of the license fee paid for the Licensed Software and/or Documentation,
with such amortization being calculated over a five (5) year period beginning
with acceptance of the Licensed Software.
8.4 ENTIRE LIABILITY. THE FOREGOING STATES THE ENTIRE LIABILITY AND OBLIGATION
OF CONNECT WITH RESPECT TO INFRINGEMENT OR ALLEGED INFRINGEMENT OF ANY KIND OF
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS BY THE LICENSED SOFTWARE OR
DOCUMENTATION OR ANY PART THEREOF.
SECTION 9 - LIMITATION OF LIABILITY
9.1 EXCEPT AS OTHERWISE PROVIDED HEREIN, IN NO EVENT SHALL EITHER PARTY BE
LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, REVENUES,
DATA OR USE, WHETHER IN AN ACTION IN CONTRACT OR TORT OR ANY OTHER FORM OF
ACTION, EVEN IF THE PARTIES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING THE FAILURE OF THE
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
9.2 EXCEPT AS OTHERWISE PROVIDED HEREIN, EACH PARTY'S TOTAL LIABILITY FOR
DAMAGES IN CONNECTION WITH THIS AGREEMENT, WHETHER IN AN ACTION IN CONTRACT OR
TORT OR ANY
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OTHER FORM OF ACTION, WILL IN NO EVENT EXCEED THE AMOUNT OF FEES ACTUALLY PAID
BY CUSTOMER TO CONNECT UNDER THIS AGREEMENT.
SECTION 10 - GENERAL
10.1 CONFIDENTIALITY. Both parties acknowledge that, in the course of dealings
between them, each party will acquire information, identified as confidential,
about the other party, its business activities and operations, its technical
information and trade secrets, of a highly confidential and proprietary nature.
Each party will hold such information which is identified in writing to be
confidential. Customer further agrees to hold the Licensed Software and
Documentation and the terms of this Agreement in strict confidence.
10.2 NOTICES. All notices, including notices of address change, given under
this Agreement must be in writing and will be deemed effective when delivered in
person or by a reputable "next day guaranteed" courier service, by facsimile (if
a confirming copy is dispatched by one of the other permitted means of dispatch
under this Section 10.2) or three (3) business days after being mailed via
certified mail, return receipt requested, to the appropriate address shown on
the signature page of this Agreement.
10.3 ASSIGNMENT AND SUCCESSORS. Except as specifically provided for herein,
neither party shall assign, transfer or convey any of its rights or licenses
under this Agreement without the prior written consent of the other party which
will not be unreasonably withheld.
10.4 EXPORT. Customer will only export, re-export or otherwise transfer the
Licensed Software or Documentation to a country other than the United States in
full compliance with the provisions of the United States Export Administration
Act and the rules and regulations thereunder, and both the Licensed Software and
the Documentation will be deemed "technical data" for purposes thereof.
10.5 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the United States and the State of New York, and the
parties expressly submit to such jurisdiction. The parties agree that the
United Nations Convention on Contracts for the International Sale of Goods
(1980) is specifically excluded from application to this Agreement.
10.6 FORCE MAJEURE. Except for the obligation to make payments, nonperformance
of either party shall be excused to the extent that performance is rendered
impossible by strike, fire, flood, governmental acts, orders or restrictions,
failure of suppliers, or any other reason where failure to perform is beyond the
control and not caused by the negligence of the non-performing party.
10.7 ARBITRATION. Any claim, dispute, or controversy arising out of or in
connection with or relating to this Agreement, including the breach or alleged
breach thereof, will be submitted by the parties to binding arbitration by the
American Arbitration Association in the City of New York, New York, under the
commercial rules then in effect for that Association, except as provided herein.
The parties will agree on one (1) arbitrator within thirty (30) days of receipt
of the notice of intent to arbitrate. If no arbitrator is appointed within the
time herein provided, or any extension of time which is mutually agreed upon,
the Association will make such appointment within thirty (30) days of such
failure. Such Association-appointed arbitrator will have a minimum of ten (10)
years experience with development of software for computers and knowledge of
wide area networks. The award rendered by the arbitrator will include costs of
arbitration, reasonable costs for expert and other witnesses, and reasonable
attorneys' fees to the prevailing party. Each party acknowledges that any
breach of its obligations with respect to the proprietary rights of the other or
its licensors or third party suppliers may cause irreparable injury for which
there are inadequate remedies at law and, therefore, the arbitrator may award
the aggrieved party and/or licensors equitable relief in addition to all other
remedies available to them. Judgment on the arbitration award may be entered in
any court having jurisdiction thereof. Nothing in this Agreement will be deemed
as preventing either party from seeking injunctive relief (or any other
provisional remedy) from any court having jurisdiction over the parties and the
subject matter of the dispute as is necessary to protect either party's name,
proprietary information, trade secrets, know-how, or any other intellectual
property rights. Because both parties to this Agreement have had the
opportunity to negotiate individual provisions of this Agreement, the parties
agree that any arbitrator or court shall not construe any ambiguity that may
exist in this Agreement against a party on the basis of that party having
drafted the Agreement.
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10.8 WAIVER AND SEVERABILITY. The waiver by either party of a breach or right
under this Agreement will not constitute a waiver of any other or subsequent
breach or right. In the event any provision of this Agreement is held invalid
or unenforceable, the remaining provisions will continue in full force and
effect.
10.9 AMENDMENT. This Agreement may be amended or modified only in a written
document signed by an authorized representative of CONNECT and Customer.
10.10 CUSTOMER OFFER. This Agreement is binding upon execution by an
authorized representative of Customer and execution by an authorized
representative of CONNECT.
10.11 U.S. GOVERNMENT RESTRICTED RIGHTS. All software is provided with
RESTRICTED RIGHTS. Use, duplication, or disclosure by the Government is subject
to restrictions as set forth in subparagraph (c)(1)(ii) of the Rights in
Technical Data and Computer Software Clause at 252.227-7013 or subparagraphs
(c)(1)(2) of the Commercial Software--Restricted Rights at 48 CFR 52.227-19, as
applicable. Contractor/manufacturer is Connect, Inc., 515 Ellis Street,
Mountain View, CA 94043-2242.
10.12 ENTIRE AGREEMENT. This Agreement, together with any executed exhibits
attached hereto, is the complete and exclusive statement of the agreement
between the parties and supersedes all previous and contemporaneous agreements,
proposals and communications, written or oral, with respect to this subject
matter. In particular, the preprinted terms and conditions of any purchase
order issued or to be issued by Customer with respect to Licensed Software or
related CONNECT services are hereby expressly and superseded by this Agreement.
A Customer purchase order that references this Agreement and that is accepted by
CONNECT may serve as a supplement to this Agreement with respect to Customer's
order of additional Licensed Software or related services; provided that such
purchase order will be effective only as to product or services identification,
quantity and price, and otherwise will be governed by terms and conditions of
this Agreement.
CONNECT CUSTOMER
By: /s/ Paul Commons By: /s/ Robert Auray, Jr.
----------------------------------- -----------------------------------
Name: Paul Commons Name: Robert Auray, Jr.
--------------------------------- ---------------------------------
Title: Vice President Finance Title: Executive Vice President and CFO
-------------------------------- --------------------------------
Date: February 5, 1996 Date: February 2, 1996
--------------------------------- ----------------------------------
Telephone: (415) 254-4000 Telephone: 914-935-3600
---------------------------- -----------------------------
Fax: (415) 254-4800 Fax: 914-935-3880
---------------------------------- -----------------------------------
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SOFTWARE LICENSE AGREEMENT
EXHIBIT A
<TABLE>
<CAPTION>
1. CONNECT SOFTWARE LICENSED TO CUSTOMER
-------------------------------------
QTY List Price Discount Markup Amount
--- ---------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
OneServer 1 $[*] [*]% [*]% $[*]
8 Concurrent User License
QTY List Price Discount Markup Amount
--- ---------- -------- ------ ------
OneManager 3 [*] [*]% [*]% [*]
1.2. THIRD PARTY SOFTWARE LICENSED TO CUSTOMER:
-----------------------------------------
QTY List Price Discount Markup Amount
--- ---------- -------- ------ ------
ORACLE* 1 $[*] [*] [*] $[*]
FULCRUM* 1 $[*] [*] [*] $[*]
RSA 1 [*] [*] [*] [*]
TOTAL $ [*]
TOTAL LICENSE FEES $[*]
</TABLE>
* CUSTOMER AGREES TO PAY SUCH FEES AS FOLLOWS
(1) $[*] UPON EXECUTION OF THIS AGREEMENT IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 4.1 ABOVE.
(2) $[*] NO LATER THAN JUNE 30, 1996.
2. ONESERVER TRAINING:
-------------------
The following standard training rates apply for training. CONNECT will invoice
according to the payment provision listed on this Agreement and as services are
rendered by CONNECT.
<TABLE>
<CAPTION>
ONESERVER TRAINING* DISCOUNTED PRICE
----------------
<S> <C>
Set-up and maintenance $ [*]
OneServer Administrative Course @ $ [*]
CONNECT's training facility (4 days)
@ $[*] per student
</TABLE>
3. SOFTWARE MAINTENANCE AND SUPPORT SERVICES FEE
Software Maintenance and Support Services Fee is included in the monthly Hosting
Fee agreement as long as hosting is performed at CONNECT's facilities under the
terms and conditions of the Hosting Agreement. Upon termination of the Hosting
Agreement and/or when Customer begins hosting at its own facilities, Customer
agrees that it shall have no further Software Maintenance and Support rights
until a negotiated Software Maintenance and Support Fee structure is in place.
4. DESIGNATED PLATFORM
4.1 Computer central processing unit
a. Brand and model: Sun Sparc 20
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- -------------------
* Confidential Treatment requested
<PAGE>
5. INSTALLED LOCATION
CONNECT is hosting the Licensed Software and Custom Application at its
facility located at the following address:
515 Ellis Street
Mountain View, CA 94043-2242
6. BILLING ADDRESS
Name: Entex Information Services
Attn.: Lynn Wilson
Address: Six International Drive
Ryebrook, NY 10573
Phone: (914) 935-3645
Fax: (914) 935-3636
CONNECT CUSTOMER
By: /s/ P. Commons By: /s/ Robert Auray, Jr.
------------------------------- ---------------------------
Name: P. Commons Name: Robert Auray, Jr.
------------------------------ -------------------------
Date: February 5, 1996 Date: February 2, 1996
------------------------------ -------------------------
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SOFTWARE LICENSE AGREEMENT
EXHIBIT B
SCOPE OF WORK AND SUPPLEMENTAL TERMS AND CONDITIONS FOR
CUSTOMER APPLICATION SOFTWARE ONLY
In the event both Customer and CONNECT have executed this Exhibit B, then the
following terms and conditions will apply to the development of Customer
Application Software:
1.0 DEVELOPMENT OF CUSTOMER APPLICATION SOFTWARE. CONNECT AGREES TO DEVELOP
AND PROVIDE THE CUSTOMER APPLICATION SOFTWARE IN ACCORDANCE WITH THE PROVISIONS,
SPECIFICATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT TOGETHER WITH ANY
EXHIBITS AND ATTACHMENTS HERETO.
1.1 ACCEPTANCE TEST PLAN. After CONNECT completes development of the Customer
Application Software such that CONNECT believes it substantially conforms with
the Scope of Work outlined in this Exhibit, CONNECT will prepare and present to
Customer an Acceptance Test Plan specifying testing and acceptance procedures
for the Customer Application Software. The Acceptance Test Plan when accepted by
Customer will enable CONNECT and Customer to verify that the Customer
Application Software performs substantially in accordance with the
specifications contained in the Scope of Work.
1.2 ACCEPTANCE TESTING BY CONNECT. After Customer approves the Acceptance Test
Plan, CONNECT will follow the Acceptance Test Plan to establish that the
Customer Application Software, as tested or after further development and
testing by CONNECT, conforms to the Scope of Work. After CONNECT is satisfied
that the Custom Application Software conforms to the Scope of Work, CONNECT will
deliver the Custom Application, Software together with CONNECT's written results
of its testing, to Customer.
1.3 ACCEPTANCE TESTING BY CUSTOMER. Customer will have ten (10) business days
after completion of the final acceptance milestone as defined on the project
master schedule to test the Customer Application Software using the Acceptance
Test Procedure. Customer shall perform the tests contained in the Acceptance
Test Plan and report the results to CONNECT in the format agreed to by the
parties. CONNECT will provide to Customer, its representatives and consultants
such documentation and assistance as may reasonably be needed by Customer to
perform such testing. If Customer determines at any time during the acceptance
testing period that the Customer Application Software does not conform to the
Scope of Work or otherwise demonstrates Major Errors, CONNECT shall, within
forty-eight (48) hours of the receipt of notice of any Major Error, initiate
work to verify such Major Error. If the Major Error is reproduced, then CONNECT
will initiate work to correct such Major Error within the same forty-eight (48)
hour period and use its best efforts to correct the Major Error and install such
corrections onto the Customer Application Software. In the event that CONNECT
is unable to correct any Major error or provide a work-around for such Major
Error within the forty-eight (48) hour period, CONNECT shall adhere to and
follow the Escalation Plan for remedying such Major Error. The Escalation Plan
will contain specific milestones and other criteria for timely resolution of
such Major Errors. The parties agree to mutually design such Escalation Plan.
The parties will use their best efforts to design such Escalation Plan in a
timely manner and will attach such Escalation Plan as an Exhibit to this
Agreement. The Escalation Plan shall also contain provisions for the resolution
of Minor Errors, and for regularly scheduled meetings between the parties for
the timely resolution of any unresolved technical issues identified by Customer
or CONNECT. The Escalation Plan will be periodically amended as deemed
necessary and mutually agreed upon. For the purposes of this Exhibit, "Major
Error" means any major error in the Customer Application Software which (a) is
demonstrable on either the host computer installed at CONNECT's facility or on
the Customer's computer system and which in the environment for which it was
designed that causes the Customer Application Software to halt, (b) causes or is
likely to cause data to be lost or destroyed, (c) prevents the Customer
Application Software from being installed or executed on the host computer in a
properly configured environment or consistently prevents the Customer
Application Software from running or being accessed by a substantial number of
client computer systems, (d) prevents the user from running any major subsystem
of the Customer Application Software. "Minor Error" means any system error
which is demonstrable in the Customer Application Software which does not rise
to the level of a Major Error. Customer's failure to provide CONNECT with a
written acceptance or written statement of nonconformity or Major Errors within
the 10 day period shall be deemed an acceptance of the Customer Application
Software.
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1.4 CHANGES IN THE SCOPE OF WORK. Any changes in the Customer Application
Software after Customer's approval of the Scope of Work must be requested by
Customer in writing. Upon CONNECT's receipt of the change order request, CONNECT
will review the impact of the requested change on the development project,
including possible revisions to the Scope of Work and/or completed programming,
and reassess the estimated charges for development of the Customer Application
Software as so changed. CONNECT reserves the right not to accept changes
because of possible cost, feasibility factors, resource limitations, or
potential interference with the performance of the Customer Application
Software. Upon completion of its review, CONNECT will submit proposed changes
to the Scope of Work and any additional charges to Customer for approval. If
Customer approves the changes and any additional charges, Customer shall provide
CONNECT with written notice of the approval and the payment schedule for the
additional charges. If Customer does not approve the proposed changes, CONNECT
shall not be responsible for implementation of the proposed changes.
LIMITED WARRANTY (FOR CUSTOMER APPLICATION SOFTWARE ONLY)
1.5 LIMITED WARRANTY. CONNECT warrants that for a period of ninety (90) days
after Customer acceptance; the Customer Application Software, when integrated
with the Licensed Software and operated on the Designated Platform for which it
is licensed, will perform substantially in accordance with the Scope of Work as
detailed in this Exhibit. CONNECT will correct all Major Errors identified by
Customer prior to or during this warranty period, subject to CONNECT being able
to reproduce the defect or error. CONNECT warrants that the services to be
performed and covered by this Exhibit B will be performed in a timely and
professional manner by qualified professionals and that the services and
software shall conform to the standards generally observed in the industry for
similar services and Software. CONNECT does not warrant that the Customer
Application Software will meet any of Customer's particular requirements, or
that operation of the Customer Application Software will be uninterrupted or
error-free.
1.7 WARRANTY OBLIGATIONS. CONNECT's sole obligations are: (i) to replace
without charge tapes, diskettes or other media embodying the Customer
Application Software that are defective under normal use, and (ii) to use best
efforts to correct any Major Error as defined in Section 1.3 above reported by
Customer to CONNECT in the Customer Application Software that is reproducible by
CONNECT on a similarly configured CPU and operating system. If, after using
best efforts, CONNECT is unable to make the Customer Application Software
operate as warranted, Customer will be entitled, upon return of all copies of
the Customer Application Software, to a refund of all fees paid to CONNECT for
the Customer Application Software.
1.8 CONNECT WARRANTS that it has full power and authority to grant the rights
granted by this Agreement to Customer with respect to the Software and
Documentation without the consent of any other person; and that neither the
performance of the Services by Licensor nor the license to and use by the
Customer of the Software and Documentation (including the copying thereof) will
in any way constitute an infringement or other violation of any copyright, trade
secret, trademark, patent, invention, proprietary information, nondisclosure or
other rights of any third party, and warrants that Software, its license to and
use by Customer, and the performance by Licensor of the Services, shall be in
compliance with all applicable laws, rules and regulations.
1.9 LIMITED WARRANTY. OTHER THAN THE WARRANTIES EXPRESSLY STATED ABOVE, THERE
ARE NO EXPRESS OR IMPLIED WARRANTIES RELATING TO THE CUSTOMER APPLICATION
SOFTWARE, , OR RELATED SERVICES, AND CONNECT EXPRESSLY DISCLAIMS ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE.
2.0 SCOPE OF WORK, DELIVERY SCHEDULE AND PRICING
2.1 SCOPE OF WORK This section outlines the major project tasks and
activities, deliverables to be produced and the way they fit together to achieve
the project's objectives. For tasks that are familiar from standard systems
design methodology no further description is provided.
2.1.a ESTABLISH PROJECT ENVIRONMENT
2.2 MAJOR DELIVERABLE: PROJECT NOTEBOOK
-----------------------------------
The Project Notebook serves as a primary control document throughout the life of
the project. It will go through frequent revisions and should remain close at
hand for all project participants.
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<PAGE>
The Connect Project Manager is responsible for distributing and controlling
releases of the Project Notebook, which may exist in virtual format as a file
structure on an ftp site.
This task also includes an all-hands project kickoff meeting. This meeting will
produce a shared understanding of the project environment, OneServer, Entex'
business, object oriented analysis and the principles of interactive design. The
purpose is to create a common language and set of expectations around team work
and one anther's deliverables. The audience is all project participants.
2.3 MAJOR DELIVERABLE: CONCEPTUAL DESIGN. The Conceptual Design document
describes the Entex Web-Purchase System in terms of three dimensions: process,
data, and architecture. It knits these dimensions together with business
scenarios that describe the system from the user's point of view.
2.3.a How It Fits In. In addition to ensuring that all players are working
from the "same sheet of music," the Conceptual Design feeds directly into later
steps in the life cycle.
The process model becomes navigation and functionality; eventually, these become
HTML and templates and CGI scripts.
The data model turns into a detailed object model and the scripts that implement
them.
The system architecture is intended to surface all of the major project issues
and describe how the pieces work together for the developers and business
people.
The business scenarios verify the design in terms of the project's objectives;
they also feed into usability and acceptance testing later in the life cycle.
For a relatively small-scale, rapid development project like this one the
Requirements Analysis task need not last more than two weeks. Still, it is
vitally important to include this task in the plan in order to foment an
effective conversation among the project sponsors and partners.
Activities during this summary task include: interviews and examination of
database schemas and other documents; an initial joint design session to produce
a top-level domain model; production and frequent discussion of draft
documentation; and sign off by senior level project sponsors.
2.3.B Design and Implement Node Structure
2.4 MAJOR DELIVERABLE: DATABASE IMPLEMENTATION SCRIPTS. During this task,
Connect Business Analysts and Software Engineers will use the output of the
requirements analysis to design an object-oriented data model of OneServer
nodes. They will prepare a graphical representation and spreadsheets that
describe major data objects and fields. The designers will present the data
model to the project team, incorporate comments and write scripts to implement
the database with a small amount of test data.
This task includes a joint design session, where representatives from every
project team member participate in creating the data model.
2.4.a Design User Interface
2.5 MAJOR DELIVERABLE: OPERATIONAL HTML, ATTACHMENTS, TEMPLATES AND CGI. This
deliverable consists of code and graphical content that will bear primary
responsibility for creating the user experiences described in the business
scenarios.
2.5.a. Design and Test Interfaces
2.6. MAJOR DELIVERABLE: OPERATIONAL INTERFACES.
Perform System Integration and Testing
2.7 MAJOR DELIVERABLE: FUNCTIONAL WEB SITE.
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<PAGE>
Training
2.8 MAJOR DELIVERABLE: TRAINED, EFFECTIVE PROJECT TEAM. There will need to be
at least one period of formal testing as possible to the commencement of coding.
It will focus on the technical skills required by OneServer developers. This
session will focus primarily on the UI coders and cover HTML templates, CGI
scripting and operations on nodes. If required by the post-Entex Web-Purchase
System business model, Connect offers administrative and operations training
from its Stamford office.
2.8.a Plan Ongoing Administration and Maintenance
2.9 MAJOR DELIVERABLE: ADMINISTRATION PLAN AND BUSINESS PROCESSES
2.10 MAJOR DELIVERABLES: STATUS REPORTS, STATUS MEETINGS, UPDATED PROJECT
PLANS. Most of the tasks above hit on the activities of the Connect Project
Manager in one way or another. In addition to many informal activities related
to scheduling, arranging, documenting and otherwise "driving the problem," this
task includes the formal activities of issue tracking, risk management and
assessment by metrics. All of these become part of the project notebook.
This task includes monthly status meetings as well as weekly status reports. The
monthly meetings are intended to include CONNECT's executive sponsorship and
upper management as well as Entex project sponsors. The project notebook will
spell out exactly the contents of the weekly status reports.
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<PAGE>
2.11 RESOURCES SUMMARY
1. COST ESTIMATES. The table below summarizes days of work required by resource
and month as well as Cost Estimates for CONNECT'S services.
<TABLE>
<CAPTION>
Resource Days Estimate Cost
- -------------------------------------------------
<S> <C> <C>
Connect Project Manager [*] $ [*]
- -------------------------------------------------
Software Engineer [*] $ [*]
- -------------------------------------------------
Business Analyst [*] $ [*]
- -------------------------------------------------
TOTAL: $ [*]
- -------------------------------------------------
</TABLE>
2. LABOR RATES. THIS AGREEMENT IS A TIME AND MATERIAL CONTRACT. THE FOLLOWING
HOURLY RATES APPLY FOR ALL WORKED PERFORMED.
<TABLE>
<CAPTION>
Resource Unit Labor Rate
- ------------------------------------------------
<S> <C> <C>
Connect Project Manager hourly $187.00
- ------------------------------------------------
Software Engineer hourly $156.00
- ------------------------------------------------
Business Analyst hourly $150.00
- ------------------------------------------------
</TABLE>
3. OTHER RATES: EXCEPT AS OTHERWISE AGREED IN THIS AGREEMENT, CUSTOMER SHALL
REIMBURSE AT 10% OF ACTUAL COST FOR THE ALL OUT-OF-POCKET EXPENSES TO INCLUDE
MILEAGE AT CURRENT IRS STANDARDS AND TRAVEL TIME.
4. INVOICING. SUBJECT TO ANY ADJUSTMENT RESULTING FROM ANY CHANGES IN THE
SCOPE OF WORK. CONNECT SHALL INVOICE ACCORDING TO THE FOLLOWING PAYMENT
SCHEDULE.
<TABLE>
<CAPTION>
Delivery Delivery Date Amount
- -------------------------------------------------------------------
<S> <C> <C>
Ratified Software License Agreement 2/1/96 $[*]
- -------------------------------------------------------------------
Conceptual Design 3/25/96 $[*]
- -------------------------------------------------------------------
Design & Implement Node Structure 4/22/96 $[*]
- -------------------------------------------------------------------
Customer Application 6/6/96 $[*]
- -------------------------------------------------------------------
</TABLE>
5. CUSTOMER APPLICATION SOFTWARE OPTIONS.
A) CUSTOMER MAY PAY FOR MAINTENANCE OF THE CUSTOMER APPLICATION SOFTWARE AT A
FEE EQUAL TO 33% OF 1. ABOVE ON A YEARLY BASIS OR,
B) ON A TIME AND MATERIAL BASIS AT CONNECT'S CURRENT RATES FOR SUCH MAINTENANCE
SERVICES.
CONNECT CUSTOMER
Initial: /s/ P.C. Initial: /s/ R.A.
------------------------- -----------------------
Date: February 5, 1996 Initial:
---------------------------- -----------------------
Page 14
- -------------------
*Confidential Treatment requested
<PAGE>
SOFTWARE LICENSE AGREEMENT
EXHIBIT C
SUPPLEMENTAL TERMS AND CONDITIONS FOR MAINTENANCE ONLY
In the event Customer has initialed this Exhibit, then the following terms and
conditions will apply solely for yearly Maintenance services for Licensed
Software and Maintenance Updates and Releases thereto. The Fees for such
maintenance are outlined in Exhibit A of this Agreement.
SECTION 1 - DEFINITIONS
The following defined terms, and other capitalized terms defined herein, shall
govern the interpretation of this Exhibit. Capitalized terms that are used and
not otherwise defined shall have the meaning set forth in the Software License
Agreement.
1.1 "ERROR" means a material failure of the Licensed Software to conform to its
functional specifications as described in the applicable User Documentation,
which failure is demonstrable in the environment for which the Licensed Software
was designed and causes it to be inoperable, to operate improperly in the
environment for which it was designed, or produces results different from those
described in the applicable User Documentation. Failures resulting from
Customer's negligence or improper use of the Licensed Software, modifications or
damage to the Licensed Software by Customer, and Customer's use of the Licensed
Software on a CPU or with an operating system other than the Designated Platform
or in combination with any third party software not provided by CONNECT or
identified as compatible by CONNECT, are not considered Errors.
1.2 "ERROR CORRECTION" means either a modification or addition that, when made
or added to the Licensed Software, brings the Licensed Software into material
conformity with its functional specifications, or a procedure or routine that,
when observed in the regular operation of the Licensed Software, avoids the
practical adverse effect of such nonconformity.
1.3 "MAJOR ERROR" means any Error in the Licensed Software which (a) is
demonstrable in the environment for which it was designed that causes the
Licensed Software to halt, (b) causes cause data to be lost or destroyed, (c)
prevents the Licensed Software from being installed or executed on the properly
configured environment, or (d) prevents the user from running any major
subsystem of the Licensed Software.
1.4 "MINOR ERROR" means any Error which is demonstrable in the Licensed
Software that does not rise to the level of a Major Error.
1.5 "MAINTENANCE UPDATE" means an updated revision of the Licensed Software
that includes Error Corrections. Maintenance Updates are normally provided to
Customer on diskette or tapes.
SECTION 2- MAINTENANCE SERVICES
2.1 ERROR CORRECTION.
2.1 ERROR CORRECTION. The following defines CONNECT's obligation to
Customer to correct System Errors through the term of this Agreement:
Major Errors. CONNECT shall, within twenty-four (24) hours of the receipt of
- ------------
notice of any Major Error, initiate work to verify such Major Error. If the
Major Error is reproduced, then CONNECT will initiate work to correct such Major
Error within the same twenty-four (24) hour period and use its best efforts to
correct the Major Error and install such corrections onto the Licensed Software.
In the event that CONNECT is unable to correct any Major Error or provide a
Page 15
<PAGE>
Work-around for such Major Error within the twenty-four hour period, CONNECT
shall adhere to and follow The Escalation Plan for remedying such Major Error.
The Escalation Plan will contain specific milestones and other criteria for
timely resolution of such Major Errors. The parties agree to mutually design
such Escalation Plan. The parties will use their best efforts to design such
Escalation Plan in a timely manner and will attach such Escalation Plan as an
Exhibit to this Agreement. The Escalation Plan shall also contain provisions for
the resolution of Minor Errors, and for regularly scheduled meetings between the
parties for the timely resolution of any unresolved technical issues identified
by Customer or CONNECT. The Escalation Plan will be periodically amended as
deemed necessary and mutually agreed upon.
(b) Minor Errors:
Entex will report any non-major OneServer error to the CONNECT technical team.
Entex will be asked to document the process which causes the error to occur.
CONNECT and Entex will jointly prioritize the error as an A bug: a bug that
severely impacts the operation of the site, or a B bug: a bug that is noticed
but does not inhibit the operation of the system.
CONNECT will have 48 hours to try to recreate the bug. If the bug can be
recreated, CONNECT Tech Support will notify Development. Development will report
on the work that must be done to fix any A bug. It will then go back to Support
for prioritization. Within one week of an A bug report, Support will report back
to Entex the proposed fix schedule. For B bugs, Tech Support will log the bug
in the CONNECT OneServer bug tracking system for fix in the future release.
2.2 CUSTOMER RESPONSIBILITIES. Customer agrees to notify CONNECT in writing
promptly following the discovery of any Error. Further, upon discovery of an
Error, Customer agrees, if requested by CONNECT, to submit to CONNECT a listing
of output and any other data that CONNECT may require in order to reproduce the
Error and the operating conditions under which the Error occurred or was
discovered. In addition, if the Licensed Software is not hosted on a CONNECT
CPU, under the terms of a separate Hosting Agreement or Exhibit to the License
Agreement, Customer is responsible for procuring, installing, and maintaining
all equipment, telephone lines, communications interfaces, and other hardware
necessary for CONNECT to provide maintenance services to Customer.
2.3 TELEPHONE SUPPORT. At all times, on a five day basis, Monday through
Friday from 6.00 a.m. to 6:00 p.m. PST, CONNECT will make a member of its
maintenance staff available by telephone to Customer's designated support
coordinator (Customer's named employee responsible for liaison with CONNECT
relating to the Software Maintenance requested hereunder) to assist Customer's
use of the Licensed Software. Customer's System Administrator will be
responsible for daily maintenance of the Licensed Software per the applicable
Documentation. Additional extended service plans are available from CONNECT at
Customer's request.
2.4 FIELD MAINTENANCE. Upon request, CONNECT will provide field support and
maintenance services at any Customer field sites at CONNECT's then current
hourly field maintenance rates, together with reimbursement of applicable travel
and related expenditures if pre-approved in writing by Customer.
2.5 ADDITIONAL TRAINING. Subject to space availability, Customer may enroll
its employees in additional or advanced training classes at CONNECT's then
current classroom hourly rates.
2.6 EXCLUSIONS FROM MAINTENANCE SERVICES. Maintenance services under this
Exhibit do not include initial installation support, system administration
training, operations training, network management setup for the Licensed
Software, travel and living expenses for installation and training, file
conversion costs, optional products and services, directories, consulting
services, shipping charges, or the costs of any recommended hardware.
This Exhibit also does not cover maintenance services for any failure or defect
in the Licensed Software caused by any of the following:
(a) the use not in accordance with the Documentation, alteration, or damage of
the Licensed Software by Customer or persons other than CONNECT employees;
(b) modifications to the Licensed Software not made or authorized by CONNECT;
Page 16
<PAGE>
(c) Software other than the Licensed Software or Third Party Software;
(d) application interfacing between the Licensed Software and other software;
(e) use of Licensed Software (i) with hardware that has not been approved by
CONNECT, or (ii) on a CPU other than the Designated Platform; or
(f) Errors in any version of the Licensed Software other than the most recent
Update.
SECTION 3 - MAINTENANCE UPDATES/RELEASES
3.1 MAINTENANCE UPDATES. CONNECT WILL, from time to time, issue maintenance
updates of the Licensed Software containing Error Corrections. CONNECT will
provide Customer with one (1) copy of each Maintenance Update for each copy of
the Licensed Software being maintained under this Agreement, without additional
charge. CONNECT will provide reasonable assistance to Customer by telephone to
install and operate each Maintenance Update. Because maintenance updates are
cumulative, each update is functional only if Customer has obtained and
installed all prior applicable Updates. If Customer chooses not to install any
update, CONNECT will maintain back-level support of the previous version of the
released software.
3.2 RELEASES. During the term of this Exhibit C, and any period of extension,
at CONNECT'S then current rates, Customer shall be entitled to new releases of
the Licensed Software for a fifteen percent (15%) discount off the list price
offered to Customers who have not entered into a maintenance Exhibit with
CONNECT.
3.3 TRAVEL AND PER DIEM EXPENSES. Customer will pay, within thirty (30) days
of invoice, all reasonable travel and per-diem expenses of CONNECT personnel
related to any on-site support and maintenance of the Licensed Software pre-
approved by Customer in writing.
<TABLE>
<CAPTION>
CONNECT COMPANY: ENTEX Information Services, Inc.
"CUSTOMER" ----------------------------------
<S> <C> <C> <C>
By: /s/ Paul Commons By: /s/ Robert Auray, Jr.
---------------------------------- ------------------------------------------
Name: Paul Commons Name: Robert Auray, Jr.
-------------------------------- ----------------------------------------
Title: Vice President Finance Title: Executive Vice President and CFO
------------------------------- ---------------------------------------
Date: February 5, 1996 Date: February 2, 1996
------------------------------- ----------------------------------------
Telephone: (415) 254-4000 Telephone: 914-935-3600
-------------------------- -----------------------------------
Fax: (415) 254-4800 Fax: 914-935-3880
-------------------------------- -----------------------------------------
</TABLE>
Page 17
<PAGE>
EXHIBIT D
1. PORTIONS OF THE CUSTOMER APPLICATION SOFTWARE UNIQUE TO CUSTOMER PURSUANT TO
SECTION 2.1 OF THE AGREEMENT TO BE MUTUALLY AGREED NO LATER THAN SIXTY (60) DAYS
AFTER SIGNATURE OF THIS AGREEMENT.
Page 18
<PAGE>
CONNECT, INC.
SOFTWARE LICENSE AGREEMENT
This Software License Agreement ("AGREEMENT") is entered into as of March 26
1996____ (the "EFFECTIVE DATE") by and between Connect, Inc., a California
corporation, with principal offices at 515 Ellis Street, Mountain View, CA
94043-2242 ("CONNECT") and Union Underwear Company, Inc. a New York corporation,
------------------------------
with principal offices at One, Fruit of the Loom Drive, Bowling Green, Kentucky
-------------------------------------------------------
42102 ("Customer")
- -----
CONNECT and Customer are entering into a Software License Agreement for CONNECT
to license its OneServer(TM) Software and OneManager(TM) Software to Customer
and to sub-license certain third-party-owned software to Customer. In addition,
Customer may request CONNECT to develop additional Customer Application Software
for Customer's use with the CONNECT Software on a "work for hire" basis, as
described herein or as defined in Exhibit B (Scope of Work) attached to this
---------
Agreement, with Supplemental terms and conditions applying only to such Customer
Application Software and Maintenance Services as defined in Exhibit C ,with
----------
supplemental terms and conditions applying only to such services.
CONNECT and Customer, therefore, agree as follows:
SECTION 1 - DEFINITIONS
The following defined terms shall govern the interpretation of this Agreement:
1.1 "CONNECT SOFTWARE" means the OneServer Software and the OneManager
Software, and associated Documentation. The OneServer and OneManager products
are built on the ORACLE relational database, Fulcrum text search engine, RSA
encryption software and provide an application platform for on-line business
services over public and private networks. The OneServer platform functions as
a world-wide-web server, a private network server, or a combination of both.
OneServer Software offers a modular framework with access control, usage
tracking, and reference counts. Creation and maintenance of all OneServer data
types is possible either from a UNIX command line, from within common gateway
interface ("CGI") scripts, or from the OneManager client.. The OneServer
Software is based on a data type called a node model that is both relational and
highly structured. The standard ways to manage data, such as setting
permissions, retrieving and labeling, can be done on an entire node or on a part
of the data contained in the node. The node model allows a number of
operations, including a sophisticated querying method. SIGNIFICANT NODES FOR THE
PURPOSES OF CUSTOMER'S APPLICATION, INCLUDE THE FOLLOWING NODES,
PROCESSES, AND FEATURES:-
PRODUCT/SKU
ORDER/SHOPPING CART NODE
BULLETIN BOARD/EMAIL NODE
USER PROFILE NODE
CREDIT CARD AUTHORIZATION PROCESS
USER REGISTRATION PROCESS
TEMPLATE ENGINE
USAGE TRACKING
MULTI-THREADING CONCURRENT ACCESS TO ONESERVER DATABASE
1.2 "DESIGNATED PLATFORM" means the computer "Platform" (meaning a series of
computers that support the Licensed Software) and operating system software
located at the installed location designated on EXHIBIT A to this Agreement,
---------
which will be the only Platform and operating system on which, and the single
location at which, the Licensed Software is licensed for installation and use
under this Agreement. Notwithstanding anything herein to the contrary, CONNECT
agrees that the "development/staging server" Platform and the "OneServer with
transaction engine, ORACLE, Fulcrum, RSA" Platform may be in separate physical
locations. In the event that Customer designates a location change for a
Platform, CONNECT will provide 48 hour overlap service at the designated site
location.
1.3 "DOCUMENTATION" means any user documentation provided by CONNECT to
Customer for use in connection with the Licensed Software, including without
limitation an overview of the software, including a clear and detailed narrative
of the organization of the Licensed Software. Such documentation is
incorporated herein and made a part hereof.
<PAGE>
1.4 "LICENSED SOFTWARE" means the CONNECT SOFTWARE and the THIRD PARTY
SOFTWARE.
1.5 "TERRITORY" means the United States of America and its territories and
possessions.
1.6 "THIRD PARTY SOFTWARE" means the number of copies of the third party owned
software sublicensed to Customer by CONNECT as specified in Exhibit A.
---------
1.7 "CUSTOMER APPLICATION SOFTWARE" means software developed by CONNECT as a
"work made for hire "or "commissioned work" for Customer in conformance with
section 2.7 stated below and a mutually agreed Scope of Work outlined in Exhibit
-------
B, and supplemental terms and conditions solely relating to such services.
- -
SECTION 2 - LICENSE GRANTS AND OWNERSHIP
2.1 CONNECT SOFTWARE LICENSE. SUBJECT TO THE TERMS AND CONDITIONS OF THIS
AGREEMENT, CONNECT GRANTS CUSTOMER (1) A NON-EXCLUSIVE, PERPETUAL, NON-
TRANSFERABLE LICENSE, WITHOUT RIGHT OF SUBLICENSE, TO INSTALL AND EXECUTE THE
CONNECT SOFTWARE IN OBJECT CODE FORMAT, SOLELY ON THE DESIGNATED PLATFORM OR
OTHER SINGLE COMPARABLE PLATFORM AND SOLELY FOR REMOTE ACCESS.
2.2 [ DELETED ]
2.3 THIRD PARTY SOFTWARE LICENSE. Subject to the terms and conditions of this
Agreement, CONNECT grants to Customer a non-exclusive, perpetual , non-
transferable license, without right of sublicense, to use Third Party Software,
solely on the Designated Platform or other comparable platform, solely for the
permitted number of processors. Customer may not make any use of the Third
Party Software on its own or with any other program besides the CONNECT
Software. Customer acknowledges and agrees that CONNECT's licensors for such
Third Party Software are intended third party beneficiaries of the terms of this
Agreement relating to Customer's use of the Third Party Software and as such
have the right to enforce such terms directly against Customer in their own
names.
2.4 DOCUMENTATION LICENSE. Subject to the terms and conditions of this
Agreement, CONNECT grants Customer the right to copy and distribute three (3)
copies of the User Documentation for each copy of the CONNECT Software licensed
to Customer. Further User Documentation reproduction rights may be negotiated.
Customer may request Documentation in electronic format subject to current
availability from CONNECT.
2.5 ARCHIVAL COPIES; COPYING; MARKINGS. Customer may make one (1) copy of the
Licensed Software for archival purposes. Each copy of the Licensed Software and
User Documentation is subject to the provisions of this Agreement. Customer may
not copy the User Documentation except as stated in Section 2.4 or to replace
lost or destroyed copies. Additional copies of the User Documentation are
available from CONNECT for a separate fee. All titles, trademarks, copyright
notices and other proprietary markings must be reproduced on all permitted
copies of the Licensed Software and User Documentation, in whatever format, and
Customer will not cause or permit the removal of same.
2.6. OWNERSHIP OF LICENSED SOFTWARE. Except for the limited licenses and right
granted herein, all right, title, and interest in the Licensed Software, Third
Party Software and User Documentation, including without limitation all patent,
rights, copyrights, trade secrets, know-how, and other intellectual property
rights, will remain the property of CONNECT or CONNECT's licensors. All aspects
of the Licensed Software and Third Party Software, including without limitation
programs, methods of processing, specific design and structure of individual
programs and their interaction and unique programming techniques employed
therein, as well as screen formats, will remain the sole and exclusive property
of CONNECT or its licensors. Customer may not rent, lease, loan, sell or
otherwise distribute the Licensed Software, Third Party Software, or User
Documentation or any derivative works based thereon in whole or in part.
Customer acknowledges that the Licensed Software, Third Party Software and User
Documentation are proprietary and contain confidential and valuable trade
secrets of CONNECT and its licensors, which Customer agrees to safeguard as
provided for under Section 10.1 Confidentiality, below.
2.7 OWNERSHIP OF CUSTOMER APPLICATION SOFTWARE. Customer shall own and hold
title to the Customer Application Software as defined in Exhibit B and all
---------
reproductions, and modifications thereof or derivative works of the Customer
Application Software made by any person, including without limitation all patent
rights copyrights, trade secrets, know how and other intellectual property
rights. CONNECT acknowledges the Customer Application Software is a "work made
for hire" and "commissioned work" and CONNECT and its employees and agents
hereby assign all right, title, and interest therein to
Page 2
<PAGE>
Customer and agree to take any and all actions and execute all necessary
documents and agreements requested by Customer to effectuate such assignment.
The Customer Application Software will be delivered free and clear of any
claims, liens or agents of CONNECT, its employees and rights and third parties.
CONNECT, except as may be agreed to in writing by Customer, shall have no right
to disclose or use the Customer Application Software for any purpose whatsoever
and CONNECT acknowledges and agrees that such software and its source code and
documentation is proprietary to Customer and has been specifically developed for
Customer's use. CONNECT shall certify to Customer that it has no copies of the
software, source code, and documentation, other than those Customer agrees in
writing to permit CONNECT to retain. CONNECT agrees to deliver to Customer the
source code and object code versions and all documentation and programmer notes,
including an overview of the Customer Application Software, a description of its
organizations, operations and database structures, security systems, help
messages and error codes of the Customer Application Software or their
equivalents in any computer languages concurrently with the delivery of the
Customer Application Software on or before June 30, 1996. Customer acknowledges
that CONNECT shall be responsible only for the creation and delivery of Customer
Application Software written by CONNECT and that Customer will contract for any
supplemental application software from third parties independent of CONNECT.
CONNECT agrees that the representations and warranties contained in Section 7
and indemnification rights contained in section 8 apply to this provision.
2.8 REVERSE ENGINEERING. As to all Licensed Software provided to Customer in
object code format only, Customer agrees not to (i) reverse engineer, decompile,
or otherwise attempt to obtain the source code corresponding to such object
code, or (ii) modify or create derivative works of the Software except as
specifically permitted by CONNECT.
2.9 COMPETITIVE PRODUCTS. Nothing herein shall be construed to prevent either
party from developing or marketing other applications, software, or components
thereof, either alone or with others, which are comparable to or competitive
with those licensed under this Agreement, provided that such development and
marketing does not infringe the Proprietary Rights of the other party and does
not involve any unauthorized use of any Confidential Information of the other
party under this Agreement and has been reduced to writing in a mutually agreed
upon non-disclosure agreement. [*]
2.10 BACKUP HARDWARE. Customer may use a single back-up or replacement
Platform as a substitute for a Designated Platform server at any time, provided
- --------
that Customer provides CONNECT with written notice of such hardware
substitution, including the information required for the Designated Platform CPU
---
in Exhibit A within three (3) business days after such substitution.
---------
2.11 CUSTOMER'S ENHANCEMENTS OF CUSTOMER APPLICATION SOFTWARE
CONNECT agrees that any and all improvements, updates, revisions, enhancements,
modification s and additions to the Customer Application Software which may be
made from time to time hereafter by Customer or any of its employees,
independent contractors or agents shall not be deemed to be part of the Licensed
Software, and CONNECT hereby disclaims releases and agrees to transfer to
Licensee any and all rights and interests which such party may have or acquire
in and of Customer's Enhancements to the Customer Application Software other
than as expressly provided herein. Customer agrees that , if CONNECT shall have
performed all of its obligations hereunder strictly in accordance with the terms
thereof, Customer shall engage in good faith bargaining concerning any proposed
licensing to CONNECT from Customer of any of Customer's enhancement s to the
Customer Application Software or interests therein.
SECTION 3 - SOFTWARE MAINTENANCE/ UPDATES
3.1 LICENSED SOFTWARE TECHNICAL AND CUSTOMER SUPPORT. Customer, at its sole
option, may order yearly maintenance services with respect to the Licensed
Software pursuant to the supplemental terms and conditions of CONNECT's standard
Software Maintenance exhibit executed and attached hereto as Exhibit C.. The
---------
yearly fees for maintenance services are set forth in Exhibit A. Such fees
---------
shall include the right to updates of the Licensed Software.
Page 3
- ---------------------
*Confidential Treatment requested
<PAGE>
SECTION 4 - PAYMENT
4.1 LICENSE FEES. THE FEES FOR THE LICENSE AND OTHER SERVICES GRANTED UNDER
THIS AGREEMENT ARE SET FORTH ON EXHIBIT A. PAYMENT TERMS WILL BE NET 30
RECEIPT OF INVOICE, BUT TWO (2%) DISCOUNT IF PAYMENT RECEIVED BY MARCH 29,
1996. CUSTOMER SHALL WIRE ALL PAYMENTS DUE UPON EXECUTION OF THIS AGREEMENT TO
THE MERCHANT ACCOUNT LISTED BELOW. All other fees and charges will be invoiced
by CONNECT to Customer and must be paid in full within thirty (30) days after
receipt of invoice or as otherwise specified on EXHIBIT A to this Agreement.
---------
All payments are due in United States dollars. CONNECT reserves the right to
apply a service charge to any unpaid balance at the rate of 1% per month (but in
no event more than the maximum rate allowed by law) for any fee or charge not
paid within thirty (30) days after receipt of invoice. If Customer fails to
pay any invoice when due, CONNECT will have the right to institute collection
procedures to recover same, and Customer will be responsible for all reasonable
costs of collection incurred by CONNECT, including without limitation litigation
costs, reasonable attorneys' fees and court costs. CONNECT also reserves the
right to discontinue or suspend any services to Customer, including the
termination of this Agreement for Customer's failure to make timely payment of
applicable fees or charges, without penalty to CONNECT.
WIRING INSTRUCTIONS:
Bank of America
Attn.: Janet Velez
Sunnyvale Main Office 0041
444 South Mathilda Avenue
Sunnyvale, CA 94086
ABA: 121-000-0358
Telephone No.: (408) 991-8303
CONNECT Inc.
515 Ellis Street
Mountain View, CA 94043-2242
Merchant Account #: 00415-20739
4.2 TAXES. All sales, use, value-added, personal property, and other taxes
(other than CONNECT income tax), customs and duties arising out of the licenses
granted or services provided under this Agreement will be paid by Customer, or,
if CONNECT is required to pay any of the same, will be reimbursed to CONNECT by
Customer.
4.3 AUDIT. During the term of this Agreement, and for a period of two (2)
years thereafter, Customer will maintain books and records in connection with
its use and distribution of the Licensed Software pursuant to this Agreement in
sufficient detail to permit CONNECT to verify Customer's compliance with the
terms and conditions of this Agreement. CONNECT will have the right upon ten
business days prior written notice through its independent auditors to inspect
Customer's facilities (including its computers) and records to verify compliance
with the terms and conditions of this Agreement, including the amount of license
fees, and other amounts payable to CONNECT hereunder. Any such audit will be
conducted during regular business hours at Customer's offices and will not
interfere unreasonably with Customer's business activities. Audits will be made
no more than once annually. If an audit reveals that Customer has underpaid
fees and/or charges to CONNECT in excess of five percent (5%), then Customer
will pay CONNECT's reasonable costs of conducting the audit, in addition to the
underpaid amounts, plus interest as provided in Section 4.1 above.
SECTION 5 - TERM AND TERMINATION
5.1 TERM AND TERMINATION. This Agreement is effective until terminated. Upon
prior written notice, either party may terminate this Agreement if the other
party becomes insolvent, ceases doing business in the regular course, files a
petition in bankruptcy or is subject to the filing of an involuntary petition
for bankruptcy which is not rescinded within a period of forty-five (45) days,
or fails to cure a material breach of any term or condition of this Agreement
within thirty (30) days after receipt of written notice specifying such breach.
In addition, Customer may terminate this Agreement upon ninety (90) days prior
written notice to CONNECT.
5.2 EFFECT OF TERMINATION. Termination of this Agreement or any license
granted hereunder will not limit either party from pursuing any other remedies
available to it, including injunctive relief, nor will termination relieve
Customer of its obligation
Page 4
<PAGE>
to pay all fees and charges that accrued prior to the effective date of
termination. The following provisions will survive any termination of this
Agreement: Sections, 5.2, 7.3 , 8, 9, and sections 10.1 through 10.12,
inclusive.
5.3 RETURN OF LICENSED SOFTWARE. Upon termination of this Agreement or any
license granted hereunder, Customer will make no further use of the applicable
Licensed Software and Documentation. Within thirty (30) days after such
termination, Customer will either destroy or return to CONNECT the originals and
all copies of the Licensed Software and Documentation and any source code in
the possession or under the control of Customer and will certify to CONNECT that
Customer has complied with the foregoing requirements.
SECTION 6 - DELIVERY, TESTING, ACCEPTANCE
6.1 LICENSED SOFTWARE
6.1(a) DELIVERY. All initial deliverables of Licensed Software and
Documentation are listed in EXHIBIT A of this Agreement and will be delivered to
---------
the shipping destination on or about a mutually agreed shipping date not to be
later than March 31, 1996. CONNECT will deliver one copy of the Licensed
Software for each Designated Platform specified on EXHIBIT A to this Agreement
---------
in the form of a tape of the Licensed Software and related User Documentation.
Customer will have 15 days from receipt of the shipment to verify that all
deliverables have been received
6.1(b) ACCEPTANCE. Licensed Software will be accepted by Customer if it
performs substantially as described in this Agreement and the then current
applicable User Documentation. Failure of Customer to inform CONNECT of
acceptance or non-acceptance within the fifteen(15)) day period following
completed delivery will constitute acceptance.
6.2 CUSTOMER APPLICATION SOFTWARE. If Customer has requested that CONNECT
provide Customer Application Software, CONNECT will provide such software as
defined in accordance with any executed Scope of Work and Supplemental Terms and
Conditions relating to testing, acceptance, and delivery outlined in any
executed Exhibit B, applicable only to such Customer Application Software.
---------
SECTION 7 - LIMITED WARRANTY (LICENSED SOFTWARE ONLY)
7.1 RIGHT TO LICENSE. CONNECT warrants (1) that it has the right to license
the Licensed Software and user Documentation to Customer on the terms and
conditions set forth in this Agreement, and (2) that the Licensed Software
contains no viruses, or implanted bugs, or other programming designed by
Licensor to cause the Licensed Software to cease to properly function at
CONNECT's instruction. and (3) that CONNECT's execution of this Agreement, and
delivery of the Licensed Software, nor its performance of its obligations
hereunder shall violate or conflict with any agreement, statute, court order,
administrative order or ruling , regulation or other federal, state or local
law, , which is binding upon Licensor, nor the provisions of the Universal
Copyright Convention, (4) that CONNECT is a corporation which is duly
organized, validly existing and in good standing under the laws of the State of
California, and that CONNECT has all the necessary corporate power and
authority to grant the rights granted hereunder and to enter into this
Agreement, (5)CONNECT's services hereunder will be performed in a timely and
professional manner by qualified professionals and equal or exceed standards
generally observed in the software services industry, and (6) that CONNECT
understands the general purpose of electronic commerce Customer intends for the
Licensed Software and represents that the Licensed Software will meet such
general requirements.
7.2 LICENSED SOFTWARE. WARRANTY OBLIGATIONS CONNECT warrants (1) that, during
the period of ninety (90) days following delivery of the Licensed Software (the
"WARRANTY PERIOD"), the Licensed Software (other than as modified by Customer)
will perform substantially and materially in accordance with the provisions
hereof and CONNECT's then current applicable Documentation, when properly
installed and used on the applicable Designated Platform, and (2) CONNECT will
replace without charge tapes, diskettes or other media embodying the Licensed
Software that are defective under normal use and (3) CONNECT will at its expense
promptly correct defects and programming errors to keep the Licensed Software
operating in accordance with this warranty provision.
7.3 LIMITED WARRANTY. OTHER THAN THE WARRANTIES EXPRESSLY STATED ABOVE, THERE
ARE NO EXPRESS OR IMPLIED WARRANTIES RELATING TO THE LICENSED SOFTWARE, THE
DOCUMENTATION OR THE SERVICES COVERED BY THIS AGREEMENT, AND CONNECT EXPRESSLY
DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND NONINFRINGEMENT.
Page 5
<PAGE>
SECTION 8 - INDEMNIFICATION
8.1 INFRINGEMENT INDEMNIFICATION BY CONNECT. CONNECT agrees to indemnify, hold
harmless ,defend or settle any claim or suit for loss, liability, damage, or
expense , including without limitation attorney's fees (collectively "claims"),
brought against Customer, or pay any final judgment awarded by a court of
competent jurisdiction related to any claims to the extent such claims arise
from Customer's reasonable reliance upon CONNECT's limited warranty and
representations as provided for in sections 7.1 and 7.2, Customer's liability
based solely upon CONNECT's negligent errors or omissions, or any claims which
are based on a claim that the Licensed Software or Documentation furnished and
used within the scope of the licenses granted under this Agreement infringes any
third party's patent, copyright, trademark, trade secret, copyright, or
proprietary right or rights; provided that (i) Customer shall give CONNECT in
writing within five (5) days after receiving written notice of the claim or suit
giving rise to such infringement action, (ii) CONNECT has sole control of the
defense of such action and all related settlement negotiations, and (iii)
Customer provides CONNECT with all reasonable assistance, information and
authority necessary to carry forth such defense and settlement negotiations.
Reasonable "out-of-pocket" expenses incurred by Customer in providing such
assistance as may be requested by CONNECT will be reimbursed by CONNECT.
CONNECT's obligation to indemnify and defend Customer hereunder shall survive
termination or expiration of this Agreement.
8.2 [DELETED]
8.3 CONNECT OPTIONS. In the event that any such final judgment of infringement
is entered, or CONNECT believes is likely to be entered, CONNECT may at its sole
option and expense: (i) modify the Licensed Software and/or Documentation to be
non-infringing, (ii) functionally equivalent software reasonably acceptable to
Customer and related documentation or (iii) terminate the applicable license and
provide Customer a full refund of all fees paid hereunder.
8.4 ENTIRE LIABILITY. THE FOREGOING STATES THE ENTIRE LIABILITY AND OBLIGATION
OF CONNECT WITH RESPECT TO INFRINGEMENT OR ALLEGED INFRINGEMENT OF ANY KIND OF
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS BY THE LICENSED SOFTWARE OR
DOCUMENTATION OR ANY PART THEREOF.
8.5[DELETED]
SECTION 9 - LIMITATION OF LIABILITY
9.1 IN NO EVENT WILL CONNECT OR ITS LICENSORS BE LIABLE FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, REVENUES, DATA OR USE, WHETHER IN
AN ACTION IN CONTRACT OR TORT OR ANY OTHER FORM OF ACTION, EVEN IF CONNECT HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
9.2 CONNECT'S TOTAL LIABILITY FOR DAMAGES IN CONNECTION WITH THIS AGREEMENT,
WHETHER IN AN ACTION IN CONTRACT OR TORT OR ANY OTHER FORM OF ACTION, WILL IN NO
EVENT EXCEED THE AMOUNT OF FEES ACTUALLY PAID BY CUSTOMER TO CONNECT UNDER THIS
AGREEMENT.
9.3 No action may be brought by Customer for any dispute arising out of or in
connection with this Agreement at any time more than twelve (12) months after
the facts occurred giving rise to the cause of action or dispute.
9.4 Notwithstanding anything to the contrary; nothing in sections 9.1, and 9.2
shall in any way limit Customer's rights of indemnification hereunder.
SECTION 10 - GENERAL
10.1 CONFIDENTIALITY. Both parties acknowledge that, in the course of dealings
between them, each party will acquire information, about the other party, its
business activities and operations, its technical information and trade secrets,
of a highly confidential and proprietary nature. Each party will hold such
information, to be confidential. The parties further agree to hold the
Licensed Software and Documentation and the terms of this Agreement in strict
confidence. Neither party to this Agreement
Page 6
<PAGE>
shall use the name of the other in any publicity or advertising or promotional
materials without securing the prior written consent of the other party.
10.2 NOTICES. All notices, including notices of address change, given under
this Agreement must be in writing and will be deemed effective when delivered in
person or by a reputable "next day guaranteed" courier service, by facsimile (if
a confirming copy is dispatched by one of the other permitted means of dispatch
under this Section 10.2) after being delivered via certified mail, return
receipt requested, to the appropriate contact points and addresses shown below
in the signature block and/or Exhibit A.
---------
10.3 ASSIGNMENT AND SUCCESSORS. Except as specifically provided for herein,
neither party shall assign, transfer or convey any of its rights or licenses
under this Agreement without the other's prior written consent, which will not
be unreasonably withheld. Subject to the foregoing, this Agreement will bind
and inure to the benefit of each party's respective successors and permitted
assigns.
10.4 EXPORT. Customer will only export, re-export or otherwise transfer the
Licensed Software or Documentation to a country other than the United States in
full compliance with the provisions of the United States Export Administration
Act and the rules and regulations thereunder, and both the Licensed Software and
the Documentation will be deemed "technical data" for purposes thereof.
10.5 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the United States and the State of California, and
the parties expressly submit to such jurisdiction. The parties agree that the
United Nations Convention on Contracts for the International Sale of Goods
(1980) is specifically excluded from application to this Agreement
10.6 FORCE MAJEURE. Except for the obligation to make payments, nonperformance
of either party shall be excused to the extent that performance is rendered
impossible by strike, fire, flood, governmental acts, orders or restrictions,
failure of suppliers, or any other reason where failure to perform is beyond the
control and not caused by the negligence of the non-performing party.
10.7 [*]
10.8 WAIVER AND SEVERABILITY. The waiver by either party of a breach or right
under this Agreement will not constitute a waiver of any other or subsequent
breach or right. In the event any provision of this Agreement is held invalid
or unenforceable, the remaining provisions will continue in full force and
effect.
10.9 AMENDMENT. This Agreement may be amended or modified only in a written
document signed by an authorized representative of CONNECT and Customer.
10.10 CUSTOMER OFFER. This Agreement is binding upon execution by an
authorized representative of Customer and execution by an authorized
representative of CONNECT.
10.11 U.S. GOVERNMENT RESTRICTED RIGHTS. All software is provided with
RESTRICTED RIGHTS. Use, duplication, or disclosure by the Government is subject
to restrictions as set forth in subparagraph (c)(1)(ii) of the Rights in
Technical Data and Computer Software Clause at 252.227-7013 or subparagraphs
(c)(1)(2) of the Commercial Software--Restricted Rights at 48 CFR 52.227-19, as
applicable. Contractor/manufacturer is Connect, Inc., 515 Ellis Street,
Mountain View, CA 94043-2242.
10.12 INSURANCE. CONNECT shall maintain during the term hereof the following
insurance: workman's compensation, public liability, product liability, and
property damage against all loss, claims, demands, proceedings, damages, costs
and expenses for injuries or damages to any person or property arising out of or
in connection with this Agreement which are directly or indirectly caused by
CONNECT.
10.13 ENTIRE AGREEMENT. This Agreement, together with any executed exhibits
attached hereto, is the complete and exclusive statement of the agreement
between the parties and supersedes all previous and contemporaneous agreements,
proposals and communications, written or oral, with respect to this subject
matter. In particular, the preprinted terms and conditions of any
* Confidential treatment requested
<PAGE>
purchase order issued or to be issued by Customer with respect to Licensed
Software or related CONNECT services are hereby expressly and superseded by this
Agreement. A Customer purchase order that references this Agreement and that is
accepted by CONNECT may serve as a supplement to this Agreement with respect to
Customer's order of additional Licensed Software or related services; provided
that such purchase order will be effective only as to product or services
identification, quantity and price, and otherwise will be governed by terms and
conditions of this Agreement.
<TABLE>
<CAPTION>
CONNECT, INC. UNION UNDERWEAR COMPANY, INC.
<S> <C>
By: /s/ Thomas P. Kehler By: /s/ Charles m. Kirk
----------------------------- --------------------------
Name: Tom Kehler Name: Charles M.. Kirk
--------------------------- -----------------------
Title: CEO/President Title: Senior Vice President and Chief Information Officer
-------------------------- ---------------------------------------------------
Date: March 28, 1996 Date: March 26, 1996
----------------------------- -----------------------
Telephone: (415) 254-4000 Telephone: 502/781-6400
-------------- -------------------
Fax: (415) 254-4800 Fax: 502/781-6493
-------------- -------------------------
</TABLE>
Page 8
<PAGE>
SOFTWARE LICENSE AGREEMENT
EXHIBIT A
1. CONNECT'S ONESERVER SOFTWARE LICENSE
------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================================
LICENSE DESCRIPTION MACHINE LIST PRICE DISCOUNT AMOUNT IF EXTENDED AMOUNT IF
COMMITTED BY 3/29/96 COMMITTED BY 3/29/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Development/ Staging Server SPARC 20 $ [ * ] $ [ * ] $ [ * ]
(Up to 2 Processors)
- -----------------------------------------------------------------------------------------------------------------------------------
OneServer with Transaction SPARC 1000 $ [ * ] $ [ * ] $ [ * ]
Engine, Oracle, Fulcrum, (Up to 4 Processors)
RSA
- -----------------------------------------------------------------------------------------------------------------------------------
OneServer Web Component SPARC 20 $ [ * ] $ [ * ] $ [ * ]
Server (Up to 2 Processors)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS $ [ * ] $ [ * ] $ [ * ]
===================================================================================================================================
</TABLE>
2. SOFTWARE MAINTENANCE AND SUPPORT SERVICES FEE
---------------------------------------------
(a) Fee for Licensed Software Maintenance Services
as described in Exhibit C the Software Maintenance
---------
Addendum (exclusive of per diem and out-of-pocket
expenses) $ [ * ]
(b) Fee for Update Releases as described in Exhibit C the
---------
Software Maintenance Addendum (exclusive of per diem
and out-of-pocket expenses) $ [ * ]
TOTAL SOFTWARE MAINTENANCE AND SUPPORT FEES $[ * ]
===========
Maintenance is offered at 18% of the license price which half is for License
Software Maintenance Service and the other half is for Optional Update
Releases. Subject to any reduction by CONNECT per section 10.7 of the Agreement,
the parties agree that CONNECT will not increase the Maintenance and Suport
Services Fee prior to the third anniversary date of the Agreement and thereafter
CONNECT may increase such fees to account for inflation no more than once per
agreement year and not to exceed the Consumer Price Index Average for all Urban
Consumers for the Nashville, TN Metropolitan Statistical Area (base year 1982-
4=100) published by the Bureau of Labor Statistics of the U.S. Department of
Labor. In addition, Customer may elect not to pay the update release portion of
such fees,commencing upon renewal of the second yearly maintenance period subect
to section 3.1 of Exhibit C, the Software Maintenance Addendum.
3. ONESERVER TRAINING
------------------
The following standard training rates apply for training. CONNECT will invoice
according to the payment provision listed on this Agreement and as services are
rendered by CONNECT.
<TABLE>
<CAPTION>
======================================================================================
NUMBER OF DAYS PER COURSE LIST PRICE PER STUDENT
- --------------------------------------------------------------------------------------
<S> <C> <C>
Client Administration Course 2 $ 700.00
- --------------------------------------------------------------------------------------
Host Administration Course 2 $ 700.00
- --------------------------------------------------------------------------------------
Developer Course 5 $1,750.00
- --------------------------------------------------------------------------------------
</TABLE>
4. DESIGNATED PLATFORM AND INSTALLATION LOCATION
---------------------------------------------
a. Brand and model: Sparc 20, Sparc 1000, Sparc 20
------------------------------
b. RAM and CPU
c. Designated Platform Operating System: As specified by Customer
in writing.
d. Designated Platform Location: As notified in writing by Customer
from time to time.
* Confidential treatment requested.
Page 9
<PAGE>
5. PAYMENT ATTACHMENT
------------------
See payment schedule listed on Attachment A to this Exhibit A attached hereto
and incorporated herein.
CONNECT, INC UNION UNDERWEAR COMPANY,
------------------------
Initial: /s/ Connect, Inc. Initial: /s/ Union Underwear Company
----------------- ---------------------------
Date: March 28, 1996 Date: March 26, 1996
-------------- --------------
ATTACHMENT A TO EXHIBIT A
<TABLE>
<CAPTION>
ITEM DESCRIPTION MACHINE AMOUNT DUE PAYMENT
DUE DATE
<S> <C> <C> <C>
Development/ Staging Server SPARC 20 $ [ * ] March 29, 1996
(Up to 2
Processors)
OneServer w/Transaction SPARC 1000 $ [ * ] March 29, 1996
Engine, Oracle, Fulcrum, (Up to 4
RSA Processors)
OneServer Web Component SPARC 20 $ [ * ] March 29, 1996
Server (Up to 2
Processors)
TOTAL SOFTWARE $ [ * ]
Additional 2% Software $ [ * ] March 29, 1996
Discount if Payment is
Transferred via wire by
3/29/96
Software Maintenance and MAINTENANCE: (a) [ * ] March 29, 1996
Support calculated as 18%
of discounted of $[ * ].
UPDATES: (b) [ * ] March 29, 1996
TOTAL MAINTENANCE $ [ * ]
CONNECT Professional $ [ * ] Billed two
Services as referenced on weeks net 30
Exhibit B attached hereto. after receipt
of invoice
</TABLE>
*Confidential treatment requested.
Page 10
<PAGE>
SOFTWARE LICENSE AGREEMENT
EXHIBIT B
SCOPE OF WORK AND SUPPLEMENTAL TERMS AND CONDITIONS FOR
CUSTOMER APPLICATION SOFTWARE ONLY
In the event both Customer and CONNECT have executed this Exhibit B, then the
---------
following terms and conditions will apply to the development of Customer
Application Software:
1.1 ACCEPTANCE TEST PLAN. After CONNECT completes development of the Customer
Application Software such that CONNECT believes it substantially conforms with
the Scope of Work outlined in this Exhibit, CONNECT will prepare and present to
Customer an Acceptance Test Plan on or before June 30, 1996, specifying testing
and acceptance procedures for the Customer Application Software. The Acceptance
Test Plan when accepted by Customer will enable CONNECT and Customer to verify
on or before June 30, 1996 that the Customer Application Software performs
substantially in accordance with the specifications contained in the Scope of
Work.
1.2 ACCEPTANCE TESTING BY CONNECT. After Customer approves the Acceptance Test
Plan, CONNECT will follow the Acceptance Test Plan to establish that the
Customer Application Software, as tested or after further development and
testing by CONNECT, conforms to the Scope of Work. After CONNECT is satisfied
that the Customer Application Software conforms to the Scope of Work, CONNECT
will deliver the Customer Application Software together with CONNECT's written
results of its testing, to Customer.
1.3 ACCEPTANCE TESTING BY CUSTOMER. Customer will have ten (10) business days
to test the Customer Application Software using the Acceptance Test Plan.
Customer shall perform the tests contained in the Acceptance Test Plan and
report the results to CONNECT in the format requested by CONNECT. CONNECT will
provide to Customer, its representatives and consultants such documentation and
assistance as may reasonably be needed by Customer to perform such testing. If
Customer determines at any time during the acceptance testing period that the
Customer Application Software does not conform to the Scope of Work or otherwise
demonstrates Major Errors, Customer shall notify CONNECT of the nature and
specifics of the nonconformity or Major Errors. Customer shall also notify
CONNECT of all Minor Errors, which CONNECT will use reasonable efforts to
correct in a timely and prompt manner. For the purposes of this exhibit, "Major
Error" means any system error in the Customer Application Software which (a) is
demonstrable on either the host computer installed at CONNECT's facility or on
the Customer's computer system and which in the environment for which it was
designed that causes the Customer Application Software to halt, (b) causes or is
likely to cause data to be lost or destroyed, (c) prevents the Customer
Application Software from being installed or executed on the host computer in a
properly configured environment or consistently prevents the Customer
Application Software from running or being accessed by a substantial number of
client computer systems, or (d) prevents the user from running any major
subsystem of the Customer Application Software. "Minor Error" means any system
error which is demonstrable in the Customer Application Software which does not
rise to the level of a Major Error. Customer's failure to provide CONNECT with
a written acceptance or written statement of nonconformity or Major Errors
within the 10 business day period shall be deemed an acceptance of the Customer
Application Software.
1.4 CHANGES IN THE SCOPE OF WORK. Any changes in the Customer Application
Software after Customer's approval of the Scope of Work must be requested by
Customer in writing. Upon CONNECT's receipt of the change order request, CONNECT
will review the impact of the requested change on the development project,
including possible revisions to the Scope of Work and/or completed programming,
and reassess the estimated charges for development of the Customer Application
Software as so changed. CONNECT reserves the right not to accept changes
because of possible cost, feasibility factors, resource limitations, or
potential interference with the performance of the Customer Application
Software. Upon completion of its review, CONNECT will submit proposed changes
to the Scope of Work and any additional charges to Customer for approval. If
Customer approves the changes and any additional charges, Customer shall provide
CONNECT with written notice of the approval and payment of the additional
charges. Such charges, as outlined in section 2.2, will remain at the hourly
rate referred to therein. If Customer does not approve the proposed changes,
CONNECT shall not be responsible for implementation of the proposed changes.
1.5 LIMITED WARRANTY (FOR CUSTOMER APPLICATION SOFTWARE ONLY. CONNECT warrants
that for a period of ninety(90) days after Customer acceptance; the Customer
Application Software, when integrated with the Licensed
Page 11
<PAGE>
Software and operated on the Designated Platform for which it is licensed, will
perform substantially in accordance with the Scope of Work. CONNECT will correct
all Major Errors identified by Customer prior to or during this warranty period,
subject to CONNECT being able to reproduce the defect or error. CONNECT does not
warrant that the Customer Application Software will meet any of Customer's
particular requirements, or that operation of the Customer Application Software
will be error-free.
1.6 WARRANTY OBLIGATIONS. CONNECT's sole obligations are: (i) to replace
without charge tapes, diskettes or other media embodying the Customer
Application Software that are defective under normal use, and (ii) to use
reasonable commercial efforts to correct any Major Error as defined in Section
1.3 above reported by Customer to CONNECT in the Customer Application Software
that is reproducible by CONNECT on a similarly configured CPU and operating
system. If, after using reasonable commercial efforts, CONNECT is unable to
make the Customer Application Software operate as warranted, Customer will be
entitled, upon return of all copies of the Customer Application Software, to a
full refund of all fees paid to CONNECT for the Customer Application Software.
1.7 LIMITED WARRANTY. OTHER THAN THE WARRANTIES EXPRESSLY STATED ABOVE, THERE
ARE NO EXPRESS OR IMPLIED WARRANTIES RELATING TO THE CUSTOMER APPLICATION
SOFTWARE, , OR RELATED SERVICES, AND CONNECT EXPRESSLY DISCLAIMS ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT.
2. SCOPE OF WORK. (TO BE NEGOTIATED)
2.1. DELIVERY SCHEDULE. (TO BE NEGOTIATED)
2.2. LABOR RATES
This Agreement is a Time and Material Contract. The following hourly rates apply
for all worked performed. CONNECT will invoice every two weeks and Customer
shall pay net 30 after receipt of invoice.
<TABLE>
<CAPTION>
Resource Unit Labor Rate
<S> <C> <C>
Project Manager/Senior Engineer hourly $187.00
</TABLE>
2.3. OTHER RATES
Customer shall be responsible for all reasonable travel, living, and out-of-
pocket expenses incurred in the performance of services pursuant to this
Agreement.
CONNECT, INC. UNION UNDERWEAR COMPANY, INC.
-----------------------------
Initial: /s/ Connect, Inc. Initial: /s/ Union Underwear Company, Inc.
----------------- --------------------------------
Date: March 28, 1996 Date: March 26, 1996
-------------- --------------
Page 12
<PAGE>
SOFTWARE LICENSE AGREEMENT
EXHIBIT C
SUPPLEMENTAL TERMS AND CONDITIONS FOR MAINTENANCE ONLY
In the event Customer has initialed this Exhibit, then the following terms and
conditions will apply solely for yearly Maintenance services for Licensed
Software and Maintenance Updates and Releases thereto. The Fees for such
maintenance are outlined in Exhibit A of this Agreement. THIS EXHIBIT DOES NOT
---------
APPLY TO MAINTENANCE OR SUPPORT SERVICES FOR CUSTOMER APPLICATION SOFTWARE WHICH
MAY BE REQUESTED FROM CONNECT UNDER A SEPARATE EXHIBIT OR AGREEMENT.
SECTION 1 - DEFINITIONS
The following defined terms, and other capitalized terms defined herein, shall
govern the interpretation of this Exhibit. Capitalized terms that are used and
not otherwise defined shall have the meaning set forth in the Software License
Agreement.
1.1 "ERROR" means a material failure of the Licensed Software to conform to its
functional specifications as described in the applicable User Documentation,
which failure is demonstrable in the environment for which the Licensed Software
was designed and causes it to be inoperable, to operate improperly in the
environment for which it was designed, or produces results different from those
described in the applicable User Documentation. Failures resulting from
Customer's negligence or improper use of the Licensed Software, modifications or
damage to the Licensed Software by Customer, and Customer's use of the Licensed
Software on a CPU or with an operating system other than the Designated Platform
or in combination with any third party software not provided by CONNECT or
identified as compatible by CONNECT, are not considered Errors.
1.2 "ERROR CORRECTION" means either a modification or addition that, when made
or added to the Licensed Software, brings the Licensed Software into material
conformity with its functional specifications, or a procedure or routine that,
when observed in the regular operation of the Licensed Software, avoids the
practical adverse effect of such nonconformity.
1.3 "MAJOR ERROR" means any Error in the Licensed Software which (a) is
demonstrable in the environment for which it was designed that causes the
Licensed Software to halt, (b) causes cause data to be lost or destroyed, (c)
prevents the Licensed Software from being installed or executed on the properly
configured environment, or (d) prevents the user from running any major
subsystem of the Licensed Software.
1.4 "MINOR ERROR" means any Error which is demonstrable in the Licensed
Software that does not rise to the level of a Major Error.
1.5 "MAINTENANCE UPDATE" means an updated revision of the Licensed Software
that includes Error Corrections. Maintenance Updates are normally provided to
Customer on diskette or tapes.
SECTION 2- MAINTENANCE SERVICES
2.1 ERROR CORRECTION.
(a) Major Errors. CONNECT shall, within twenty four (24)) hours of the receipt
-------------
of written notice of any Major Error, via email or fax initiate work to verify
such Major Error. If the Major Error is reproduced, then CONNECT will initiate
work to correct such Major error within the twenty four (24) hour period and
use its best efforts to correct the Major Error, including any necessary
modification to the Licensed Software. In the event that CONNECT is unable to
provide correction for any Major Error within such twenty four (24)) hour
period, Customer shall have the right to request written assurances from CONNECT
that it is using its best efforts to provide correction for the Major Error and
is likely to do so within a commercially reasonable time. In the event that
CONNECT is unable to correct any Major Error within sixty (60) calendar days
after receipt of notice of the Major Error,
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Customer shall have the right to terminate this Agreement, including all
licenses, rights, and obligations hereunder and receive a full refund of
maintenance fees paid hereunder
(b) Minor Errors. CONNECT may or may not at its sole discretion correct Minor
--------------
Errors.
2.2 CUSTOMER RESPONSIBILITIES. Customer agrees to notify CONNECT in writing
promptly following the discovery of any Error. Further, upon discovery of an
Error, Customer agrees, if requested by CONNECT, to submit to CONNECT a listing
of output and any other data that CONNECT may require in order to reproduce the
Error and the operating conditions under which the Error occurred or was
discovered. In addition, if the Licensed Software is not hosted on a CONNECT
CPU, under the terms of a separate Hosting Agreement or Exhibit to the License
Agreement, Customer is responsible for procuring, installing, and maintaining
all equipment, telephone lines, communications interfaces, and other hardware
necessary for CONNECT to provide maintenance services to Customer.
2.3 TELEPHONE SUPPORT. At all times, on a five day basis, Monday through
Friday from 7.00 a.m. to 6:00 p.m. PST, CONNECT will make a member of its
maintenance staff available by telephone to Customer's designated support
coordinator (Customer's named employee responsible for liaison with CONNECT
relating to the Software Maintenance requested hereunder) to assist Customer's
use of the Licensed Software. Customer's System Administrator will be
responsible for daily maintenance of the Licensed Software per the applicable
Documentation. Additional extended service plans are available from CONNECT at
Customer's request.
2.4 FIELD MAINTENANCE. Upon request, CONNECT will provide field support and
maintenance services at any Customer field sites at CONNECT's then current
hourly field maintenance rates, together with reimbursement of applicable travel
and related expenditures, at CONNECT's cost.
2.5 ADDITIONAL TRAINING. Subject to space availability, Customer may enroll
its employees in additional or advanced training classes at CONNECT's hourly
rates listed on Exhibit A of this Agreement.
---------
2.6 EXCLUSIONS FROM MAINTENANCE SERVICES. Maintenance services under this
Exhibit do not include initial installation support, system administration
training, operations training, network management setup for the Licensed
Software, travel and living expenses for installation and training, file
conversion costs, optional products and services, directories, consulting
services, shipping charges, or the costs of any recommended hardware.
This Exhibit also does not cover maintenance services for any failure or defect
in the Licensed Software caused by any of the following:
(a) the improper use, alteration, or damage of the Licensed Software by
Customer or persons other than CONNECT employees;
(b) modifications to the Licensed Software not made or authorized by CONNECT;
(c) Software other than the Licensed Software;
(d) application interfacing between the Licensed Software and other software;
(e) use of Licensed Software (i) with hardware that has not been approved by
CONNECT, or (ii) other than the Designated Platform; or
(f) Errors in any version of the Licensed Software other than the most recent
Update.
SECTION 3 - MAINTENANCE AND MAJOR RELEASES AND RELATED SUPPORT
3.1 MAINTENANCE RELEASES. CONNECT may, from time to time, issue maintenance
updates of the Licensed Software containing Error Corrections. CONNECT will
provide Customer with one (1) copy of each Maintenance Update for each copy of
the Licensed Software being maintained under this Agreement, without additional
charge. CONNECT will provide reasonable assistance to Customer by telephone to
install and operate each Maintenance Update. CONNECT provides both major and
minor maintenance releases. Major releases are bundled with documentation and
shipped to customer. For maintenance release, Customer will be notified that the
release is available and CONNECT will ship the release. Major releases are
numbered as 1.2,
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1.3, or 2.0, 2.1. Maintenance releases will be numbered 1.1.1 or 1.1.2 or 2.0.1.
or 2.11. Major releases will include enhancements and bug fixes, and will be on
a release cycle. With each major release new documentation will be shipped along
with software releases. Each software module will be replaced at that time.
Upgrade scripts will be provided if required to migrate from the prior release
to the new release. CONNECT will not support upgrade scripts from other than the
current release to the new release. Maintenance releases will be for bug fixes
only, and will be scheduled by CONNECT. CONNECT will notify customers of each
new maintenance release. Because maintenance updates are cumulative, the
Customer may not apply only a partial update. [EXAMPLE] 1.1.1 is a bug fix for
1.1 and can replace the binaries for 1.1, Release 1.1.2 will include all bug
fixes done for 1.1.1 and the new fixes for 1.1.2.] Customer may not selectively
choose which fixes to apply. Release documentation will accompany all
maintenance releases. CONNECT will support the current release until superseded
and replaced. The previous release will be supported for six months after the
release of the current release, however such support will be for priority 1. bug
fixes only on a commercially reasonable basis and subject to availability of
support staff.
3.2. DISCONTINUATION OF SERVICES. Notwithstanding anything herein to the
contrary, Customer shall have the right after the first agreement year to
discontinue maintenance and support services herunder, without terminating the
underlying license for the Licensed Software, on 30 days prior written notice to
CONNECT.
CONNECT, INC. UNION UNDERWEAR COMPANY, INC.
-----------------------------
By: /s/ Thomas P. Kehler By: /s/ Charles M. Kirk
-------------------- -------------------
Name: Tom Kehler Name: Charles M. Kirk
-------------------- -------------------
Title: CEO/President Title: Senior VP & CIO
-------------------- -------------------
Date: March 28, 1996 Date: March 26, 1996
-------------------- -------------------
Telephone: (415) 254-4000 Telephone: 502/781-6400
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Fax: (415) 254-4800 Fax: 502/781-6493
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EXHIBIT 10.11
CONNECT, INC
Software License Agreement
This Software License Agreement ("Agreement") is entered into as of November 7,
1995 (the "Effective Date") by and between CONNECT, Inc., a California
corporation, with principal offices at 515 Ellis Street, Mountain View, CA
94043-2242 ("CONNECT") and PhotoDisc Inc., a Washington corporation, with
principal offices at 2013 Fourth Avenue, Fourth Floor, Seattle, Washington 98121
("Customer").
Background
A. Customer wishes to license certain computer programs and related
documentation from CONNECT for use in Customer's operations.
B. CONNECT wishes to license those computer programs and related
documentation to Customer.
Now Therefore, in consideration of their mutual promises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows.
Section 1 - Definitions
The following defined terms, and other capitalized terms defined herein, shall
govern the interpretation of the Agreement:
1.1 "CONNECT Software" means the OneServer Software and the OneManager
Software.
1.2 "Designated Platform" means the computer central processing unit
("CPU") and operating system software located at the installed location
designated on Exhibit A to this Agreement, which will be the only CPU and
operating system on which, and the only location at which, the CONNECT Software
is licensed for installation and use under this Agreement, except as otherwise
provided below. Customer and CONNECT agree and acknowledge that the Designated
Platform and the CPUs designated as alternates on Exhibit A does and is required
to conform to the standard of a four Concurrent User class license with respect
to CONNECT Software and Third Party Software. Customer may request additional
processors, or a change of CPU, subject to the payment of additional license
fees if the Designated Platform CPU is in a different CONNECT or third party
software license class. If Customer has entered into a Hosting Agreement with
CONNECT, during the term of the Hosting Agreement, the Designated Platform shall
be the CPU and operating system software provided by CONNECT pursuant to the
Hosting Agreement.
1.3 "Documentation" means any User Documentation provided with the
Licensed Software.
1.4 "Licensed Software" means the CONNECT Software and the Third Party
Software.
1.5 "OneManager Software" means the number of copies of CONNECT owned
software specified in section 1.1.2 of Exhibit A.
1.6 "OneServer Software" means the number of copies of CONNECT owned
software specified in section 1.1.1 of Exhibit A.
1.7 "Third Party Software" means the number of copies of the third party
owned software sublicensed to Customer by CONNECT as specified in section 1.3 of
Exhibit A.
Section 2 - License Grants and Ownership
2.1 CONNECT Software License. Subject to the terms and conditions of
this Agreement, CONNECT grants Customer (1) a non-exclusive, non-transferable
license, without right of sublicense, to install and execute the OneServer
Software in object code format, solely on the Designated Platform and (2) a non-
exclusive, non-transferable license, without right of sublicense, to install and
use the OneManager Software in object code format on the Designated Platform or
any other single CPU.
2.2(deleted)
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2.3 Third Party Software License. Subject to the terms and conditions of
this Agreement, CONNECT grants to Customer a non-exclusive, non-transferable
license, without right of sublicense, to use the Third Party Software, solely on
the Designated Platform. Customer may not make any use of the Third Party
Software on its own or with any other program besides the CONNECT Software and
the software licensed pursuant to the Custom Application Development Agreement
of even date herewith. Customer acknowledges and agrees that CONNECT's licensors
for such Third Party Software are intended third party beneficiaries of the
terms of this Agreement relating to Customer's use of the Third Party Software
and as such have the right to enforce such terms directly against Customer in
their own names.
2.4 Documentation License. Subject to the terms and conditions of this
Agreement, CONNECT grants Customer the right to copy and distribute six (6)
copies of the Documentation for each copy of the OneServer software licensed to
Customer.
2.5 Archival Copies; Copying; Markings. Customer may make one (1) copy
of the Licensed Software for archival purposes. Each copy of the Licensed
Software and Documentation is subject to the provisions of this Agreement.
Customer may not copy the Documentation except as stated in Section 2.4 or to
replace lost or destroyed copies. Additional copies of the Documentation are
available from CONNECT for a separate fee. Customer shall report any lost
copies of the Documentation to CONNECT. All titles, trademarks, copyright
notices and other proprietary markings must be reproduced on all permitted
copies of the Licensed Software and Documentation, and Customer will not cause
or permit the removal of same.
2.6 Ownership. Except for the limited licenses and rights granted
herein, all rights, title, and interest in the Licensed Software, Third Party
Software and Documentation, including without limitation copyright, will remain
the property of CONNECT or CONNECT's licensors. All aspects of the Licensed
Software and Third Party Software, including without limitation programs,
methods of processing, specific design and structure of individual programs and
their interaction and unique programming techniques employed therein, as well as
screen formats, will remain the sole and exclusive property of CONNECT or its
licensors. Customer may not rent, lease, loan, sell or otherwise distribute the
Licensed Software, Third Party Software, Documentation or any derivative works
based thereon in whole or in part. Customer shall not reverse engineer,
decompile or otherwise prepare any derivative works of the Licensed Software or
Third Party Software. Customer acknowledges that the Licensed Software, Third
Party Software and Documentation are proprietary and contain confidential and
valuable trade secrets of CONNECT and its licensors, which Customer agrees to
safeguard as provided for under Section 11.1 Confidentiality, below. The
foregoing requirements will not prohibit the licensed use of the Licensed
Software in the intended operational environment where the operation of same may
be observed by persons other than Customer.
2.7 Updates. All updates, revisions, and new releases of the Licensed
Software and Documentation as may be made available by CONNECT to Customer are
subject to the provisions of this Agreement.
2.8 Backup Hardware. Customer may use a single back-up or replacement
CPU as a substitute for a Designated Platform CPU at any time, provided that
Customer provides CONNECT with written notice of such hardware substitution,
including the information required for the Designated Platform CPU in Exhibit A
within seven (7) days of such replacement.
2.9 The parties agree that they shall finalize and enter into a Hosting
Agreement and Custom Application Development Agreement in the forms currently
circulated among the parties, with changes agreed to on November 7, 1995 and
such additional changes as the parties agree.
Section 3 - Software Maintenance Services
3.1 Licensed Software Technical and Customer Support. Customer, at its
sole option, within ninety days after the execution of this agreement may order
maintenance services with respect to the Licensed Software pursuant to the terms
and conditions of CONNECT's standard Software Maintenance Addendum. The fee for
maintenance services, if elected by Customer, are set forth in Section 3 of
Exhibit A.
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Section 4 - Payment
4.1 License Fees. The fees for the licenses granted under this Agreement
are set forth on Exhibit A to this Agreement. Such fees and charges will accrue
upon execution by Customer of this Agreement or, with respect to future orders,
a supplement to this Agreement. All such fees and charges will be invoiced by
CONNECT to Customer and must be paid in full within thirty (30) days after the
invoice date or applicable date due under Exhibit A or as otherwise specified on
Exhibit A to this Agreement. All payments are due in United States dollars.
CONNECT reserves the right to apply a service charge to the undisputed unpaid
balance at the rate of 1.5% per month (but in no event more than the maximum
rate allowed by law) for any undisputed fee or charge not paid within thirty
(30) days after the invoice date. If Customer fails to pay any undisputed
invoice when due, CONNECT will have the right to institute collection or other
due procedures to recover same, and Customer will be responsible for all costs
of collection incurred by CONNECT, including without limitation litigation
costs, reasonable attorneys' fees and court costs. CONNECT also reserves the
right to discontinue or suspend any services to Customer, including the
termination of this Agreement for Customer's failure to make timely payment of
undisputed applicable fees or charges, without penalty to CONNECT.
4.2 Taxes. All sales, use, value-added, personal property, and other
taxes, customs and duties (other than income tax), arising out of the licenses
granted or services provided under this Agreement will be paid by Customer, or,
if CONNECT is required or chooses to pay any of the same, will be reimbursed to
CONNECT by Customer.
4.3 Audit. During the term of this Agreement, and for a period twelve
(12) months thereafter, Customer will maintain books and records in connection
with its use and distribution of the Licensed Software pursuant to this
Agreement in sufficient detail to permit CONNECT to verify Customer's compliance
with the terms and conditions of this Agreement. CONNECT will have the right
with two (2) business days prior written notice thereof through its independent
auditors to inspect Customer's facilities (including computers) and records to
verify compliance with the terms and conditions of this Agreement, including the
amount of license fees, and other amounts payable to CONNECT hereunder. Any
such audit will be conducted during regular business hours at Customer's offices
and will not interfere unreasonably with Customer's business activities. Audits
will be made no more than once annually.
Section 5 - Term and Termination
5.1 Term and Termination. This Agreement is effective until terminated.
Upon prior written notice, either party may terminate this Agreement if the
other party becomes insolvent, ceases doing business in the regular course,
files a petition in bankruptcy or is subject to the filing of an involuntary
petition for bankruptcy which is not rescinded within a period of forty-five
(45) days, or fails to cure a material breach of any term or condition of this
Agreement within thirty (30) days of receipt of written notice specifying such
breach. In addition, Customer may terminate this Agreement upon ninety (90)
days prior written notice to CONNECT.
5.2 Effect of Termination. Termination of this Agreement or any license
granted hereunder will not limit either party from pursuing any other remedies
available to it, including injunctive relief, nor will termination relieve
Customer of its obligation to pay all fees and charges that accrued prior to the
effective date of termination. However, notwithstanding the previous sentence,
should Customer fail to accept Phase One of the Statement of Work of the Custom
Application Development Agreement if any, then customer may terminate this
Agreement for a full refund of all fees paid under this Agreement and Software
Maintenance agreement of even date herewith. The following provisions will
survive any termination of this Agreement: Sections 1, 2.6, 5.2, 7.1, 7.3(b),
7.4, 8.1, 8.2, 8.3, 8.4, 9.1, 9.2, 9.3, 9.4 and sections 11.1 through 11.11,
inclusive.
5.3 Return of Licensed Software. Upon termination of this Agreement or
any license granted hereunder, Customer will make no further use of the
applicable Licensed Software and Documentation. Within thirty (30) days after
such termination, Customer will either destroy or return to CONNECT the
originals and all copies of the applicable Licensed Software and Documentation
in the possession or under the control of Customer and will certify to CONNECT
that Customer has complied with the foregoing requirements. The foregoing
obligations apply to copies of the Licensed Software and Documentation in all
forms, partial and complete, in all types of media and computer memory, and
whether or not modified or combined with other materials.
Section 6 - Delivery and Acceptance
6.1 Delivery. All initial deliverables of Licensed Software and
Documentation are listed in Exhibit A of this Agreement and will be delivered to
the shipping destination on or about the delivery date set forth thereon.
CONNECT
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will deliver one copy of the CONNECT Software for each Designated Platform
specified on Exhibit A to this Agreement in the form of a "golden master"
diskette(s) containing the Licensed Software and a diskette with the related
Documentation in PageMaker format. CONNECT will use commercially reasonable
efforts to ship any additional deliverables to Customer as may be ordered by
Customer and accepted by CONNECT within ten (10) business days after receipt of
a properly completed purchase order or execution by the parties of an
appropriate supplement to this Agreement. Shipment will be at the risk of
CONNECT. Customer will have ten (10) days from receipt of the shipment to verify
that all deliverables have been received. CONNECT will replace any missing
deliverables at no charge. All deliverables will be conclusively deemed to have
been received at the end of the 10 day verification period, except for those
deliverables identified by Customer as missing during such 10 day verification
period. An additional 10 day verification period will apply beginning upon
receipt of the shipment of the replacement deliverables.
6.2 Acceptance. Licensed Software will be accepted by Customer if it
performs substantially as described in its then current applicable
Documentation. Failure of Customer to inform CONNECT of acceptance or non-
acceptance within the ten (10)day period following completed delivery, or
commercial use of the deliverables by Customer, will constitute acceptance.
Section 7 - LIMITED WARRANTY
7.1 Right to License. CONNECT warrants that it has the right to license
the Licensed Software and Documentation to Customer on the terms and conditions
set forth in this Agreement, and that such Licensed Software and Documentation
if free of any lien or encumbrance.
7.2 Software. CONNECT warrants that, during the period of ninety (90)
days following completed delivery of the Licensed Software (the "Warranty
Period"), the Licensed Software (other than as modified by Customer) will
perform substantially in accordance with CONNECT's then current applicable User
Documentation. The media only will be free of defects in materials and
workmanship when properly installed and used on the applicable Designated
Platform. CONNECT does not warrant that the Licensed Software will meet any of
Customer's particular requirements.
7.3 Warranty Obligations. (a) CONNECT's sole obligations during the
Warranty Period under this Section 7.2 are: (i) to replace without charge tapes,
diskettes or other media embodying the Licensed Software that are defective
under normal use, and (ii) to use reasonable commercial efforts to correct any
material error reported by Customer to CONNECT in the then current Licensed
Software release that are reproducible by CONNECT on a similarly configured CPU
and operating system, as required to conform the Licensed Software to the
foregoing warranty, and (b) If, after using reasonable commercial efforts,
CONNECT is unable to make the Licensed Software operate as warranted, Customer
will be entitled, upon return of all copies of the Licensed Software and
Documentation in accordance with Section 5.3, to a refund of all the applicable
license fees paid to CONNECT under this License Agreement, and the Software
Maintenance agreement.
7.4 LIMITED WARRANTY. Other than the warranties expressly stated above,
there are no express or implied warranties relating to the Licensed Software,
the Documentation or the services covered by this Agreement, and CONNECT
expressly disclaims any implied warranties of merchantability, and fitness for a
particular purpose.
Section 8 - Indemnification
8.1 Indemnification by Connect. CONNECT agrees to defend, indemnify, and
hold harmless Customer from and against any claim, suit, demand, or action (a)
alleging that the Licensed Software or Documentation infringes a United States,
Canada, Europe, Australia or Japan patent, copyright or trade secret or any
other intellectual property right of any third party, or (b) arising from a
breach of this Agreement by CONNECT, including but not limited to Sections 7.1
and 11.4 hereof; provided, however, that (i) Customer shall give CONNECT prompt
written notice of such claim, suit, demand, or action; (ii)
Customer shall fully cooperate with CONNECT (at CONNECT's expense) in the
defense and settlement of such action; and (iii) CONNECT shall have sole control
of the defense of such action and all negotiations for its settment or
compromise, subject to Customer's reasonable approval as such relates to
Customer's use of the Licensed Software and the Documentation or Customer's
liability.
8.2 Limitation of Liability. CONNECT will have no liability with respect
to any claim of infringement arising out of (i) any modification of the Licensed
Software or Documentation, or any use of the Licensed Software or Documentation
in combination with other software or equipment not provided or specified in
writing by CONNECT, (ii) any markings or branding placed on Licensed Software or
Documentation by, or at the request of, Customer, (iii)
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CONNECT's compliance with specifications provided by Customer, provided that
such claim does not arise from the method by which CONNECT chose to comply with
such specification or (iv) use of other than the most recent version of the
Licensed Software or Documentation. CONNECT shall not be liable for any costs or
expenses incurred without its prior written authorization.
8.3 CONNECT Options. In the event that any such final judgment of
infringement is entered, or CONNECT believes is likely to be entered, CONNECT
may at its expense: (i) modify the Licensed Software and/or Documentation to be
non-infringing, (ii) obtain for Customer the right to continue using the
Licensed Software and/or Documentation or, if neither of the foregoing remedies
are available to CONNECT on commercially reasonable terms, (iii)terminate the
applicable license and refund the unamortized portion of the license fee paid
for the Licensed Software and/or Documentation, with such amortization being
calculated over a three (3) year period beginning with delivery of the Licensed
Software, and terminate the Software Maintenance Agreement, if any.
8.4 Entire Liability. THE FOREGOING STATES THE ENTIRE LIABILITY AND
OBLIGATION OF CONNECT WITH RESPECT TO INFRINGEMENT OR ALLEGED INFRINGEMENT OF
ANY KIND OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS BY THE LICENSED SOFTWARE OR
DOCUMENTATION OR ANY PART THEREOF.
Section 9 - Limitation of Liability
9.1 In no event will either party be liable for any indirect, incidental,
special or consequential damages arising out of this Agreement, including
without limitation loss of profits, revenues, data or use, whether in an action
in contract or tort or any other form of action, even if either party has been
advised of the possibility of such damages. THESE LIMITATIONS SHALL APPLY
NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
Nothing in this section 9.1 shall be deemed to reduce CONNECTs liabilities under
section 8.1 above.
9.2 Except for CONNECT's liability under Section 8.1 above, neither
party's liability for damages in connection with this Agreement, whether in an
action in contract or tort or any other form of action, will in no event exceed
the amount of fees actually paid by Customer to CONNECT under this Agreement.
9.3 No action may be brought or arbitration demanded by Customer for any
dispute arising out of or in connection with this Agreement at any time more
than TWELVE (12) months after Customer became aware of the facts occurred giving
rise to the cause of action or dispute.
9.4 Customer is responsible for the selection of software products to
satisfy its requirements, and for the data and other results obtained from
operation of the Licensed Software. CONNECT will have no liability to Customer
or third parties in connection with such data and other results.
Section 10 - Government Contracting
See "Government Contracting Addendum" if applicable.
Section 11 - General
11.1 Confidentiality. Both parties acknowledge that, in the course of
dealings between the parties, both parties will acquire information, identified
as confidential, about the other party, its business activities and operations,
its technical information and trade secrets, of a highly confidential and
proprietary nature. Each party will hold such information, which is identified
in writing as being confidential. Customer will hold the Licensed Software
and Documentation and CONNECT will hold Customer's data and content, in strict
confidence and will not reveal the same except for any information generally
available to or known to the public, known prior to the negotiations leading to
this Agreement, independently developed outside the scope of this Agreement,
lawfully disclosed by a third party, or required to be disclosed to a tribunal,
provided that in the case of required disclosures to tribunals, the party will
use its best efforts to obtain protective orders maintaining the confidentiality
of such information.
11.2 Notices. All notices, including notices of address change, given
under this Agreement must be in writing and will be deemed effective when
delivered in person or by a reputable "next day guaranteed" courier service, by
facsimile (if a confirming copy is dispatched by one of the other permitted
means of dispatch under this Section 11.2) or
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three (3) business days after being mailed via certified mail, return receipt
requested, to the appropriate address shown on the signature page of this
Agreement.
11.3 Assignment and Successors. Except as specifically provided for
herein, Customer shall not assign, transfer or convey any of its rights or
licenses under this Agreement without CONNECT's prior written consent, which
will not be unreasonably withheld except that Customer shall have the right to
assign this Agreement in the case of a sale of substantially all of its assets,
a merger or similar transaction. Subject to the foregoing, this Agreement will
bind and inure to the benefit of the successors and permitted assigns of
Customer and CONNECT.
11.4 Export. If the Territory extends beyond the United States, Customer
will only export, re-export or otherwise transfer the Licensed Software or
Documentation to another country in full compliance with the provisions of the
United States Export Administration Act and the rules and regulations
thereunder, and both the Licensed Software and the Documentation will be deemed
"technical data" for purposes thereof. As long as the Designated Platform is in
the U.S., CONNECT represents and warrants that no export, re-export or transfer
will have occurred.
11.5 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the United States and the State of California, as
applied to agreements entered into and to be performed entirely within
California between California residents. The parties agree that the United
Nations Convention on Contracts for the International Sale of Goods (1980) is
specifically excluded from application to this Agreement. The captions
appearing in this Agreement are inserted only as a matter of convenience and in
no way define, limit, construe or describe the scope or interpretation of this
Agreement.
11.6 Force Majeure. Except for the obligation to make payments,
nonperformance of either party shall be excused to the extent that performance
is rendered impossible by strike, fire, flood, governmental acts, orders or
restrictions, failure of suppliers, or any other reason where failure to perform
is beyond the control and not caused by the negligence of the non-performing
party.
11.7 Arbitration. Any claim, dispute, or controversy arising out of or
in connection with or relating to this Agreement, including the breach or
alleged breach thereof, will be submitted by the parties to binding arbitration
by the American Arbitration Association in the City of San Jose, State of
California or City of Seattle, State of Washington, in the state of the party
against whom the arbitration has been initiated, under the commercial rules
then in effect for that Association, except as provided herein. The parties will
agree on one (1) arbitrator within thirty (30) days of receipt of the notice of
intent to arbitrate. If no arbitrator is appointed within the time herein
provided, or any extension of time which is mutually agreed upon, the
Association will make such appointment within thirty (30) days of such failure.
Such Association-appointed arbitrator will have a minimum of ten (10) years
experience with development of software for computers and knowledge of wide area
networks. The award rendered by the arbitrator will include costs of
arbitration, reasonable costs for expert and other witnesses, and reasonable
attorneys' fees to the prevailing party. Customer and CONNECT acknowledges that
any breach of its obligations with respect to the proprietary rights of both
parties or its licensors or third party suppliers will cause such party
irreparable injury for which there are inadequate remedies at law and,
therefore, the arbitrator may award such party equitable relief in addition to
all other remedies available to them. Judgment on the arbitration award may be
entered in any court having jurisdiction thereof. Nothing in this Agreement will
be deemed as preventing either party from seeking injunctive relief (or any
other provisional remedy) from any court having jurisdiction over the parties
and the subject matter of the dispute as is necessary to protect either party's
name, proprietary information, trade secrets, know-how, or any other
intellectual property rights. Because both parties to this Agreement have had
the opportunity to negotiate individual provisions of this Agreement, the
parties agree that any arbitrator or court shall not construe any ambiguity that
may exist in this Agreement against a party on the basis of that party having
drafted the Agreement.
11.8 Waiver and Severability. The waiver by either party of a breach or
right under this Agreement will not constitute a waiver of any other or
subsequent breach or right. In the event any provision of this Agreement is
held invalid or unenforceable, the remaining provisions will continue in full
force and effect.
11.9 Amendment. This Agreement may be amended or modified only in a
written document signed by an authorized representative of CONNECT and Customer.
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11.11 Entire Agreement. This Agreement, together with the addenda,
attachments and exhibits attached hereto, is the complete and exclusive
statement of the agreement between the parties and supersedes all previous and
contemporaneous agreements, proposals and communications, written or oral, with
respect to this subject matter. In particular, the preprinted terms and
conditions of any purchase order issued or to be issued by Customer with respect
to Licensed Software or related CONNECT services are hereby expressly objected
to and superseded by this Agreement. A Customer purchase order that references
this Agreement and that is accepted by CONNECT may serve as a supplement to this
Agreement with respect to Customer's order of additional Licensed Software or
related services; provided that such purchase order will be effective only as to
product or services identification, quantity and price, and otherwise will be
governed by terms and conditions of this Agreement.
CONNECT, Inc. Company: PhotoDisc
"Customer"
By: /s/ THOMAS KEHLER By: /s/ THOMAS D. HUGHES
----------------------- -----------------------
Name: Thomas Kehler Name: Thomas D. Hughes
--------------------- ---------------------
Title: President and CEO Title: President
-------------------- --------------------
Date: 11/7 ,1995 Date: 11/7 ,1995
--------------------- ---------------------
Telephone: (415) 254-4000 Telephone: (206) 441-9355
---------------- ----------------
Fax: (415) 254-4800 Fax: (206) 441-9379
---------------------- ----------------------
Page 7
<PAGE>
Software License Agreement
EXHIBIT A
1. Licensed Software
-----------------
1.1 CONNECT Software Licensed to Customer and associated Documentation:
1.1.1 OneServer Version: 1.0
Number of copies: 1 4 concurrent user class license
1.1.2 OneManager Version: 1.0
Number of copies: 1
1.2 For the purpose of this Agreement a OneServer four concurrent user class
license shall enable Customer to execute approximately 100,000 Internet
hits per a 24 hour period. In the event that Customer exceeds by 10% an
average of 100,000 hits per day over any quarterly period, the Customer
agrees to upgrade to an eight concurrent user class license, at CONNECT's
then current license fee for such additional license or to terminate
this License without liability. For the purposes of this Agreement, a
Third Party Software four concurrent user license shall enable Customer
to execute the Third Party Software on the Designed Platform, or any
Designated Platform permitted pursuant to section 4.1 below this
Exhibit A.
1.3 Third Party Software Licensed to Customer:
1.3.1 ORACLE-RDBMS Server Version: 7 runtime
Number of copies: 1 4 concurrent user class license.
1.3.2 FULCRUM-Text Search Version: 2.0
Number of copies: 1 4 concurrent user class license.
1.3.3 RSA Encryption Software
2. Licensed Software Licensee Fees and Related Charges:
----------------------------------------------------
2.1 All Licensed Software (above) = $[ * ]/copy)
-----------------------------
Subject to the following discount schedule:
a) [*]% Discount if paid for by 12/31/95
b) [*]% Discount if paid for by March 31, 1996.
c) [*]% Discount if paid for during the balance of 1996.
2.2 CONNECT at Customer's option shall provide installation support at
$[ * ] per day.
2.3 CONNECT at Customer's option shall provide system administration
training at $[ * ] per day.
2.4 CONNECT at Customer's option shall provide operations training for at
$[ * ] per day.
2.5 CONNECT at Customer's option shall provide network management
setup at $[ * ] per day.
2.6 CONNECT's travel and lodging expenses to Customer's site if in Seattle
shall not exceed $[ * ] per day.
3. Maintenance Services and Error Corrections - Enhancements Fees
--------------------------------------------------------------
(a) Fee for optional Licensed Software Maintenance Services as described in
the Software Maintenance Addendum Section 3 (exclusive of per diem and out-of-
pocket expenses)[*]% of the license for Licensed Software ($[ * ]) List Price
of Software License. Maintenance and updates for software developed under the
Custom Application Development Agreement is not included without addition.
(b) Fee for optional Update Releases as described in the Software Maintenance
Addendum Section 4 (exclusive of per diem and out-of-pocket expenses) is
included in the [*]% referenced in 3(a) above.
*Confidential treatment requested.
Page 8
<PAGE>
4. Designated Platform
-------------------
4.1 Computer central processing unit
a. Brand and model: Sun Sparc Station 20 (2) 75 MHz processors
512 MB RAM or Sun Sparc Station 20 with (3)
75 MHz processors
b. Operating System: Solaris 2.4
4.2 Installed Location (A)
Name: Bill Heston
Address: PhotoDisc, Inc.
2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
Phone: (206) 441-9355
Fax: (206) 441-9379
Installed Location (B)
CONNECT's designated Data Center facility.
5. Delivery
--------
5.1 Delivery Date: To be designated by Customer within 30 days prior to
----------------------------------------------------
such Delivery Date.
- ------------------
5.2 Customer Shipping Destination
Name: Thomas D. Hughes
Address: PhotoDisc, Inc.
2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
Phone: (206) 441-9355
Fax: (206) 441-9379
6. Billing Address
---------------
SAME:
Name: Thomas D. Hughes
Address: PhotoDisc, Inc.
2013 Fourth Avenue, 4th Floor
Seattle, WA 98121
Phone: (206) 441-9355
Fax: (206) 441-9379
Page 9
<PAGE>
EXHIBIT 10.12
FIRST AMENDMENT TO
CONNECT, INC. & PHOTODISC, INC.
SOFTWARE LICENSE AGREEMENT
WHEREAS PhotoDisc, Inc. and Connect, Inc. entered into a Software License
agreement dated November 7, 1995, and both parties now wish to amend the
Agreement as follows: (the "Agreement")
1. The second sentence of Section 1.2 is deleted.
2. Section 1.8 is added as follows:
1.8 "Development License" means a version of the Licensed Software which
is exclusively licensed for the purpose of internal development, testing,
and prototyping of applications by Customer. At no time shall this
version of the Licensed Software be accessed by anyone other than
Customer, or be used for any purpose other than as stated herein.
3. A new section, Section 2.9 DEVELOPMENT LICENSE is added as follows:
In addition to the license granted in Section 2.1, CONNECT agrees to
provide customer with one (1) 4 concurrent user class Development License
of the CONNECT Software. The Development License is authorized for
operation only on the Designated Platform as set forth in Section 1.2 and
in the locations designated in Exhibit A of the Agreement.
Amendments to Exhibit A:
1. Section 1. shall be deleted and replaced as follows:
Licensed Software
1.1 CONNECT Software Licensed to Customer, and associated documentation:
1.1.1 OneServer Version 1.1
Number of Copies: 1 4-processor class license
1.1.2 OneManager Version 1.1
Number of Copies: 2
1.2 Section 1.2 is deleted in its entirety.
1.3 Section 1.3 is deleted and replaced as follows:
Third Party Software Licensed to Customer:
1.3.1 Oracle RDBMS Server Version: 7 Runtime
Number of Copies: (1) 4-processor license
1.3.2 Fulcrum Searchtools Version 2.0
Number of copies: (1) 4-processor license
1.3.3 RSA Bsafe Encryption Software
2. Section 2.1 is deleted and replaced as follows:
Licensed Software Licensee Fees and Related Charges
First Addendum to Connect, Inc. March 29, 1996 Page 1 of 2
& PhotoDisc Software License Agreement
<PAGE>
Customer agrees to pay CONNECT the sum total of $[*] for all Licensed
Software (above) and the license granted in new Section 2.9. Payments
shall be made in 18 monthly payments of $[*] per month, to be paid
completely on or before August 29, 1997. In no case will the total of these
Licensed Software payments be less than $[*] on or before December 31,
1996. The first payment shall be due upon execution of this Addendum to the
Agreement.
Section 2.3 is deleted and replaced as follows:
2.3 CONNECT at Customer's option shall provide OneServer Client
Administration training for one (1) person, and Introduction to OneServer
training for two (2) people for no additional fee, provided the training is
conducted in CONNECT's regularly scheduled public classes in the CONNECT
training facilities in Mountain View, CA, and completed on or before June
29, 1996.
3. Section 3 (a) Maintenance Services and Error Corrections - Enhancements
Fees is deleted and replaced as follows:
(a) Fee for optional Licensed Software Maintenance Services as described in
the Software Maintenance Addendum Section 3 (exclusive of per diem and
out-of-pocket expenses) [*]% of the Licensed Price of Software License
(i.e. $[*]). Maintenance and updates for software developed under
the Custom Application Development Agreement is not included without
addition.
4. Section 4.1 is deleted and replaced as follows:
4.1 Computer central processing unit
a. Brand and model: Sun SparcServer 1000
4 processors
b. Operating System: Solaris 2.4
5. CONNECT at Customer's option shall provide additional licenses for CONNECT
Software up to four (4) additional processors at $[*] per processor if
purchased by Customer on or before March 31, 1997.
Save as amended above, the Agreement of November 7, 1995 remain in full force
and effect.
CONNECT, Inc. Company: PhotoDisc
"Customer"
By: /s/ Thomas P. Kehler By: /s/ Thomas Hughes
--------------------- ------------------
Name: Thomas Kehler Name: Thomas Hughes
--------------------- -----------------
Title: President Title: President
------------- ---------------
Date: 3/29/1996 Date: 3/29/96
------------- ----------------
Telephone: 415-254-4000 Telephone: 206-441-9355
Fax: 415-254-4800 Fax: 206-441-9379
First Addendum to Connect, Inc. March 29, 1996 Page 2 of 2
& PhotoDisc Software License Agreement
* Confidential treatment requested
<PAGE>
EXHIBIT 10.13
AGREEMENT NO. ___________
FULCRUM SEARCHTOOLS SOFTWARE DEVELOPMENT AND DISTRIBUTION
LICENSE AGREEMENT
THIS AGREEMENT dated as of September 16, 1994 made
BETWEEN: FULCRUM TECHNOLOGIES INC., a
corporation incorporated under the
laws of Delaware;
(hereinafter referred to as "Licensor")
AND
CONNECT, INC., a
corporation incorporated under the laws
of the state California;
(hereinafter referred to as "Licensee")
WHEREAS:
(a) Licensor is the owner and/or licensee of a family of proprietary
full text information retrieval software known as Fulcrum
SearchTools;
(b) Licensee wishes to license Licensor's Fulcrum SearchTools for the
purposes identified in Schedule "A";
(c) Licensor hereby agrees to license such software to Licensee on
the terms and conditions set out herein.
NOW THEREFORE it is agreed as follows:
1. Definitions
In this Agreement, unless there is something in the context
inconsistent therewith:
(a) "Derivative Software" means the object code form of the
application developed by Licensee from its use of the SearchServer SDK,
which application incorporates or utilizes SearchServer, in machine-
readable binary form, its proprietary data structures, or any part
thereof, licensed under the name Connect Corporate On-line Server (TM).
(b) "SearchServer SDK" means that portion of Licensor's Fulcrum
SearchTools family of products, in object code form, which has full
application development capabilities, and
- --------------------------------------------------------------------------------
1
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Fulcrum Technologies Inc. Connect,Inc.
- --------------------------------------------------------------------------------
which is used on the Server(s), together with its related
documentation. Licensor refers to the SearchServer SDK as the
"SearchServer SDK Developers Kit" or "SDK".
(c) "User" means an individual or computer authorized to access
the Derivative Software under a subscription agreement between
Licensee and a third party to the Licensee's Connect Corporate On-Line
Server(TM).
(d) "Point of Contact" means for each party the contact points
named in paragraph 20 for that party. Licensee's Technical Point of
Contact shall be its designated addressee where subsequently released
versions, releases, software bug fixes and related documentation are
regularly shipped.
(e) "SearchServer" means that portion of Licensor's Fulcrum
SearchTools family of products, in object code form, which does not
have application development capabilities and only performs execute
functions, and which is used on the Server(s), together with its
related documentation. SearchServer is generated from SearchServer
SDK.
(f) "SearchSoftware" or "SearchTools" means both SearchServer
SDK and SearchServer.
(g) "Server" means for a version of the SearchSoftware the
binary compatible combination of hardware and operating system
software that will run that version.
(h) "Term" means the Initial Term and any Renewal Term as
defined in paragraph 5.
(i) "Territory" means the [*].
2. Grant
(a) Licensor grants Licensee:
(i) a non-exclusive, non-transferable, except as otherwise
set forth in Paragraph 24, right in the Territory for
one developer to use each copy of a SearchServer SDK
in the version specified in Schedule "B" and delivered
under this Agreement on its Server to develop and
enhance the Derivative Software, for the purpose of
exercising its license under paragraph 2(b), and
(ii) a non-exclusive right to copy SearchServer for use as
part of the Derivative Software, for the purposes of
exercising its license under paragraph 2(b); and
(b) Licensor also grants Licensee during the Term of this
Agreement the limited rights:
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*Confidential Treatement Requested
<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
- --------------------------------------------------------------------------------
(i) to copy for use at its premises, on the three Servers
identified in Schedule "B", SearchServer as part of the Derivative Software,
for the purposes described in and subject to the restrictions in Schedule "A";
(ii) to copy and distribute to sublicensed end users
SearchServer as part of the Derivative Software to for the purposes of and
subject to the limitations in Schedule "A".
3. Delivery
Licensor shall deliver to Licensee one copy of the SearchServer SDK
for SunO/S, as specified in Schedule "B", on magnetic media suitable for
running on the identified Server, within seven (7) days of the execution of
this Agreement. Licensor will deliver to Licensee two (2) copies of the
SearchServer SDK for Pyramid as specified in Schedule "B", on magnetic media
suitable for running on the identified Servers upon completion of the port of
such SDK to the Pyramid environment.
4. Payment
Licensee shall pay Licensor, upon successful completion of the
porting of the SearchServer SDK to the Pyramid environment as specified in
Schedule "C", the license and support fees set forth in Schedule "C" of this
Agreement, together with any other fees set out therein. In addition, Licensee
shall pay Licensor for each User, during the Term of this Agreement, the
royalty fees set out in Schedule "E". All royalty fees are payable on the last
day of each calendar quarter. Payment terms are net thirty (30) days. All fees
are payable in United States dollars at Ottawa, Canada, or such other location
as Licensor may direct, net of any applicable withholding tax. Overdue accounts
shall be charged interest at the rate of one percent (1%) per month per year
(12% per year effective interest), or the maximum lawful amount, whichever is
less. The Agreement No. stated on the face page (or if unstated as advised by
Licensor) shall be referenced by Licensee on all communications regarding this
Agreement.
5. Term
The SearchServer SDK and SearchServer licenses granted in paragraph
2(a) herein shall continue in full force and effect, unless terminated in
accordance with paragraph 16. Unless earlier terminated in accordance with
paragraph 16, the license granted under paragraph 2(b) herein shall be in
effect from the date of this Agreement and shall be in full force and effect
until June 30,1997, the "Initial Term". After the expiry of the Initial Term,
this Agreement shall, unless earlier terminated in accordance with paragraph
16, continue in full force and effect for successive periods of one year, (each
such successive year is a "Renewal Term"), provided neither party has given
notice to terminate at least ninety (90) days prior to the end of the Initial
Term or then current Renewal Term, as applicable.
- --------------------------------------------------------------------------------
September 16, 1994 3
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<PAGE>
Fulcrum Technologies Inc. Connect,Inc.
- --------------------------------------------------------------------------------
6. Support
Licensor shall provide during the Term support for the SearchSoftware
in accordance with the terms set forth in Schedule "D". All enhancements,
maintenance releases, corrections to the SearchSoftware or other materials
delivered by Licensor shall be governed by the terms and conditions of this
Agreement.
7. Training
Licensor shall provide during the Term to Licensee training in
the installation, operation and use of the SearchSoftware as described in
Schedule "D".
8. ASG Services
Licensor will during the Term provide to Licensee upon execution of a
mutually agreed work order for same application support group services (ASG)
services on the terms set out in Schedule "D".
9. Ownership
(a) The SearchSoftware is the exclusive property of Licensor and/or
its licensors. The SearchSoftware represents confidential information and trade
secrets belonging to Licensor and/or its licensors. Licensor is the sole owner
of all intellectual and industrial property rights therein, including but not
limited to patent, copyright, trade secret and trademark. No rights are granted
to Licensee except those set forth in this Agreement.
(b) Licensee agrees that it will use at least the same degree of
care, but no less than a reasonable degree of care, with respect to the
SearchSoftware, as it uses with respect to its own confidential information, to
ensure that it does not violate Licensor's or its licensors, proprietary
interest in the SearchSoftware. Licensee will place a copyright notice
indicating Licensor's copyright in the SearchSoftware on all future
documentation software start-up screen or "About" box, and media associated
with the Derivative Software. This notice shall include the following words:
"Portions of the Connect Corporate On-line Server(TM) include technology used
under license from Fulcrum Technologies Inc. and are copyright of Fulcrum
Technologies Inc. and/or its licensors".
(c) Licensee shall not reproduce SearchSoftware, the Derivative
Software or any documentation or media associated therewith except as permitted
by the terms of this Agreement. Licensee shall not deposit the SearchSoftware,
the Derivative Software or any documentation or media associated therewith in
escrow. Licensee retains ultimate responsibility for any such action by its
officers directors. employees, agents and contractors should such action cause
damage to Licensor.
- --------------------------------------------------------------------------------
September 16, 1994 4
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<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
- --------------------------------------------------------------------------------
(d) Each sublicense agreement entered into by Licensee for
the Derivative Software shall include the terms and conditions set out
in Schedule "A".
10. Escrow of Source Code
Licensor shall deposit the source code for the SearchSoftware in
escrow with Royal Trust Corporation of Canada, or such other escrow agent as
determined by Licensor from time to time. and shall deposit all upgrades and
enhancements to the SearchSoftware in escrow during the Term of this Agreement.
In the event that Licensor should become insolvent or cease to carry on
business, and the business of Licensor is not continued by a Receiver or
Trustee or Assignee, Licensee shall have the right to acquire a copy of the
source code of the SearchSoftware licensed to it for the sole purpose of
continuing its authorized use. Licensor shall cause Royal Trust Corporation of
Canada to send Licensee a notification confirming its entitlement to obtain a
copy of Licensor's source code in accordance with the provisions of Licensor's
escrow agreement.
11. Confidentiality
Each party agrees not to use or to disclose to others any
confidential or proprietary information of the other party acquired hereunder,
or in connection herewith, except as such use or disclosure may be authorized
in writing herein or from time to time. Each party shall ensure that only those
employees or contractors with a need to know shall have access to any
confidential information made known during the Term of this Agreement and that
all such employees or contractors shall have first signed written
confidentiality agreements sufficient to satisfy this Agreement. Upon request,
each party agrees to make available to the other, copies of all such
confidentiality agreements. For the purposes of this Agreement, confidential
information shall include, but shall not be limited to the SearchSoftware, the
Derivative Software and other proprietary information furnished under this
Agreement. Licensee shall not, for any reason, attempt to disassemble, reverse
engineer or decompile the object or binary code of the SearchSoftware. The
business terms of this Agreement are strictly confidential between Licensee and
Licensor and will not be revealed by either party to any third party, except as
required by law.
12. Trademarks
Licensee acknowledges that "Fulcrum" and "SearchServer" are
trademarks of Licensor. Licensee shall not make any use of such trademarks
without the prior written consent of Licensor, which
consent shall not be unreasonably withheld.
13. Limitation of Warranties and Liability
(a) Licensor warrants that the SearchSoftware and its related
documentation, are the property of Licensor and/or its licensors.
- --------------------------------------------------------------------------------
September 16, 1994 5
Fulcrum LF-101 (Can/U.S.)
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<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
- --------------------------------------------------------------------------------
(b) Licensor warrants that SearchSoftware shall, at the
time of delivery to Licensee, be capable of performing the functions
described in their related documentation, but are otherwise accepted
by Licensee "as is". Licensor's sole liability under this paragraph
shall be to modify or correct the SearchSoftware in accordance with
Schedule "D", if it does not match the form and functionality
described in their related documentation.
(c) Licensor warrants that the SearchSoftware (including
any future versions delivered by Licensor to Licensee pursuant to this
Agreement) shall not, at the time of delivery to Licensee, infringe
any valid U.S. or Canadian copyright or any other proprietary rights
of third parties. Licensor agrees to defend any and all actions and
suits alleging any such infringement that may be brought against
Licensee during the Term of this Agreement, and to pay all damages and
costs finally awarded against Licensee in such actions or suits on
account of such infringement, provided that:
(i) Licensor shall have prompt notice of the commencement of
any such action or suit and carriage of same;
(ii) Licensee and, where applicable, those for whom Licensee
is in law responsible, shall cooperate fully with Licensor
in defense of the action, at Licensor's expense;
(iii) the action shall not result from the use of any of
the SearchSoftware for purposes for which it was not
authorized or designed or the use of any of the
SearchSoftware in combination with software or other
products not supplied by Licensor or the infringement would
have been avoided by use of the then current version of the
SearchSoftware; and
(iv) Licensor may, instead of defending such action or suit,
procure for Licensee the right to continue the use of the
SearchSoftware or replace or modify the SearchSoftware so
that it becomes non-infringing, provided there is no
materially negative impact on the functionality of the
SearchSoftware.
(d) THE WARRANTIES AND LIMITATIONS SET FORTH IN THIS
PARAGRAPH 13 CONSTITUTE THE ONLY WARRANTIES OF LICENSOR WITH RESPECT
TO THE SEARCHSOFTWARE AND THE DERIVATIVE SOFTWARE. THEY ARE IN LIEU OF
ALL OTHER WARRANTIES OR CONDITIONS, WRITTEN OR ORAL, STATUTORY OR
OTHERWISE. EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE
WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. THE REMEDIES OF LICENSEE SHALL BE LIMITED TO THOSE
PROVIDED HEREIN TO THE EXCLUSION OF ANY AND ALL OTHER REMEDIES
INCLUDING, WITHOUT LIMITATION, EXCLUSION OF INCIDENTAL, SPECIAL.
INDIRECT OR CONSEQUENTIAL DAMAGES WHETHER BASED ON CONTRACT, TORT OR
OTHER LEGAL THEORY. NO AGREEMENTS VARYING OR EXTENDING THE FOREGOING
WARRANTIES, REMEDIES OR LIMITATIONS WILL BE BINDING ON LICENSOR
UNLESS IN WRITING AND SIGNED
- --------------------------------------------------------------------------------
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<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
- --------------------------------------------------------------------------------
BY A DULY AUTHORIZED OFFICER OF LICENSOR. LICENSOR'S TOTAL LIABILITY
UNDER OR RELATED IN ANY WAY TO THIS AGREEMENT FOR DAMAGES WHETHER IN
CONTRACT OR IN TORT, OR ITS LIABILITY TO PROVIDE INDEMNIFICATION,
SHALL NOT EXCEED THE FEES PAID BY LICENSEE PURSUANT TO THIS AGREEMENT.
14. Audit
Licensee agrees to maintain complete and accurate records
relating to its use and distribution of the SearchSoftware. Licensor
shall have the right, no more often than annually, to appoint an
independent third party to examine Licensee's facilities and audit
Licensee's books and records in order to verify Licensee's compliance
with the terms of this Agreement. Alternatively, Licensor may request
that the external auditors of Licensee, as part of Licensee's annual
audit, audit and report to Licensor and Licensee on Licensee's
compliance with the terms of this Agreement. Any such audit by
Licensor's auditors, or the additional audit, if any, by Licensee's
auditors shall be at the expense of Licensor unless the audit reveals
a material non-compliance by Licensee with the terms of this Agreement
in which case the audit shall be at the expense of Licensee.
15. Remedies
Licensee acknowledges that damages may not be an adequate
remedy to Licensor if Licensee materially breaches its obligations
under paragraphs 9, 11, or 12 of this Agreement, since such material
breaches may result in irreparable harm to Licensor. Licensee
therefore agrees that, in the event of any such material breach,
Licensor shall be entitled to appropriate mandatory or negative
injunctive relief against Licensee in addition to whatever other
remedies Licensor might have at law.
16. Termination
(a) Either party may terminate this Agreement and the
licenses granted herein at any time by giving the other party written
notice to that effect, effective on the date of receipt of such
notice, if:
(i) the other party enters into liquidation whether
compulsory or voluntarily or a receiver is appointed of all
or any part of its assets or if the other party becomes
bankrupt or insolvent or enters into any arrangement with
its creditors or if the other party takes or suffers any
similar action in consequence of debt or becomes unable to
pay its debts as they fall due;
(ii) the other party is in breach of its obligations under
this Agreement and has failed to remedy such breach within
thirty (30) days of having received written notice of such
breach; or
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<PAGE>
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- --------------------------------------------------------------------------------
(iii) the other party has persistently materially breached its
obligations under this Agreement.
(b) Licensor may terminate any license granted pursuant to this
Agreement if Licensee materially breaches its obligations under paragraphs 4, 9,
11 or 12 of this Agreement. Notwithstanding the foregoing Licensee shall be
permitted to cure a default in its payment obligations to Licensor, provided
that such opportunity to cure occurs not more than twice in any twelve (12)
month period.
(c) If this Agreement, or any license granted hereunder, is
terminated for any reason, Licensee shall on the effective date of such
termination cease using the SearchSoftware. Licensee shall then deliver to
Licensor all copies of the SearchSoftware and all related documentation in its
possession, or shall provide evidence, satisfactory to Licensor, that all such
copies have been destroyed. Notwithstanding the foregoing, any sublicenses
granted by Licensee prior to the termination of this Agreement shall remain in
full force and effect on a perpetual basis, provided such sublicenses have been
paid for by Licensee.
(d) Unless inconsistent in the context thereof, paragraphs 4, 9,
11, 12, 13, 14, and 15 shall survive any termination of this Agreement.
17. Force Majeure
The parties shall be relieved from their obligations (other than the
obligation to pay fees) at any time upon the occurrence and for the duration of
any act or event outside the control of the parties which would render the
performance of such obligations impossible, or by any event constituting force
majeure, always provided that the party so relieved of its obligations shall
take reasonable steps to prevent, correct or amend such act or event which
renders such performance of obligations impossible.
18. Relationship of the Parties
Nothing in this Agreement shall be construed as in any way placing
either party in the position of an agent of the other party and neither party
shall have the power to bind the other party or to contract in the name of or
create a liability against the other party in any way for any purpose. Neither
party shall be responsible for the acts or defaults of the other party or any of
the other party's employees or agents.
19. Reports
Licensee shall prepare a written report to Licensor, in the form
required by Licensor, at the end of each calendar quarter, commencing September
30, 1994 which report shall provide reasonable detail on Derivative Software
sublicenses entered into during the previous quarter and royalties due to
Licensor. All such reports shall be prepared and sent to the
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- --------------------------------------------------------------------------------
Licensor within fifteen (15) working days of the end of each quarter.
Such reports shall contain but not be limited to sublicensees name and
the number of Users.
20. Notices
(a) Any notice or other communication to the parties shall
be sent to the contact points noted in 20(b) or at such other places
as they may from time to time specify by notice in writing to the
other party. Any such notice or other communication shall be in
writing and shall be given by delivery to the designated officer of
the addressee by prepaid courier or facsimile with receipt
acknowledgment.
Any such notice or other communication shall be deemed to have been
given when such notice should have reached the addressee in the
ordinary course.
(b) Point of Contact addresses are as follows:
(i) For Licensor: (Contractual and administrative)
General Counsel
Fulcrum Technologies Inc.
785 Carling Avenue
Ottawa, Canada KlS 5H4
Tel: 613-238-1761
Fax: 613-238-7695
(ii) For Licensor: (Technical)
Product Support
Fulcrum Technologies Inc.
785 Carling Avenue
Ottawa,Canada K15 5H4
Tel: 613-238-1761
Fax: 613-238-7695
(iii) For Licensee: (Contractual and administrative)
Chief Financial Officer
Connect, Inc.
10161 Bubb Road
Cupertino, California 95014
Tel: 408-973-0110
Fax: 408-973-0497
- --------------------------------------------------------------------------------
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<PAGE>
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- --------------------------------------------------------------------------------
(iv) For Licensee: (Technical)
Executive VP, Development and Engineering
Connect, Inc.
10161 Bubb Road
Cupertino, California 95014
Tel: 408-973-0110
Fax: 408-973-0497
21. Legal Fees
In the event either party shall bring an action to enforce
the provisions of this Agreement, the party in favour of whom the
judgment in such action is awarded shall be entitled to recover its
reasonable legal fees incurred in such action from the other party.
22. Further Assurances
The parties agree to do all such things and to execute such
further documents as may reasonably be required to give full effect to
this Agreement.
23. Waiver and Amendment
This Agreement shall be modified or amended only by means of
a written agreement executed by both parties. No waiver of any part of
this Agreement shall be effective unless made in writing. No waiver of
any breach of this Agreement shall constitute a waiver of any
subsequent breach of the same or any other provision of this
Agreement.
24. Entire Agreement
This Agreement and the attached Schedules constitute the
entire agreement between the parties and the parties agree that there
are no other representations, warranties or oral agreements relating
to the subject matter of this Agreement. The terms or conditions on
Licensee's purchase orders shall not form part of this Agreement.
25. Non-Assignability
This Agreement and the rights granted hereunder shall not be
assigned, sublicensed, encumbered by security interest or otherwise
transferred by Licensee without the prior written consent of Licensor,
which shall not be unreasonably withheld. An amalgamation, acquisition
or merger of Licensee with any person who is not a party to this
Agreement shall be deemed to result in an assignment of this
Agreement. Licensor may assign this Agreement to an affiliate of
Licensor at any time upon notice to this effect to Licensee provided
the Licensor shall continue to be liable for the performance of its
obligations hereunder following such assignment.
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- --------------------------------------------------------------------------------
26. Compliance With Laws
Licensee shall carry out the obligations contemplated hereby and shall
otherwise deal with the SearchSoftware in conformity with all applicable laws,
rules and regulations of all governmental authorities, including, without
limitation, the Export Administration Act, and shall obtain all permits and
licenses required in connection with the license, installation or use of the
SearchSoftware.
27. U.S. Government Restricted Rights
The use, duplication or disclosure by the Government is subject to
restrictions set forth in the Rights in Technical Data and Computer Software
clause at FAR 52.227-19 and DFAR 252.227-7013(c)(l)(ii).
28. Successors and Assigns
This Agreement shall enure to the benefit of and be binding upon the
parties, their successors and permitted assigns.
29. Severability
If any of the provisions of this Agreement are held to be
unenforceable, the remaining portions of the Agreement shall remain in full
force and effect.
30. Governing Law
This Agreement shall be construed and enforced in accordance with the
laws of state of California. The parties hereby attorn to the jurisdiction of
the courts of state of California. The U.N. Convention on the Sale of Goods
shall not apply to this Agreement.
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<PAGE>
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- --------------------------------------------------------------------------------
IN WITNESS THEREOF the parties have executed this Agreement
on the date first written above.
FULCRUM TECHNOLOGIES INC.
By: /s/ W. David Keys
-------------------------------------
Name: W. David Keys
-----------------------------------
Title: VP & General Counsel
----------------------------------
CONNECT, INC.
By: /s/ Paul Commons
-------------------------------------
Name: Paul Commons
-----------------------------------
Title: VP
----------------------------------
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September 16, 1994
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<PAGE>
Fulcrum Technologies Inc. Connect,Inc.
- --------------------------------------------------------------------------------
SCHEDULE "A"
PURPOSE OF LICENSE
AND GRANT OF RIGHTS
Pursuant to paragraph 2(b)(i) of the Agreement, Licensor is permitted to use
the SearchServer Software as part of the Licensee's Connect Corporate On-Line
Server(TM) application, which application is restricted to an [*] using
Oracle or Sybase RDBMS or current similar RDBMS data base
management system, only for the purpose of permitting any subscriber
("subscriber") to Licensee's Connect Corporate On-Line Server(TM) [*]
the data on the Connect Corporate On-Line Server(TM). Pursuant to
paragraph 2(b)(ii) of the Agreement, Licensee is permitted to sublicense
SearchServer as part of Licensee's Connect Corporate On-Line Server (TM)
application to end users ("Sublicensees") who are licensed by Licensee to use
the Connect Corporate On-Line Server(TM) application on computers owned or
operated by such Sublicensee. Licensee's rights are subject to the following
restrictions::
(i) all Derivative Software used internally or sublicensed,
unless expressly exempted in this Agreement, shall be
subject to royalty payments to Licensor as set forth in
Schedule "E" of this Agreement. In addition to the
Sublicensees sublicensed pursuant to paragraph 2(b)(ii),
the Derivative Software will be to deemed sublicensed to
each subscriber to the Licensee's Connect Corporate On-Line
Server(TM) service;
(ii) Licensee agrees not to sublicense or permit access to
the Derivative Software to any subscriber until such
subscriber has entered into Licensee's standard subscription
agreement for the Connect Corporate On-Line Server and
Licensee agrees not to sublicense the SearchServer to any
Sublicensee until such Sublicensee has entered into an end
user license ("Sublicense Agreement") with Licensee which
contains the minimum provisions required in this Agreement.
No Sublicense Agreement shall permit the Sublicensee to
further distribute the SearchServer Software except to
subscribers accessing, on computers operated by such
Sublicensee the Connect Corporate On-Line Server(TM)
application service offered by such Sublicensee
(iii) user guides and/or user manuals, for future versions
of the Derivative Software, must incorporate Licensee's
copyright notice which shall contain the following or
similar words: "This product incorporates technology used
under license from Fulcrum Technologies Inc. and are
copyright of Fulcrum Technologies Inc. and/or its
licensors";
(iv) proper notice of Licensor's proprietary interest in
SearchServer must be shown, by copyright notice, on all
media which contain the Derivative Software and on all
startup screens (or About screens) of the Derivative
Software;
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- --------------------------------------------------------------------------------
(v) Licensee must use reasonable efforts to enforce the
provisions of its Sublicense Agreement to the same extent
that Licensee enforces such provisions to protect Licensee's
own proprietary products;
(vi) Licensee agrees that it will promptly notify Licensor
of any material change made to any of the terms and
conditions of its end-user agreement that would affect
SearchServer; and
(vii) the Derivative Software shall not have application
development capabilities, and shall not be used for system
integration purposes. In addition, SearchServer shall
operate as a "slave" to RDBMS, meaning access will only be
through the same user interface as for the RDBMS, and access
to SearchServer will be controlled by the RDBMS license
manager.
(viii) the Fulcrum SearchServer API would not be exposed to Users;
(ix) all subscriber data and information is held only in the
RDBMS tables and there is no data outside the RDBMS tables;
(x) access by a User to SearchServer will be governed
through the RDBMS license manager. Licensee must purchase
the equivalent or a greater number of User licenses for
SearchServer as it is required to purchase in respect of
users of the RDBMS tables.
MINIMUM TERMS AND CONDITIONS
FOR SUBLICENSED SOFTWARE
Except as otherwise provided, each Sublicense Agreement entered into by Licensee
shall include, at a minimum, the following terms and conditions:
l. An acknowledgment by sublicensee that:
(a) title and ownership of all third party licensors and all
rights related thereto, including but limited to patent,
trademark, trade secrets and copyright related thereto are
the exclusive property of such third party licensors;
(b) Sublicensee shall only acquire the right to use the
Derivative Software in accordance with Sublicense Agreement;
and
(c) Sublicensee shall take all necessary steps to ensure
that all intellectual property underlying the binary version
of the Derivative Software remains confidential.
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2. A prohibition against:
(a) copying the Derivative Software for any reason other
than for archival or emergency restart purposes or program
error verification;
(b) permitting more Users to use the Derivative Software
than the subscriber has purchased licenses for;
(c) moving the Derivative Software to a replacement CPU
without first obtaining authorization, which authorization
shall not be unreasonably withheld and shall only be
provided upon payment of any applicable incremental license
fees based on minimum concurrent user license requirements.
(d) offering the Derivative Software for use in a service
bureau, or time sharing environment, except as part of the
Connect Corporate On-Line Server (TM) service offered by the
Sublicensee;
(e) sublicensing, renting or otherwise making the Derivative
Software available outside of Sublicensee's legal business
entity;
(f) decompiling or reverse engineering the Derivative
Software; and
(g) assigning any rights under the Sublicensee Agreement
without the prior written consent of Licensee.
3. A statement in bold print or block capital letters that.
(a) the medium on which the program is furnished is
warranted to be free of defects in materials and workmanship
under normal use for a period of thirty (30) days from the
date of delivery of the Derivative Software;
(b) the warranty under (a) above is in lieu of all other
warranties or conditions, either express, implied or
statutory, or otherwise including the express or implied
warranties or conditions of merchantability and fitness for
a particular purpose; and
(c) the program contained on the medium is provided without
warranty of any kind and the sublicensee is responsible for
the entire risk with respect to the quality and performance
of the program.
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- -------------------------------------------------------------------------------
4. A statement that neither Licensee, nor its licensors, shall be liable
whatsoever for loss of profits or special, indirect, consequential or
exemplary damages, including legal fees, in connection with the
supply, use or performance of the Derivative Software, and that the
total liability of Licensee and its licensors, if any, in any event
shall not exceed the subscriber fee paid for the Derivative Software.
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SCHEDULE "B"
SearchServer SDK Licenses
<TABLE>
<CAPTION>
Licensed Server Type Licensed Version
-------------------- ----------------
Hardware Operating System SearchTools Version
-------- ---------------- -------------------
<C> <S> <C> <C>
1. Pyramid UNIX 2.0
2. Pyramid UNIX 2.0
3. Sun/Sparc Solaris 2.0
</TABLE>
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SCHEDULE "C"
LICENSE, SUPPORT, TRAINING PORTING AND ASG FEES
SearchServer SDK Fees:
The license fee for the first copy of an SDK listed in Schedule "B" is $[*]
and is in respect of the grant of rights for one developer to use that licensed
copy on a single server of type indicated.
If during the Term Licensee requires additional copies of the SDKs listed in
Schedule "B", or copies of other versions for use on other Servers supported by
Licensor, Licensor shall provide such additional copies, within a reasonable
time of Licensee's written request, at a price of $[*] per developer, plus
shipping and handling charges. All additional copies of SearchServer SDK shall
be governed by the terms of this Agreement and shall be deemed added to
Schedule "B" upon Licensor's acceptance of Licensee's order. Licensee shall pay
the additional support fee notified by Fulcrum for the additional copies on
other Servers added to Schedule "B".
In addition, Licensor shall provide one copy of the related documentation for
each copy of SearchServer SDK specified in Schedule "B". Licensor reserves the
right to amend its prices not more than once in each twelve (12) month period
during the Term.
Annual Support Fees
1. Hot Line Support Fees
$[*] per Support Year.
2. Maintenance Support Fees
(a) For the SUN SDK, the maintenance fees for each Support Year,
are an amount equal to [*]% of the cumulative license fees and royalty fees for
SearchServer Software included in the Derivative Software used in the SUN
environment paid or payable under this Agreement by Licensee.
(b) (i) For the Pyramid SDK, the maintenance fees for each
Support Year are an amount equal to [*]% of the cumulative license fees and
royalty fees for SearchServer Software included in the Derivative Software used
in the Pyramid environment paid or payable under this Agreement by Licensee.
(ii) Any maintenance or porting activity required to adapt
or migrate maintenance materials to the Pyramid SDK is provided on a time and
materials basis at Licensor's rate of one thousand dollars per person day and
will he provided pursuant to separate purchase orders issued by Licensee in
advance. Each purchase order shall be for an increment of
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*Confidential Treatment Requested
<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
================================================================================
at least ($[*]) of maintenance or porting activity services and shall be in
the form acceptable to Licensor. For the first thirty (30) days following
successful completion of the Pyramid SDK port, maintenance and porting
activities for the Pyramid SDK required to correct errors in the porting of
the SDK will be provided to Licensee without charge.
(c) Maintenance fees for licenses commencing during a Support
Year, will be pro rated for that Support Year.
3. Payment of Annual Support Fees
(a) Except as otherwise provided, the Annual Support Fees are due
and payable in advance: (i) for the first Support Year on the date execution
of this Agreement; and (ii) for each subsequent Support Year on each
anniversary date of such date of execution. The fees for the maintenance and
porting activities for Pyramid ordered under a purchase order as will be
invoiced quarterly based on usage.
(b) With respect to Maintenance Support fees, for the first Support
Year an initial payment will be made based on the total amount of the Initial
Order. In subsequent years, the initial annual payment will be based on the
aggregate cumulative license fees and royalties paid or payable to the end of
the preceding year. The initial annual fee will be adjusted quarterly and the
adjustment paid concurrent with the filing of the royalty report for the
quarter. In the event a sublicensee of the Derivative Software terminates its
sublicense with Licensee, Licensee shall have no obligation to renew support
for such terminated sublicense.
4. Support Year
A Support Year is a twelve month period. The first Support Year
commences upon the date of execution of this Agreement and each successive
Support Year commences upon the anniversary of the execution date.
5. Pyramid Standard Support
If the Pyramid Server becomes a Server supported by Licensor under
its standard support program, Licensee will be notified of the then standard
terms and conditions for Support for that environment. Licensee, at its
option, may then continue the Pyramid support under the standard program and
any remaining consulting days under the then current purchase order would be
credited against the Maintenance support fees for Pyramid payable under the
standard program. If Licensee should decline to take the standard Maintenance
at that time, the value of the remaining consulting days would not be refunded
but could be applied against other services or education provided by Licensor.
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*Confidential Treatment Requested
<PAGE>
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- --------------------------------------------------------------------------------
6. Termination of Support
The Licensee may discontinue the Support Services at the end of any Support Year
by providing three (3) months prior written notice to the Licensor. If after
such termination the Licensee wishes to reinstate the Support Services, Licensee
may do so provided the Support Fees for any discontinued period are paid
concurrent with the Support Fees for the new Support Year.
Training Fee
The registration fee for the first two people enrolled by Licensee in Licensor's
training program will be [*] dollars ($[*]). Additional enrollments will be at
Licensor's standard rates.
ASG Services
NA
Porting Services and Fees
Licensee hereby requests, and Licensor agrees to provide the following porting
services:
1. Subject to the provisions of this paragraph, Licensor will port
SearchServer SDK to the Pyramid Server.
2. Licensee will pay to Licensor upon successful completion of such port a
porting fee ("Porting Fee") of [*] dollars to port SearchServer
SDK to the Pyramid environment. Licensor will commence the port within ten
(10) days of execution of this Agreement. Licensor will use reasonable best
efforts to complete the port for the Porting Fee. On the [*] day and,
unless the Agreement has been earlier terminated, on the [*] day following
the commencement of the porting activities, Licensor will notify whether or not
the port can be completed for the Porting Fee. If Licensor notifies Licensee
that the port cannot be completed for the Porting Fee, Licensee may notify
Licensor in writing within one (1) further business day that Licensee wishes the
port to be discontinued. If Licensee so notifies Licensor to discontinue the
port, then, this Agreement will, without liability, terminate in its entirety,
and Licensee shall return all SearchSoftware to Licensor and make no further use
of same and shall pay Licensor for all porting effort to the day of cancellation
at the per diem per person rate of $[*]. If Licensee does not so terminate, then
Licensor shall continue the porting activities and Licensee shall in addition to
the Porting Fee, pay Licensor for such activities at the rate of $[*] per
person day. The porting of the SearchServer SDK to the Pyramid environment will
be successfully completed if the ported Pyramid SDK performs on the Pyramid
Server the functions that the SUN SDK performs on the SUN Server.
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<PAGE>
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- --------------------------------------------------------------------------------
3. All materials related to the porting services, including but not limited to
the ported version of SearchServer SDK, remain the exclusive property of
Licensor and Licensor retains exclusive ownership of all intellectual property
rights therein. Without limiting the foregoing, Licensee acknowledges that the
source code for the SearchSoftware that Licensee installs on the Server to
carry out the port is not licensed under this Agreement and Licensee shall have
no right to use or access such source code.
Currency and Pricing Validity
All prices shown in U.S. dollars and are subject to change.
- --------------------------------------------------------------------------------
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<PAGE>
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- --------------------------------------------------------------------------------
Initial Order
1. A. First SearchServer SDK-Pyramid $[*]
B. Second SearchServer SDK-Pyramid [*]
C. Third SearchServer SDK-Sun/Solaris [*]
Total Initial SDK license fees $[*]
2. 1 SearchServer license for 128 Users
for a Pyramid system [*]
less discount of $[*] (as per Schedule "E")
Net SearchServer License Fees [*]
3. Porting Fee [*]
4. Initial Support Fees [*]
Total $[*]
The amount of the Initial Order, less $[*] for the first SearchServer Runtime
license, shall be paid upon successful completion of the port of the SDK to the
Pyramid environment. The payment of $[*] for the first SearchServer runtime
shall be made no later than [*].
In addition, Licensee agrees to acquire an additional 128 User SearchServer
License payment for this License and support will be due on June 30, 1995, or
upon shipment to the customer, whichever is earlier.
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- --------------------------------------------------------------------------------
SCHEDULE "D"
TRAINING, SUPPORT AND ASG SERVICES
1. Training
Licensee shall ensure that at least two of its employees attends the
training program offered by Licensor at a mutually agreed time and place.
Licensor's obligation to provide support, as described below, is subject to the
above condition being satisfied.
Subject to availability of personnel, upon request from Licensee,
Licensor shall provide training in the use and operation of the SearchSoftware
Products at its then current prices for such services.
Licensor reserves the right to reschedule a course date in the event
less than 3 attendees are enrolled for any particular course.
2. Support
2.1 Support Services
(a) The Support services consist of the Hot Line Support and the
Maintenance support specified in this paragraph 2. Licensor shall
have no obligation to provide Support Services unless the
SearchSoftware Products are the current release (or penultimate
release) utilized on a Server supported by Licensor and Licensee
pays the annual support fees provided herein. For the purposes of
this paragraph, so long as Licensee is paying the Support Fees
specified in Schedule "C" for the Pyramid environment. The
Pyramid Server will be deemed to be a Server supported by
Licensor.
(b) Documentation, software maintenance releases, bug fixes and
version enhancements issued to Licensee pursuant to the Support
services will be shipped only to Licensee's Technical Point of
Contact addressee. All such materials are governed by the terms
and conditions of this Agreement and provided the Licensee is
taking Maintenance support, such materials may be distributed by
Licensee to its sublicensees under the terms and conditions of
this Agreement.
2.2 Hot Line Support
(a) Licensor shall provide Hot Line support, during the hours of 8:00
AM to 8:00 PM (EST) from its offices in Ottawa, Canada. Hot Line
support at other sites will be at Licensee's expense. Hot Line
support will be provided only to Licensee's Technical Point of
Contact addressee and Licensee's one appointed alternate at the
same physical location.
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<PAGE>
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- --------------------------------------------------------------------------------
(b) Hot Line support shall be requested by Licensee by preparing a
written problem report which includes a description of the
software bug and a test case which demonstrates the bug on the
then current or penultimate release of the SearchSoftware
Products. An error which is encountered in the SearchSoftware
Products which cannot be reproduced on Licensor's premises will
not be considered a software bug. The preceding sentence will not
apply to an error in the Pyramid SDK while the Hot Line support
for such environment are provided on a time and materials basis.
(c) Licensor shall be responsible for providing an initial response
to the Licensee's written problem reports within a reasonable
period. This initial response will normally include a preliminary
analysis and a plan for addressing the problem. Licensor retains
the ultimate responsibility for determining:
(i) whether the software bug reported is valid;
(ii) whether and when the software bug will be fixed; and
(iii) how such fix shall be effected on Licensee's version of
Derivative Software and/or documentation.
Licensor agrees to provide to Licensee a probable time frame for
resolution, and shall exert reasonable efforts to provide
Licensee with a correction for each reported problem as soon as
practicable, and not later than by the next generally available
release of the SearchSoftware Products. Licensor will follow its
standard escalation procedures as set out in Schedule "F" with
respect to errors in the Sun environment. For the Pyramid
environment, Licensor will continue the correction effort for any
particular bug outside the standard support hours specified
above, if so requested by the Licensee.
2.3 Maintenance Support
(a) Maintenance enhancements to an SDK listed in Schedule "B" or
subsequently released versions made generally available by
Licensor, under similar terms and conditions, shall be provided
to Licensee, at no charge except for direct incremental costs of
delivery of documentation, in executable and object code,
provided the annual Maintenance support fee has been continuously
paid. Licensee may be charged an upgrade fee in the event a new
version of the contains significant new functionality
- --------------------------------------------------------------------------------
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<PAGE>
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- -------------------------------------------------------------------------------
3. Application Services Group ("ASG Services")
(a) Licensor agrees to provide the ASG Services specified in Schedule
"C".
(b) Licensee agrees to pay Licensor the ASG fees specified in
Schedule "C" for ASG services or if unspecified Licensor's then
standard rates for same at time of delivery. Unless otherwise
agreed, Licensee shall be invoiced on a monthly basis. ASG
Services are provided on a time and materials basis and in no
event shall the provision of ASG Services be considered a "fixed
price" contract.
(c) Licensee agrees to pay all reasonable travel, living, out-of-
pocket and overtime expenses incurred by Licensor while providing
the ASG Services. Licensor shall comply with all reasonable
travel and living policies of Licensee, provided Licensor is
requested, in writing, to do so.
(d) Licensor does not guarantee any estimates, including delivery
dates. Licensor shall notify Licensee, as soon as practicable, if
any estimate will be exceeded. Licensor and Licensee shall use
reasonable efforts to avoid delays. In the event of a material
change to an estimate or protracted delay, Licensee shall have
the right to terminate this Agreement. In the event of
termination, Licensee shall pay for all ASG Services provided up
to and including the date of termination.
(e) A working day consists of seven and one half (7.5) hours.
Licensor's personnel shall have the use and benefit of work space
and necessary equipment ordinarily provided to Licensee's full-
time employees.
(f) Licensor will instruct its personnel to keep confidential all
information which is marked "confidential" by Licensee and
submitted to Licensor by Licensee in order to carry out the ASG
Services. Licensor shall use the same care and discretion with
such information as it uses with its own confidential
information. Licensor shall not be required to keep confidential
any data which is, or becomes, publicly available, is already in
Licensor's possession, is independently developed by Licensor
outside the scope of the ASG Services, or is rightfully obtained
from a third party.
(g) The ideas, concepts, know-how or techniques related to computer
software based methods and procedures, developed in the course of
the ASG Services, may be used by either party without obligation
to the other.
(h) The provision of ASG Services under this Agreement shall not
preclude Licensor from developing materials which are
competitive, irrespective of their similarity, to materials which
may be delivered to Licensee pursuant to this Agreement.
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- --------------------------------------------------------------------------------
(i) Licensee acknowledges that Licensor's personnel performing the
ASG Services may provide similar services from time to time to
other parties. This Agreement shall not prevent Licensor from
providing such similar services to other parties, or in any way
restrict Licensor in the use of its personnel.
(j) In the event Licensor's personnel fail to perform the ASG
Services because of illness, resignation or other causes beyond
Licensor's reasonable control, Licensor shall use reasonable
efforts to replace such personnel within a reasonable time, but
shall in no event be liable as a result of its inability to do
so.
(k) Licensor and Licensee agree that while the ASG Services are being
performed, and for a period of one (1) year following the
completion of the ASG Services or termination of this Agreement,
no solicitation for employment (other than through a publicly
advertised position posting) shall be made by either party to the
other party's employees assigned to the porting activity without
the prior written consent of Licensor.
(l) Notwithstanding paragraph 13(d) of the Software Development and
Distribution Agreement, Licensor's total liability under this
Agreement for all claims relating to ASG Services shall be
limited in the aggregate to the total fees paid by Licensee for
the ASG Services, and under no circumstances shall Licensor be
liable for indirect or consequential damages, including lost
profits, or any claims or demands against Licensee by any other
party. Licensor does not exclude liability for death or personal
injury to the extent that it results from the negligence of
Licensor, its employees or agents.
(m) No cause of action arising from, or related to, this Agreement
may be brought by either party more than one (1) year after the
earlier of the date of completion of the ASG Services or the
termination of this Agreement, except in the event of non-payment
by Licensee.
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SCHEDULE "E"
ROYALTY FEES
Licensee shall pay Licensor a royalty, based on the number of Users per Server
per order of the Derivative Software, as set out below:
<TABLE>
<CAPTION>
Number of Concurrent Users Index and Search Kernel
Per Server Per order
<S> <C>
[*] Users $[*]
[*] Users [*]
[*] Users [*]
[*] Users [*]
[*] Users [*]
[*] Users [*]
[*] Users [*]
[*] Users [*]
</TABLE>
Additional Users can be added to a Server by paying the applicable Upgrade Fee.
The Upgrade Fee is the difference between the license fee for the new license
category and the previous license category, such that to upgrade from [*]
Users on a Server, an Upgrade fee of $[*] is due. Each additional [*] Users
per Server over [*] Users can be added for $[*].
"Concurrent Users" means the maximum number of workstations or devices that are
permitted to have simultaneous access to the Derivative Software residing on
the network, regardless of the number of workstations or devices connected to
the network. A workstation or device becomes concurrent once it access (through
the network or through direct connection to the Server) the Derivative Software
and remains concurrent for the time the Derivative Software remains in use.
Discounts
The above royalties are subject to a cumulative discount on an annual basis as
follows:
<TABLE>
<CAPTION>
Commitment Discount Factor
---------- ---------------
<S> <C>
$[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
</TABLE>
- --------------------------------------------------------------------------------
September 16,1994 27
Fulcrum LF-101 (Can/U.S.)
5/2/94
*Confidential Treatment Requested
<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
- --------------------------------------------------------------------------------
SCHEDULE "F"
ESCALATION PROCEDURES
PROBLEM CLASSIFICATION AND ESCALATION PROCEDURES
PROBLEM CLASSIFICATION
Problems should be classified to accurately reflect their impact on our
customers. Sufficient commitment must be requested from all involved parties to
make sure the problem actually receives the level of attention it requires.
Please note that URGENT is the highest level of problem classification that can
be assigned by Product Support without consultation with other departments at
Fulcrum as defined in the Escalation Procedures.
Problem Level Problem Name
0 HOT SITE
1 CRITICAL
2 URGENT
3 IMPORTANT
4 MINOR
5 COMMENT
0- HOT SITE
A HOT SITE may be declared if:
(i) A CRITICAL bug (Level 1) exists and the customer agrees
to the resource commitment as described under HOT SITE
Declaration.
AND
(ii) The sales account manager responsible for the account
agrees to declare a Hot Site.
1- CRITICAL Problems
The criteria for designating a problem as CRITICAL are:
(i) Ongoing development of a customer's application has been
halted.
- --------------------------------------------------------------------------------
September 16,1994 28
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<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
================================================================================
OR
A bug results in significant performance problems,
operational difficulties, or potential data integrity
problems with this or other customers' production systems.
OR
A user account is in jeopardy.
AND
(ii) No suitable work-around exists. A "suitable" work-
around must be proven effective and able to be implemented
in a relatively short period of time.
2 - URGENT Problems
The criteria for designating a problem as URGENT are:
(i) A major feature failure exists; the system is
operational with limited use.
OR
A user application used in daily operation is down or
severely degraded.
AND
(ii) A work-around is inconvenient in terms of effectiveness
or profitability.
OR
Development has been severely crippled, but can continue.
AND
(iii) The customer cannot wait until the next scheduled release
for resolution.
3 -IMPORTANT Problems
An IMPORTANT Problem is:
(i) Feature failure; system is operational. There is little
or no impact on ongoing development.
OR
There is performance degradation with use of specific
functions.
AND
(ii) No suitable work-around exists.
- --------------------------------------------------------------------------------
September 16, 1994 29
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<PAGE>
Fulcrum Technologies Inc. Connect,Inc.
- --------------------------------------------------------------------------------
4 - MINOR Problems
A MINOR Problem is:
(i) As described for (3) above, but a work-around exists.
OR
(ii) One or more of the following:
Customer requires information in a short time frame.
A Prospect requires information.
A Customer requires available software shipped in a short time
frame.
A documentation error.
5 - COMMENTS
(i) Suggestions for future enhancements.
(ii) Comments on current products.
- --------------------------------------------------------------------------------
September 16, 1994 30
Fulcrum LF-101 (Can/U.S.)
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<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
- --------------------------------------------------------------------------------
ESCALATION PROCEDURES
0 - HOT SITE
(i) HOT SITE Declaration
A HOT SITE will be declared:
(a) After Product Support reviews the issue with the
Account Sales Manager, the appropriate Development
Manager, and the Product Manager. The System Engineer
should be part of the decision, whenever possible. The
review:
. Obtains the agreement of the managers involved that
the problem qualifies as a HOT SITE.
. Confirms that the problem as stated appears to be a
bug.
. Confirms that no work-arounds can be identified.
The review must be completed within 24 hours of the
HOT SITE being requested.
(b) After the customer agrees to designate a prime contact
to have as his first priority working with us to
resolve the problem. This individual must be available
to immediately provide information, run tests and
attempt to implement suggested fixes and work-arounds.
(c) After Product Support designates a single contact to
have as his top priority working with Development and
the customer to resolve the problem.
(d) After the Director responsible for Design Verification
is notified.
(e) The following are notified by the Product Support
Manager of the declaration of a HOT SITE:
VP, Development
The appropriate Director of Development
The Director responsible for Design
Verification
Product Manager
Regional Sales Director
Manager of System Engineering
Director, Customer Services
(ii) HOT SITE Resolution
By definition, every reasonable attempt is made to fix a HOT
SITE as soon as possible. All parties involved agree to make
it their first priority and, if necessary, work beyond
normal working hours towards a problem resolution.
Resolution is
- --------------------------------------------------------------------------------
September 16, 1994 31
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5/2/94
<PAGE>
Fulcrum Technologies Inc. Connect,Inc.
- --------------------------------------------------------------------------------
defined as a either a fix in the customer's hands, or a
suitable work-around which permits the downgrading of the
problem classification.
(iii) HOT SITE Escalation
After two (2) working days without resolution, the following
are notified by the Product Support Manager:
Director, Customer Services
The appropriate Director of Development
Regional Director of Sales
Product Manager
Notification includes the customer information, description
of the problem and its impact, action being taken, expected
resolution and further action required.
After an additional two (2) working days without resolution,
the following are notified. Notification is done by the
Product Support Manager and includes the same information as
above.
VP, Marketing and Sales
VP, Development
Chief Financial Officer (if necessary)
The above receive a weekly summary of HOT SITE and CRITICAL
problems in addition to the individual problem escalations.
The summary report is produced and distributed each Friday.
See appendix B for a sample of the summary report.
After ten (10) working days without resolution, the
President is included on the distribution list for summary
reports.
NOTE: Should the customer not be able to provide the same level of
commitments for local resources, then the problem is
automatically downgraded in priority to CRITICAL.
1 - CRITICAL Problems
(i) CRITICAL Problem Declaration
A problem will be declared CRITICAL:
(a) After Product Support reviews the situation with the
Account Sales Manager, the appropriate Development
Manager, and the Product Manager, and the System
Engineer, if available. The review:
. Obtains the agreement of the managers involved that
the problem qualifies as CRITICAL.
. Confirms the problem definition.
- --------------------------------------------------------------------------------
September 16, 1994 32
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<PAGE>
Fulcrum Technologies Inc. Connect,Inc.
- --------------------------------------------------------------------------------
. Identifies that no work-arounds have been missed.
(b) When the customer provides a prime contact for
information and testing.
(c) After Product Support designates a prime contact for
managing the problem resolution with the customer.
(d) After Director responsible for Design Verification is
notified.
(e) The following are notified by Product Support Manager
of the declaration of a CRITICAL site:
The appropriate Director of Development
Product Manager
Appropriate Sales Manager
Manager of System Engineering
Director of Customer Services
(ii) CRITICAL Problem Resolution
CRITICAL problems are the number one priority after HOT
SITES. They are worked on, generally in normal working
hours, until resolution. Product Support responds to the
customer with an initial analysis within twenty-four (24)
hours of receipt.
Resolution is defined as having a fix in the customer's
hand, or a work-around which permits the problem
classification to be downgraded.
(iii) CRITICAL Problem Escalation
After two (2) working days without resolution, the following
are notified by the Product Support manager:
Director, Customer Services
The appropriate Director of Development
Regional Director of Sales
Product Manager
After an additional two (2) working days without resolution,
the following are notified:
VP, Marketing and Sales
VP, Development
Chief Financial Officer (if necessary)
The above receive a weekly summary of HOT SITE and CRITICAL
problems in addition to the individual problem escalations.
The Summary report is produced and distributed each Friday.
See appendix B for a sample of the summary report.
- --------------------------------------------------------------------------------
September 16, 1996 33
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5/2/94
<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
- --------------------------------------------------------------------------------
After fifteen (15) working days without resolution, the
President is included in the distribution list for summary
reports.
NOTE: As with HOT SITES, a failure of the customer to live
up to their commitment for local resources automatically
downgrades the problem to URGENT.
2 - URGENT
(i) URGENT Problem Identification
The classification of a problem as URGENT is mutually agreed
upon by the customer and Product Support. The appropriate
Product Manager and Sales Manager may be consulted to
resolve disputes over classification of a given problem at
this level.
(ii) URGENT Problem Resolution
Product Support responds to URGENT problems with an initial
analysis within forty-eight (48) hours of receipt.
Fulcrum makes every effort to fix URGENT problems in a
timely fashion, the time period not to exceed ninety (90)
calendar days of being reported to Product Support.
(iii) URGENT Problem Escalation
Escalation takes two forms:
(a) Ongoing monthly reporting of summary information to
the VP, Marketing and Sales, VP, Development, and
Chief Financial Officer. This includes numbers of
major problems outstanding, average days outstanding,
and numbers of major problems fixed within the
reporting period. This information is reported at the
detail level, i.e. by product and platform and at the
summary level.
(b) The monthly report also provides detailed exception
information for problems not fixed within ninety (90)
days. The report shows product, platform and customer
information, current responsibility, expected date of
resolution and issues relating to this problem.
This exception report Is reviewed in a monthly meeting
attended by the Director of Product Development, the
Director of Customer Services and, as required, their
direct reports.
- --------------------------------------------------------------------------------
September 16, 1994 34
Fulcrum LF-101 (Can/U.S.)
5/2/94
<PAGE>
Fulcrum Technologies Inc. Connect, Inc.
- --------------------------------------------------------------------------------
3 - IMPORTANT
Product Support responds with an initial analysis within five (5)
working days upon receipt.
Problems classified as IMPORTANT are scheduled for the next
maintenance release. Product Development, Marketing and Product
Support may request alterations to this practice depending on
requirements.
4 - MINOR
Product support responds within ten (10) working days upon
receipt.
The current practice of gathering information from existing
documentation, and asking for clarification where necessary
continues. Product Support informs the appropriate account
manager immediately of any contact with a prospective customer.
5 - COMMENTS
Suggestions for future enhancements or comments on current
products are passed to the Product Manager for consideration for
the requirements list.
- --------------------------------------------------------------------------------
September 16, 1994 35
Fulcrum LF-101 (Can/U.S.)
5/2/94
<PAGE>
AMENDING AGREEMENT
BETWEEN: FULCRUM TECHNOLOGIES INC., a
corporation incorporated under the
laws of Delaware;
(hereinafter referred to as "Licensor")
AND
CONNECT, INC., a corporation incorporated
under the laws of the state California;
(hereinafter referred to as "Licensee")
WHEREAS:
The parties entered into a Fulcrum SearchTools Software Development and
Distribution License dated as of September 16, 1994 (the "Agreement"); and
The parties wish to amend Schedule "E" of the Agreement to provide for a [*]
Users license category;
NOW THEREFORE it is agreed as follows:
1. Schedule "E" of the Agreement is deleted and replaced with the Schedule "E"
attached to this Amending Agreement. This amendment applies from and after the
date of this Amending Agreement has been executed by both parties.
2. Except as stated above, the Agreement is unamended.
In Witness Whereof the parties have executed this Agreement on the date below.
FULCRUM TECHNOLOGIES INC. CONNECT, INC.
By: /s/ W. DAVID KEYS By: /s/ HENRY V. MORGAN
--------------------------------- --------------------------------
Name: W. DAVID KEYS Name: HENRY V. MORGAN
------------------------------- ------------------------------
Title: VP & GENERAL COUNSEL Title: EVP & CFO
------------------------------ -----------------------------
Date: April 10, 1995 Date: May 2, 1995
------------------------------- ------------------------------
*Confidential Treatment Requested
<PAGE>
SCHEDULE "E"
ROYALTY FEES
Licensee shall pay Licensor a royalty, based on the number of Users per Server
per order of the Derivative Software, as set out below:
<TABLE>
<CAPTION>
Number of Concurrent Users Index and Search Kernel
Per Server Per order
<S> <C>
[*] $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
</TABLE>
Additional Users can be added to a Server by paying the applicable Upgrade Fee.
The Upgrade Fee is the difference between the license fee for the new license
category and the previous license category, such that to upgrade from [*]
Users on a Server, an Upgrade fee of $[*] is due. Each additional [*] Users per
Server over [*] Users can be added for $[*].
"Concurrent Users" means the maximum number of workstations or devices that are
permitted to have simultaneous access to the Derivative Software residing on the
network, regardless of the number of workstations or devices connected to the
network. A workstation or device becomes concurrent once it access (through the
network or through direct connection to the Server) the Derivative Software and
remains concurrent for the time the Derivative Software remains in use.
Discounts
The above royalties are subject to a cumulative discount on an annual basis as
follows:
<TABLE>
<CAPTION>
Commitment Discount Factor
---------- ---------------
<S> <C>
$[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
</TABLE>
*Confidential Treatment Requested
<PAGE>
AMENDING AGREEMENT NO. 2
THIS AGREEMENT dated March, 1995 made,
BETWEEN: FULCRUM TECHNOLOGIES CORP, a
corporation incorporated under the
laws of Delaware (formerly named Fulcrum
Technologies Inc.);
(hereinafter referred to as "Licensor")
AND
CONNECT, INC., a
corporation incorporated under the laws of the state California;
(hereinafter referred to as "Licensee")
WHEREAS:
The parties entered into a Fulcrum SearchTools Software Development and
Distribution License Agreement dated as of September 16, 1994 and an amending
Agreement to the Fulcrum SearchTools Software Development and Distribution
License Agreement on May 2, 1995 (collectively the "Agreement");
The parties wish to amend the Agreement on the following terms and conditions;
NOW THEREFORE:
1. Subsection 1(a) is deleted and the following substituted therefore:
"(a) "Derivative Software" means the object code form of the applications
developed by Licensee from its use of the SearchServer SDK, which
applications incorporate or utilize SearchServer, in machine-readable binary
form, its proprietary data structures, or any part thereof licensed under the
names "Connect Corporate On-Line Server" (TM) and "OneServer." "
2. Schedule "A" of the Agreement is deleted and replaced by the Schedule "A.1"
in the form attached to this Amending Agreement No. 2. All references to
Schedule "A" in the Agreement shall hereinafter be read as referring to
Schedule "A.1"
3. (a) Licensee hereby orders and Licensor hereby accepts Licensee's order for
the following two SearchServer SDK's:
HP 9000s800 HP-UX version 2.0
IBM RS/6000 AIX version 2.0
<PAGE>
(b) Schedule "B" is hereby amended to add the above SDK's.
(c) Licensee acknowledges that it has received from Fulcrum the SDK's in
(a) above and Fulcrum acknowledges that it has received payment for the SDK's
in (a) above from Licensee.
4. The amendments set forth in this Amending Agreement No. 2 apply from and
after May 15, 1995. Except as expressly amended in this Amending Agreement
No. 2 the Agreement remains in full force and effect.
IN WITNESS THEREOF the parties have executed this Agreement on the date first
written above.
FULCRUM TECHNOLOGIES CORP. CONNECT, INC.
By: /s/ W. David Keys By: /s/ Paul Commons
-------------------------------- --------------------------------
Name: W. David Keys Name: Paul Commons
------------------------------ ------------------------------
Title: Secretary Title: Vice President
----------------------------- -----------------------------
Date: March 4, 1996 Date: March 14, 1996
------------------------------ -------------------------------
<PAGE>
SCHEDULE "A.1"
PURPOSE OF LICENSE
AND GRANT OF RIGHTS
1. Subject to the terms and conditions of this Agreement, Licensor grants to
Licensee;
(a) pursuant to paragraph 2(b)(i) of the Agreement, the right to use the
SearchServer software as part of the Licensee's Connect Corporate On-Line Server
(TM) application, which application is restricted to an [*] using Oracle or
Sybase RDBMS or current similar RDBMS data base management system, only for the
purpose of permitting any subscriber ("subscriber") to Licensee's Connect
Corporate On-Line Server (TM) to [*]. Pursuant to paragraph 2(b)(ii) of the
Agreement, Licensee is permitted to sublicense SearchServer as part of
Licensee's Connect Corporate On-Line Server (TM) application to end users
("Sublicensees") who are licensed by Licensee to use the Connect Corporate On-
Line Server (TM) application on computers owned or operated by such Sublicensee;
and
(b) pursuant to paragraph 2(b)(ii) of the Agreement, the right to incorporate
the SearchServer software as part of the Licensee's OneServer application, which
does not have [*] for the purpose of sublicensing SearchServer as part of
Licensee's OneServer application to end users ("Sublicensees") who are licensed
by Licensee to use the OneServer application on computers owned or operated by
such Sublicensee;
all of which are subject to the following restrictions:
(i) all Derivative Software used internally or sublicensed, unless
expressly exempted in this Agreement, shall be subject to royalty
payments to Licensor as set forth in Schedule "E" of this Agreement.
In addition to the Sublicensees sublicensed pursuant to paragraph 2
(b) (ii), the Connect Corporate On-Line Server (TM) will be deemed as
sublicensed to each subscriber to the Licensee's Connect Corporate
On-Line Server (TM) service;
(ii) Licensee agrees not to sublicense or permit access to the Connect
Corporate On-Line Server (TM) application to any subscriber until
such subscriber has entered into Licensee's standard subscription
agreement for the Connect Corporate On-Line Server and Licensee
agrees not to sublicense the SearchServer software as part of the
Connect Corporate On-Line Server application to any Sublicensee until
such Sublicensee has entered into an end user license ("Sublicense
Agreement") with Licensee which contains the minimum provisions
required in this Agreement. No such Sublicense Agreement shall permit
the Sublicensee to further distribute the SearchServer except
software as part of the Connect Corporate On-Line Server application
to subscribers accessing, on computers operated by such
*Confidential Treatment Requested
<PAGE>
Sublicensee the Connect Corporate On-Line Server (TM) application
service offered by such Sublicensee
(iii) Licensee agrees not to sublicense the OneServer application until
such Sublicensee has entered into an end user license ("Sublicense
Agreement") with Licensee which contains the minimum provisions
required in this Agreement. No Sublicense Agreement shall permit
the Sublicensee to further distribute the SearchServer Software.
(iv) user guides and/or user manuals, for future versions of the
Derivative Software, must incorporate Licensee s copyright notice
which shall contain the following or similar words: "This product
incorporates technology used under license from Fulcrum
Technologies Inc. and are copyright of Fulcrum Technologies Inc.
and/or its licensors";
(v) proper notice of Licensor's proprietary interest in SearchServer
must be shown, by copyright notice, on all media which contain the
Derivative Software and on all startup screens (or About screens)
of the Derivative Software;
(vi) Licensee must use reasonable efforts to enforce the provisions of
its Sublicense Agreement to the same extent that Licensee enforces
such provisions to protect Licensee's own proprietary products;
(vii) Licensee agrees that it will promptly notify Licensor of any
material change made to any of the terms and conditions of its end-
user agreement that would affect SearchServer; and
(viii) the Derivative Software shall not have application development
capabilities, and shall not be used for system integration
purposes. In addition, SearchServer shall operate as a "slave" to
RDBMS, meaning access will only be through the same user interface
as for the RDBMS, and access to SearchServer will be controlled by
the RDBMS license manager.
(ix) the Fulcrum SearchServer API would not be exposed to Users;
(x) all subscriber data and information is held only in the RDBMS
tables and there is no data outside the RDBMS tables;
(xi) licenses for SearchServer as it is required to purchase in respect
of users of the RDBMS tables.
<PAGE>
MINIMUM TERMS AND CONDITIONS
FOR SUBLICENSED SOFTWARE
Except as otherwise provided, each Sublicense Agreement entered into by Licensee
shall include, at a minimum, the following terms and conditions:
1. An acknowledgment by sublicensee that:
(a) title and ownership of all third party licensors and all rights
related thereto, including but limited to patent, trademark, trade
secrets and copyright related thereto are the exclusive property of
such third party licensors;
(b) Sublicensee shall only acquire the right to use the Derivative
Software in accordance with Sublicense Agreement; and
(c) Sublicensee shall take all necessary steps to ensure that all
intellectual property underlying the binary version of the Derivative
Software remains confidential.
2. A prohibition against:
(a) copying the Derivative Software for any reason other than for archival
or emergency restart purposes or program error verification;
(b) permitting more Users to use the Derivative Software than the
subscriber has purchased licenses for;
(c) moving the Derivative Software to a replacement CPU without first
obtaining authorization, which authorization shall not be unreasonably
withheld and shall only be provided upon payment of any applicable
incremental license fees based on minimum concurrent user license
requirements.
(d) offering the Derivative Software for use in a service bureau, or time
sharing environment, except as part of the Connect Corporate On-Line
Server (TM) service offered by the Sublicensee;
(e) sublicensing, renting or otherwise making the Derivative Software
available outside of Sublicensee's legal business entity;
(f) decompiling or reverse engineering the Derivative Software; and
(g) assigning any rights under the Sublicensee Agreement without the prior
written consent of Licensee.
3. A statement in bold print or block capital letters that.
<PAGE>
(a) the medium on which the program is furnished is warranted to be free
of defects in materials and workmanship under normal use for a period
of thirty (30) days from the date of delivery of the Derivative
Software;
(b) the Warranty under (a) above is in lieu of all other warranties or
conditions, either express, implied or statutory, or otherwise
including the express or implied warranties or conditions of
merchantability and fitness for a particular purpose; and
(c) the program contained on the medium is provided without warranty of any
kind and the sublicensee is responsible for the entire risk with
respect to the quality and performance of the program.
4. A statement that neither Licensee, nor its licensors, shall be liable
whatsoever for loss of profits or special, indirect, consequential or exemplary
damages, including legal fees, in connection with the supply, use or performance
of the Derivative Software, and that the total liability of Licensee and its
licensors, if any, in any event shall not exceed the subscriber fee paid for the
Derivative Software.
<PAGE>
AMENDING AGREEMENT NO.3
THIS AGREEMENT dated as of March 31, 1996 is made,
BETWEEN: FULCRUM TECHNOLOGIES CORP.,
a corporation incorporated under the laws of Delaware (formerly
named Fulcrum
Technologies Inc.
(hereinafter referred to as "Licensor")
AND
CONNECT, INC., a corporation incorporated under the laws
of the state California;
(hereinafter referred to as "Licensee")
WHEREAS:
The parties entered into a Fulcrum SearchTools Software Development and
Distribution License Agreement dated as of September 16, 1994 and an Amending
Agreement to the Fulcrum SearchTools Software Development and Distribution
License Agreement on May 2, 1995 and a further Amending Agreement NO. 2 dated
March 14, 1996 (collectively the "Agreement");
The parties wish to further amend the Agreement on the following terms and
conditions;
NOW THEREFORE:
1. Paragraph 20(b) of the Agreement is amended by deleting the Licensee
Points of Contact therein specified and replacing them with the following:
(iii) For Licensee: (Contractual and (iv) For Licensee: (Technical)
administrative)
Chief Financial Officer Executive VP, Development and
Engineering
Connect, Inc. Connect, Inc.
515 Ellis Street 515 Ellis Street
Mountain View, California 94043 Mountain View, California 94043
Tel.: 415-254-4000 Tel.: 415-254-4000
------------ ------------
Fax: 415-254-4800 Fax: 415-254-4800
------------ ------------
2. Schedule "E" of the Agreement is deleted and replaced with the Schedule
"E" attached to this Amending Agreement No. 3. The sublicense granted by
Licensee (or any subdistributor of Licensee) to any End User must be either a
Concurrent User based sublicense or a Per CPU based sublicense. Royalty
reports shall set out separately the End Users licensed on a Concurrent User
basis and the End Users licensed on a Per CPU basis.
3. Licensee will issue a royalty report for at least ten CPUs and pay
Licensor the related royalty fees of [*] dollars.
*Confidential Treatment Requested
<PAGE>
4. Licensee is hereby authorized to distribute the Derivative Software to End
Users through subdistributors, providing Licensee enters into a written
subdistributor agreement with each such subdistributor containing provisions
consistent with the provisions of this Agreement (except that License shall be
free to set its own prices with such subdistributors). Licensee shall pay
Licensor royalties as set out in Schedule "E" in respect of all End Users
licensed by any subdistributor.
5. Licensee and Licensor will issue a mutually agreed press release, within
thirty (30) days of the execution of this Amending Agreement No. 3 confirming
their relationship and the Licensee's use of the Fulcrum software. Nothing in
this provision shall entitle Licensee to disclose the royalties payable under
the Agreement.
6. The amendments set forth in this Amending Agreement No. 3 apply from and
after March 31, 1996. Except as expressly amended in this Amending Agreement
No. 3 the Agreement remains in full force and effect.
IN WITNESS THEREOF the parties have executed this Agreement on the date first
written above.
FULCRUM TECHNOLOGIES CORP. CONNECT, INC.
By: /s/ W. David Keys By: /s/ Henry V. Morgan
--------------------------------- ---------------------------------
Name: W. David Keys Name: Henry V. Morgan
------------------------------- --------------------------------
Title: Secretary Title: CFO
------------------------------ -------------------------------
<PAGE>
SCHEDULE "E"
ROYALTY FEES
1. Where the Licensee has licensed the End User on a Concurrent User" basis,
Licensee shall pay Licensor a royalty, based on the number of Users per Server
per order of the Derivative Software, as set out below:
Number of Concurrent Users Index and Search Kernel
Per Server Per order
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
[*] Users $[*]
Additional Users can be added to a Server by paying the applicable Upgrade Fee.
The Upgrade Fee is the difference between the license fee for the new license
category and the previous license category, such that to upgrade from [*]
Users on a Server, an Upgrade fee of $[*] is due. Each additional [*] Users per
Server over [*] Users can be added for $[*].
"Concurrent Users" means the maximum number of workstations or devices that are
permitted to have simultaneous access to the Derivative Software residing on the
network, regardless of the number of workstations or devices connected to the
network. A workstation or device becomes concurrent once it access (through the
network or through direct connection to the Server) the Derivative Software and
remains concurrent for the time the Derivative Software remains in use.
2. Discounts
The royalties in paragraph 1 above are subject to a cumulative discount on an
annual basis as follows:
Commitment Discount Factor
- ---------- ---------------
$[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
3. Where the End User has been licensed on a Per CPU basis, the Licensee shall
pay Licensor a royalty of [*] dollars per CPU for each CPU authorized under the
sublicense.
*Confidential Treatment Requested
<PAGE>
EXHIBIT 10.14
Date of Agreement: 6/30/95
-------------------------
BSAFE/TIPEM
OEM MASTER LICENSE AGREEMENT
THIS OEM MASTER LICENSE AGREEMENT ("Agreement") is entered into on the date set
forth below between RSA Data Security, Inc., a Delaware corporation ("RSA"),
having a principal mailing address at 100 Marine Parkway, Suite 500, Redwood
City., California 94065, and the entity named below as "OEM" ("OEM"), having a
principal address as set forth below.
OEM:
Connect Inc.. a corporation
- --------------------------------------------------------------------------------
(Name and jurisdiction of incorporation)
OEM Address:
515 Ellis Street
- --------------------------------------------------------------------------------
Mountain View. CA 94043
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OEM Legal Contact::
Emily Stein, Contracts Administrator
- --------------------------------------------------------------------------------
(name, telephone and title)
OEM Billing Contact:
Karen Pao, Accounts Payable
- --------------------------------------------------------------------------------
(name, telephone and title)
OEM Technical Contact:
Ken Ross, Executive Vice President of Development
- --------------------------------------------------------------------------------
(name, telephone and title)
OEM Commercial Contact:
Fred Cummins, Director of Product Development
- --------------------------------------------------------------------------------
(name, telephone and title)
OEM Initial P.O. Number:
- --------------------------------------------------------------------------------
Territory:
Worldwide; provided, however, that OEM shall not grant licenses for use of the
- --------------------------------------------------------------------------------
Bundled Product in any foreign country where the terms of the license agreement
- --------------------------------------------------------------------------------
would not provide the intellectual property protections intended to be provided
- --------------------------------------------------------------------------------
by such license, or where there is a significant risk that the RSA Software or
- --------------------------------------------------------------------------------
any part thereof would thereby fall into the public domain.
- --------------------------------------------------------------------------------
Exhibit "C" Special Terms and Conditions
Attached:
YES [ X ] NO [ ]
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 3
1.13 "RSA Object Code" means the Licensed Software in machine-readable,
compiled object code form.
1.14 "RSA Software" means RSA proprietary software known as BSAFE and
TIPEM as described in the User Manuals associated therewith. "RSA Software"
shall also include all modifications and enhancements (including all New
Releases and New Versions) to such programs as provided by RSA to OEM.
1.15 "RSA Source Code" means the mnemonic, high level statement versions
of the RSA Software written in the source language used by programmers.
1.16 "Territory" means those countries or portions of countries listed on
page 1 hereof.
1.17 "User Manual" means the most current version of the user manual
customarily supplied by RSA to end users who license the RSA Object Code.
2. GRANT OF LIMITED LICENSES
-------------------------
2.1 RSA Source Code License. For OEM's convenience, RSA wishes to permit
-----------------------
OEM to port the RSA Software to any environment OEM desires in accordance with
the following license, if granted. If a source code license is specified in a
License/Product Schedule, RSA hereby grants OEM a non-exclusive, non-
transferable, non-assignable limited license in the Territory during the term
specified in Section 8 to:
2.1.1 Modify the RSA Source Code to create interfaces and other
software necessary to permit the object code to the RSA Software to operate in
accordance with the User Manual in any of OEM's proprietary products (all such
modifications to the RSA Source Code referenced collectively as "Interface
Modifications").
2.1.2 Use the RSA Source Code to provide support of Bundled Products
to End User Customers.
2.1.3 Compile the RSA Source Code to create object code solely to
permit creation of Interface Modifications and for the purposes set forth in
Section 2.2 (with the limitations set forth in Section 2.3).
2.2 Object Code License. RSA wishes to permit OEM to incorporate into
-------------------
Bundled Products only specified portions and functionality of the RSA Software;
additional portions and functionality of the RSA Software can be added and
additional Bundled Products can be added by executing an amendment to a License
Product Schedule or a new License/Product Schedule. RSA hereby grants OEM a non-
exclusive, non-transferable, non-assignable limited license in the Territory
during the term specified in Section 8 to:
2.2.1 Incorporate the Licensed Functionality of the RSA Object Code
into the OEM Product to create a Bundled Product.
2.2.2 Reproduce, have reproduced, and sublicense the Licensed
Functionality of the RSA Object Code and the User Manual incorporated in a
Bundled Product.
2.3 Limitations On Object Code License. The licenses granted in Section
----------------------------------
2.2 shall be limited as follows:
2.3.1 Sublicenses of the RSA Object Code to Licensed Software shall
be granted only to (i) Distributors and (ii) End User Customers.
2.3.2 OEM may not in any way sell, rent, license, sublicense or
otherwise distribute the RSA Software or any part thereof or the right to use
the RSA Software or any part thereof as a stand-alone product to any person or
entity.
2.3.3 OEM may not incorporate into any Bundled Product any algorithm
or other functionality included within the RSA Software which is not Licensed
Software as set forth on the License/Product Schedule with respect to such
Bundled Product.
2.3.4 If Licensed Software with respect to a Bundled Product has a
specified Licensed Functionality, it may be incorporated,
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 4
reproduced, or sublicensed only with respect to such Licensed Functionality and
no other functionality of such Licensed Software is permitted to be
incorporated, reproduced, or sublicensed in such Bundled Product. If no Licensed
Functionality restriction is specified for an item of Licensed Software with
respect to a Bundled Product, then OEM shall have the rights set forth in
Section 2.2 with respect to all functionalities of such Licensed Software with
respect to such Bundled Product.
2.4 Title.
-----
2.4.1 Except for the limited licenses granted in Sections 2.1 and
2.2, RSA shall at all times retain full and exclusive right, title and ownership
interest in and to the RSA Software and in any and all related patents,
trademarks, copyrights or proprietary or trade secret rights.
2.4.2 OEM shall at all times retain full and exclusive right, title
and ownership interest in and to the Interface Modifications and in any and all
related copyrights or proprietary or trade secret rights; provided, however,
that OEM hereby agrees that it will not assert against RSA any of such
copyrights or proprietary or trade secret rights with respect to any interfaces
independently developed by RSA without reference to the source code to the
Interface Modifications.
3. LICENSE FEES
------------
3.1 License Fees. In consideration of RSA's grant to OEM of the limited
------------
license rights hereunder, OEM shall pay to RSA the amounts set forth below (the
"License Fees"):
3.1.1 Source Code License Fees. If RSA is granting to OEM RSA Source
------------------------
Code license rights as specified in a License/Product Schedule, OEM shall pay to
RSA the license fee as specified on each such License/Product Schedule.
3.1.2 Object Code License Fees. In consideration of RSA's grant to
------------------------
OEM of the RSA Object Code sublicense rights for each Bundled Product described
in each License/Product Schedule, OEM shall pay to RSA the license fees set
forth in each such License/Product Schedule, subject to the following:
3.1.2.1 Fixed Dollar Amount. If a fixed dollar fee is
-------------------
specified for each copy/unit of a Bundled Product licensed or otherwise
distributed by OEM or a Distributor, the License Fee per copy/unit shall be in
the amount specified in the License Product Schedule.
3.1.2.2 Percentage of Net Sales. If a License Fee based on Net
Sales is specified in the License/Product Schedule, a License Fee shall be due
for each copy/unit of a Bundled Product licensed or otherwise distributed by OEM
or a Distributor, in the amount of the specified percentage of the Net Sales
Price of the Bundled Product. The "Net Sales Price" shall be the gross amount of
all cash, in-kind or other consideration receivable by OEM or such Distributor
at any time in consideration of the licensing or other distribution of the
Bundled Product, excluding any amounts received by OEM or such Distributor for
sales and use taxes, shipping, insurance and duties, and reduced by all
discounts, rebates, refunds or allowances granted in the ordinary course of
business. For the purposes of determining Net Sales Price, the amount of in-kind
or other non-cash consideration receivable by OEM shall be deemed to have a
dollar value equal to the standard price (as listed in OEM's published price
schedule on the date of the grant of the license or the sale in question)
("Standard Price") for such Bundled Product, less all cash paid. With respect to
a Bundled Product which is licensed or otherwise distributed by OEM or a
Distributor as part of a larger group of products or as an integral part of
another product, a license fee shall be due as set forth above as though the
Bundled Product had been licensed or distributed separately by OEM or such
Distributor; provided, however, that if the amount invoiced for the Bundled
Product when licensed or distributed in this manner is more than five percent
(5%) below the Standard Price for the Bundled Product, then the Net Sale Price
relating to such invoice shall be deemed to be no less than ninety-five percent
(95%) of the Standard Price, notwithstanding the actual amount of the invoice.
3.1.3 Prepayment of License Fees. OEM shall prepay license fees in
--------------------------
the amount set
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 5
forth in the License/Product Schedule upon execution of the License/Product
Schedule. In no event shall such prepayment be refundable. If OEM has prepaid
License Fees with respect to a Bundled Product, one-half (1/2) of the License
Fees accrued may be offset against such prepaid License Fees. OEM shall show the
application of prepaid fees in the licensing reports provided to RSA pursuant to
Section 3.5.
3.2 Taxes. All taxes, duties, fees and other governmental charges of
-----
any kind (including sales and use taxes, but excluding United States or
California taxes based on the gross revenues or net income of RSA) which are
imposed by or under the authority of any government or any political subdivision
thereof on the License Fees or any aspect of this Agreement shall be borne by
OEM and shall not be considered a part of a deduction from or an offset
against, the License Fees.
3.3 Terms of Payment. License fees shall accrue with respect to
----------------
Bundled Products licensed or otherwise distributed by OEM or Distributors upon
the date of invoice of the Bundled Product to an End User Customer or
Distributor. License fees due RSA hereunder shall be paid by OEM to the
attention of the Software Licensing Department at RSA's address set forth above
on or before the thirtieth (30th) day after the close of the calendar quarter
during which the fees accrued. If OEM has prepaid License Fees with respect to a
Bundled Product, one-half (1/2) of License Fees accrued with respect to that
Bundled Product may be offset against such prepaid License Fees. A late payment
penalty of one percent (1%) of any license fees not paid when due shall be
assessed for each thirty (30) day period, or portion thereof, during which such
payment is delayed, beginning on the thirty-first (31st) day after the last day
of the calendar quarter to which the delayed payment relates.
3.4 U.S. Currency. All payments hereunder shall be made in lawful
-------------
United States currency. If OEM receives payment in foreign currencies, the
amount of its license fees to RSA shall be calculated using the closing exchange
rate published in The Wall Street Journal Western Edition on the last business
-----------------------
day such journal is published in the calendar quarter immediately preceding the
date of payment.
3.5 Licensing Report. A report in reasonably detailed form setting
----------------
forth the calculation of license fees due from OEM and signed by a responsible
officer of OEM shall be delivered to RSA on or before the thirtieth (3Oth) day
after the close of each calendar quarter during the term of this Agreement,
regardless of whether royalty payments are required to be made pursuant to
Section 3.3. The report shall include, at a minimum, the following information
(if applicable to OEM's designated method of calculating license fees) with
respect to the relevant quarter: (i) the total number of copies/units of Bundled
Products licensed or otherwise distributed (indicating the names and versions
thereof); (ii) if applicable, the total Net Sales Price invoiced to Distributors
and End User Customers; and (iii) total license fees accrued.
3.6 Audit Rights. RSA shall have the right, at its sole cost and
expense, to conduct during normal business hours and not more frequently than
annually, an audit of the appropriate records of OEM to verify the number of
copies/units of Bundled Products licensed or otherwise distributed by OEM and
Distributors and, if relevant to OEM's designated method of calculating license
fees, the Net Sales Price therefor. If such amounts are found to be different
than those reported, or the license fees accrued are different than those
reported, OEM will be invoiced or credited for the difference, as applicable.
Any additional license fees, along with the late payment penalty assessed in
accordance with Section 3.3, shall be payable within thirty (30) days of such
invoice. If OEM has prepaid License Fees with respect to a Bundled Product, one-
half (1/2) of License Fees accrued with respect to that Bundled Product may be
offset against such prepaid License Fees. If the deficiency in license fees paid
by OEM is greater than five percent (5%) of the license fees reported by OEM for
any quarter, OEM will pay the reasonable expenses associated with such audit, in
addition to the deficiency.
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 6
4. WARRANTY AND MAINTENANCE
------------------------
4.1 Limited Warranty. During the initial ninety (90)-day term of each
----------------
License/Product Schedule RSA warrants that the Licensed Functionality of the
Licensed Software specified in each License/Product Schedule will operate in
material conformance to RSA's published specifications for such Licensed
Functionality of the Licensed Software. RSA does not warrant that the RSA
Software or any portion thereof is error-free. OEM's exclusive remedy, and RSA's
entire liability in tort, contract or otherwise, shall be correction of any
warranted nonconformity as provided in Section 4.4. This limited warranty and
any obligations of RSA under Section 4.2 shall not apply to any Interface
Modifications or any nonconformites caused thereby and shall terminate
immediately if OEM makes any modification to the RSA Software other than
Interface Modifications.
4.2 Optional Maintenance. For the year commencing upon the expiration of
--------------------
the first ninety (90) days of each License/Product Schedule and for each year
thereafter commencing on the anniversary of such expiration, OEM may elect to
purchase annual maintenance, as defined in Section 4.4, by paying the then-
current annual maintenance fee. Such amount shall be payable for the first year
upon the execution of each License/Product Schedule and for each subsequent year
in advance of the commencement of such year. RSA may cease to offer maintenance
by notice delivered to OEM ninety (90) days or more before the end of the then-
current maintenance term.
4.3 Additional Charges. In the event RSA is required to take actions to
------------------
correct a difficulty or defect which is traced to OEM errors, modifications,
enhancements, software or hardware, then OEM shall pay to RSA its time and
materials charges at RSA's rates then in effect. In the event RSA's personnel
must travel to perform maintenance or on-site support. OEM shall reimburse RSA
for any reasonable out-of-pocket expenses incurred, including travel to and from
OEM's sites, lodging, meals and shipping, as may be necessary in connection with
duties performed under this Section 4 by RSA.
4.4 Maintenance Provided by RSA. During the ninety (90) days following
---------------------------
commencement of a License/Product Schedule and for periods for which OEM has
paid an annual maintenance fee, RSA will provide OEM with the following
services:
4.4.1 RSA will provide telephone support to OEM during RSA's normal
business hours. RSA may provide on-site support reasonably determined to be
necessary by RSA at OEM's location specified on page 1 hereof. RSA shall provide
the support specified in this Section 4.4.1 to OEM's employees responsible for
developing Bundled Products, maintaining Bundled Products, and providing support
to End User Customers. No more than two (2) OEM employees may obtain such
support from RSA at any one time. On RSA's request, OEM will provide a list with
the names of the employees designated to receive support from RSA. OEM may
change the names on the list at any time by providing written notice to RSA.
4.4.2 In the event OEM discovers an error in the Licensed
Functionality of the Licensed Software which causes the Licensed Functionality
of the Licensed Software not to operate in material conformance to RSA's
published specifications therefor, OEM shall submit to RSA a written report
describing such error in sufficient detail to permit RSA to reproduce such
error. Upon receipt of any such written report, RSA will use its reasonable
business judgment to classify a reported error as either: (i) a "Level 1
Severity" error, meaning an error that causes the Licensed Functionality of the
Licensed Software to fail to operate in a material manner or to produce
materially incorrect results and for which there is no workaround or only a
difficult workaround; or (ii) a "Level 2 Severity" error, meaning an error that
produces a situation in which the Licensed Functionality of the Licensed
Software is usable but does not function in the most convenient or expeditious
manner, and the use or value of the Licensed Functionality of the Licensed
Software suffers no material impact. RSA will acknowledge receipt of a
conforming error report within two (2) business days and (A) will use its
continuing best efforts to provide a correction for any Level 1 Severity error
to OEM as early as practicable; and (B) will use its
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 7
reasonable efforts to include a correction for any Level 2 Severity error in the
next release of the RSA Software.
4.4.3 RSA will provide OEM information relating to New Releases and
New Versions of the RSA Software during the term of this Agreement. New Releases
will be provided at no additional charge. New Versions will be provided at RSA's
standard upgrade charges in effect at the time. Any New Releases or New Versions
acquired by OEM shall be governed by all of the terms and provisions of this
Agreement.
4.5 License of New Releases. In the event OEM has not purchased optional
maintenance with respect to any Licensed Software, OEM may obtain a license of a
New Release of such Licensed Software or any service which is provided as a part
of maintenance by paying the maintenance fees which would otherwise have been
due from the expiration of maintenance provided pursuant to Section 4.1 to the
date of license of such New Release.
5. MASTER COPY
-----------
As soon as practicable but not later than five (5) business days after the
date of execution of a License/Product Schedule RSA shall deliver to OEM one (1)
copy of each of the RSA Object Code, the RSA Source Code and the User Manual
licensed hereunder and such other information, documentation and instructions
reasonably deemed necessary by RSA to enable OEM to perform its obligations
under this Agreement.
6. ADDITIONAL OBLIGATIONS OF OEM
-----------------------------
6.1 Bundled Product Marketing. OEM is authorized to represent to
-------------------------
Distributors and End User Customers only such facts about the RSA Software as
RSA states in its published product descriptions, advertising and promotional
materials or as may be stated in other non-confidential written material
furnished by RSA.
6.2 Customer Support. OEM shall, at its expense, provide all support for
----------------
the Bundled Products to Distributors and End User Customers.
6.3 License Agreements. OEM shall cause to be delivered to each Distributor
------------------
and End User Customer a license agreement which shall contain, at a minimum,
substantially all of the limitations of rights and the protections for RSA which
are contained in Sections 2.3, 6.4.2, 6.6, 7.1, 7.2, 9.8 and 9.9 of this
Agreement and shall prohibit Distributors and End User Customers pursuant to
written agreements from modifying, reverse engineering, decompiling or
disassembling the RSA Object Code or any part thereof. OEM shall use its
reasonable best efforts to ensure that all Distributors and End User Customers
abide by the terms of such agreements.
6.4 Confidentiality.
---------------
6.4.1 OEM acknowledges that in RSA's performance of its duties
hereunder RSA will communicate to OEM (or its designee) certain confidential
and proprietary information concerning the RSA Software, and know-how,
technology, techniques or marketing plans related thereto (collectively, the
"Know-How") all of which are confidential and proprietary to, and trade secrets
of, RSA. OEM agrees to hold all the RSA Software and Know-How within its own
organization and shall not, without specific written consent of RSA or as
expressly authorized herein, utilize in any manner, publish, communicate or
disclose any part of the RSA Software or Know-How to third parties. This Section
6.4.1 shall impose no obligation on OEM with respect to any Know-How which: (i)
at the time of disclosure in writing is not marked or stamped with a legend
identifying it as "Company Private," "Proprietary," "Confidential" or a similar
legend, or, within thirty (30) days after oral disclosure, is not so identified
in writing; (ii) is in the public domain at the time disclosed by RSA; (iii)
enters the public domain after disclosure other than by breach of OEM's
obligations hereunder or by breach of another party's confidentiality
obligations; or (iv) is shown by documentary evidence to have been known by OEM
prior to its receipt from RSA. OEM will take such steps as are consistent with
OEM's protection of its own confidential and proprietary information (but will
in no event exercise less than reasonable care) to ensure that the provisions of
this Section 6.4.1 are not violated by OEM's End User Customers,
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 8
Distributors, employees, agents or any other person.
6.4.2 OEM agrees not to remove or destroy any proprietary, trademark
or copyright markings or confidentiality legends placed upon or contained within
the RSA Source Code, RSA Object Code, User Manuals or any related materials or
documentation. OEM further agrees to insert and maintain: (i) within every
Bundled Product and any related materials or documentation a copyright notice in
the name of OEM; and (ii) within the splash screens, user documentation, printed
product collateral, product packaging and advertisements for the Bundled
Product, the appropriate RSA "Licensee Seal" from the form attached as Exhibit
"B" to this Agreement and a statement that the Bundled Product contains the RSA
Software. OEM shall not take any action which might adversely affect the
validity of RSA's proprietary, trademark or copyright markings or ownership by
RSA thereof, and shall cease to use the markings, or any similar markings, in
any manner on the expiration or other termination of the license rights granted
pursuant to Section 2.
6.4.3 OEM acknowledges the extreme importance of the confidentiality
and trade secret status of the RSA Source Code and OEM agrees, in addition to
complying with the requirements of Sections 6.4.1 and 6.4.2 as they relate to
the RSA Source Code, to: (i) inform any employee that is granted access to all
or any portion of the RSA Source Code of the importance of preserving the
confidentiality and trade secret status of the RSA Source Code; and (ii)
maintain a controlled, secure environment for the storage and use of the RSA
Source Code.
6.4.4 The placement of a copyright notice on any of the RSA Software
shall not constitute publication or otherwise impair the confidential or trade
secret nature of the RSA Software.
6.4.5 OEM acknowledges that the restrictions contained in this
Section 6.4 are reasonable and necessary to protect RSA's legitimate interests
and that any violation of these restrictions will cause irreparable damage to
RSA within a short period of time and OEM agrees that RSA will be entitled to
injunctive relief against each violation. OEM further agrees that all
confidentiality commitments hereunder shall survive the expiration or
termination for any reason of this Agreement or the license rights granted
pursuant to Section 2.
6.5 Federal Government Sublicense. Any sublicense of a Bundled Product
-----------------------------
acquired from OEM or any Distributor under a United States government contract
shall be subject to restrictions as set forth in subparagraph (c)(1)(ii) of
Defense Federal Acquisition Regulations Supplement (DFARs) Section 252.227-7013
for Department of Defense contracts and as set forth in Federal Acquisition
Regulations (FARs) Section 52.227-19 for civilian agency contracts or any
successor regulations. OEM agrees that any such sublicense shall set forth all
of such restrictions and the tape or diskette label for the Bundled Product and
any documentation delivered with the Bundled Product shall contain a restricted
rights legend conforming to the requirements of the current, applicable DFARs or
FARs.
6.6 Notices. OEM shall immediately advise RSA of any legal notices served
-------
on OEM which might affect RSA, the RSA Software or any Bundled Products.
6.7 INDEMNITY. OEM EXPRESSLY INDEMNIFIES AND HOLDS HARMLESS RSA, ITS
SUBSIDIARIES, AGENTS AND AFFILIATES FROM: (i) ANY AND ALL LIABILITY OF ANY KIND
OR NATURE WHATSOEVER TO OEM'S END USER CUSTOMERS, DISTRIBUTORS AND THIRD PARTIES
WHICH MAY ARISE FROM ACTS OF OEM OR FROM THE LICENSE OF BUNDLED PRODUCTS BY OEM
OR ANY DOCUMENTATION, SERVICES OR ANY OTHER ITEM FURNISHED BY OEM TO ITS END
USER CUSTOMERS OR DISTRIBUTORS; AND (ii) ANY LIABILITY ARISING IN CONNECTION
WITH AN UNAUTHORIZED REPRESENTATION OR ANY MISREPRESENTATION OF FACT MADE BY OEM
OR ITS AGENTS, EMPLOYEES OR DISTRIBUTORS TO ANY PARTY WITH RESPECT TO THE RSA
SOFTWARE OR ANY BUNDLED PRODUCTS.
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 9
7. DISCLAIMER OF WARRANTIES; LIMITATION OF LIABILITY: INTELLECTUAL PROPERTY
------------------------------------------------------------------------
INDEMNITIES
- -----------
7.1 DISCLAIMER. EXCEPT FOR THE EXPRESS LIMITED WARRANTY PROVIDED IN
----------
SECTION 4.1, THE RSA SOFTWARE IS PROVIDED "AS IS" WITHOUT ANY WARRANTY
WHATSOEVER. RSA DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO
ANY MATTER WHATSOEVER, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. RSA DISCLAIMS ANY WARRANTY OR REPRESENTATION
TO ANY PERSON OTHER THAN OEM WITH RESPECT TO THE RSA SOFTWARE. OEM SHALL NOT,
AND SHALL TAKE ALL MEASURES NECESSARY TO INSURE THAT ITS AGENTS AND EMPLOYEES DO
NOT, MAKE OR PASS THROUGH ANY SUCH WARRANTY ON BEHALF OF RSA TO ANY DISTRIBUTOR,
END USER CUSTOMER OR OTHER THIRD PARTY.
7.2 LIMITATION OF LIABILITY. IN NO EVENT WILL RSA BE LIABLE TO OEM (OR TO
-----------------------
ANY PERSON CLAIMING RIGHTS DERIVED FROM OEM) FOR INDIRECT, INCIDENTAL, SPECIAL,
CONSEQUENTIAL OR EXEMPLARY DAMAGES ARISING OUT OF OR RELATED TO THE TRANSACTIONS
CONTEMPLATED UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOST PROFITS,
BUSINESS INTERRUPTION OR LOSS OF BUSINESS INFORMATION, EVEN IF RSA HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. UNDER NO CIRCUMSTANCES SHALL RSA'S
TOTAL LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT EXCEED THE TOTAL
AMOUNT PAID BY OEM TO RSA HEREUNDER, REGARDLESS OF WHETHER ANY ACTION OR CLAIM
IS BASED ON WARRANTY, CONTRACT, TORT OR OTHERWISE.
7.3 Proprietary Rights Infringement by RSA.
---------------------------------------
7.3.1 Subject to the limitations set forth below, RSA, at its own
expense, shall: (i) defend, or at its option settle, any claim, suit or
proceeding against OEM on the basis of infringement of any United States patent,
copyright or trade secret in the field of cryptography by the unmodified
Licensed Software as delivered by RSA (excluding the Interface Modifications) or
any claim that RSA has no right to license the Licensed Software hereunder; and
(ii) pay any final judgment entered or settlement against OEM on such issue in
any such suit or proceeding defended by RSA. RSA shall have no obligation to OEM
pursuant to this Section 7.3.1 unless: (A) OEM gives RSA prompt written notice
of the claim; (B) RSA is given the right to control and direct the
investigation, preparation, defense and settlement of the claim; and (C) the
claim is based on OEM's use of the unmodified Licensed Software in accordance
with this Agreement.
7.3.2 If RSA receives notice of an alleged infringement, RSA shall
have the right, at its sole option, to obtain the right to continue use of the
Licensed Software or to replace or modify the Licensed Software so that it is no
longer infringing. If neither of the foregoing options is reasonably available
to RSA, then the license rights granted pursuant to Section 2 may be terminated
at the option of either party hereto without further obligation or liability
except as provided in Sections 7.3.1 and 8.3 and in the event of such
termination, RSA shall refund the License Fees paid by OEM hereunder less
depreciation for use assuming straight line depreciation over a five (5)-year
useful life.
7.3.3 THE RIGHTS AND REMEDIES SET FORTH IN SECTIONS 7.3.1 AND 7.3.2
CONSTITUTE THE ENTIRE OBLIGATION OF RSA AND THE EXCLUSIVE REMEDIES OF OEM
CONCERNING RSA'S PROPRIETARY RIGHTS INFRINGEMENT.
7.4 Proprietary Rights Infringement by OEM.
--------------------------------------
7.4.1 Subject to the limitations set forth below, OEM, at its own
expense, shall: (i) defend, or at its option settle, any claim, suit or
proceeding against RSA on the basis of infringement of any United States patent,
copyright or trade secret by any Bundled Product (excluding the unmodified RSA
Software) or the Interface Modifications; and (ii) pay any final
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 10
judgment entered or settlement against RSA on such issue in any such suit or
proceeding defended by OEM. OEM shall have no obligation to RSA pursuant to this
Section 7.4.1 unless: (A) RSA gives OEM prompt written notice of the claim; and
(B) OEM is given the right to control and direct the investigation, preparation,
defense and settlement of the claim.
7.4.2 If OEM receives notice of an alleged infringement, OEM shall
have the right, at its sole option, to obtain the right to continued use of the
Interface Modifications or the Bundled Product or to replace or modify the
Interface Modifications or Bundled Product so that they are no longer
infringing. If neither of the foregoing options is reasonably available to OEM,
then the license rights granted pursuant to Section 2 of this Agreement may be
terminated at the option of either party hereto without further obligation or
liability except as provided in Sections 7.4.1 and 8.3, and in the event of such
termination, RSA shall retain all License Fees paid by OEM hereunder.
7.4.3 THE RIGHTS AND REMEDIES SET FORTH IN SECTIONS 7.4.1 AND 7.4.2
CONSTITUTE THE ENTIRE OBLIGATION OF OEM AND THE EXCLUSIVE REMEDIES OF RSA
CONCERNING OEM'S PROPRIETARY RIGHTS INFRINGEMENT.
8. TERM AND TERMINATION
--------------------
8.1 Term. The license rights granted pursuant to Section 2 shall be
----
effective with respect to each License/Product Schedule as of the date thereof
and shall continue in full force and effect for each item of Licensed Software
for an initial period as set forth on each License/Product Schedule unless
sooner terminated pursuant to the terms of this Agreement. Such license rights
shall be automatically renewed for successive one (1)-year terms unless either
party notifies the other party in writing of its intention not to renew at least
sixty (60) days prior to the expiration of the then-current term. Such non-
renewal option may be exercised by either party with or without cause.
Notwithstanding the foregoing, either party shall be entitled to terminate all
the license rights granted pursuant to this Agreement at any time on written
notice to the other in the event of a default by the other party and a failure
to cure such default within a period of thirty (30) days (five (5) days if the
default involves the payment of money) following receipt of written notice
specifying that a default has occurred.
8.2 Insolvency. In the event that either party is adjudged insolvent or
----------
bankrupt, or upon the institution of any proceedings by or against either party
seeking relief, reorganization or arrangement under any laws relating to
insolvency, or upon any assignment for the benefit of creditors, or upon the
appointment of a receiver, liquidator or trustee of any of either party's
property or assets, or upon the liquidation, dissolution or winding up of either
party's business, then and in any such events all the license rights granted
pursuant to this Agreement may immediately be terminated by the other party upon
giving written notice.
8.3 Disposition of RSA Software and User Manuals on Termination. Upon the
-----------------------------------------------------------
expiration or termination pursuant to this Section 8 of the license rights
granted pursuant to Section 2, the remaining provisions of this Agreement
(including without limitation the confidentiality provisions of Section 6.4)
shall remain in full force and effect, and OEM shall cease making copies of,
using or licensing the RSA Software and Bundled Products excepting only such
copies of Bundled Products necessary to fill orders placed with OEM prior to
such expiration or termination. OEM shall destroy all copies of the RSA Software
and Bundled Products not subject to any then-effective license agreement with an
End User Customer and all information and documentation provided by RSA to OEM
(including all Know-How), other than such copies of the RSA Object Code, the
User Manual and the Bundled Products as are necessary to enable OEM to perform
its continuing support obligations in accordance with Section 6.2, if any, and
except as provided in the next following sentence. If OEM has licensed Source
Code hereunder, for a period of one (1) year after the date of expiration or
termination of the license rights granted under this Agreement, OEM may retain
one (1) copy of the RSA Source Code and is hereby licensed for such term to use
such RSA Source Code solely for the purpose of
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 11
supporting End User Customers of Bundled Products. Upon the expiration of such
one (1)-year period, OEM shall destroy or return to RSA such single copy of the
RSA Source Code.
9. MISCELLANEOUS PROVISIONS
------------------------
9.1 Governing Laws. IT IS THE INTENTION OF THE PARTIES HERETO THAT THE
--------------
INTERNAL LAWS OF THE STATE OF CALIFORNIA, U.S.A. (IRRESPECTIVE OF ITS CHOICE OF
LAW PRINCIPLES) SHALL GOVERN THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION OF
ITS TERMS, AND THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF
THE PARTIES HERETO. THE PARTIES AGREE THAT THE UNITED NATIONS CONVENTION ON
CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY TO THIS AGREEMENT.
THE PARTIES HEREBY AGREE THAT ANY SUIT TO ENFORCE ANY PROVISION OF THIS
AGREEMENT OR ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE BUSINESS
RELATIONSHIP BETWEEN THE PARTIES HERETO SHALL BE BROUGHT IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OR THE SUPERIOR OR
MUNICIPAL COURT IN AND FOR THE COUNTY OF SAN MATEO, CALIFORNIA, U.S.A. Each
party hereby agrees that such courts shall have exclusive in personam
-----------
jurisdiction and venue with respect to such party, and each party
hereby submits to the exclusive in personam jurisdiction and venue of such
-----------
courts.
9.2 Binding upon Successors and Assigns. Except as otherwise provided
-----------------------------------
herein, this Agreement shall be binding upon, and inure to the benefit of, the
successors, executors, heirs, representatives, administrators and assigns of the
parties hereto; provided, however, that this Agreement shall not be assignable
by OEM, by operation of law or otherwise, without the prior written consent of
RSA, which shall not be unreasonably withheld. Any such purported assignment or
delegation without RSA's written consent shall be void and of no effect.
9.3 Severability. If any provision of this Agreement, or the application
------------
thereof, shall for any reason and to any extent, be invalid or unenforceable,
the remainder of this Agreement and application of such provision to other
persons or circumstances shall be interpreted so as best to reasonably effect
the intent of the parties hereto. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT
EACH AND EVERY PROVISION OF THIS AGREEMENT WHICH PROVIDES FOR A LIMITATION OF
LIABILITY, DISCLAIMER OF WARRANTIES OR EXCLUSION OF DAMAGES IS INTENDED BY THE
PARTIES TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION AND TO BE
ENFORCED AS SUCH.
9.4 Entire Agreement. This Agreement and the exhibits and schedules hereto
----------------
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings between the parties.
9.5 Amendment and Waivers. Any term or provision of this Agreement may be
---------------------
amended, and the observance of any term of this Agreement may be waived, only by
a writing signed by the party to be bound thereby.
9.6 Attorneys' Fees. Should Suit be brought to enforce or interpret any
---------------
part of this Agreement, the prevailing party shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including without limitation, costs, expenses and fees on
any appeal).
9.7 Notices. Whenever any party hereto desires or is required to give any
-------
notice, demand, or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is delivered
by personal service or mailed, United States certified or registered mail,
postage prepaid, return receipt requested, addressed as follows:
RSA: To the address set forth on page 1
<PAGE>
RSA Data Security, Inc.
OEM Master License Agreement
Page 12
If to RSA, with a copy to:
Timothy Tomlinson, Esq.
Tomlinson Zisko Morosoli & Maser
200 Page Mill Road, Second Floor
Palo Alto, California 94306
OEM: To the address set forth on page 1
Such communications shall be effective when they are received by the
addressee thereof; but if sent by certified or registered mail in the manner set
forth above, they shall be effective five (5) days after being deposited in the
United States mail in the contiguous 48 states or ten (10) days after being
deposited in the United States mail in any other location. Any party may change
its address for such communications by giving notice thereof to the other party
in conformity with this Section.
9.8 Foreign Reshipment Liability. THIS AGREEMENT IS EXPRESSLY MADE SUBJECT
----------------------------
TO ANY LAWS, REGULATIONS, ORDERS OR OTHER RESTRICTIONS ON THE EXPORT FROM THE
UNITED STATES OF AMERICA OF THE RSA SOFTWARE OR BUNDLED PRODUCTS OR OF
INFORMATION ABOUT SUCH RSA SOFTWARE OR BUNDLED PRODUCTS WHICH MAY BE IMPOSED
FROM TIME TO TIME BY THE GOVERNMENT OF THE UNITED STATES OF AMERICA.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, OEM SHALL
NOT EXPORT OR REEXPORT, DIRECTLY OR INDIRECTLY, ANY RSA SOFTWARE OR BUNDLED
PRODUCTS OR INFORMATION PERTAINING THERETO TO ANY COUNTRY FOR WHICH SUCH
GOVERNMENT OR ANY AGENCY THEREOF REQUIRES AN EXPORT LICENSE OR OTHER
GOVERNMENTAL APPROVAL AT THE TIME OF EXPORT OR REEXPORT WITHOUT FIRST OBTAINING
SUCH LICENSE OR APPROVAL.
9.9 Trade Names, Logos; Publicity. By reason of this Agreement or the
-----------------------------
performance hereof, OEM shall acquire no rights of any kind in any RSA
trademark, trade name, logo or product designation under which the RSA Software
was or is marketed and OEM shall not make any use of the same for any reason
except as expressly authorized by this Agreement or otherwise authorized in
writing by RSA. RSA shall have the right during the term of the license rights
granted hereunder to disclose to third parties that OEM is an OEM of the RSA
Software and that any publicly-announced Bundled Product incorporates the RSA
Software. OEM shall provide to RSA, solely for RSA's display purposes, one (1)
working copy of each Bundled Product which consists solely of computer software
and one (1) working or non-working unit of any hardware product in which is
incorporated a Bundled Product which consists of an integrated circuit or other
hardware.
9.10 Remedies Non-Exclusive. Any remedy provided for in this Agreement is
----------------------
deemed cumulative with, and not exclusive of, any other remedy provided for in
this Agreement or otherwise available at law or in equity. The exercise by a
party of any remedy shall not preclude the exercise by such party of any other
remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
OEM:
CONNECT, INC.
By: /s/ Henry Morgan
--------------------------------------------
Printed Name: Henry Morgan
----------------------------------
Title: CFO
-----------------------------------------
RSA DATA SECURITY. INC.
By: /s/ D. James Bidzos
--------------------------------------------
Printed Name: D. James Bidzos
----------------------------------
Title: President
-----------------------------------------
<PAGE>
License/Product Schedule Numb ______________________________________
Date of this License/Product Schedule: _____________________________
EXHIBIT "A"
LICENSE/PRODUCT SCHEDULE
OEM:
Connect, Inc. SOURCE CODE LICENSE
- ---------------------------------------------- -------------------
BSAFE
OEM Master License Agreement Number: YES [ ] NO [ X ]
- ----------------------------------------------
0695-CON-0-MLA-1 TIPEM
YES [ ] NO [ X ]
Date of OEM Master License Agreement
6/30/95
- ----------------------------------------------
This License/Product Schedule Amends Schedules
Dated:
N/A
- ----------------------------------------------
Term of Agreement for this Bundled Product:
5 years
- ----------------------------------------------
Bundled Product:
Single-user desktop client and server applications, where the server is
providing RSA-enabled services to only RSA-enabled clients and where the client
and server applications are non-security products (i.e., products whose primary
functionality is other than encryption/authentication of data).
RSA Software:
BSAFE 2.1x, TIPEM 1.x
- -----------------------------------------------
RSA Software Distribution Method:
x Tangible Media or
- -------
Electronic Transmission
- -------
<PAGE>
Exhibit "A"
License/Product Schedule
Page 2
OBJECT CODE LICENSES
- --------------------
LICENSED SOFTWARE AND FUNCTIONALITY FOR THIS BUNDLED PRODUCT:
<TABLE>
<CAPTION>
RIGHT TO LICENSED DESCRIBE
INCLUDE SOFTWARE LICENSED
OBJECT FUNCTIONALITY FUNCTIONALITY
CODE FOR RESTRICTION
BUNDLED
PRODUCT
<S> <C> <C> <C> <C> <C>
BSAFE YES NO YES NO
RSA Public Key Cryptosystem [X] [ ] [X] [ ] Certificate
authentication must
support RSA root
keys.
Diffie-Hellman Key [X] [ ] [ ] [X]
Negotiation
Data Encryption Standard [X] [ ] [ ] [X]
(DES)
Extended Data Encryption [X] [ ] [ ] [X]
Standard (DESX)
RC2 Variable-Key Size [X] [ ] [ ] [X]
Symmetric Block Cipher
RC4 Variable-Key Size [X] [ ] [ ] [X]
Symmetric Stream Cipher
MD Hashing Algorithm [X] [ ] [ ] [X]
MD2 Hashing Algorithm [X] [ ] [ ] [X]
MD5 Hashing Algorithm [X] [ ] [ ] [X]
TIPEM (all set forth below) [X] [ ] [ ] [X]
RSA Public Key Cryptosystem
Data Encryption Standard (DES)
RC2 Variable Key Size
Symmetric Block Cipher
MD2 Hashing Algorithm
MD5 Hashing Algorithm
</TABLE>
<PAGE>
Exhibit "A"
License/Product Schedule
Page 3
LICENSE AND MAINTENANCE FEES
- ----------------------------
Object Code License Fees:
- -------------------------
Percentage (%) of Net Sales:
[*]% of the Net Sales Price of the client and server software, but not less than
$[*] per client copy and not less than $[*] per server copy.
Additional Object Code License Fees:
- ------------------------------------
1. Amount. The parties acknowledge that OEM intends to offer a proprietary
Web service, such that third parties will contract with OEM to use OEM's
internal Web servers (the "Web Service"). The parties further acknowledge that
OEM's internal Web servers will be running the Bundled Product identified as the
"server application." As additional consideration for the RSA Object Code
licenses granted in this License/Product Schedule, OEM shall pay to RSA $[*]
for each copy of the server application which OEM uses internally, including for
purposes of the Web Service.
2. Payment and Reporting. License Fees based on OEM's internal use of the
server application shall accrue with respect to each copy on the date such copy
is loaded on an OEM Web server. OEM shall report License Fees accrued for
internal use of the server application in its reports delivered to RSA pursuant
to Section 3.5, indicating the number of copies used.
Source Code License Fee:
- ------------------------
N/A
Prepayment of License Fees:
- ---------------------------
$[*], payable as follows:
* $[*] upon execution of this License/Product Schedule
* $[*] on the first date after execution of this License/Product Schedule
that OEM secures mezzanine financing, or on August 31, 1995, whichever is
earlier
* $[*] on or before November 30, 1995
* $[*] on or before February 28, 1996
Present Annual Maintenance Fee for this
- ---------------------------------------
License/Product Schedule:
- -------------------------
$[*]
THE PROVISIONS OF THIS LICENSE/PRODUCT SCHEDULE ARE PROVIDED AS A BASIS OF
DISCUSSION BETWEEN OEM AND RSA AND WILL BECOME BINDING UPON THE PARTIES ONLY IF
THEY HAVE EXECUTED A BSAFE/TIPEM OEM MASTER LICENSE AGREEMENT AND HAVE INDICATED
THEIR ACCEPTANCE OF THE TERMS CONTAINED IN THIS LICENSE/PRODUCT SCHEDULE BY
THEIR SIGNATURES BELOW ON OR BEFORE JUNE 30, 1995.
OEM:
CONNECT, INC.
By: /s/ Henry Morgan
------------------------------------
Printed Name: Henry Morgan
--------------------------
Title: CFO
---------------------------------
AGREED AND ACCEPTED:
RSA DATA SECURITY, INC.
By: /s/ D. James Bidzos
-------------------------------------
Printed Name: D. James Bidzos
--------------------------
Title: President
---------------------------------
[*] Confidential Treatment Requested
<PAGE>
Exhibit "C"
Page 2
IN WITNESS WHEREOF, the parties have executed this Exhibit "C" as of the
date set forth above.
OEM:
CONNECT, INC. RSA DATA SECURITY, INC.
By: /s/ Henry Morgan By: /s/ D. James Bidzos
----------------------------- --------------------------------
Printed Name: Henry Morgan Printed Name: D. James Bidzos
------------------- ----------------------
Title: CFO Title: President
-------------------------- -----------------------------
<PAGE>
EXHIBIT "C"
SPECIAL TERMS AND CONDITIONS
OEM: Connect. Inc.
---------------------------------------------------------------------------
Master License Agreement Number: 0695-CON-0-MLA-i
-----------------------------------------------
Master License Agreement Date: 6/30/95
-------------------------------------------------
Exhibit "C" Date: 6/30/95
--------------------------------------------------------------
THE OEM MASTER LICENSE AGREEMENT between RSA Data Security, Inc. and the
OEM set forth above dated as of the date set forth above ("Agreement") is
---------
amended as set forth below.
1. Definitions. Capitalized terms used and not otherwise defined in this
-----------
Exhibit "C" shall have the meanings designated for such terms in the Agreement.
2. Amendments to Agreement. The following provisions of the Agreement,
-----------------------
referenced by the applicable Section numbers in the Agreement, are hereby
amended as follows:
2.1 Section 3.7. A new Section 3.7 is added, as follows:
-----------
3.7 Evaluation Copies. OEM may deliver copies of Bundled Products
-----------------
identified as "client" products on a License/Product Schedule to
prospective End User Customers on a trial basis for evaluation purposes
only (each, an "Evaluation Copy") provided that each such prospective
End User Customer has received a written or electronic trial license
prohibiting the End User Customer from copying, modifying, reverse
engineering. decompiling or disassembling the RSA Object Code or any
part thereof. All Evaluation Copies licensed shall contain a feature
which disables the Evaluation Copy no later than ninety (90) days after
delivery to the prospective End User Customer. No License Fees shall be
reportable or payable with respect to Evaluation Copies unless and until
the Evaluation Copy is replaced with or converted to a standard Bundled
Product or the End User Customer is invoiced for the Bundled Product,
whichever occurs first.
2.2 Section 6.3. Section 6.3 is amended by adding the words "or
-----------
electronic" after the word "written" in the ninth line thereof.
3. Effect of Amendment. This Exhibit "C" is an amendment to the Agreement.
-------------------
Except as expressly amended above, the Agreement shall remain in full force and
effect.
<PAGE>
EXHIBIT 10.16
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER' S RULES.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR
RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
CONNECT, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
CONNECT, Inc. (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. Definitions:
--------------
(a) "Optionee" shall be Thomas Kehler.
(b) "Date of Option Grant" shall mean January 16, 1996.
(c) "Number of Option Shares" shall mean 750,000 shares of common
stock of the Company as adjusted from time to time pursuant to paragraph 9
below.
(d) "Exercise Price" shall mean $0.25 per share as adjusted from time
to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring one year after
January 1, 1996.
(g) Determination of "Vested Ratio":
<PAGE>
Vested Ratio
------------
On date of Option Grant 0
On Initial Vesting Date, provided the 12/72
Optionee is continuously employed by a
Participating Company from the Date of
Option Grant until the Initial Vesting
Date
Plus
----
For the last day of each full calendar 1/72
month of the Optionee's continuous
employment by a Participating Company
from the Initial Vesting Date
In no event shall the Vested Ratio
exceed 1/1.
Notwithstanding the foregoing, in the event any of the Performance
Objectives are met, the fractions "12/72" and "1/72" set forth above shall be
amended automatically upon the determination by the Company's Board of Directors
that such Performance Objectives have been met as follows:
(i) If Performance Objective "A" is met,
the denominator of the fractions
"12/72" and "1/72" shall be amended to
be the number determined by subtracting
from 72 the sum of 12 and any amounts
from (ii) and (iii) below;
(ii) If Performance Objective "B" is met, the denominator
of the fractions "12/72" and "1/72" shall be amended to
be the number determined by subtracting from 72 the sum
of 6 and any amounts from (i) above and (iii) below;
and
(iii) If Performance Objective "C" is met for any quarter of
1996, the denominator of the fractions "12/72" and
"1/72" shall be amended to be the number determined by
subtracting from 72 the sum of 1.5 multiplied by the
number of quarters in 1996 for which this objective is
met and any amounts from (i) above and (ii) above.
<PAGE>
The determination of whether the Performance Objectives have been met
shall be made by the Board of Directors of the Company, whose judgment shall be
final and binding on Optionee.
(h) "Option Term Date" shall mean ten (10) years after the Date of
Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Connect, Inc., a California corporation, and
any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in Sections 425(e) and 425(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Performance Objectives" shall mean the achievement of the
following milestones:
(i) Performance Objective "A": achievement of the Company's
revenue goal for 1996, as set forth in the Company's
business plan approved during the first quarter of 1996
(the "Plan");
(ii) Performance Objective "B": achievement of the Company's
revenue and expense goals for the fourth quarter of 1996,
as set forth in the Plan;
(iii) Performance Objective "C": achievement of revenue and
expense targets set forth in the Plan for each quarter of
1996.
(n) "Plan" shall mean the Connect, Inc. 1989 Stock Option Plan.
2. Status of the Option. This Option is intended to be an incentive
--------------------
stock option as described in Section 422A of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under Section 422A of the Code, including, but not limited to, holding period
requirements.
3. Administration. All questions of interpretation concerning this
--------------
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has
<PAGE>
been appointed and, unless the powers of the committee have been specifically
limited, the committee shall have all of the powers of the Board granted in the
Plan, including, without limitation, the power to terminate or amend the Plan at
any time, subject to the terms of the Plan and any applicable limitations
imposed by law. All determinations by the Board shall be final and binding upon
all persons having an interest in the Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
4. Exercise of the Option.
----------------------
(a) Right to Exercise. The Option shall be immediately exercisable in
-----------------
its entirety on and after the Initial Exercise Date subject to the Optionee's
agreement that any shares purchased upon exercise are subject to the Company's
repurchase rights set forth in paragraph 11 and paragraph 12 below.
Notwithstanding the foregoing, except as provided in paragraph 16 below, the
aggregate fair market value of the stock with respect to which the Optionee may
exercise the Option for the first time during any calendar year, together with
any other incentive stock options which are exercisable for the first time
during any such year, as determined in accordance with Section 422A(d) of the
Code, shall not exceed One Hundred Thousand Dollars ($100,000). Such limitation
on exercise described in Section 422A(d) of the Code shall be referred to in
this Option Agreement as the "$100,000 Exercise Limitation." Notwithstanding the
foregoing, the Option may not be exercised more frequently than twice in any
continuous twelve (12) month period; provided, however, that the foregoing
restriction shall not apply so as to prevent an exercise (i) following the
Optionee's termination of employment as set forth in paragraph 7 below or (ii)
during the thirty (30) day periods immediately preceding and following an
Ownership Change as defined in paragraph 8 below.
(b) Method of Exercise. The Option shall be exercisable by written
------------------
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of joint escrow instructions
referenced below.
(c) Form of Payment of Option Price. Such payment shall be made in
-------------------------------
cash, by check, or cash equivalent.
(d) Withholding. At the time the Option is exercised, in whole or in
-----------
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise,
<PAGE>
in whole or in part, of the Option, (ii) the transfer, in whole or in part, of
any shares acquired on exercise of the Option, or (iii) the operation of any law
or regulation providing for the imputation of interest, or (iv) the lapsing of
any restriction with respect to any shares acquired on exercise of the Option.
(e) Certificate Registration. The certificate or certificates for the
------------------------
shares as to which the Option shall be exercised shall be registered in the name
of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of Shares. The
----------------------------------------------------------
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES. Section 260.141.11 of the Rules of
the Commissioner of Corporations of the State of California is set forth in
paragraph 17 herein. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
(g) Fractional Shares. The Company shall not be required to issue
-----------------
fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised during
---------------------------------
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of the Option. The Option shall terminate and may no
-------------------------
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
<PAGE>
7. Termination of Employment.
-------------------------
(a) Termination of the Option. If the Optionee ceases to be an
-------------------------
employee of the Participating Company Group for any reason except death or
disability within the meaning of Section 422A(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within one
(1) month after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death of the Optionee or disability of
the Optionee, the Option may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve (12) months
from the date the Optionee's employment terminated, but in any event no later
than the Option Term Date. The Optionee's employment shall be deemed to have
terminated on account of death if the Optionee dies within one (1) month after
the Optionee's termination of employment. Notwithstanding the provisions of
this paragraph 7(a), the Option may not be exercised after the Optionee's
termination of employment if the shares acquired on exercise of the Option would
be Unvested Shares as that term is defined in paragraph 11 below.
(b) Termination of Employment Defined. For purposes of this paragraph
---------------------------------
7, the Optionee's employment shall be deemed to have terminated either upon an
actual termination of employment or upon the Optionee's employer ceasing to be a
Participating Company.
(c) Exercise Prevented by Law. Except as provided in this paragraph
-------------------------
7, the Option shall terminate and may not be exercised after the Optionee's
employment with the Participating Company Group terminates unless the exercise
of the Option in accordance with this paragraph 7 is prevented by the provisions
of paragraph 4(f) above. If the exercise of the Option is so prevented, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date. The Company makes no representation
as to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise.
(d) Optionee Subject to Section 16(b). Notwithstanding the foregoing,
---------------------------------
if the exercise of the Option within the applicable time periods set forth above
would subject the Optionee to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which the Optionee would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee's termination of
employment, or (iii) the Option Term Date. The Company makes no representation
as to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise.
(e) Leave of Absence. For purposes hereof, the Optionee's employment
----------------
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment
<PAGE>
shall be deemed to terminate on the ninety-first (91st) day of the leave unless
the Optionee's right to reemployment with the Participating Company Group
remains guaranteed by statute or contract. Notwithstanding the foregoing,
however, a leave of absence shall be treated as employment for purposes of
determining the Optionee's Vested Ratio if and only if the leave of absence is
designated by the Company as (or required by law to be) a leave for which
vesting credit is given.
8. Ownership Change and Transfer of Control. For purposes hereof, the
----------------------------------------
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the shareholders of the
Control Company of all or substantially all of the stock of the Control Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the shareholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's stock
for the Option. In the event the Acquiring Corporation elects not to assume the
Company's rights and obligations under this Option Agreement or substitute for
the Option in connection with a Transfer of Control involving an Ownership
Change described in (b) or (c) above, the Board shall provide that all shares
acquired on exercise of the Option become Vested Shares for purposes of
paragraph 11 below effective upon the Transfer of Control. The Option shall
terminate effective as of the date of the Transfer of Control to the extent that
the Option is neither assumed by the Acquiring Corporation nor exercised as of
the date of the Transfer of Control.
9. Effect of Change in Stock Subject to the Option. Appropriate
-----------------------------------------------
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the
<PAGE>
"New Shares"), the Company may unilaterally amend the Option to provide that the
Option is exercisable for New Shares. In the event of any such amendment, the
number of shares and the exercise price shall be adjusted in a fair and
equitable manner.
10. Rights as a Shareholder or Employee. The Optionee shall have no
-----------------------------------
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. Unvested Share Repurchase Option.
--------------------------------
(a) Unvested Share Repurchase Option. In the event the Optionee's
--------------------------------
employment with the Participating Company Group is terminated for any reason,
with or without cause, or if the Optionee or the Optionee's legal representative
attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other
than pursuant to an Ownership Change) any shares acquired upon exercise of the
Option which exceed the Optionee's Vested Shares as defined in paragraph 11(b)
below (the "Unvested Shares"), the Company shall have the right to repurchase
the Unvested Shares under the terms and subject to the conditions set forth in
this paragraph 11 (the "Unvested Share Repurchase Option").
(b) Vested Shares and Unvested Shares Defined. The total number of
-----------------------------------------
Option Shares multiplied by the Vested Ratio as set forth in paragraph 1 above
are Vested Shares. For purposes of this paragraph 11, the Unvested Shares are
the number of shares acquired upon exercise of the Option in excess of the
Vested Shares. Any additional shares acquired by the Optionee on exercise of
this Option would also be Unvested Shares.
(c) Exercise of Unvested Share Repurchase Option. The Company may
--------------------------------------------
exercise the Unvested Share Repurchase Option by written notice to the Optionee
within sixty (60) days after (i) such termination of employment (or exercise of
the Option, if later) or (ii) the Company has received notice of the attempted
disposition. If the Company fails to give notice within such sixty (60) day
period, the Unvested Share Repurchase Option shall terminate unless the Company
and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if
at all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the Company
---------------------------------------
to the Optionee shall be made in cash within thirty (30) days after the date of
the mailing of the written notice of exercise of the Unvested Share Repurchase
Option. For purposes of the foregoing, cancellation of any indebtedness of the
Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled. The purchase price per share being repurchased by the Company shall
be an amount equal to the Optionee's original cost per share, as adjusted
pursuant to paragraph 9 above. The
<PAGE>
shares being repurchased shall be delivered to the Company by the Optionee at
the same time as the delivery of the purchase price to the Optionee.
(e) Assignment of Unvested Share Repurchase Option. The Company shall
----------------------------------------------
have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such Option is then exercisable, to one (1) or more persons as
may be selected by the Company.
(f) Ownership Change. In the event of an Ownership Change, the
----------------
Unvested Share Repurchase Option shall continue in full force and effect;
provided, however, that "employment with the Participating Company Group" for
purposes of this paragraph 11 shall include all service with any corporation
which was a Participating Company at the time the services were rendered,
whether or not the corporation was included within such term both before and
after the event constituting the Ownership Change.
12. Right of First Refusal.
----------------------
(a) Right of First Refusal. In the event the Optionee proposes to
----------------------
sell, pledge, or otherwise transfer any Vested Shares (the "Transfer Shares") to
any person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
paragraph 12 (the "Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed transfer of
---------------------------
the Transfer Shares, the Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price. In the event of a bona fide gift or involuntary transfer, the proposed
transfer price shall be deemed to be the fair market value of the Transfer
Shares as determined by the Company in good faith. In the event the Optionee
proposes to transfer any Vested Shares to more than one (1) Proposed Transferee,
the Optionee shall provide a separate Transfer Notice for the proposed transfer
to each Proposed Transferee. The Transfer Notice shall be signed by both the
Optionee and the Proposed Transferee and must constitute a binding commitment of
the Optionee and the Proposed Transferee for the transfer of the Transfer Shares
to the Proposed Transferee subject only to the Right of First Refusal.
(c) Bona Fide Transfer. Within ten (10) days after receipt of the
------------------
Transfer Notice, the Company shall determine the bona fide nature of the
proposed voluntary transfer and give the Optionee written notice of the
Company's determination. If the proposed transfer is deemed not to be bona
fide, the Optionee shall be responsible for providing additional information to
the Company to show the bona fide nature of the proposed transfer. The Company
shall have the right to demand further assurances from the Optionee and the
Proposed Transferee (in a form satisfactory to the Company) that the Transfer
Notice fully and accurately sets forth all of the terms and conditions of the
proposed transfer, including, without limitation, assurance that the Transfer
Notice fully and accurately sets forth the consideration actually paid for the
Transfer Shares and all transactions, directly or indirectly, between the
parties which may have affected the price the Proposed Transferee was willing to
pay for the Transfer Shares.
<PAGE>
(d) Exercise of the Right of First Refusal. In the event the proposed
--------------------------------------
transfer is deemed to be bona fide, the Company shall have the right to purchase
all, but not less than all, of the Transfer Shares at the purchase price and on
the terms set forth in the Transfer Notice by delivery to the Optionee of a
notice of exercise of the Right of First Refusal within thirty (30) days after
the date the Transfer Notice is delivered to the Company or ten (10) days after
the Company has approved the proposed transfer as bona fide, whichever is later.
The Company's exercise or failure to exercise the Right of First Refusal with
respect to any proposed transfer described in a Transfer Notice shall not affect
the Company's ability to exercise the Right of First Refusal with respect to any
proposed transfer described in any other Transfer Notice, whether or not such
other Transfer Notice is issued by the Optionee or issued by a person other than
the Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the Company
and the Optionee shall thereupon consummate the sale of the Transfer Shares to
the Company on the terms set forth in the Transfer Notice; provided, however,
that in the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for the
Transfer Shares by the discounted cash equivalent of the consideration described
in the Transfer Notice as reasonably determined by the Company. For purposes of
the foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to the
extent of the unpaid principal and any accrued interest canceled.
(e) Failure to Exercise Right of First Refusal. If the Company fails
------------------------------------------
to exercise the Right of First Refusal in full within the period specified in
paragraph 12(d) above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than one hundred twenty
(120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide,
pursuant to paragraph 12(c) above. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this paragraph 12.
(f) Transferees of the Transfer Shares. All transferees of the
----------------------------------
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 12
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 12 are met.
(g) Transfers Not Subject to the Right of First Refusal. The Right of
---------------------------------------------------
First Refusal shall not apply to any transfer or exchange of the shares acquired
pursuant to the exercise of the Option if such transfer is in connection with an
Ownership Change. If the consideration
<PAGE>
received pursuant to such transfer or exchange consists of stock of a
Participating Company, such consideration shall remain subject to the Right of
First Refusal unless the provisions of paragraph 12(i) below result in a
termination of the Right of First Refusal.
(h) Assignment of the Right of First Refusal. The Company shall have
----------------------------------------
the right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer to one (1) or more persons as may be selected
by the Company.
(i) Early Termination of the Right of First Refusal. The other
-----------------------------------------------
provision of this paragraph 12 notwithstanding the Right of First Refusal shall
terminate, and be of no further force and effect upon (i) the occurrence of a
Transfer of Control, unless the surviving, continuing, successor, or purchasing
corporation, as the case may be, assumes the Company's rights and obligations
under the Plan, or (ii) the existence of a public market for the class of shares
subject to the Right of First Refusal. A "public market" shall be deemed to
exist if (x) such stock is listed on a national securities exchange (as that
term is used in the Exchange Act) or (y) such stock is traded on the over-the-
counter market and prices therefor are published daily on business days in a
recognized financial journal.
13. Escrow.
------
(a) Establishment of Escrow. To insure shares subject to the Unvested
-----------------------
Share Repurchase Option and the Right of First Refusal will be available for
repurchase, the Company may require the Optionee to deposit the certificate or
certificates evidencing the shares which the Optionee purchases upon exercise of
the Option with an escrow agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does
not require such deposit as a condition of exercise of the Option, the Company
reserves the right at any time to require the Optionee to so deposit the
certificate or certificates in escrow. The Company shall bear the expenses of
the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable after the
------------------------------
expiration of the Unvested Share Repurchase Option and the Right of First
Refusal, but not more frequently than twice each calendar year, the escrow agent
shall deliver to the Optionee the shares no longer subject to such restrictions.
(c) Notices and Payments. In the event the shares held in escrow are
--------------------
subject to the Company's exercise of the Unvested Share Repurchase Option or the
Right of First Refusal, the notices required to be given to the Optionee shall
be given to the escrow agent and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares which the
Company has purchased to the Company and shall deliver the payment received from
the Company to the Optionee.
14. Stock Dividends Subject to Option Agreement. If, from time to time,
-------------------------------------------
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is
<PAGE>
entitled by reason of the Optionee's ownership of the shares acquired upon
exercise of the Option shall be immediately subject to the Unvested Share
Repurchase Option and the Right of First Refusal with the same force and effect
as the shares subject to the Unvested Share Repurchase Option and the Right of
First Refusal immediately before such event.
15. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
----------------------------------------------
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired pursuant to
the Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At the time during the one-year or two-
year periods set forth above, the Company may place a legend or legends on any
certificate or certificates representing shares acquired pursuant to the Option
requesting the transfer agent for the Company's stock to notify the Company of
any such transfers for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate or certificates pursuant to the preceding sentence.
16. Exception to $100,000 Exercise Limitation. Notwithstanding any other
-----------------------------------------
provision of this Option Agreement, if compliance with the $100,000 Exercise
Limitation as set forth in paragraph 4(a) above will result in the
exercisability of any Vested Shares (as defined in paragraph 11(b) above) being
delayed more than thirty (30) days beyond the vesting date for such shares, the
Option shall be deemed to be two (2) options. The first option shall be for the
maximum number of shares subject to the Option that can comply with the $100,000
Exercise Limitation without causing the Option to be unexercisable as to Vested
Shares. The second option, which shall not be treated as an incentive stock
option as described in Section 422A(b) of the Code, shall be for the balance of
the shares subject to the Option and shall be exercisable on the same terms and
at the same time as set forth in this Option Agreement, provided, however, that
(a) the second sentence of paragraph 4(a) above shall not apply to the second
option and (b) such shares shall become Vested Shares on the same date or dates
as set forth in this Option Agreement without regard to this paragraph. Unless
the Optionee specifically elects to the contrary in the Optionee's written
notice of exercise, the first option shall be deemed to be exercised first to
the maximum possible extent and then the second option shall be deemed to be
exercised.
17. Rules of the Commissioner of Corporations. The Optionee is hereby
-----------------------------------------
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following
text are references to the California Corporations Code.
<PAGE>
260.141.11. Restriction on Transfer.
-----------------------
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificates evidencing the security is
delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of the rules) except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants, or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
<PAGE>
(12) by way of an exchange qualified under Section 25111,
25112 or 25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed
Property Law or to the administrator of the unclaimed property law of another
state;
(15) by the State Controller pursuant to the Unclaimed
Property Law or by the administrator of the unclaimed property law of another
state if, in either such case, such person (i) discloses to potential purchasers
at the sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer
does not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities
in an issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102; provided that any such transfer is on the
condition that any certificate evidencing the security issued to such transferee
shall contain the legend required by this Section.
(c) The certificates representing all such securities subject to
such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend prominently stamped or
printed thereon in capital letters of not less than 10-point size reading as
follows: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
18. Legends. The Company may at any time place legends referencing the
-------
Unvested Share Repurchase Option set forth in paragraph 11 above, the Right of
First Refusal set forth in paragraph 12 above and any applicable federal or
state securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to effectuate the provisions of this
paragraph. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
<PAGE>
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY, STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the Commissioner
of Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
(d) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
19. Initial Public Offering. The Optionee hereby agrees that in the
-----------------------
event of an initial public offering of stock made by the Company under the
Securities Act, the Optionee shall not offer, sell, contract to sell, pledge,
hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time as may be established by the
underwriter for such initial public offering; provided, however, that such
period of time shall not exceed one hundred eighty (180) days from the effective
date of the registration statement to be filed in connection with such initial
public offering. The foregoing limitation shall not apply to shares registered
under the Securities Act and shall cease to apply once a registration statement
is effective covering shares issuable pursuant to options granted pursuant to
the Plan, whether or not such registration statement applies to any of the
shares issued or issuable pursuant to the Option.
20. Binding Effect. This Option Agreement shall inure to the benefit
--------------
of and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
21. Termination or Amendment. The Board, including any duly appointed
------------------------
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee unless such amendment is required to enable the Option to qualify as an
Incentive Stock Option.
<PAGE>
22. Integrated Agreement. This Option Agreement constitutes the entire
--------------------
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
23. Applicable Law. This Option Agreement shall be governed by the laws
--------------
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
24. Tax Consequences. The Optionee understands that any of the
----------------
foregoing references to taxation are based on federal income tax laws and
regulations now in effect. The Optionee has reviewed with the Optionee's own tax
advisors the federal, state, local and foreign tax consequences of the
transactions contemplated by this Agreement. The Optionee is relying solely on
such advisors and not on any statements or representations of the Company or any
of its agents. The Optionee understands that the Optionee (and not the Company)
shall be responsible for the Optionee's own tax liability that may arise as a
result of the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, the Optionee further agrees that the filing of
elections under Section 83(b) of the Code shall be the responsibility of the
Optionee, and shall not be the Company's responsibility.
CONNECT, INC.
By: /s/ Gordan J. Bridge
----------------------
Title: Chairman
-------------------
<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION l(g) HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS OPTION, THE COMPANY'S PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 11 and the Right of First Refusal set forth in
paragraph 12 and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California regarding restriction on transfer.
Dated: January 16, 1996
-------------------
/s/ Thomas P. Kehler
-----------------------------------
Thomas Kehler, Optionee
Residence Address: ________________
___________________________________
___________________________________
___________________________________
Social Security No.________________
<PAGE>
EXHIBIT 10.17
IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR
RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
CONNECT, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
CONNECT, Inc. (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. Definitions:
--------------
(a) "Optionee" shall be Gordon Bridge.
(b) "Date of Option Grant" shall mean January 16, 1996.
(c) "Number of Option Shares" shall mean 250,000 shares of common
stock of the Company as adjusted from time to time pursuant to paragraph 9
below.
(d) "Exercise Price" shall mean $0.25 per share as adjusted from time
to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring one year after
January 1, 1996.
(g) Determination of "Vested Ratio":
-1-
<PAGE>
Vested Ratio
------------
On date of Option Grant 0
On Initial Vesting Date, provided the 12/72
Optionee is continuously employed by a
Participating Company from the Date of
Option Grant until the Initial Vesting
Date
Plus
----
For the last day of each full calendar 1/72
month of the Optionee's continuous
employment by a Participating Company
from the Initial Vesting Date
In no event shall the Vested Ratio
exceed 1/1.
Notwithstanding the foregoing, in the event the Performance Objectives
are met, the fractions "12/72" and "1/72" set forth above shall be amended
automatically upon the determination by the Company's Board of Directors that
such Performance Objectives have been met to be "12/48" and "1/48,"
respectively. The determination of whether the Performance Objectives have been
met shall be made by the Board of Directors of the Company, whose judgment shall
be final and binding on Optionee.
(h) "Option Term Date" shall mean ten (10) years after the Date of
Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Connect, Inc., a California corporation, and
any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in Sections 425(e) and 425(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Performance Objectives" shall mean the achievement of all of the
following milestones:
-2-
<PAGE>
(i) establishment of strategic partnerships during 1996
consistent with strategic partnership objectives established by the Board of
Directors and Optionee
(ii) the execution during 1996 of agreements with customers
involving payments to the Company of at least $1 million, with the number of
such customers determined by the Board of Directors consistent with objectives
established by Optionee and the Board;
(n) "Plan" shall mean the Connect, Inc. 1989 Stock Option Plan.
2. Status of the Option. This Option is intended to be an incentive stock
--------------------
option as described in Section 422A of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under Section 422A of the Code, including, but not limited to, holding period
requirements.
3. Administration. All questions of interpretation concerning this Option
--------------
Agreement shall be determined by the Board of Directors of the Company (the
"Board") and/or by a duly appointed committee of the Board having such powers as
shall be specified by the Board. Any subsequent references herein to the Board
shall also mean the committee if such committee has been appointed and, unless
the powers of the committee have been specifically limited, the committee shall
have all of the powers of the Board granted in the Plan, including, without
limitation, the power to terminate or amend the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law. All
determinations by the Board shall be final and binding upon all persons having
an interest in the Option. Any officer of a Participating Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated to
the Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
4. Exercise of the Option.
----------------------
(a) Right to Exercise. The Option shall be immediately exercisable in
-----------------
its entirety on and after the Initial Exercise Date subject to the Optionee's
agreement that any shares purchased upon exercise are subject to the Company's
repurchase rights set forth in paragraph 11 and paragraph 12 below.
Notwithstanding the foregoing, except as provided in paragraph 16 below, the
aggregate fair market value of the stock with respect to which the Optionee may
exercise the Option for the first time during any calendar year, together with
any other incentive stock options which are exercisable for the first time
during any such year, as determined in accordance with Section 422A(d) of the
Code, shall not exceed One Hundred Thousand Dollars ($100,000). Such limitation
on exercise described in Section 422A(d) of the Code shall be referred to in
this Option Agreement as the "$100,000 Exercise Limitation." Notwithstanding the
foregoing, the Option may not be exercised more frequently than twice in any
continuous twelve (12) month period; provided, however, that the foregoing
restriction shall not apply so as to prevent an exercise (i) following the
Optionee's termination of employment as set forth in paragraph 7 below or (ii)
during the thirty (30) day periods immediately preceding and following an
Ownership Change as defined in paragraph 8 below.
-3-
<PAGE>
(b) Method of Exercise. The Option shall be exercisable by written
------------------
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of joint escrow instructions
referenced below.
(c) Form of Payment of Option Price. Such payment shall be made in
-------------------------------
cash, by check, or cash equivalent.
(d) Withholding. At the time the Option is exercised, in whole or in
-----------
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired on exercise of the Option, or (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired on exercise of the Option.
(e) Certificate Registration. The certificate or certificates for the
------------------------
shares as to which the Option shall be exercised shall be registered in the name
of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of Shares. The
----------------------------------------------------------
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES. Section 260.141.11 of the Rules of
the Commissioner of Corporations of the State of California is set forth in
paragraph 17 herein. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
-4-
<PAGE>
(g) Fractional Shares. The Company shall not be required to issue
-----------------
fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised during
---------------------------------
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of the Option. The Option shall terminate and may no
-------------------------
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. Termination of Employment.
-------------------------
(a) Termination of the Option. If the Optionee ceases to be an
-------------------------
employee of the Participating Company Group for any reason except death or
disability within the meaning of Section 422A(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within one
(1) month after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death of the Optionee or disability of
the Optionee, the Option may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve (12) months
from the date the Optionee's employment terminated, but in any event no later
than the Option Term Date. The Optionee's employment shall be deemed to have
terminated on account of death if the Optionee dies within one (1) month after
the Optionee's termination of employment. Notwithstanding the provisions of
this paragraph 7(a), the Option may not be exercised after the Optionee's
termination of employment if the shares acquired on exercise of the Option would
be Unvested Shares as that term is defined in paragraph 11 below.
(b) Termination of Employment Defined. For purposes of this paragraph
---------------------------------
7, the Optionee's employment shall be deemed to have terminated either upon an
actual termination of employment or upon the Optionee's employer ceasing to be a
Participating Company.
(c) Exercise Prevented by Law. Except as provided in this paragraph
-------------------------
7, the Option shall terminate and may not be exercised after the Optionee's
employment with the Participating Company Group terminates unless the exercise
of the Option in accordance with this paragraph 7 is prevented by the provisions
of paragraph 4(f) above. If the exercise of the Option is so prevented, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date. The Company makes no representation
as to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise.
(d) Optionee Subject to Section 16(b). Notwithstanding the foregoing,
---------------------------------
if the exercise of the Option within the applicable time periods set forth above
would subject the Optionee to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which the Optionee would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee's termination of
employment, or
-5-
<PAGE>
(iii) the Option Term Date. The Company makes no representation as to the tax
consequences of any such delayed exercise. The Optionee should consult with the
Optionee's own tax advisors as to the tax consequences to the Optionee of any
such delayed exercise.
(e) Leave of Absence. For purposes hereof, the Optionee's employment
----------------
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
8. Ownership Change and Transfer of Control. For purposes hereof, the
----------------------------------------
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the shareholders of the
Control Company of all or substantially all of the stock of the Control Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the shareholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's stock
for the Option. In the event the Acquiring Corporation elects not to assume the
Company's rights and obligations under this Option Agreement or substitute for
the Option in connection with a Transfer of Control involving an Ownership
Change described in (b) or (c) above, the Board shall provide that all shares
acquired on exercise of the Option become Vested Shares for purposes of
paragraph 11 below effective upon the Transfer of Control. The Option shall
terminate effective as of the date of the Transfer of Control to the extent that
the Option is neither assumed by the Acquiring Corporation nor exercised as of
the date of the Transfer of Control.
9. Effect of Change in Stock Subject to the Option. Appropriate
-----------------------------------------------
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in
-6-
<PAGE>
the capital structure of the Company. In the event a majority of the shares
which are of the same class as the shares that are subject to the Option are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
10. Rights as a Shareholder or Employee. The Optionee shall have no
-----------------------------------
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. Unvested Share Repurchase Option.
--------------------------------
(a) Unvested Share Repurchase Option. In the event the Optionee's
--------------------------------
employment with the Participating Company Group is terminated for any reason,
with or without cause, or if the Optionee or the Optionee's legal representative
attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other
than pursuant to an Ownership Change) any shares acquired upon exercise of the
Option which exceed the Optionee's Vested Shares as defined in paragraph 11(b)
below (the "Unvested Shares"), the Company shall have the right to repurchase
the Unvested Shares under the terms and subject to the conditions set forth in
this paragraph 11 (the "Unvested Share Repurchase Option").
(b) Vested Shares and Unvested Shares Defined. The total number of
-----------------------------------------
Option Shares multiplied by the Vested Ratio as set forth in paragraph 1 above
are Vested Shares. For purposes of this paragraph 11, the Unvested Shares are
the number of shares acquired upon exercise of the Option in excess of the
Vested Shares. Any additional shares acquired by the Optionee on exercise of
this Option would also be Unvested Shares.
(c) Exercise of Unvested Share Repurchase Option. The Company may
--------------------------------------------
exercise the Unvested Share Repurchase Option by written notice to the Optionee
within sixty (60) days after (i) such termination of employment (or exercise of
the Option, if later) or (ii) the Company has received notice of the attempted
disposition. If the Company fails to give notice within such sixty (60) day
period, the Unvested Share Repurchase Option shall terminate unless the Company
and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if
at all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the Company
---------------------------------------
to the Optionee shall be made in cash within thirty (30) days after the date of
the mailing of the written notice of exercise of the Unvested Share Repurchase
Option. For purposes of the foregoing, cancellation of any indebtedness of the
Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled. The purchase price per share being repurchased by the Company shall
be an amount equal to the Optionee's original cost per share, as adjusted
pursuant to paragraph 9 above. The
-7-
<PAGE>
shares being repurchased shall be delivered to the Company by the Optionee at
the same time as the delivery of the purchase price to the Optionee.
(e) Assignment of Unvested Share Repurchase Option. The Company shall
----------------------------------------------
have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such Option is then exercisable, to one (1) or more persons as
may be selected by the Company.
(f) Ownership Change. In the event of an Ownership Change, the
----------------
Unvested Share Repurchase Option shall continue in full force and effect;
provided, however, that "employment with the Participating Company Group" for
purposes of this paragraph 11 shall include all service with any corporation
which was a Participating Company at the time the services were rendered,
whether or not the corporation was included within such term both before and
after the event constituting the Ownership Change.
12. Right of First Refusal.
----------------------
(a) Right of First Refusal. In the event the Optionee proposes to
----------------------
sell, pledge, or otherwise transfer any Vested Shares (the "Transfer Shares") to
any person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
paragraph 12 (the "Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed transfer of
---------------------------
the Transfer Shares, the Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price. In the event of a bona fide gift or involuntary transfer, the proposed
transfer price shall be deemed to be the fair market value of the Transfer
Shares as determined by the Company in good faith. In the event the Optionee
proposes to transfer any Vested Shares to more than one (1) Proposed Transferee,
the Optionee shall provide a separate Transfer Notice for the proposed transfer
to each Proposed Transferee. The Transfer Notice shall be signed by both the
Optionee and the Proposed Transferee and must constitute a binding commitment of
the Optionee and the Proposed Transferee for the transfer of the Transfer Shares
to the Proposed Transferee subject only to the Right of First Refusal.
(c) Bona Fide Transfer. Within ten (10) days after receipt of the
------------------
Transfer Notice, the Company shall determine the bona fide nature of the
proposed voluntary transfer and give the Optionee written notice of the
Company's determination. If the proposed transfer is deemed not to be bona
fide, the Optionee shall be responsible for providing additional information to
the Company to show the bona fide nature of the proposed transfer. The Company
shall have the right to demand further assurances from the Optionee and the
Proposed Transferee (in a form satisfactory to the Company) that the Transfer
Notice fully and accurately sets forth all of the terms and conditions of the
proposed transfer, including, without limitation, assurance that the Transfer
Notice fully and accurately sets forth the consideration actually paid for the
Transfer Shares and all transactions, directly or indirectly, between the
parties which may have affected the price the Proposed Transferee was willing to
pay for the Transfer Shares.
(d) Exercise of the Right of First Refusal. In the event the proposed
--------------------------------------
transfer is deemed to be bona fide, the Company shall have the right to purchase
all, but not less than all, of the Transfer Shares at the purchase price and on
the terms set forth in the Transfer Notice by
-8-
<PAGE>
delivery to the Optionee of a notice of exercise of the Right of First Refusal
within thirty (30) days after the date the Transfer Notice is delivered to the
Company or ten (10) days after the Company has approved the proposed transfer as
bona fide, whichever is later. The Company's exercise or failure to exercise the
Right of First Refusal with respect to any proposed transfer described in a
Transfer Notice shall not affect the Company's ability to exercise the Right of
First Refusal with respect to any proposed transfer described in any other
Transfer Notice, whether or not such other Transfer Notice is issued by the
Optionee or issued by a person other than the Optionee with respect to a
proposed transfer to the same Proposed Transferee. If the Company exercises the
Right of First Refusal, the Company and the Optionee shall thereupon consummate
the sale of the Transfer Shares to the Company on the terms set forth in the
Transfer Notice; provided, however, that in the event the Transfer Notice
provides for the payment for the Transfer Shares other than in cash, the Company
shall have the option of paying for the Transfer Shares by the discounted cash
equivalent of the consideration described in the Transfer Notice as reasonably
determined by the Company. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled.
(e) Failure to Exercise Right of First Refusal. If the Company fails
------------------------------------------
to exercise the Right of First Refusal in full within the period specified in
paragraph 12(d) above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than one hundred twenty
(120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide,
pursuant to paragraph 12(c) above. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this paragraph 12.
(f) Transferees of the Transfer Shares. All transferees of the
----------------------------------
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 12
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 12 are met.
(g) Transfers Not Subject to the Right of First Refusal. The Right of
---------------------------------------------------
First Refusal shall not apply to any transfer or exchange of the shares acquired
pursuant to the exercise of the Option if such transfer is in connection with an
Ownership Change. If the consideration received pursuant to such transfer or
exchange consists of stock of a Participating Company, such consideration shall
remain subject to the Right of First Refusal unless the provisions of paragraph
12(i) below result in a termination of the Right of First Refusal.
(h) Assignment of the Right of First Refusal. The Company shall have
----------------------------------------
the right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer to one (1) or more persons as may be selected
by the Company.
-9-
<PAGE>
(i) Early Termination of the Right of First Refusal. The other
-----------------------------------------------
provision of this paragraph 12 notwithstanding the Right of First Refusal shall
terminate, and be of no further force and effect upon (i) the occurrence of a
Transfer of Control, unless the surviving, continuing, successor, or purchasing
corporation, as the case may be, assumes the Company's rights and obligations
under the Plan, or (ii) the existence of a public market for the class of shares
subject to the Right of First Refusal. A "public market" shall be deemed to
exist if (x) such stock is listed on a national securities exchange (as that
term is used in the Exchange Act) or (y) such stock is traded on the over-the-
counter market and prices therefor are published daily on business days in a
recognized financial journal.
13. Escrow.
------
(a) Establishment of Escrow. To insure shares subject to the Unvested
-----------------------
Share Repurchase Option and the Right of First Refusal will be available for
repurchase, the Company may require the Optionee to deposit the certificate or
certificates evidencing the shares which the Optionee purchases upon exercise of
the Option with an escrow agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does
not require such deposit as a condition of exercise of the Option, the Company
reserves the right at any time to require the Optionee to so deposit the
certificate or certificates in escrow. The Company shall bear the expenses of
the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable after the
------------------------------
expiration of the Unvested Share Repurchase Option and the Right of First
Refusal, but not more frequently than twice each calendar year, the escrow agent
shall deliver to the Optionee the shares no longer subject to such restrictions.
(c) Notices and Payments. In the event the shares held in escrow are
--------------------
subject to the Company's exercise of the Unvested Share Repurchase Option or the
Right of First Refusal, the notices required to be given to the Optionee shall
be given to the escrow agent and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares which the
Company has purchased to the Company and shall deliver the payment received from
the Company to the Optionee.
14. Stock Dividends Subject to Option Agreement. If, from time to time,
-------------------------------------------
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Unvested Share Repurchase Option
and the Right of First Refusal with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and the Right of First Refusal
immediately before such event.
15. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
----------------------------------------------
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares
-10-
<PAGE>
acquired pursuant to the Option in the Optionee's name (and not in the name of
any nominee) for the one-year period immediately after exercise of the Option
and the two-year period immediately after grant of the Option. At the time
during the one-year or two-year periods set forth above, the Company may place a
legend or legends on any certificate or certificates representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfers for the Company's stock to
notify the Company of any such transfers. The obligation of the Optionee to
notify the Company of any such transfer shall continue notwithstanding that a
legend has been placed on the certificate or certificates pursuant to the
preceding sentence.
16. Exception to $100,000 Exercise Limitation. Notwithstanding any other
-----------------------------------------
provision of this Option Agreement, if compliance with the $100,000 Exercise
Limitation as set forth in paragraph 4(a) above will result in the
exercisability of any Vested Shares (as defined in paragraph 11(b) above) being
delayed more than thirty (30) days beyond the vesting date for such shares, the
Option shall be deemed to be two (2) options. The first option shall be for the
maximum number of shares subject to the Option that can comply with the $100,000
Exercise Limitation without causing the Option to be unexercisable as to Vested
Shares. The second option, which shall not be treated as an incentive stock
option as described in Section 422A(b) of the Code, shall be for the balance of
the shares subject to the Option and shall be exercisable on the same terms and
at the same time as set forth in this Option Agreement, provided, however, that
(a) the second sentence of paragraph 4(a) above shall not apply to the second
option and (b) such shares shall become Vested Shares on the same date or dates
as set forth in this Option Agreement without regard to this paragraph. Unless
the Optionee specifically elects to the contrary in the Optionee's written
notice of exercise, the first option shall be deemed to be exercised first to
the maximum possible extent and then the second option shall be deemed to be
exercised.
17. Rules of the Commissioner of Corporations. The Optionee is hereby
-----------------------------------------
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following
text are references to the California Corporations Code.
260.141.11. Restriction on Transfer.
-----------------------
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificates evidencing the security is
delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of the rules) except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these rules;
-11-
<PAGE>
(4) to the transferor's ancestors, descendants, or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants, or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any
-12-
<PAGE>
such transfer is on the condition that any certificate evidencing the security
issued to such transferee shall contain the legend required by this Section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend prominently stamped or printed
thereon in capital letters of not less than 10-point size reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
18. Legends. The Company may at any time place legends referencing the
-------
Unvested Share Repurchase Option set forth in paragraph 11 above, the Right of
First Refusal set forth in paragraph 12 above and any applicable federal or
state securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to effectuate the provisions of this
paragraph. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
(d) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
19. Initial Public Offering. The Optionee hereby agrees that in the event
-----------------------
of an initial public offering of stock made by the Company under the Securities
Act, the Optionee shall not
-13-
<PAGE>
offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase
or make any short sale of, or otherwise dispose of any shares of stock of the
Company or any rights to acquire stock of the Company for such period of time as
may be established by the underwriter for such initial public offering;
provided, however, that such period of time shall not exceed one hundred eighty
(180) days from the effective date of the registration statement to be filed in
connection with such initial public offering. The foregoing limitation shall not
apply to shares registered under the Securities Act and shall cease to apply
once a registration statement is effective covering shares issuable pursuant to
options granted pursuant to the Plan, whether or not such registration statement
applies to any of the shares issued or issuable pursuant to the Option.
20. Binding Effect. This Option Agreement shall inure to the benefit of
--------------
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
21. Termination or Amendment. The Board, including any duly appointed
------------------------
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee unless such amendment is required to enable the Option to qualify as an
Incentive Stock Option.
22. Integrated Agreement. This Option Agreement constitutes the entire
--------------------
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
23. Applicable Law. This Option Agreement shall be governed by the laws
--------------
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
24. Tax Consequences. The Optionee understands that any of the foregoing
----------------
references to taxation are based on federal income tax laws and regulations now
in effect. The Optionee has reviewed with the Optionee's own tax advisors the
federal, state, local and foreign tax consequences of the transactions
contemplated by this Agreement. The Optionee is relying solely on such advisors
and not on any statements or representations of the Company or any of its
agents. The Optionee understands that the Optionee (and not the Company) shall
be responsible for the Optionee's own tax liability that may arise as a result
of the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, the Optionee further agrees that the filing of
elections under Section 83(b) of the Code shall be the responsibility of the
Optionee, and shall not be the Company's responsibility.
CONNECT, INC.
By: /s/ Thomas P. Kehler
___________________________________
Title: President and CEO
________________________________
-14-
<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION l(g) HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS OPTION, THE COMPANY'S PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 11 and the Right of First Refusal set forth in
paragraph 12 and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California regarding restriction on transfer.
Dated: 6/8/96
_______________________
/s/ Gordon J. Bridge
____________________________________
Gordon Bridge, Optionee
Residence Address:__________________
____________________________________
____________________________________
____________________________________
Social Security No.
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<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER' S RULES.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR
RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
CONNECT, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
CONNECT, Inc. (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. Definitions:
--------------
(a) "Optionee" shall be Gordon Bridge.
(b) "Date of Option Grant" shall mean April 24, 1996.
(c) "Number of Option Shares" shall mean 50,000 shares of common
stock of the Company as adjusted from time to time pursuant to paragraph 9
below.
(d) "Exercise Price" shall mean $0.25 per share as adjusted from time
to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring one year after
January 1, 1996.
(g) Determination of "Vested Ratio":
-1-
<PAGE>
Vested Ratio
------------
On date of Option Grant 0
On Initial Vesting Date, provided the 12/72
Optionee is continuously employed by a
Participating Company from the Date of
Option Grant until the Initial Vesting
Date
Plus
----
For the last day of each full calendar 1/72
month of the Optionee's continuous
employment by a Participating Company
from the Initial Vesting Date
In no event shall the Vested Ratio
exceed 1/1.
Notwithstanding the foregoing, in the event the Performance Objectives
are met, the fractions "12/72" and "1/72" set forth above shall be amended
automatically upon the determination by the Company's Board of Directors that
such Performance Objectives have been met to be "12/48" and "1/48,"
respectively. The determination of whether the Performance Objectives have been
met shall be made by the Board of Directors of the Company, whose judgment shall
be final and binding on Optionee.
(h) "Option Term Date" shall mean ten (10) years after the Date of
Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Connect, Inc., a California corporation, and
any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in Sections 425(e) and 425(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Performance Objectives" shall mean the achievement of all of the
following milestones:
-2-
<PAGE>
(i) establishment of strategic partnerships during 1996 consistent
with strategic partnership objectives established by the Board
of Directors and Optionee
(ii) the execution during 1996 of agreements with customers involving
payments to the Company of at least $1 million, with the number
of such customers determined by the Board of Directors
consistent with objectives established by Optionee and the
Board;
(n) "Plan" shall mean the Connect, Inc. 1996 Stock Option Plan.
2. Status of the Option. This Option is intended to be an incentive stock
--------------------
option as described in Section 422A of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under Section 422A of the Code, including, but not limited to, holding period
requirements.
3. Administration. All questions of interpretation concerning this Option
--------------
Agreement shall be determined by the Board of Directors of the Company (the
"Board") and/or by a duly appointed committee of the Board having such powers as
shall be specified by the Board. Any subsequent references herein to the Board
shall also mean the committee if such committee has been appointed and, unless
the powers of the committee have been specifically limited, the committee shall
have all of the powers of the Board granted in the Plan, including, without
limitation, the power to terminate or amend the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law. All
determinations by the Board shall be final and binding upon all persons having
an interest in the Option. Any officer of a Participating Company shall have
the authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated to
the Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
4. Exercise of the Option.
----------------------
(a) Right to Exercise. The Option shall be immediately exercisable in
-----------------
its entirety on and after the Initial Exercise Date subject to the Optionee's
agreement that any shares purchased upon exercise are subject to the Company's
repurchase rights set forth in paragraph 11 and paragraph 12 below.
Notwithstanding the foregoing, except as provided in paragraph 16 below, the
aggregate fair market value of the stock with respect to which the Optionee may
exercise the Option for the first time during any calendar year, together with
any other incentive stock options which are exercisable for the first time
during any such year, as determined in accordance with Section 422A(d) of the
Code, shall not exceed One Hundred Thousand Dollars ($100,000). Such limitation
on exercise described in Section 422A(d) of the Code shall be referred to in
this Option Agreement as the "$100,000 Exercise Limitation." Notwithstanding the
foregoing, the Option may not be exercised more frequently than twice in any
continuous twelve (12) month period; provided, however, that the foregoing
restriction shall not apply so as to prevent an exercise (i) following the
Optionee's termination of employment as set forth in paragraph 7 below or (ii)
during the thirty (30) day periods immediately preceding and following an
Ownership Change as defined in paragraph 8 below.
-3-
<PAGE>
(b) Method of Exercise. The Option shall be exercisable by written
------------------
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of joint escrow instructions
referenced below.
(c) Form of Payment of Option Price. Such payment shall be made in
-------------------------------
cash, by check, or cash equivalent.
(d) Withholding. At the time the Option is exercised, in whole or in
-----------
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired on exercise of the Option, or (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired on exercise of the Option.
(e) Certificate Registration. The certificate or certificates for the
------------------------
shares as to which the Option shall be exercised shall be registered in the name
of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of Shares. The
----------------------------------------------------------
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES. Section 260.141.11 of the Rules of
the Commissioner of Corporations of the State of California is set forth in
paragraph 17 herein. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence
-4-
<PAGE>
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(g) Fractional Shares. The Company shall not be required to issue
-----------------
fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised during
---------------------------------
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of the Option. The Option shall terminate and may no
-------------------------
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. Termination of Employment.
-------------------------
(a) Termination of the Option. If the Optionee ceases to be an
-------------------------
employee of the Participating Company Group for any reason except death or
disability within the meaning of Section 422A(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within one
(1) month after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death of the Optionee or disability of
the Optionee, the Option may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve (12) months
from the date the Optionee's employment terminated, but in any event no later
than the Option Term Date. The Optionee's employment shall be deemed to have
terminated on account of death if the Optionee dies within one (1) month after
the Optionee's termination of employment. Notwithstanding the provisions of
this paragraph 7(a), the Option may not be exercised after the Optionee's
termination of employment if the shares acquired on exercise of the Option would
be Unvested Shares as that term is defined in paragraph 11 below.
(b) Termination of Employment Defined. For purposes of this paragraph
---------------------------------
7, the Optionee's employment shall be deemed to have terminated either upon an
actual termination of employment or upon the Optionee's employer ceasing to be a
Participating Company.
(c) Exercise Prevented by Law. Except as provided in this paragraph
-------------------------
7, the Option shall terminate and may not be exercised after the Optionee's
employment with the Participating Company Group terminates unless the exercise
of the Option in accordance with this paragraph 7 is prevented by the provisions
of paragraph 4(f) above. If the exercise of the Option is so prevented, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date. The Company makes no representation
as to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise.
(d) Optionee Subject to Section 16(b). Notwithstanding the foregoing,
---------------------------------
if the exercise of the Option within the applicable time periods set forth above
would subject the Optionee to suit under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the
-5-
<PAGE>
"Exchange Act"), the Option shall remain exercisable until the earliest to occur
of (i) the tenth (10th) day following the date on which the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of employment, or (iii) the Option Term Date.
The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
(e) Leave of Absence. For purposes hereof, the Optionee's employment
----------------
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
8. Ownership Change and Transfer of Control. For purposes hereof, the
----------------------------------------
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the shareholders of the
Control Company of all or substantially all of the stock of the Control Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the shareholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's stock
for the Option. In the event the Acquiring Corporation elects not to assume the
Company's rights and obligations under this Option Agreement or substitute for
the Option in connection with a Transfer of Control involving an Ownership
Change described in (b) or (c) above, the Board shall provide that all shares
acquired on exercise of the Option become Vested Shares for purposes of
paragraph 11 below effective upon the Transfer of Control. The Option shall
terminate effective as of the date of the Transfer of Control to the
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extent that the Option is neither assumed by the Acquiring Corporation nor
exercised as of the date of the Transfer of Control.
9. Effect of Change in Stock Subject to the Option. Appropriate
-----------------------------------------------
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. Rights as a Shareholder or Employee. The Optionee shall have no
-----------------------------------
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. Unvested Share Repurchase Option.
--------------------------------
(a) Unvested Share Repurchase Option. In the event the Optionee's
--------------------------------
employment with the Participating Company Group is terminated for any reason,
with or without cause, or if the Optionee or the Optionee's legal representative
attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other
than pursuant to an Ownership Change) any shares acquired upon exercise of the
Option which exceed the Optionee's Vested Shares as defined in paragraph 11(b)
below (the "Unvested Shares"), the Company shall have the right to repurchase
the Unvested Shares under the terms and subject to the conditions set forth in
this paragraph 11 (the "Unvested Share Repurchase Option").
(b) Vested Shares and Unvested Shares Defined. The total number of
-----------------------------------------
Option Shares multiplied by the Vested Ratio as set forth in paragraph 1 above
are Vested Shares. For purposes of this paragraph 11, the Unvested Shares are
the number of shares acquired upon exercise of the Option in excess of the
Vested Shares. Any additional shares acquired by the Optionee on exercise of
this Option would also be Unvested Shares.
(c) Exercise of Unvested Share Repurchase Option. The Company may
--------------------------------------------
exercise the Unvested Share Repurchase Option by written notice to the Optionee
within sixty (60) days after (i) such termination of employment (or exercise of
the Option, if later) or (ii) the Company has received notice of the attempted
disposition. If the Company fails to give notice within such sixty (60) day
period, the Unvested Share Repurchase Option shall terminate unless the Company
and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if
at all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the Company
---------------------------------------
to the Optionee shall be made in cash within thirty (30) days after the date of
the mailing of the
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written notice of exercise of the Unvested Share Repurchase Option. For purposes
of the foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to the
extent of the unpaid principal and any accrued interest canceled. The purchase
price per share being repurchased by the Company shall be an amount equal to the
Optionee's original cost per share, as adjusted pursuant to paragraph 9 above.
The shares being repurchased shall be delivered to the Company by the Optionee
at the same time as the delivery of the purchase price to the Optionee.
(e) Assignment of Unvested Share Repurchase Option. The Company shall
----------------------------------------------
have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such Option is then exercisable, to one (1) or more persons as
may be selected by the Company.
(f) Ownership Change. In the event of an Ownership Change, the
----------------
Unvested Share Repurchase Option shall continue in full force and effect;
provided, however, that "employment with the Participating Company Group" for
purposes of this paragraph 11 shall include all service with any corporation
which was a Participating Company at the time the services were rendered,
whether or not the corporation was included within such term both before and
after the event constituting the Ownership Change.
12. Right of First Refusal.
----------------------
(a) Right of First Refusal. In the event the Optionee proposes to
----------------------
sell, pledge, or otherwise transfer any Vested Shares (the "Transfer Shares") to
any person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
paragraph 12 (the "Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed transfer of
---------------------------
the Transfer Shares, the Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price. In the event of a bona fide gift or involuntary transfer, the proposed
transfer price shall be deemed to be the fair market value of the Transfer
Shares as determined by the Company in good faith. In the event the Optionee
proposes to transfer any Vested Shares to more than one (1) Proposed Transferee,
the Optionee shall provide a separate Transfer Notice for the proposed transfer
to each Proposed Transferee. The Transfer Notice shall be signed by both the
Optionee and the Proposed Transferee and must constitute a binding commitment of
the Optionee and the Proposed Transferee for the transfer of the Transfer Shares
to the Proposed Transferee subject only to the Right of First Refusal.
(c) Bona Fide Transfer. Within ten (10) days after receipt of the
------------------
Transfer Notice, the Company shall determine the bona fide nature of the
proposed voluntary transfer and give the Optionee written notice of the
Company's determination. If the proposed transfer is deemed not to be bona
fide, the Optionee shall be responsible for providing additional information to
the Company to show the bona fide nature of the proposed transfer. The Company
shall have the right to demand further assurances from the Optionee and the
Proposed Transferee (in a form satisfactory to the Company) that the Transfer
Notice fully and accurately sets forth all of the terms and conditions of the
proposed transfer, including, without limitation, assurance that the Transfer
Notice fully and accurately sets forth the consideration actually paid
-8-
<PAGE>
for the Transfer Shares and all transactions, directly or indirectly, between
the parties which may have affected the price the Proposed Transferee was
willing to pay for the Transfer Shares.
(d) Exercise of the Right of First Refusal. In the event the proposed
--------------------------------------
transfer is deemed to be bona fide, the Company shall have the right to purchase
all, but not less than all, of the Transfer Shares at the purchase price and on
the terms set forth in the Transfer Notice by delivery to the Optionee of a
notice of exercise of the Right of First Refusal within thirty (30) days after
the date the Transfer Notice is delivered to the Company or ten (10) days after
the Company has approved the proposed transfer as bona fide, whichever is later.
The Company's exercise or failure to exercise the Right of First Refusal with
respect to any proposed transfer described in a Transfer Notice shall not affect
the Company's ability to exercise the Right of First Refusal with respect to any
proposed transfer described in any other Transfer Notice, whether or not such
other Transfer Notice is issued by the Optionee or issued by a person other than
the Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the Company
and the Optionee shall thereupon consummate the sale of the Transfer Shares to
the Company on the terms set forth in the Transfer Notice; provided, however,
that in the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for the
Transfer Shares by the discounted cash equivalent of the consideration described
in the Transfer Notice as reasonably determined by the Company. For purposes of
the foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to the
extent of the unpaid principal and any accrued interest canceled.
(e) Failure to Exercise Right of First Refusal. If the Company fails
------------------------------------------
to exercise the Right of First Refusal in full within the period specified in
paragraph 12(d) above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than one hundred twenty
(120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide,
pursuant to paragraph 12(c) above. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this paragraph 12.
(f) Transferees of the Transfer Shares. All transferees of the
----------------------------------
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 12
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 12 are met.
(g) Transfers Not Subject to the Right of First Refusal. The Right of
---------------------------------------------------
First Refusal shall not apply to any transfer or exchange of the shares acquired
pursuant to the exercise of the Option if such transfer is in connection with an
Ownership Change. If the consideration
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<PAGE>
received pursuant to such transfer or exchange consists of stock of a
Participating Company, such consideration shall remain subject to the Right of
First Refusal unless the provisions of paragraph 12(i) below result in a
termination of the Right of First Refusal.
(h) Assignment of the Right of First Refusal. The Company shall have
----------------------------------------
the right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer to one (1) or more persons as may be selected
by the Company.
(i) Early Termination of the Right of First Refusal. The other
-----------------------------------------------
provision of this paragraph 12 notwithstanding the Right of First Refusal shall
terminate, and be of no further force and effect upon (i) the occurrence of a
Transfer of Control, unless the surviving, continuing, successor, or purchasing
corporation, as the case may be, assumes the Company's rights and obligations
under the Plan, or (ii) the existence of a public market for the class of shares
subject to the Right of First Refusal. A "public market" shall be deemed to
exist if (x) such stock is listed on a national securities exchange (as that
term is used in the Exchange Act) or (y) such stock is traded on the over-the-
counter market and prices therefor are published daily on business days in a
recognized financial journal.
13. Escrow.
------
(a) Establishment of Escrow. To insure shares subject to the Unvested
-----------------------
Share Repurchase Option and the Right of First Refusal will be available for
repurchase, the Company may require the Optionee to deposit the certificate or
certificates evidencing the shares which the Optionee purchases upon exercise of
the Option with an escrow agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does
not require such deposit as a condition of exercise of the Option, the Company
reserves the right at any time to require the Optionee to so deposit the
certificate or certificates in escrow. The Company shall bear the expenses of
the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable after the
------------------------------
expiration of the Unvested Share Repurchase Option and the Right of First
Refusal, but not more frequently than twice each calendar year, the escrow agent
shall deliver to the Optionee the shares no longer subject to such restrictions.
(c) Notices and Payments. In the event the shares held in escrow are
--------------------
subject to the Company's exercise of the Unvested Share Repurchase Option or the
Right of First Refusal, the notices required to be given to the Optionee shall
be given to the escrow agent and any payment required to be given to the
Optionee shall be given to the escrow agent. Within thirty (30) days after
payment by the Company, the escrow agent shall deliver the shares which the
Company has purchased to the Company and shall deliver the payment received from
the Company to the Optionee.
14. Stock Dividends Subject to Option Agreement. If, from time to time,
-------------------------------------------
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Unvested Share Repurchase Option
and the Right of First Refusal with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and the Right of First Refusal
immediately before such event.
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<PAGE>
15. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
----------------------------------------------
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired pursuant to
the Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At the time during the one-year or two-
year periods set forth above, the Company may place a legend or legends on any
certificate or certificates representing shares acquired pursuant to the Option
requesting the transfer agent for the Company's stock to notify the Company of
any such transfers for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate or certificates pursuant to the preceding sentence.
16. Exception to $100,000 Exercise Limitation. Notwithstanding any other
-----------------------------------------
provision of this Option Agreement, if compliance with the $100,000 Exercise
Limitation as set forth in paragraph 4(a) above will result in the
exercisability of any Vested Shares (as defined in paragraph 11(b) above) being
delayed more than thirty (30) days beyond the vesting date for such shares, the
Option shall be deemed to be two (2) options. The first option shall be for the
maximum number of shares subject to the Option that can comply with the $100,000
Exercise Limitation without causing the Option to be unexercisable as to Vested
Shares. The second option, which shall not be treated as an incentive stock
option as described in Section 422A(b) of the Code, shall be for the balance of
the shares subject to the Option and shall be exercisable on the same terms and
at the same time as set forth in this Option Agreement, provided, however, that
(a) the second sentence of paragraph 4(a) above shall not apply to the second
option and (b) such shares shall become Vested Shares on the same date or dates
as set forth in this Option Agreement without regard to this paragraph. Unless
the Optionee specifically elects to the contrary in the Optionee's written
notice of exercise, the first option shall be deemed to be exercised first to
the maximum possible extent and then the second option shall be deemed to be
exercised.
17. Rules of the Commissioner of Corporations. The Optionee is hereby
-----------------------------------------
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following
text are references to the California Corporations Code.
260.141.11. Restriction on Transfer.
-----------------------
(a) The issuer of any security upon which a restriction on transfer
has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall
cause a copy of this section to be delivered to each issuee or transferee of
such security at the time the certificates evidencing the security is delivered
to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the
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<PAGE>
Commissioner (until this condition is removed pursuant to Section 260.141.12 of
the rules) except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants, or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such
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<PAGE>
person (i) discloses to potential purchasers at the sale that transfer of the
securities is restricted under this rule, (ii) delivers to each purchaser a copy
of this rule, and (iii) advises the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this Section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend prominently stamped or printed
thereon in capital letters of not less than 10-point size reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
18. Legends. The Company may at any time place legends referencing the
-------
Unvested Share Repurchase Option set forth in paragraph 11 above, the Right of
First Refusal set forth in paragraph 12 above and any applicable federal or
state securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to effectuate the provisions of this
paragraph. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT
OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S
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<PAGE>
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
(d) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
19. Initial Public Offering. The Optionee hereby agrees that in the event
-----------------------
of an initial public offering of stock made by the Company under the Securities
Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate,
grant any option to purchase or make any short sale of, or otherwise dispose of
any shares of stock of the Company or any rights to acquire stock of the Company
for such period of time as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such initial public offering. The
foregoing limitation shall not apply to shares registered under the Securities
Act and shall cease to apply once a registration statement is effective covering
shares issuable pursuant to options granted pursuant to the Plan, whether or not
such registration statement applies to any of the shares issued or issuable
pursuant to the Option.
20. Binding Effect. This Option Agreement shall inure to the benefit of
--------------
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
21. Termination or Amendment. The Board, including any duly appointed
------------------------
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee unless such amendment is required to enable the Option to qualify as an
Incentive Stock Option.
22. Integrated Agreement. This Option Agreement constitutes the entire
--------------------
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
23. Applicable Law. This Option Agreement shall be governed by the laws
--------------
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
24. Tax Consequences. The Optionee understands that any of the foregoing
----------------
references to taxation are based on federal income tax laws and regulations now
in effect. The Optionee has reviewed with the Optionee's own tax advisors the
federal, state, local and foreign tax consequences of the transactions
contemplated by this Agreement. The Optionee is relying solely on such advisors
and not on any statements or representations of the Company or any of its
agents. The Optionee understands that the Optionee (and not the Company) shall
be responsible for the Optionee's own tax liability that may arise as a result
of the transactions
-14-
<PAGE>
contemplated by this Agreement. Without limiting the generality of the
foregoing, the Optionee further agrees that the filing of elections under
Section 83(b) of the Code shall be the responsibility of the Optionee, and shall
not be the Company's responsibility.
CONNECT, INC.
By: /s/ THOMAS P. KEHLER
-----------------------------------
Title: PRESIDENT AND CEO
________________________________
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<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION l(g) HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS OPTION, THE COMPANY'S PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 11 and the Right of First Refusal set forth in
paragraph 12 and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California regarding restriction on transfer.
Dated: 6/8/96
-----------------
/s/ GORDON J. BRIDGE
__________________________________________
Gordon Bridge, Optionee
Residence Address:________________________
__________________________________________
__________________________________________
__________________________________________
Social Security No._______________________
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EXHIBIT 10.19
October 19, 1995
Mr. Gordon Bridge
99 India Brook Drive
Mendham, NJ 07922
Dear Gordon:
On behalf of the Board of Directors of CONNECT, Inc., we are pleased to
offer you the position of Chairman of the Board with the following terms and
conditions:
Position: You will be nominated by QUAESTUS to serve as a Director and will
be appointed Chairman of the Board of Directors at the next
regularly scheduled meeting of the Board. In addition to the
normal responsibilities of a director and Chairman, you will
function as the top business development executive of the
Company. In this business development function, you will take
your direction from the CEO, Tom Kehler and will collaborate
closely with the top management of the Company, and you will be
responsible for: (i) identifying, negotiating and completing
strategic and major account relationships with large companies
that will generate revenues and otherwise advance the business
objectives of the Company; (ii) articulating the mission and
message of the Company to major corporations who are potential
alliance partners and customers, opinion leaders, third party
consultants and others of strategic value including potential
shareholders and sources of finance; (iii) providing external
marketing direction and support; and (iv) providing overall
advice, counsel and support to the CEO and top management.
Start Date: November 1, 1995. Your appointment will be accompanied by a press
release by CONNECT, which you will have the right to review and
approve.
Compensation: Base Salary: $150,000 per year. Your salary will be reviewed on
an annual basis.
Bonus: The Compensation Committee of the Board intends to award
you quarterly bonuses based on the actual completion of strategic
deals and major account relationships. The amount and whether
such bonuses are due will be in the sole discretion of the
Compensation Committee, but as a guideline, the Compensation
Committee would consider the revenue impact of the transaction;
the strategic value of the customer relationship, in terms of its
ability to lead to other sales and enhance the Company's
visibility; the potential for generating further revenue
opportunities with the customer; and how
<PAGE>
closely the transaction fits within the Company's strategic
focus. The maximum bonus in any calendar year would be such that
your maximum total potential compensation, including bonus and
base salary, would not exceed $500,000. The Committee shall
review your performance once each quarter and shall make a
decision on the applicable bonus for that quarter. The Committee
currently consists of Richard Weening, Tom Kehler, and Richard
Lussier.
Options: You will be enrolled in the Company stock option program
and receive options to purchase 390,000 shares of common stock
("the Award") of the Company which will vest and become
exercisable over 36 months beginning in the first month of your
employment by CONNECT. You will receive an increase in the number
of option shares following the planned financing, the amount of
which will be determined by the Compensation Committee and
generally will be consistent with the treatment afforded other
top managers of the Company. The unvested portion of the Award
will vest in the event of a Change in Control, defined as (1) a
situation in which the Company issues shares of stock, or there
are transactions in the Company's stock, as a result of which the
acquiring shareholder(s) gain the right to elect a majority of
Directors to the Board of Directors, or (2) the shareholders
approve a merger, consolidation, reorganization, or other
transfer of shares under which the current shareholders (as of
the close of the pending financing) would no longer exercise
control of the Corporation. Some or all of the unvested portion
of the Award may also vest in some cases upon your termination,
as described below. The option price for all the shares will be
the market price as determined in connection with the pending
financing.
Expenses & Support: Your reasonable business travel and related
expenses will be reimbursed and you will be provided with the
support of the CONNECT infrastructure including mail, phone mail,
secretarial, etc.
Location: The parties expect that you will be capable of fulfilling your
duties from your current residence. This assumption will be
revisited six months into the arrangement. The full out of pocket
expense of any relocation (other than unusual benefits such as
broker fees, points, and the like) would be reimbursed to you.
Benefits: You will receive standard CONNECT medical and other benefits
comparable to those received by other members of the management
team.
Termination: These arrangements are terminable by you or the Company at any
time with or without cause. If you were to terminate the
arrangement, or if the Company were to terminate the arrangement
with cause, you will receive (1) your cash compensation earned
through the date of termination, and (2) any vested options to
which you are entitled through the date of notice
<PAGE>
of termination. "Cause" for this purpose shall include a
significant failure to meet performance standards mutually agreed
by you and the Board at the beginning of each fiscal year.
If you were to be terminated by the Company without cause, you
would receive (1) one year's cash compensation from CONNECT,
payable over time as if you remained an employee; (2) any bonuses
from closed deals which the Compensation Committee determines are
due to you; (3) the vested options to which you are entitled
through the date of notice of termination; and (4) a percentage
of the remaining unvested portion of the option Award as follows:
(a) if the termination occurs before the first anniversary of
your employment start date, 50% of the unvested options shall
vest; and (b) if the termination occurs on or after the first
anniversary of your employment start date, 100% of the unvested
options shall vest.
Gordon, we are pleased that we have been able to attract someone of your
caliber to the CONNECT opportunity and believe that you can make a great
contribution to the Company's future. We look forward to working with you to
capitalize on the opportunity.
Sincerely,
/s/ TOM KEHLER
Tom Kehler
President and CEO
<PAGE>
June 7, 1996
VIA COURIER
- -----------
Gordon Bridge
CONNECT, Inc.
515 Ellis Street
Mountain View, CA 94025
CONNECT, Inc.
-------------
Dear Gordon:
This letter confirms our interpretation of the offer letter (the "Offer
Letter") dated October 19, 1995 under which you were offered employment with
CONNECT, Inc. (the "Company").
First, we confirm that the terms of the Offer Letter relating to vesting of
stock options upon a Change of Control and upon termination of employment apply
to all stock options issued by the Company to you through the date of this
letter (i.e., options on 390,000 shares issued in November 1995, options on
250,000 shares issued in January 1996 and options on 50,000 shares issued in
April 1996). Second, we confirm that the Company's issuance of shares of Series
F Preferred Stock in December 1995 and January 1996 and shares of Common Stock
in the Company's initial public offering do not constitute a Change of Control
(as defined in the Offer Letter) of the Company. In addition, these events will
not be combined with any future events to mathematically trigger a Change of
Control of the Company. Finally, we confirm that the vesting periods of 36
months, 72 months (subject to acceleration in certain events as set forth in the
option agreement) and 72 months (subject to acceleration in certain events as
set forth in the option agreement) are the agreed upon option vesting periods
for your stock option grants made in November 1995, January 1996 and April 1996,
respectively.
This letter is intended to interpret the provisions of the Offer Letter.
In the event the terms of this letter conflict with the terms of any other
agreement or letter, including without limitation the Offer Letter, between the
Company and you, the terms of this letter shall prevail.
Please indicate your agreement with the matters indicated in this letter by
signing a copy of this letter and returning it to the Company.
Very truly yours,
CONNECT, Inc.
By /s/ THOMAS P. KEHLER
--------------------
<PAGE>
Agreed: /s/ GORDON J. BRIDGE
-------------------------
Gordon Bridge
<PAGE>
EXHIBIT 10.22
BUSINESS ALLIANCE PROGRAM AGREEMENT
This Business Alliance Program Agreement (the "Agreement") is between
Oracle Corporation with its principal place of business at 500 Oracle Parkway,
Redwood City, California 94065 ("Oracle") and Connect, Inc. (legal name) with
its principal place of business at 515 Ellis Street, Mountain View CA 94043
(the "Alliance Member"). The terms of this Agreement shall apply to each
Program license granted and to all services provided by Oracle under this
Agreement. When completed and executed by both parties, an Order Form shall
evidence the Program licenses granted and the services that are to be provided.
1. DEFINITIONS
1.1 "Commencement Date" shall mean the date on which the Programs are
delivered by Oracle, or if no delivery is necessary, the Effective Date set
forth on the relevant Order Form.
1.2 "Designated System" shall mean the computer hardware and
operating system designated on the relevant Order Form or Sublicense report for
use in conjunction with a Sublicensed Program, Development License, or Marketing
Support License.
1.3 "Order Form" shall mean the document by which the Alliance Member
orders Program licenses, Sublicenses, and services, and which is agreed to by
the parties. The Order Form shall reference the Effective Date of this
Agreement.
1.4 "Price List" shall mean Oracle's standard commercial fee schedule
that is in effect when a Program license, Sublicense, or services are ordered by
the Alliance Member.
1.5 "Program" shall mean the computer software in object code form
owned or distributed by Oracle for which the Alliance Member is granted a
license or grants a Sublicense pursuant to this Agreement; the user guides and
manuals for use of the software ("Documentation"); and Updates. "Limited
Production Program" shall mean a Program not specified on the Price List or
which is designated as Limited Production by Oracle.
1.6 "Sublicense Addenda" shall mean the addenda to this Agreement
specifying additional Sublicense terms and Sublicense rates and fees for the
various types of Sublicenses which may be granted by the Alliance Member.
1.7 "Sublicense" shall mean a nonexclusive, nontransferable right
granted by or through the Alliance Member to an end user to use an object code
copy of the Programs with the Value-Added Package under authority of a
Sublicense Addendum. "Sublicensee" shall mean a third party who is granted a
Sublicense of the Programs with the Value-Added Package for such party's own
internal data processing purposes and not for purposes of any further
distribution.
1.8 "Supported Program License" shall mean a Development License or
Marketing Support License for which the Alliance Member has ordered Technical
Support for the relevant time period. "Technical Support" shall mean Program
support provided under Oracle's policies in effect on the date Technical Support
is ordered.
<PAGE>
1.9 "Update" shall mean a subsequent release of a program which is
generally made available for Supported Program Licenses at no additional charge,
other than media and handling charges. Update shall not include any release,
option or future product which Oracle licenses separately.
1.10 "User," unless otherwise specified in the Order Form or
Sublicense report for a user type specified in the Price List in effect when the
Program is Sublicensed, shall mean a specific individual employed by the
Alliance Member or Sublicensee (as the case may be) who is authorized by such
party to use the Programs, regardless of whether the individual is actively
using the Programs at any given time.
1.11 "Value-Added Package" shall mean the hardware or software
products or services having added value which are developed, sold, and/or
licensed with the Programs to a Sublicensee by the Alliance Member, as provided
under the applicable Sublicense Addenda.
2. LICENSES GRANTED
2.1 Development Licenses and Trial Licenses
A. Oracle grants to the Alliance Member a nonexclusive license to use
the Development Licenses the Alliance Member obtains under this Agreement and
applicable Sublicense Addenda, as follows:
1. to develop or prototype the Value-Added Package on the Designated
System or on a backup system if the Designated System is inoperative, up to any
applicable maximum number of designated Users or other such limitation as may be
applicable;
2. to demonstrate the Programs to potential Sublicensees solely in
conjunction with the Value-Added Package;
3. to provide training and technical support to employees and to
customers solely in conjunction with the Value-Added Package;
4. to use the Documentation provided with the Programs in support of
the Alliance Member's authorized use of the Programs; and
5. to copy the Programs for archival or backup purposes; no other
copies shall be made without Oracle's prior written consent. All titles,
trademarks, and copyright and restricted rights notices shall be reproduced in
such copies. All archival and backup copies of the Programs are subject to the
terms of this Agreement.
B. The Alliance Member may order temporary trial licenses ("Trial
Licenses") for its evaluation purposes only and not for development or prototype
purposes, for use during a period specified in the Order Form. Each Order Form
for Trial Licenses shall clearly state the trial period and shall identify that
the order is for a Trial License.
<PAGE>
2.2 Marketing Support Licenses
Oracle grants to the Alliance Member a nonexclusive license to
use the Marketing Support Licenses the Alliance Member obtains under this
Agreement and applicable Sublicense Addenda, as follows:
A. to demonstrate the Programs to potential Sublicensees solely in
conjunction with the Value-Added Package, up to any applicable maximum number of
designated Users or other such limitation as may be applicable;
B. to develop customized prototypes of the Value-Added Package for
prospective Sublicensees on the Designated System if the Alliance Member does
not receive any fees related to the development of such customized prototypes;
C. to use the Documentation provided with the Programs in support of
the Alliance Member's authorized use of the Programs; and
D. to copy the Programs for archival or backup purposes; no other
copies shall be made without Oracle's prior written consent. All titles,
trademarks, and copyright and restricted rights notices shall be reproduced in
such copies. All archival and backup copies of the Programs are subject to the
terms of this Agreement.
2.3 Sublicensing
A. License to Sublicense Programs
As further set forth in the applicable Sublicense Addenda, Oracle
hereby grants the Alliance Member a nonexclusive, nontransferable license to
market and grant Sublicenses as set forth in such Sublicense Addenda and at the
rates and fees set forth in such Sublicense Addenda. The Alliance Member shall
only have the right to Sublicense Programs pursuant to an effective Sublicense
Addendum between the parties hereto.
The Alliance Member shall Sublicense the Programs solely through
a written Sublicense agreement as provided under Section 2.3.B. Upon Oracle's
request, the Alliance Member shall provide Oracle with a copy of the Alliance
Member's standard Sublicense agreement.
B. Sublicense Agreement
Every Sublicense Agreement shall include, at a minimum,
contractual provisions which:
1. Restrict use of the Programs to object code, subject to the
restrictions provided under the applicable Sublicense Addenda and consistent
with the Sublicense fees payable to Oracle;
<PAGE>
2. Prohibit (a) transfer of the Programs except for temporary
transfer in the event of computer malfunction; (b) assignment, timesharing and
rental of the Programs; and (c) title to the Programs from passing to the
Sublicensee or any other party;
3. Prohibit the reverse engineering, disassembly or decompilation of
the Programs and prohibit duplication of the Programs except for a single backup
or archival copy;
4. Disclaim, to the extent permitted by applicable law, Oracle's
liability for any damages, whether direct, indirect, incidental or
consequential, arising from the use of the Programs;
5. Require the Sublicensee, at the termination of the Sublicense, to
discontinue use and destroy or return to the Alliance Member all copies of the
Programs and Documentation;
6. Prohibit publication of any results of benchmark tests run on the
Programs;
7. Require the Sublicensee to comply fully with all relevant export
laws and regulations of the United States to assure that neither the Programs,
nor any direct product thereof, are exported, directly or indirectly, in
violation of United States law; and
8. Specify Oracle as a third party beneficiary of the Sublicense
agreement to the extent permitted by applicable law.
C. Marketing/Sublicensing Practices
In marketing and Sublicensing the Programs, the Alliance
member shall:
1. Not engage in any deceptive, misleading, illegal, or
unethical practices that may be detrimental to Oracle or to the Programs;
2. Not make any representations, warranties, or guarantees to
Sublicensees concerning the Programs that are inconsistent with or in addition
to those made in this Agreement or by Oracle; and
3. Comply with all applicable federal, state, and local laws
and regulations in performing its duties with respect to the Programs.
2.4 Acceptance of Programs
For each Program license for which delivery from Oracle is
required under this Agreement, the Alliance Member shall have a 15 day
Acceptance Period, beginning on the Commencement Date, in which to evaluate the
Program. During the Acceptance Period, the Alliance Member may cancel the
license by giving written notice to Oracle and returning the
<PAGE>
Program in accordance with Section 6.6 below. Unless such cancellation notice is
given, the license will be deemed to have been accepted by the Alliance Member
at the end of the Acceptance Period.
2.5 Limitations on Use
The Alliance Member shall not use or duplicate the Programs
(including the Documentation) for any purpose other than as specified in this
Agreement or make the Programs available to unauthorized third parties. The
Alliance member shall not (a) use the Programs for its internal data processing
or for processing customer data; (b) rent, electronically distribute, or
timeshare the Programs or market the Programs by interactive cable or remote
processing services or otherwise distribute the Programs other than as specified
in this Agreement; or (c) cause or permit the reverse engineering, disassembly,
or decompilation of the Programs.
2.6 Title
Oracle shall retain all title, copyright, and other proprietary
rights in the Programs and any modifications or translations thereof. The
Alliance Member and its Sublicensees do not acquire any rights in the Programs
other than those specified in this Agreement.
2.7 Transfer of Programs
The Alliance Member may transfer a Development License or
Marketing Support License within its organization upon notice to Oracle;
transfers are subject to the terms and fees specified in Oracle's transfer
policy in effect at the time of the transfer.
2.8 Use of Programs by Agents
The Alliance Member and each Sublicensee (as the case may be)
shall have the right to allow each such party's own third party agents to use
each such party's licensed Programs as licensed or Sublicensed under this
Agreement so long as the applicable party endures that its agents use the
Programs in accordance with the terms of this Agreement or the applicable
Sublicense agreement.
2.9 Pre-Production Programs
As an accommodation to the Alliance Member, Oracle may supply the
Alliance Member with pre-production releases of Programs (which may be labeled
"Alpha" or "Beta"). These products are not suitable for production use.
<PAGE>
3. TECHNICAL SERVICES
3.1 Technical Support Services
Oracle shall provide Technical Support services ordered by the
Alliance Member under Oracle's Technical Support policies in effect on the date
Technical Support is ordered, subject to the payment by the Alliance Member of
the applicable fees. Reinstatement of lapsed Technical Support services is
subject to Oracle's Technical Support reinstatement fees in effect on the date
Technical Support is re-ordered. The Alliance Member may obtain Technical
Support services for Limited Production Programs and pre-production releases of
Programs on a time and materials basis.
3.2 Training Services
Oracle will provide training services agreed to by the parties
under the terms of this Agreement. For any on-site services requested by the
Alliance Member, the Alliance Member shall reimburse Oracle for actual,
reasonable travel and out-of-pocket expenses incurred.
4. FEES AND PAYMENTS
4.1 License Fees and Sublicense Fees
The Alliance Member may order Development Licenses or Marketing
Support Licenses at the standard Program license fees set forth in the Price
List or at the fees otherwise provided in a Sublicense Addendum. For each
Sublicense granted by the Alliance Member, the Alliance Member agrees to pay
Oracle a Sublicense fee as set forth in the applicable Sublicense Addenda. The
Alliance Member shall not be relived of its obligation to pay Sublicense fees
owed to Oracle by the nonpayment of such fees by the Sublicensee.
The Alliance Member is free to determine unilaterally its own
license fees to its Sublicensees. If the Alliance Member or a Sublicensee
upgrades the Programs to a larger computer, transfers the Programs outside the
United States and/or to another operating system, or increases the licensed
number of Users, the Alliance Member will pay additional Sublicense fees to
Oracle as provided under Oracle's transfer policies and rates in effect at the
time the Program is upgraded or transferred.
4.2 Technical Support Fees
Technical Support services ordered by the Alliance Member for
Development Licenses and Marketing Support Licenses will be provided under
Oracle's Technical Support policies and rates in effect on the date Technical
Support is ordered.
4.3 General Payment Terms
Except as otherwise provided in a Sublicense Addendum, invoices
for payment of license fees shall be payable 30 days from the Commencement Date.
Technical Support fees for Sublicenses shall be payable as specified in the
applicable Sublicense Addendum.
<PAGE>
Technical Support fees for Development Licenses and Marketing Support Licenses
shall be payable annually in advance, net 30 days from the renewal date; such
fees will be those in effect at the beginning of the period for which the fees
are paid. All payments made shall be in United States currency and shall be made
without deductions based on any taxes or withholdings, except where such
deduction is based on gross income. Any amounts payable by the Alliance Member
hereunder which remain unpaid after the due date shall be subject to a late
charge equal to 1.5% per month from the due date until such amount is paid. The
Alliance Member agrees to pay applicable media and shipping charges. The
Alliance Member shall issue a purchase order, or alternative document acceptable
to Oracle, on or before the Effective Date of the applicable Order Form.
4.4 Taxes
The fees listed in this Agreement do not include taxes; if Oracle
is required to pay sales, use, property, value-added, or other federal, state or
local taxes based on the licenses granted under this Agreement or the
Sublicenses granted by the Alliance Member, then such taxes shall be billed to
and paid by the Alliance Member. This shall not apply to taxes based on Oracle's
income .
5. RECORDS
5.1 Records Inspection
The Alliance Member shall maintain adequate books and records in
connection with activity under this Agreement. Such records shall include,
without limitation, executed Sublicense agreements, the information required in
or related to the Sublicense reports required under a Sublicense Addendum, the
number of copies of Programs used or Sublicensed by the Alliance Member , the
computers on which the Programs are installed, and the number of Users using the
Programs. Oracle may audit the relevant books and records of the Alliance
Member to ensure compliance with the terms of this Agreement upon reasonable
notice to the Alliance Member. Any such audit shall be conducted during regular
business hours at the Alliance Member's offices and shall not interfere
unreasonably with the Alliance Member's business activities. If an audit
reveals that the Alliance Member has underpaid fees to Oracle, the Alliance
Member shall be invoiced for such underpaid fees based on the Price List in
effect at the time the audit is completed. If the underpaid fees exceed five
percent (5%) of the applicable license fees or Sublicense fees paid, then the
Alliance Member shall pay Oracle's reasonable costs of conducting the audit.
Audits shall be made no more than once annually.
5.2 Notice of Claim
The Alliance Member will notify the Oracle legal department
promptly in writing of: (a) any claim or proceeding involving the Programs that
comes to its attention; and (b) any material change in the management or control
of the Alliance Member.
<PAGE>
6. TERM AND TERMINATION
6.1 Term
This Agreement shall become effective on the Effective Date and
shall be valid until the expiration or termination of all Sublicense Addenda
hereunder, unless terminated earlier as set forth herein. If not otherwise
specified on the Order Form, each Program license granted under this Agreement
shall remain in effect perpetually under the terms of this Agreement unless the
license or this Agreement is terminated as provided in this Article 6 below. The
term of each Sublicense Addendum hereunder shall be as set forth in each such
Addendum.
6.2 Termination by the Alliance Member
The Alliance Member may terminate any Program license, any
Sublicense Addenda, or this Agreement at any time; however, termination shall
not relieve the Alliance Member's obligations specified in Sections 6.5 and 6.6.
6.3 Termination by Oracle
Oracle may terminate any Program license, any Sublicense Addenda,
or this Agreement upon written notice if the Alliance Member breaches this
Agreement and fails to correct the breach within 30 days following written
notice specifying the breach.
6.4 Force Majeure
Neither party shall be liable to the other for failure or delay
in the performance of a required obligation if such failure or delay is caused
by strike, riot, fire, flood, natural disaster, or other similar cause beyond
such party's control, provided that such party gives prompt written notice of
such condition and resumes its performance as soon as possible, and provided
further that the other party may terminate this Agreement if such condition
continues for a period of one hundred eighty (180) days.
6.5 Effect of Termination
Upon expiration or termination of a Sublicense Addendum or this
Agreement, all the Alliance Member's rights to market and Sublicense the
Programs as set forth in such Sublicense Addendum or this Agreement shall cease.
The termination of this Agreement, a Sublicense Addendum, or any
license shall not limit either party from pursuing any other remedies available
to it, including injunctive relief, nor shall such termination relieve the
Alliance Member's obligation to pay all fees that have accrued or that the
Alliance Member has agreed to pay under a Sublicense Addendum or any Order Form,
other similar ordering document under this Agreement, or that appear in a
Sublicense report. The parties' rights and obligations under Sections 2.5, 2.6,
2.7 and Articles 4, 5, 6, 7, and 8 shall survive termination of this Agreement.
<PAGE>
6.6 Handling of Programs Upon Termination
If a license granted under this Agreement expires or otherwise
terminates, the Alliance Member shall: (a) cease using the applicable Programs;
and (b) certify to Oracle within one month after expiration or termination that
the Alliance Member has destroyed or has returned to Oracle the Programs and all
copies. This requirement applies to copies in all forms, partial and complete,
in all types of media and computer memory, and whether or not modified or merged
into other materials. Before returning Programs to Oracle, the Alliance Member
shall acquire a Return Material Authorization ("RMA") number from Oracle.
7. INDEMNITY, WARRANTIES, REMEDIES
7.1 Infringement Indemnity
Oracle will defend and indemnify the Alliance Member against a
claim that Programs infringe a copyright or patent, provided that: (a) the
Alliance Member notifies Oracle in writing within 30 days of the claim; (b)
Oracle has sole control of the defense and all related settlement negotiations;
and (c) the Alliance Member provides Oracle with the assistance, information and
authority necessary to perform Oracle's obligations under this Section.
Reasonable out-of-pocket expenses incurred by the Alliance Member in providing
such assistance will be reimbursed by Oracle.
Oracle shall have no liability for any claim of infringement based
on use of a superseded or altered release of Programs if the infringement would
have been avoided by the use of a current unaltered release of the Programs
which Oracle provides to the Alliance Member.
In the event the Programs are held or are believed by Oracle to
infringe, Oracle shall have the option, at its expense, to (a) modify the
Programs to be noninfringing; (b) obtain for the Alliance Member a license to
continue using the Programs; or (c) terminate the license for the infringing
Programs and refund the license fees paid for those Programs, prorated over a
five-year term from the Commencement Date. This Section 7.1 states Oracle's
entire liability and the Alliance Member's exclusive remedy for infringement.
7.2 Warranties and Disclaimers
A. Program Warranty
Oracle warrants for a period of one year from the Commencement Date
that each unmodified Program for which the Alliance Member has a Supported
Program License will perform the functions described in the Documentation
provided by Oracle when operated on the Designated System.
B. Media Warranty
Oracle warrants the tapes, diskettes or other media to be free of
defects in materials and workmanship under normal use for 90 days from the
Commencement Date.
<PAGE>
C. Services Warranty
Oracle warrants that its Technical Support and training services
will be performed consistent with generally accepted industry standards. This
warranty shall be valid for 90 days from performance of service.
D. Disclaimers
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Oracle does not warrant that the Programs will run properly on all
Hardware, that the Programs will meet requirements of the Alliance Member or the
Sublicensees or operate in the combinations which may be selected for use by the
Alliance Member or the Sublicensees, that the operation of the Programs will be
uninterrupted or error free, or that all Program errors will be corrected.
Limited Production Programs, Pre-Production Releases of Programs, and Computer-
Based Training Products are Distributed "As is."
The Alliance Member shall not make any warranty on Oracle's behalf.
7.3 Exclusive Remedies
For any breach of the warranties contained in Section 7.2 above, the
Alliance Member's exclusive remedy, and Oracle's entire liability, shall be:
A.For Programs
The correction of Program errors that cause breach of the warranty,
or if Oracle is unable to make the Program operate as warranted, the Alliance
Member shall be entitled to recover the fees paid to Oracle for the Program
license.
B.For Media
The replacement of defective media returned within 90 days of the
Commencement Date.
C.For Services
The reperformance of the services, or if Oracle is unable to perform
the services as warranted, the Alliance Member shall be entitled to recover the
fees paid to Oracle for the unsatisfactory services.
<PAGE>
7.4 Indemnification of Oracle
The Alliance Member agrees to enforce the terms of its Sublicense
agreements required by this Agreement and to notify Oracle of any known breach
of such terms. The Alliance Member will defend and indemnify Oracle against:
A. All claims and damages to Oracle arising from any use by the
Alliance Member or its Sublicensees of any product not provided by Oracle but
used in combination with the Programs if such claim would have been avoided by
the exclusive use of the Programs;
B. All claims and damages to Oracle caused by the Alliance Member's
failure to include the required contractual terms set forth in Section 2.3.B
hereof in each Sublicense agreement; and
C. All claims and damages to Oracle caused by Sublicensees' breach
of any of the applicable provisions required by Section 2.3 hereof.
7.5 Equitable Relief
The Alliance Member acknowledges that any breach of its
obligations with respect to proprietary rights of Oracle will cause Oracle
irreparable injury for which there are inadequate remedies at law and that
Oracle shall be entitled to equitable relief in addition to all other remedies
available to it.
8. GENERAL TERMS AND CONDITIONS
8.1 Nondisclosure
Neither party shall, without first obtaining the written consent
of the other party disclose the terms and conditions of this Agreement, except
as may be required to implement and enforce the terms of this Agreement, or as
may be required by legal procedures or by law. No other information exchanged
between the parties shall be deemed confidential unless the parties otherwise
agree in writing. The Alliance Member shall not disclose the results of
benchmark tests or other evaluation of the Programs to any third party without
Oracle's prior written approval.
8.2 Copyrights
The Programs are copyrighted by Oracle. The Alliance Member shall
retain all Oracle copyright notices on the Programs used by the Alliance Member
under its Development Licenses or Marketing Support Licenses. The Alliance
Member shall include the following on all copies of the Programs in software
Value-Added Packages incorporating the Programs distributed by the Alliance
Member:
A. A reproduction of Oracle's copyright notice; or
<PAGE>
B. A copyright notice indicating that the copyright is vested in
the Alliance Member containing the following:
1. A "c" in a circle and the word "copyright";
2. The Alliance Member's name;
3. The date of copyright; and
4. The words "All Rights Reserved."
Such notices shall be placed on the Documentation, the sign-
on screen for any software Value-Added Package incorporating the Programs, and
the diskette or tape labels. Notwithstanding any copyright notice by the
Alliance Member to the contrary, the copyright to the Program included in any
such application package shall remain in Oracle. Other than as specified above,
on any reproduction or translation of any Programs, Documentation, or promotion
material, the Alliance Member agrees to reproduce Oracle's copyright notices
intact.
8.3 Trademarks
"Oracle" and any other trademarks and service marks adopted by
Oracle to identify the Programs and other Oracle products and services belong to
Oracle; the Alliance Member will have no rights in such marks except as
expressly set forth herein and as specified in writing from time to time. The
Alliance Member's use of Oracle's trademarks shall be under Oracle's trademark
policies and procedures in effect from time-to-time. The Alliance Member agrees
not to use the trademark "ORACLE," or any mark beginning with the letters "Ora,"
or any other mark likely to cause confusion with the trademark "ORACLE" as any
portion of the Alliance Member's tradename, trademark for the Alliance Member's
Value-Added Package, or trademark for any other products of the Alliance Member.
The Alliance Member shall have the right to use the trademark "ORACLE" and other
Oracle trademarks solely to refer to Oracle's Programs, products and services.
The Alliance Member agrees with respect to each registered
trademark of Oracle, to include in each advertisement, brochure, or other such
use of the trademark, the trademark symbol "circle R" and the following
statement:
________________________ is a registered trademark of Oracle
Corporation, Redwood City, California.
Unless otherwise notified in writing by Oracle, the Alliance
Member agrees, with respect to every other trademark of Oracle, to include in
each advertisement, brochure, or other such use of the trademark, the symbol
"TM" and the following statement:
________________________ is a trademark of Oracle Corporation,
Redwood City, California.
<PAGE>
The Alliance Member shall not market the Oracle Programs in any
way which implies that the Oracle Programs are the proprietary product of the
Alliance Member or of any party other than Oracle. Oracle shall not have any
liability to the Alliance Member for any claims made by third parties relating
to the Alliance Member's use of Oracle's trademarks.
8.4 Relationships between Parties
In all matters relating to this Agreement, the Alliance Member
will act as an independent contractor. The relationship between Oracle and the
Alliance Member is that of licensor/licensee. Neither party will represent that
it has any authority to assume or create any obligation, express or implied, on
behalf of the other party, nor to represent the other party as agent, employee,
franchisee, or in any other capacity. Nothing in this Agreement shall be
construed to limit either party's right to independently develop or distribute
software which is functionally similar to the other party's product, so long as
proprietary information of the other party is not included in such software.
8.5 Assignment
The Alliance Member may not assign or otherwise transfer any
rights under this Agreement without Oracle's prior written consent.
8.6 Notice
All notices, including notices of address change, required to be
sent hereunder shall be in writing and shall be deemed to have been given when
deposited in first class mail to the first address listed in the relevant Order
Form (if to the Alliance Member) or to the Oracle address on the Order Form (if
to Oracle).
To expedite order processing, the Alliance Member agrees that
Oracle may treat documents faxed by the Alliance Member to Oracle as original
documents; nevertheless, either party may require the other to exchange original
signed documents.
8.7 Governing Law/Jurisdiction
This Agreement, and all matters arising out of or relating to
this Agreement, shall be governed by the substantive and procedural laws of the
State of California and shall be deemed to be executed in Redwood City,
California. The parties agree that any legal action or proceeding relating to
this Agreement shall be instituted in any state or federal court in San
Francisco or San Mateo County, California. Oracle and the Alliance Member agree
to submit to the jurisdiction of, and agree that venue is proper in, these
courts in any such legal action or proceeding.
8.8 Severability
In the event any provision of this Agreement is held to be
invalid or unenforceable, the remaining provisions of this Agreement will remain
in full force and effect.
<PAGE>
8.9 Export
The Alliance Member agrees to comply fully with all relevant
export laws and regulations of the United States ("Export Law") to assure that
neither the Programs, nor any direct product thereof, are (a) exported, directly
or indirectly, in violation of Export Laws; or (b) are intended to be used for
any purposes prohibited by the Export Laws, including, without limitation,
nuclear, chemical, or biological weapons proliferation.
8.10 Limitation of Liability
In no event shall either party be liable for any indirect,
incidental, special or consequential damages, or damages for loss of profits,
revenue, data or use, incurred by either party or any third party, whether in an
action in contract or to, even if the other party or any other person has been
advised of the possibility of such damages. Oracle's liability for damages
hereunder shall in no event exceed the amount of fees paid by the Alliance
Member under this Agreement, and if such damages result from the Alliance
Member's use of the Program or services, such liability shall be limited to fees
paid for the relevant Program or services giving rise to the liability, prorated
over a five-year term from the Commencement Date of the applicable license or
the date of performance of the applicable services.
The provisions of this Agreement allocate the risks between
Oracle and the Alliance Member. Oracle's pricing reflects this allocation of
risk and the limitation of liability specified herein.
8.11 Federal Government Sublicenses.
If the Alliance Member grants a Sublicense to the United States
government, the Programs shall be provided with "Restricted Rights" and the
Alliance Member will place a legend, in addition to applicable copyright
notices, on the documentation, and on the tape or diskette label, substantially
similar to the following:
RESTRICTED RIGHTS LEGEND
"Use, duplication or disclosure by the Government is subject to
restriction as set forth in subparagraph (c)(1)(ii) of the Department of Defense
Regulations Supplement ("DFARS") 252.227-7013, Rights in Technical Data and
Computer Software (October 1988) and Federal Acquisition Regulation ("FAR")
52.227-14, Rights in Data-General, including Alternate III (June 1987), as
applicable. Oracle Corporation, 500 Oracle Parkway, Redwood City, CA 94065."
8.12 Waiver
The waiver by either party of any default or breach of this
Agreement shall not constitute a waiver of any other or subsequent default or
breach. Except for actions for non-payment or breach of Oracle's proprietary
rights in the Programs, no action, regardless of form, arising out of this
Agreement may be brought by either party more than one year after the cause of
action has accrued.
<PAGE>
8.13 Entire Agreement
This Agreement constitutes the complete agreement between the
parties and supersedes all prior or contemporaneous agreements or
representations, written or oral, concerning the subject matter of this
Agreement. This Agreement may not be modified or amended except in a writing
signed by a duly authorized representative of each party; no other act,
document, usage or custom shall be deemed to amend or modify this Agreement.
This Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which shall constitute together but one and the
same document.
It is expressly agreed that the terms of this Agreement and any
Order Form shall superseded the terms in any Alliance Member purchase order or
other ordering document. This Agreement shall also supersede the terms of any
shrink-wrap or break-the-seal license agreement included in any package for
Oracle-furnished software, except terms contained in such license agreement that
grant specific use rights for the Programs.
The Effective Date of this Agreement shall be June 11, 1996.
Executed by Connect, Inc.: Executed by Oracle Corporation:
Authorized signature: Authorized Signature:
/s/ Henry V. Morgan /s/ Lloyd Alexander
- ------------------- -------------------
Name: Hank Morgan Name: Lloyd Alexander
------------ ----------------
Title: CFO Title: Manager - Western Region
----- ---------------------------
Channels Sales Support
----------------------
Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94065
(415) 506-7000
Oracle is a registered trademark of Oracle Corporation
1-95
<PAGE>
RUNTIME SUBLICENSE ADDENDUM
This document (the "Addendum") is between Oracle Corporation ("Oracle") and
Connect, Inc. (the "Alliance Member") and shall be governed by the terms of the
Business Alliance Program Agreement between the Alliance Member and Oracle
effective __________, 19__ (the "Agreement") and the terms set forth below.
1. SUBLICENSES
1.1 Sublicense Programs and Terms
The Alliance Member may only sublicense Runtime Programs for
which the Alliance Member has previously acquired a Supported Development
License for the applicable Designated System. Notwithstanding any other
provision of this Agreement, the Alliance Member shall have no right to
Sublicense Programs designated as Oracle Applications Programs, Oracle Express
Programs, Limited Production Programs, or other Programs specified by Oracle
from time-to-time without the prior written consent of Oracle.
The Alliance Member shall have the right to market and grant
Sublicenses of Runtime Programs under the conditions set forth in the Agreement
and under the following restrictions:
A. Sublicense Runtime Programs with the Application Program in the
Application Package for use on Designated systems to Sublicensees. Each copy of
the runtime Programs distributed shall be for the Sublicensee's own internal use
in the Territory only on a single Designated System limited to a maximum number
of Users; and
B. Make and deliver to the sublicensee a single copy of the Runtime
Programs in the Application Package for each Sublicense granted.
The Alliance Member shall use all practical means available, both
contractual and technical, to control the restricted use of each Runtime Program
Sublicense. If a Sublicensee uses the Runtime Program beyond the limited
functionality described in Section 1.2 hereof, the Alliance Member or
Distributor shall immediately notify the Sublicensee of such unauthorized use
and if the Sublicensee fails to discontinue such unauthorized use following
notification either terminate the Sublicense or forward to Oracle one hundred
percent (100%) of the applicable Full Use standard Program license fees in
effect at the time the payment is made to Oracle together with a written request
by the Sublicensee for a Full Use Program license from Oracle. Oracle must
approve, in writing, the Sublicensee's request before continued use of the
Programs by the Sublicensee shall be deemed authorized.
1.2 Runtime Programs
For the purposes of this Addendum, "Runtime Program(s)" shall
mean Programs which shall be limited to use solely for the purpose of running
the Alliance Member's Application Program, and may not be used to create or
alter tables or reports except as necessary
<PAGE>
for operating the Alliance Member's Application Program. "Full Use Programs"
shall mean unaltered versions of the Programs with all functions intact.
1.3 Value-Added Package
For the purposes of this Addendum, "Application Program(s)" shall
mean the Alliance Member's value-added application software, described in the
attached Application Package Attachment with which the Runtime Programs are to
be coupled. "Application Package(s)" shall mean the runtime Programs coupled
with the Application Programs. for purposes of the Agreement, the Application
Program shall be regarded as the Alliance Member's Value-Added Package.
1.4 Trial Sublicenses
The Alliance Member and its distributors shall be entitled to
grant, at no charge, up to a maximum combined total of ten (10) temporary Trial
Sublicenses of the Application Package at any one time. Such Sublicenses shall
be for evaluation purposes only and shall be for a period not to exceed thirty
(30) days. The Alliance Member shall pay Oracle sublicense fees for any Trial
Sublicenses in excess of thirty (30) days. Each such Trial Sublicense shall be
Sublicensed under a Sublicense agreement which provides for such trial use.
1.5 Distributors
Oracle grants the Alliance Member the right to appoint third
parties ("Distributors") to market and Sublicense the Runtime Programs in the
Territory, under the terms of the Agreement and this Addendum. However,
Distributors shall have no right to make copies of the Programs for Sublicensing
and shall obtain all such Programs from the Alliance member. Each Distributor
shall execute a written agreement with the Alliance Member binding the
Distributor provisions substantially similar to those contained in Sections 2.3,
2.5, 2.6, 5.1, 5.2, 6.1, 6.3, 6.4, 6.5, 7.2.D, 7.5, 8.1, 8.2, 8.3, 8.5, 8.7,
8.9, and 8.11 of the Agreement and to those contained in Sections 1 (except
1.5), 3, 4, 5, and 6 of this Addendum. Each obligation of the Alliance Member
under such provisions shall also be applicable to each Distributor. Each
Distributor agreement shall also contain any other provisions necessary for the
Alliance Member to satisfy its commitments under the Agreement. The Alliance
Member shall notify Oracle promptly in writing of the appointment of each such
Distributor.
In addition, the Alliance Member shall keep executed Distributor
agreements and records of the Distributor information required under the
Alliance Member's Sublicense reports, and shall allow Oracle to inspect such
information as specified under the agreement. The Alliance Member will defend
and indemnify Oracle against all damages to Oracle caused by (i) the
Distributors' failure to include the required contractual terms set forth in
Section 2.3.B of the Agreement in each Sublicense agreement, and (ii) the
Distributors' breach of any of the applicable provisions required in its
Distributor agreement.
<PAGE>
1.6 Documentation
The Alliance Member shall be responsible for providing
documentation for Sublicensees. The Alliance Member shall have the right to
incorporate portions of the Documentation into the Alliance Member's
documentation, subject to the provisions of Section 8.2 of the Agreement.
2. SUBLICENSE FEES
2.1 Sublicense Fees and Rate
For each copy of the Programs Sublicensed by the Alliance Member
or its Distributor in the Application Package, the Alliance Member agrees to pay
Oracle a Sublicense fee equal to [*]
([*] of the applicable license fee for each
such Program, as specified in the applicable Price List and Alliance Member
Price list supplement to such Price List in effect at the time the applicable
Programs are Sublicensed.
As further specified in Section 6 of this Addendum, Sublicense
fees shall be due and payable within twenty (20) days of the last day of each
month. The Alliance Member shall not be relieved of its obligation to pay
Sublicense fees owed to Oracle by the nonpayment of such fees by the
Sublicensee.
On or after each anniversary during the Term of this Addendum,
Oracle may amend the Sublicense fee percentage rate set forth above based on
Oracle's then-current standard Sublicense fee percentage rate schedule and the
actual amount of Sublicense fees received by Oracle hereunder.
2.2 Price List for Sublicenses
Notwithstanding any other provision of the Agreement, the
applicable Price List for determining Sublicense fees shall be the standard
Oracle Alliance Member Price List in effect at the time the Applicable Package
is Sublicensed.
Notwithstanding any other provision of this Agreement, if the
Alliance Member issues a written Sublicense quote and such quote is accepted by
the applicable Sublicensee, for a period of ninety (90) days after the date of
submission of the quote to the Sublicensee, the Sublicense fee applicable to the
Programs identified in the quote shall be based on the Price List in effect on
such date.
2.3 Users
The Sublicense fees for a Program shall be based and priced on
the applicable User Level for the maximum number of Users for such Program, as
specified in the Price List. The Alliance Member shall have the right to
Sublicense Programs on any User basis specified in the Price List in effect at
the time the applicable Program is Sublicensed.
* Confidential treatment requested
<PAGE>
3. TERM
This Addendum shall become effective on the Effective Date of this
Addendum and shall be valid for three (3) years (the "Term") from the Effective
Date, unless terminated as provided in the Agreement. Any renewal of this
Addendum shall be subject to renegotiation of terms and fees.
Unless the expiration or termination is for default by the Alliance
Member, the Alliance Member may continue using the release of the Programs then
in the Alliance Member's possession on the Designated Systems for which
Development Licenses were granted, solely for the purpose of continuing
technical support for Sublicenses granted prior to termination. Such continued
use of the Programs shall be subject to all the provisions of this agreement,
including, without limitation, payment of the Technical Support Fees specified
herein.
4. TERRITORY
The Alliance Member shall have the right to market and grant
Sublicense of Programs in the United States only (the "Territory").
5. TECHNICAL SUPPORT
5.1 Technical Support for Sublicensees
A. Installation
The Alliance Member or its Distributors will be responsible
for any assistance needed to install the Application Package at Sublicensee
sites.
B. Sublicensing Support
The Alliance Member is responsible for providing all
technical support, training and consultations to its Sublicensees and
Distributors. In consideration of the payments specified in Section 5.2, the
Alliance Member shall have the right to use the Oracle Technical Support
services acquired for its Supported Development Licenses to provided technical
support services to its Sublicensees as further set forth in the Agreement. The
Alliance Member shall continuously maintain Oracle Technical Support services
for the Development Licenses during the period during which the Alliance Member
provides technical support services to any Sublicensees. Any questions from the
Alliance Member's Sublicensees or Distributors will be referred by Oracle to the
Alliance Member.
5.2 Technical Support Fees
For Technical Support services for Sublicensees, each year the
Alliance Member agrees to pay Oracle annual Technical Support Fees for each
Runtime Program Sublicensed under this Addendum, a previous Alliance Member
Addendum, or previous distribution agreement between the parties hereto where
the Sublicensee received technical support services for such Runtime Program
during the applicable support period. Annual
<PAGE>
Technical Support Fees for a Program shall be equal to the applicable Technical
Support percentage rate for the highest Technical Support services level
selected by the Alliance Member for Technical Support services for any
Development License used under this Addendum of the cumulative Sublicense fees
accrued to Oracle for such supported Program.
Upon December 31 of each year, the Alliance Member shall provide
Oracle a report setting forth all of the Alliance Members' Sublicenses and those
Sublicensed Programs which were supported by the Alliance Member during the
calendar year. The report shall also include the applicable Technical Support
Fees due and payable to Oracle for such calendar year. The Alliance Member
shall provide Oracle with payment of all Technical Support Fees for such
calendar year required under the applicable December 31 report with such report
in the form of a check made out in the amount of such fees. All Technical
Support Fees paid to Oracle are noncancelable and nonrefundable.
6. SUBLICENSE REPORTS
Within twenty (20) days of the last day of each month, the
Alliance Member shall send Oracle a report detailing for that month:
A. For each Sublicensed Application Package shipped during the prior
month, Sublicensee name, address, make/model and operating system of the
Designated System, date of shipment, Runtime Programs shipped, maximum number of
licensed Users, whether the Sublicense is a Trial Sublicense, and total
Sublicense fees and Technical Support Fees due to Oracle;
B. For each Application Program licensed to end-users to be used with
previously installed software licensed by Oracle in conjunction with the
Application Program, Sublicensee name, address, make/model and operating system
of the computer, and date of installation; and
C. The Distributor agreements executed during the prior month,
including names and addresses of the Distributors.
The Alliance Member shall require its Distributors to report this
information to the Alliance Member on a monthly basis and will include it in the
report for the month in which the Alliance Member received the information. The
Alliance Member shall provide Oracle with payment of all fees required under the
monthly report with such report in the form of a check made out in the amount of
such fees.
7. ADDITIONAL LICENSES
During the Term, the Alliance Member may order production release
versions of Oracle off-the-shelf Programs available as production release as of
the Effective Date of this Addendum and listed on the Price List in effect as of
such date. The license fee for Development Licenses shall be equal to Oracle's
standard list license fees in effect when an order is placed. The Alliance
Member shall have the right to order Programs for use as Marketing Support
Licenses at [*] to the Alliance Member. The Alliance Member may obtain Technical
Support
*Confidential treatment requested
<PAGE>
services from Oracle for such Programs under Oracle's applicable Technical
Support fees and policies in effect when such services are ordered.
The Effective Date of this Agreement shall be June 11, 1996.
Executed by Connect, Inc.: Executed by Oracle Corporation:
Authorized signature: Authorized Signature:
/s/ Henry V. Morgan /s/ Lloyd Alexander
- ------------------------- ----------------------------------
Name: Hank Morgan Name: Lloyd Alexander
-------------------- -----------------------------
Title: CFO Title: Manager - Western Region
------------------- ----------------------------
Channels Sales Support
----------------------------------
Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94065
(415) 506-7000
Oracle is a registered trademark of Oracle Corporation
8-95
<PAGE>
AMENDMENT ONE
TO THE
RUNTIME SUBLICENSE ADDENDUM
to the
BUSINESS ALLIANCE PROGRAM AGREEMENT
between
CONNECT, INC.
and
ORACLE CORPORATION
This Amendment One shall serve to amend the Runtime Sublicense Addendum
dated June 11, 1996 (the "Addendum") to the Business Alliance Program Agreement
between Connect, Inc. (the "Alliance Member") and Oracle Corporation ("Oracle")
effective June 11, 1996 (the "Agreement").
The Addendum is hereby amended as follows:
1. After the first paragraph of Section 2.2 insert the following new
paragraph:
"All Sublicense fees for Sublicenses installed outside the
United States shall be based on Oracle's Global Price List."
2. Delete the body of Section 4 in its entirety and insert the following:
"4. TERRITORY
The Alliance Member shall have the right to market and grant
Sublicenses of Programs in the Application Package in all countries
worldwide (the "Territory") subject to the terms of this Section.
Oracle may from time to time deny the Alliance Member the right
to Sublicense in certain countries in the Territory in order to
protect Oracle's interests if, in the reasonable opinion of Oracle's
counsel, such countries (i) do not provide adequate protection for
Oracle's proprietary rights through copyright, trade secret, patent,
or other laws; or (ii) have laws or regulations or the government has
committed acts which in the opinion of Oracle's counsel, are injurious
to Oracle's interests in the programs.
The Alliance Member acknowledges that the Programs are subject to
export controls imposed on Oracle and the Alliance Member by the U.S.
Export Administration Act, United States Departments of Commerce,
Treasury, and State regulations and directives, and other United
States law ("Export laws"). The Alliance Member certifies that
neither the Programs nor any direct product thereof are (i) exported,
directly or indirectly, in violation of Export laws; or (ii) are
intended to be used for any purposes prohibited by the Export laws,
including, without limitation, nuclear, chemical, or biological
weapons proliferation. Furthermore, the Alliance Member shall not
transfer the Programs outside of the territory for which the Alliance
Member has Sublicense rights under this Agreement.
<PAGE>
Furthermore, the Alliance Member shall not transfer the Programs
outside of the territory for which the Alliance Member has Sublicense
rights under this Agreement.
Other than the addition of the foregoing, the Addendum remains unchanged
and in full force and effect.
The Effective Date of this Amendment One is June 11, 1996.
CONNECT, INC. ORACLE CORPORATION
By: /s/ Henry V. Morgan By: /s/ Lloyd Alexander
--------------------- -------------------------------
Name: Hank Morgan Name: Lloyd Alexander
------------------- -----------------------------
Title: CFO Title: Manager - Western Region
------------------ ----------------------------
Channels Sales Support
----------------------------------
-2-
<PAGE>
AMENDMENT TWO
to the
RUNTIME SUBLICENSE ADDENDUM
to the
BUSINESS ALLIANCE PROGRAM AGREEMENT
between
CONNECT, INC.
and
ORACLE CORPORATION
This Amendment Two shall serve to amend the Runtime Sublicense Addendum
dated June 11, 1996 (the "Addendum") to the business Alliance Program Agreement
between Connect, Inc. (the "Alliance Member") and Oracle Corporation ("Oracle")
effective June 11, 1996 (the "Agreement").
The Addendum is hereby amended as follows:
1. Notwithstanding any provision in the Addendum, until March 20, 1997,
the Alliance Member shall have the right to Sublicense Runtime versions of the
Program designated in the Price List as "Oracle 7 Server" ("Oracle 7") to
Sublicensees for use in conjunction with the Oneserver Application Package
("Oneserver") for use and installation in the Territory under the terms and
conditions of the Addendum and the Agreement at the fees specified herein. For
each Sublicense of Oracle 7 in conjunction with Oneserver, the Alliance shall
pay to Oracle a Sublicense fee [*] Designated System for which the Application
Package is Sublicensed, as set forth in the below table.
<TABLE>
<S> <C>
[*]
</TABLE>
The rates specified above are for Sublicenses of Oracle 7 for the
applicable Designated System [*]. Notwithstanding any other provision of the
Addendum, the Sublicense Fee for Sublicenses of Oracle 7 for use and
installation outside the U.S., shall be equal to [*] of the Sublicense Fees set
forth above.
The Alliance Member shall not disclose to Sublicensees or potential
Sublicensees the price of Oracle 7 as a component of Oneserver. The Alliance
Member shall present to such Sublicensees or potential Sublicensees only the
price of the Oneserver Application Package as a whole. The Alliance Member
agrees that the pricing terms of such Oracle Programs shall be deemed
confidential information of Oracle and shall not be revealed of any third party.
Failure to keep such information confidential shall be deemed a material breach
of the Agreement.
The Alliance Member warrants that neither it nor its Distributors will
grant Sublicenses in or ship any Programs to a country until it (or the
Distributor) has completed all necessary government formalities in such country
and upon reasonable request by Oracle, the Alliance Member (or its Distributor)
provides evidence of completion of such formalities to Oracle. The Alliance
Member will indemnify Oracle for any losses, costs, liability, and damages
incurred by Oracle as a result of a failure by the Alliance Member or its
Distributors to comply with tthe necessary government requirements in any
country. The obligations under this Section shall survive the expiration or
termination of this Addendum. Upon Oracle's reasonable request, the Alliance
Member shall make records available to Oracle to allow to confirm the Alliance
Member's compliance with this Section.
Other than the addition of the foregoing, the Addendum remains unchanged
and in full force and effect.
* Confidential treatment requested
<PAGE>
The Effective Date of this Amendment Two is June 11, 1996.
CONNECT, INC. ORACLE CORPORATION
By: /s/ Henry V. Morgan By: /s/ Lloyd Alexander
---------------------- ------------------------------
Name: Hank Morgan Name: Lloyd Alexander
-------------------- ----------------------------
Title: CFO Title: Manager - Western Region
------------------- ---------------------------
Channels Sales Support
---------------------------------
-2-
<PAGE>
EXHIBIT 10.23
CONNECT, INC.
AGREEMENT AND MUTUAL RELEASE
This Agreement and Mutual Release ("Agreement") is made by and between
CONNECT, Inc., a California corporation (the "Company"), and Henry Morgan
("Employee").
WHEREAS, Employee is employed by the Company;
WHEREAS, the Company and Employee have entered into an agreement regarding
confidential information and ownership of inventions (the "Employee Agreement");
and
WHEREAS, the Company and Employee have mutually agreed to terminate the
employment relationship and to release each other from any claims arising from
or related to the employment relationship.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
Company and Employee (collectively referred to as the "Parties") hereby agree as
follows:
1. Resignation; Continuation of Employment; Benefits.
-------------------------------------------------
(a) Employee and the Company agree to the following terms with respect
to continuation of Employee's employment by the Company:
(i) that Employee's status as Executive Vice President, Chief
Financial Officer of the Company shall terminate at such time as so determined
by the Company's Board of Directors, provided, however, that Employee's
employment with the Company shall continue beyond the termination of such status
as provided in this Agreement. Employee and the Company agree that Employee
shall retain his current executive office until such time as a new Executive
Vice President, Chief Financial Officer is hired at which time Employee would be
relocated to another office in the Company's headquarters building with ongoing
administrative support;
(ii) that Employee shall continue to work as a full-time employee of
the Company until August 15, 1996, and shall be entitled to receive his regular
salary (less applicable withholding) while so employed. The Company and
Employee further agree that Employee's employment may continue until November
15, 1996, if so requested by Employee, and that if continued, the Company shall
pay Employee his regular salary (less applicable withholding) for such period of
employment. Employee's last day of employment is referred to in this Agreement
as the Termination Date;
(iii) that the Company shall have the right at any time, prior to
November 15, 1996, to terminate the employment of Employee with Cause, as
defined in Section 14 below, and without payment of any consideration to
Employee; and
(iv) that as a condition to Employee's continued employment with the
Company, Employee agrees to provide services to assist the President, or other
employees of the Company as designated by the President, in fulfilling tasks
identified by the President. All of such tasks shall fall within the normal
scope of duties of the Company's Chief Financial Officer.
-1-
<PAGE>
(b) Except as otherwise provided below and elsewhere in this
Agreement, Employee shall not be entitled to participate in any of the Company's
benefit plans or programs offered to employees or officers of the Company after
the Termination Date.
(i) Employee shall continue to receive the Company's life, medical,
dental and vision insurance benefits at Company expense until the Termination
Date. Following such date, Employee shall have the right to continue, at his
own expense, coverage under the Company's medical, dental and vision (but not
life) insurance programs as provided by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). Employee's coverage under the
Company's Accidental Death & Dismemberment and Long-Term Disability Insurance
Programs shall terminate on the Termination Date.
(c) In consideration for Employee's agreement to remain an Employee
through August 15, 1996, the Parties agree that an additional 30,000 shares of
the Company's Common Stock purchasable by Employee pursuant to the terms of the
stock option agreements issued by the Company to Employee shall vest on the
Effective Date of this Agreement. The Company and Employee agree that such
vesting shall occur as of the Effective Date but that if Employee voluntarily
terminates his employment with the Company for any reason other than death or
disability before August 15, such shares shall be forfeited to the Company. The
Parties further agree that if Employee terminates his employment on August 15,
an additional 10,000 option shares shall vest on the termination date. In
addition, the Parties agree that if Employee elects to continue his employment
after August 15, Employee shall be entitled to the vesting of additional option
shares as follows: (1) if Employee terminates his employment after August 15,
but before September 15, 1996, an additional 6,667 shares shall vest on the
termination date; (2) if Employee terminates his employment after September 15,
but before October 15, 1996, an additional 3,334 shares shall vest on the
termination date; and (3) if Employee terminates his employment after October
15, but before November 15, 1996, no additional shares shall vest on the
termination date. Employee acknowledges and agrees that he remains bound by all
other terms of the stock option agreements issued by the Company to Employee,
including, but not limited to, the possible imposition of a market standoff
agreement in connection with an initial public offering of the Company's Common
Stock.
(d) Employee acknowledges and agrees that the additional vesting of
option shares described in paragraph (c) above and the Company's agreement to
retain Employee as an employee and to pay him his salary through November 15,
1996, are in full satisfaction of any obligations the Company would otherwise
have to Employee in connection with Employee's termination of employment and
are, in addition, accepted by Employee in consideration for the release of
claims set forth below and other obligations under this Agreement.
2. No Other Payments Due. The Company agrees that it will continue to pay
---------------------
to Employee his normal salary through the Termination Date per the Company's
normal payroll practices, and the Company will pay to Employee on or before the
Termination Date all salary and accrued vacation as may then be due to Employee.
Employee will execute an acknowledgment of receipt of all such payments as
received and an acknowledgment that, in light of the payment by the Company of
all wages due, or to become due to Employee, California Labor Code Section 206.5
is not applicable to the Parties hereto. That section provides in pertinent
part as follows:
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<PAGE>
No employer shall require the execution of any release of any
claim or right on account of wages due, or to become due, or
made as an advance on wages to be earned, unless payment of
such wages has been made.
3. Release of Claims. In consideration for the obligations of both
-----------------
parties set forth in this Agreement, Employee and the Company, on behalf of
themselves, and their respective heirs, executors, officers, directors,
employees, investors, stockholders, administrators and assigns, hereby fully and
forever release each other and their respective heirs, executors, officers,
directors, employees, investors, stockholders, administrators and assigns, of
and from any claim, duty, obligation or cause of action relating to any matters
of any kind, whether presently known or unknown, suspected or unsuspected, that
any of them may possess arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement including, without
limitation:
(a) any and all claims relating to or arising from Employee's
employment relationship with the Company and the termination of that
relationship;
(b) any and all claims relating to, or arising from, Employee's right
to purchase, or actual purchase of shares of stock of the Company, other than
claims relating to rights to purchase shares that have vested or that vest
pursuant to the terms of this Agreement;
(c) any and all claims for wrongful discharge of employment; breach of
contract, both express and implied; breach of a covenant of good faith and fair
dealing, both express and implied, negligent or intentional infliction of
emotional distress; negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic advantage;
negligence; and defamation;
(d) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, and the California
Fair Employment and Housing Act;
(e) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
(f) any and all claims for attorneys' fees and costs.
The Company and Employee agree that the release set forth in this
Section 3 shall be and remain in effect in all respects as a complete general
release as to the matters released. This release does not extend to any
obligations incurred under this Agreement.
4. Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges
---------------------------------------------
that he is waiving and releasing any rights he may have under the Age
Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Employee and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Agreement. Employee acknowledges that the
consideration given for this waiver and release Agreement is in addition to
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anything of value to which Employee was already entitled. Employee further
acknowledges that he has been advised by this writing that (a) he should consult
with an attorney prior to executing this Agreement; (b) he has at least twenty-
-----
one (21) days within which to consider this Agreement; (c) he has at least seven
(7) days following the execution of this Agreement by the Parties to revoke the
Agreement; and (d) this Agreement shall not be effective until the revocation
period has expired.
5. Civil Code Section 1542. The Parties represent that they are not aware
-----------------------
of any claim by either of them other than the claims that are released by this
Agreement. Employee and the Company acknowledge that they have been advised by
legal counsel and are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Employee and the Company, being aware of said Code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.
6. No Admission of Liability. The Parties understand and acknowledge that
-------------------------
this Agreement constitutes a compromise and settlement of disputed claims. No
action taken by the Parties hereto, or either of them, either previously or in
connection with this Agreement shall be deemed or construed to be (a) an
admission of the truth or falsity of any claims heretofore made or (b) an
acknowledgment or admission by either party of any fault or liability whatsoever
to the other party or to any third party.
7. Tax Consequences. The Company makes no representations or warranties
----------------
with respect to the tax consequences of the payment of any sums to Employee
under the terms of this Agreement or the Consulting Agreement (or the exhibits
thereto). Employee agrees and understands that he is responsible for payment,
if any, of local, state and/or federal taxes on the sums paid hereunder by the
Company and any penalties or assessments thereon. Employee further agrees to
indemnify and hold the Company harmless from any claims, demands, deficiencies,
penalties, assessments, executions, judgments, or recoveries by any government
agency against the Company for any amounts claimed due on account of Employee's
failure to pay federal or state taxes or damages sustained by the Company by
reason of any such claims, including reasonable attorneys' fees.
8. Confidentiality. The Parties hereto each agree to use their best
---------------
efforts to maintain in confidence the existence of this Agreement, the contents
and terms of this Agreement, and the consideration for this Agreement
(hereinafter collectively referred to as "Settlement Information"). Each Party
hereto agrees to take every reasonable precaution to prevent disclosure of any
Settlement Information to third parties, and each agrees that there will be no
publicity, directly or indirectly, concerning any Settlement Information. The
Parties hereto agree to take every precaution to disclose Settlement Information
only to those employees, officers, directors, attorneys, accountants,
governmental entities, and family members who have a
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<PAGE>
reasonable need to know of such Settlement Information. Notwithstanding the
foregoing , the Company in its sole discretion may choose to describe the
contents of this Agreement, and publicly file this Agreement as an exhibit, as
part of any document prepared in connection with any securities offering by the
Company, which document may be distributed publicly, in which case Employee
shall be released from the covenant contained in this paragraph.
9. Non-Disparagement. Each Party agrees to refrain from any
-----------------
disparagement, criticism, defamation, slander of the other, or tortious
interference with the contracts and relationships of the other.
10. Authority. The Company represents and warrants that the undersigned
---------
has the authority to act on behalf of the Company and to bind the Company and
all who may claim through it to the terms and conditions of this Agreement.
Employee represents and warrants that he has the capacity to act on his own
behalf and on behalf of all who might claim through him to bind them to the
terms and conditions of this Agreement. Each Party warrants and represents that
there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of action released herein.
11. No Representations. Neither Party has relied upon any representations
------------------
or statements made by the other Party hereto which are not specifically set
forth in this Agreement.
12. Severability. In the event that any provision hereof becomes or is
------------
declared by a court or other tribunal of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
13. Arbitration. The Parties shall attempt to settle all disputes arising
-----------
in connection with this Agreement (or any of the exhibits hereto) through good
faith consultation. In the event no agreement can be reached on such dispute
within fifteen (15) days after notification in writing by either Party to the
other concerning such dispute, the dispute shall be settled by binding
arbitration to be conducted in Santa Clara County before the American
Arbitration Association under its California Employment Dispute Resolution
Rules, or by a judge to be mutually agreed upon. The arbitration decision shall
be final, conclusive and binding on both Parties and any arbitration award or
decision may be entered in any court having jurisdiction. The Parties agree
that the prevailing party in any arbitration shall be entitled to injunctive
relief in any court of competent jurisdiction to enforce the arbitration award.
The Parties further agree that the prevailing Party in any such proceeding shall
be awarded reasonable attorneys' fees and costs.
14. Cause. For purposes of this Agreement, "Cause" shall mean gross
-----
negligence or willful misconduct where such gross negligence or willful
misconduct has resulted or is likely to result in substantial and material
damage to the Company. Anything contained in this Section 14 to the contrary
notwithstanding, Employee shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to Employee a copy of a
resolution duly adopted by the Board of Directors of the Company, after
reasonable notice to Employee and an opportunity for Employee, together with
Employee's counsel, to be heard before the Board, finding that in the good faith
opinion of the Board, Employee has engaged in the conduct described in this
Section 14.
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<PAGE>
15. Entire Agreement. This Agreement, and the exhibits thereto, represent
----------------
the entire agreement and understanding between the Company and Employee
concerning Employee's separation from the Company, and supersede and replace any
and all prior agreements and understandings concerning Employee's relationship
with the Company and his compensation by the Company, other than the stock
option agreements described in Section 1 and the Employee Agreement described in
the recitals.
16. No Oral Modification. This Agreement may only be amended in writing
--------------------
signed by Employee and the Company.
17. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of California.
18. Effective Date. This Agreement is effective seven days after it has
--------------
been signed by both Parties and such date is referred to herein as the
"Effective Date."
19. Counterparts. This Agreement may be executed in counterparts, and
------------
each counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
20. Assignment. This Agreement may not be assigned by Employee or the
----------
Company without the prior written consent of the other party. Notwithstanding
the foregoing, this Agreement may be assigned by the Company to a corporation
controlling, controlled by or under common control with the Company without the
consent of Employee.
21. Voluntary Execution of Agreement. This Agreement is executed
--------------------------------
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:
(a) they have read this Agreement;
(b) they have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(c) they understand the terms and consequences of this Agreement and
of the releases it contains; and
(d) they are fully aware of the legal and binding effect of this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement and Mutual
Release on the respective dates set forth below.
CONNECT, INC.
Dated as of May 24, 1996 By: /s/ Thomas P. Kehler
---------------------
Title: President & Chief Executive Officer
HENRY MORGAN, an individual
Dated as of May 24, 1996 /s/ Henry V. Morgan
-----------------------
Henry Morgan
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<PAGE>
EXHIBIT 10.24
DEVELOPMENT AND LICENSE AGREEMENT
This Development and License Agreement (this "Agreement") is made
as of March 29, 1996 (the "Effective Date") by and between Time Warner
Cable, a division of Time Warner Entertainment Company, L.P., a Delaware
limited partnership ("TWC"), and Connect, Inc., a California corporation
("Connect").
RECITALS
A. TWC has undertaken the development and operation of one or more
World Wide Web shopping sites currently operating under the name
DreamShop(TM) (including any successors or substitutes, "DreamShop").
B. TWC wishes to have, and Connect wishes to provide, Connect's
OneServer software to serve as a platform for DreamShop and Connect's
OneManager software to serve as a means of managing and administering
the OneServer software.
C. TWC wishes to engage Connect to develop, and Connect wishes to
develop on behalf of TWC, applications software for DreamShop conforming
to the requirements of this Agreement.
Accordingly, the parties agree as follows:
AGREEMENT
1. Definitions.
1.1 "Additional Platform" has the meaning set forth in Section 5.2
of this Agreement.
1.2 "Affiliate," with respect to a patty, means a corporation,
partnership or other entity controlling, controlled by or under common
control with such party. For purposes of this Section 1.2, "control"
means ownership, directly or indirectly, of at least fifty percent (50%)
of the voting rights in such entity (or, in the case of a noncorporate
entity, equivalent rights).
1.3 "Applications Software" means the applications software
developed by or for Connect that is described in the Specifications
referenced in Exhibit A.
---------
1.4 "Cable Modem Platform" means a server hardware and related
operating system as are necessary or desirable to connect the Designated
Platform with a cable modem.
1.5 "Concurrent Users" means the maximum number of OneServer
Transactions that may execute at a given point in time.
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1.6 "Connect Software" means the OneServer Software and the
OneManager Software.
1.7 "Deliverables" means the deliverables referenced in Exhibit B,
---------
and any other materials delivered or required to be delivered to TWC under
this Agreement.
1.8 "Delivery Date," with respect to any Deliverables, means the
delivery date for such Deliverables on the Delivery Schedule or otherwise
agreed to in writing by the parties.
1.9 "Delivery Schedule" means the schedule for delivery of the
Deliverables referenced in Exhibit B.
---------
1.10 "Designated Platform" means the server hardware and related
operating system and network software as designated on Exhibit A
---------
together with client systems networked with such server and may include,
without limitation, (i) primary server hardware and related operating
system, (ii) a back-up server hardware and related operating system with
functions synchronized to the primary computer network and operating
systems software provided that the primary server and backup server will at
no time concurrently operate the Connect Software or the Third Party
Software, and (iii) three Cable Modem Platforms, which Cable Modem
Platforms may operate the web server portion of the Connect Software but
will at no time operate any other portion of the Connect Software or the
Third Party Software. TWC may change the Designated Platform or substitute
an alternative computer network or networks pursuant to Section 5.2 of this
Agreement.
1.11 "Documentation" means (i) all documentation customarily provided
to Connect customers in connection with the use, operation and development
of the Connect Software and the Third Party Software, including, without
limitation, manuals, product templates and data models, and (ii)
commercially reasonable materials (including an electronic version of such
materials), based on an updated version of the Specifications, prepared by
Connect to support the use and continued development by TWC of the
Applications Software, including without limitation manuals, product
templates and data models.
1.12 "Maximum Number of Concurrent Users" means the Maximum
Number of Concurrent Users set forth in Exhibit A, provided that TWC
---------
may change the Maximum Number of Concurrent Users pursuant to Section 5.1
of this Agreement.
1.13 "Non-exclusive Applications Software" means the portion of
the Applications Software which has been specifically designated as
non-exclusive in Exhibit A.
---------
1.14 "OneManager Software" means the software made generally
commercially available to Connect customers under the name OneManager, but
excluding the Applications Software.
2
<PAGE>
1.15 "OneServer Transactions" means a request of the OneServer
Software to perform an action in the node data base, such actions to
include, without limitation, retrieving data from the node data base,
querying the node data base or writing data to the node data base.
1.16 "OneServer Software" means the software made generally
commercially available to Connect customers under the name OneServer, but
excluding the Applications Software.
1.17 "Project Manager" has the meaning set forth in Section 8.1
of this Agreement.
1.18 "Project Team" has the meaning set forth in Section 8.2 of
this Agreement.
1.19 "Server Class" means the Server Class set forth on Exhibit A.
---------
1.20 "Software" means the Connect Software, the Third Party
Software and the Applications Software.
1.21 "Specifications" means the functionality, performance and
other specifications referenced in Exhibit A and the Documentation,
---------
and any other requirements agreed to in writing by the parties.
1.22 "Third-Party Software" means the software licensed by Connect
from third parties to operate in connection with the Connect Software as
set forth in Exhibit A.
---------
1.23 "TWC Exclusive Software" means the Applications Software other
than the Non-exclusive Applications Software, including without limitation
the Applications Software designated as exclusive in Exhibit A.
---------
2. Development and Delivery of Software.
2.1 Development. Connect will develop the Applications Software for
TWC pursuant to the Delivery Schedule. The OneServer Software will serve as
the platform for the Applications Software. The OneManager Software will
provide a means of managing and administering the OneServer Software.
2.2 Delivery. Connect will deliver and install the Deliverables in
accordance with the Delivery Schedule. Except as otherwise specified in
Exhibit A for Third-Party Software, all Software will be delivered in both
---------
object code and source code versions and will be delivered together with
relevant Documentation, provided that the source code for the Connect
Software will be delivered to the escrow agent as set forth in the Escrow
Agreement attached hereto as Exhibit C. The Deliverables will be without
---------
material errors or defects, and will conform in all material respects to
the Specifications and other requirements of this Agreement. The amount of
professional services payments which are due with respect to Deliverables
delivered late shall be reduced by ten percent (10%)
3
<PAGE>
for each month (pro rated for each portion of a month) such Deliverables
are delivered after the date one month following the Delivery Date for such
Deliverables. TWC will have no right to reduce payment as the result of a
delay in delivery to the extent the delay is caused by TWC or Clement Mok
Design acting as TWC's agent.
2.3 Mutual Cooperation. The parties will cooperate and communicate in
connection with the development and delivery of the Deliverables. At TWC's
request, Connect will provide TWC with reasonable progress reports,
including descriptions of work completed and problems encountered, and
supply copies of work in progress.
2.4 Modification of Specifications. TWC may from time to time, prior
to or after delivery of Deliverables, modify the Specifications. In such
event, Connect will, at TWC's request, make changes to the Deliverables to
comply with the modified Specifications, provided that the fees and the
Delivery Date will be adjusted to reflect the actual cost and actual time
of making the changes. Any such revision to the fees and Delivery Date will
be agreed to in writing before Connect commences any work on the changes.
2.5 Review and Testing. Upon delivery to TWC of Deliverables, TWC
will review and test the Deliverables to determine whether the Deliverables
comply with the Specifications. If TWC rejects the Deliverables, TWC will
provide written notice to Connect of the manner in which the Deliverables
fall to comply with the Specifications. If TWC does not respond to Connect
in writing within twenty (20) business days after receipt of Deliverables,
the Deliverables will be deemed accepted.
2.6 Rejection of Deliverables. In the event that TWC rejects any
Deliverables for failure to comply with the Specifications, Connect will
have an additional twenty (20) business days to submit a corrected version.
If Connect fails to submit a corrected version conforming to the
Specifications within such twenty (20) day period, TWC will have the right,
at TWC's option:
(a) to terminate this Agreement, and be refunded all amounts
other than the amounts designated on Exhibit B as
---------
non-refundable; or
(b) to provide Connect with an additional twenty (20) day
period to submit a corrected version, provided that the
professional services payments due with respect to such
Deliverables will be reduced by [*] percent [*] for
each month (pro rated for each portion of a month)
that the Deliverables are late beyond the original date
of rejection.
The process set forth in this Section 2.6 will continue until TWC accepts
the Deliverables or elects to terminate this Agreement in accordance with
Section 2.6(a). TWC will have no right to terminate this Agreement or
reduce payment as the result of a delay in delivery to the extent the delay
is caused by TWC or Clement Mok Design acting as TWC's agent.
* Confidential Treatment Requested
4
<PAGE>
3. Licenses.
3.1 Exclusive Applications Software. Connect hereby grants TWC an
irrevocable, perpetual, paid-up, exclusive, transferable, worldwide right
and license (with right to sublicense) to use, reproduce, distribute, make,
sell, perform and display (whether publicly or otherwise), and prepare
derivative works based on and otherwise modify all or any portions of the
Exclusive Applications Software and derivative works thereof, and any
patents, copyrights, trade secrets and other intellectual property rights
relating thereto and products, process and other subject matter based
thereon.
3.2 Non-exclusive Applications Software. Connect hereby grants TWC an
irrevocable, perpetual, paid-up, non-exclusive, transferable, worldwide
right and license (with right to sublicense) to use, reproduce, distribute,
make, sell, perform and display (whether publicly or otherwise), and
prepare derivative works based on and otherwise modify all or any portions
of the Non-exclusive Applications Software and derivative works thereof,
and any patents, copyrights, trade secrets and other intellectual property
rights relating thereto and products, process and other subject matter
based thereon.
3.3 Connect Software. Connect hereby grants TWC an irrevocable,
perpetual, non-exclusive, non-transferable (except as set forth in Section
17.5) right and license to install and use, and to perform and display
(whether publicly or otherwise) the Connect Software on the Designated
Platform for access by the Maximum Number of Concurrent Users.
3.4 Connect Software Source Code; Escrow Agreement. Connect hereby
grants TWC an irrevocable, perpetual, non-exclusive, non-transferable
(except as set forth in Section 17.5), right and license to use and to
create derivative works based on, and otherwise modify, the Connect
Software source code when delivered to TWC pursuant to the Escrow Agreement
attached hereto as Exhibit C.
---------
3.5 Third-Party Software. Connect hereby grants to TWC an
irrevocable, perpetual, non-exclusive, non-transferable sub-license to
install and use, and to perform and display (whether publicly or otherwise)
the Third-Party Software for use on the Designated Platform solely in
connection with TWC's use of the Connect Software.
3.6 Archival Copies. TWC may make five (5) copies of the Connect
Software for archival purposes. Each copy of the Connect Software will be
subject to the terms of this Agreement All titles, trademarks, copyright
notices and other proprietary markings (collectively, the "Marks") will be
reproduced on all copies of the Connect Software, and TWC will not cause or
permit removal of the Marks.
3.7 Documentation. Connect hereby grants to TWC an irrevocable,
perpetual, paid-up, non-exclusive, transferable, worldwide right and
license (with right to sublicense) to use, reproduce, distribute, make,
sell and prepare derivative works based on and otherwise modify all or any
portions of the Documentation as reasonably required for TWC's internal use
in operating DreamShop.
5
<PAGE>
4. Moral Rights; Patent Rights.
4.1 Moral Rights. The rights and licenses granted in Section 3
include, without limitation, the license to modify (including without
limitation making additions and deletions from) the Applications Software,
regardless of the medium into which such Applications Software may be
modified and regardless of the effect of such modifications on the
integrity of the Applications Software. Connect (on behalf of itself and
its contractors and suppliers) further hereby waives and agrees not to
assert any "moral right" Connect or its contractors or suppliers may have
with respect to the Applications Software.
4.2 Patent Rights. The licenses granted in Section 3 include, without
limitation, the license under any patents of Connect to use, reproduce and
distribute all or any portion of the Connect Software, the Applications
Software and any derivative works thereof, whether alone or in combination
with other software or hardware, provided that such patent license with
respect to the Connect Software will apply only to the extent the Connect
Software is to be used in accordance with the limitations set forth in
Section 3.3.
5. Maximum Number of Concurrent Users; Substitute Platforms;
Additional Platforms
5.1 Maximum Number of Concurrent Users; Server Class. TWC may, from
time to time, in its sole discretion, increase the Maximum Number of
Concurrent Users and upgrade the Server Class, provided that the TWC shall
pay to Connect an additional licensing fee in an amount no greater than to
the difference between the licensing fee charged generally by Connect for a
license of the Connect Software and the Third Party Software for the
upgraded Server Class for access by the increased Maximum Number of
Concurrent Users and any amount already paid by TWC pursuant to this
Agreement as a licensing fee for the Connect Software and the Third Party
Software.
5.2 Substitute Platforms. TWC may from time to time, in its sole
discretion, change the Designated Platform (including the location thereof)
or replace the Designated Platform with an alternative server hardware and
related operating system and network software within the Server Class (a
"Substitute Platform"), provided that TWC will provide Connect with written
notice within thirty (30) business days after such change or replacement.
5.3 Additional Platforms. TWC may from time to time, in its sole
discretion, designate additional server hardware and related operating
system and network software (in addition to the Designated Platform) to
serve as a platform or platforms for the Software (each an "Additional
Platform"). In such event, Connect will grant a license to TWC for
installation and use of the Connect Software and the Third Party Software
on each Additional Platform. The licensing fees payable by TWC for such
license will be no greater than the fees charged by Connect for licenses of
the Connect Software and Third Party Software generally for installation
and use on similar platforms.
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<PAGE>
5.4 Substitute Version of Software; Porting. If requested by TWC,
Connect will provide TWC with a substitute version of the Connect Software
which is compatible with a Substitute Platform or an Additional Platform
(provided that a version of the Connect Software exists which is compatible
with the computer network and related operating system and network software
underlying such Additional Platform or Substitute Platform). TWC will pay
Connect a servicing fee for such substitute version in an amount no greater
than the servicing fee charged by Connect to customers generally.
Furthermore, if requested by TWC, Connect will exercise its best efforts to
port the Software to a Substitute Platform or an Additional Platform
provided that a version of the Connect Software exists which is compatible
with the computer network and related operating system and network software
underlying such Additional Platform or Substitute Platform). The scheduling
of such porting services will be subject to availability of Connect staff,
provided that TWC will be granted priority no less favorable than other
Connect customers. TWC will pay Connect a fee for such porting services in
an amount no greater than an amount computed on the basis of Connect's
hourly rate for contract services charged to customers generally.
6. Payments by TWC.
6.1 Payment. In addition to the payments in the aggregate of [*]
already made by TWC, TWC will pay Connect [*] for professional services and
[*] as a down payment for the Connect Software upon execution of this
Agreement. TWC will make further payments in amounts set forth on the
Delivery Schedule. All payments will be due upon acceptance by TWC of the
Deliverables set forth opposite such payments. All payments will be paid in
full within thirty (30) days after such due date and will be in United
States Dollars.
6.2 Taxes. TWC will be responsible for all duties, freight, and
sales or use taxes relating to the Software.
7. Technical Training; Support; Correction of Defects.
7.1 Training of TWC Personnel. Connect will provide employees and/or
contractors of TWC, for a fee in an amount no greater than an amount
computed on the basis of Connect's hourly rate charged to Connect's
customers generally, with customized technical and operational training
with respect to the use of the Software and the use and further development
of the Applications Software. In addition, TWC shall be entitled to enroll
two TWC employees in and/or contractors in the OneServer Client
Administration Class [*] and additional employees and/or contractors at a
charge of [*] per person per two (2) day OneServer Client Administration or
OneServer Host Administration class, [*] per five (5) day Introduction to
OneServer Development class, or a group rate of [*] per two (2) day One
Server Client Administration or OneServer Host Administration class of up
to eight (8) people or $[*] per five (5) day Introduction to OneServer
Development class of up to eight (8)
* Confidential treatment requested
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<PAGE>
people. All training will be conducted at the Connect Regional Office in
Stamford, Connecticut.
7.2 Correction of Defects. For a period of one hundred eighty (180)
days after the acceptance of the final portion Software, Connect will
promptly correct any defect or error in such Software, or any failure of
any such Software to operate substantially in accordance with and further
to comply in all material respects with the Specifications, and Connect
will thereupon promptly deliver to TWC the corrected Software. Connect will
exercise its best efforts to make the corrections, and deliver the
corrected Software, within twenty (20) days after notice from TWC of any
defect, error or failure. In addition, Connect will replace without charge
tapes, diskettes or other media embodying the Deliverables that are
defective under normal use.
7.3 Annual Maintenance Agreement. TWC may, at its sole option, order
yearly maintenance services pursuant to the terms of the form of Annual
Maintenance Agreement attached hereto as Exhibit D (any such agreement the
---------
"Annual Maintenance Agreement"). TWC's failure to exercise such option in
any given year will not in any way impair its rights hereunder. However, in
the event that TWC fails to exercise such option in any given year, TWC
will not be entitled to exercise such option in any following year unless
TWC pays to Connect all fees due under the Annual Maintenance Agreement for
the years during which such option was not exercised.
7.4 Technical Support. Connect shall make technical support available
to TWC as set forth in the Annual Maintenance Agreement attached hereto as
Exhibit D.
---------
8. Project Managers; Staffing; Agreements with Personnel; Travel
Expenses.
8.1 Project Managers. Each party will designate one or more employees
(each a "Project Manager") to serve as a liaison with respect to the other
party. Each party will notify the other after a change in the designated
Project Managers.
8.2 Staffing, Connect will identify to TWC in writing the employees
and contractors assigned to the development of the Applications Software
(collectively, the "Project Team"), and will promptly notify TWC of any
change in the Project Team. Furthermore, TWC will be entitled to suspend or
terminate this Agreement at any time, in the event that TWC is not
reasonably satisfied that he Project team possesses sufficient technical or
design resources to satisfy the obligations of Connect hereunder.
8.3 Connect's Agreements with Personnel. Connect will obtain and
maintain in effect written agreements with all personnel who participate in
the development of the Applications Software. Such agreements will contain
terms sufficient for Connect to comply with the terms of this Agreement.
including, without limitation terms (a) assigning to Connect all right,
title and interest in and to the Applications Software, and (b) agreeing to
maintain in confidence all Confidential Information and proprietary
information provided by or assigned to TWC.
8
<PAGE>
8.4 Travel Expenses. Following submission of receipts TWC will reimburse
Connect for reasonable out-of-pocket travel expenses, provided that TWC has
granted Connect prior written approval of such expenses.
9. Ownership and Proprietary Right Notices.
9.1 Non-exclusive Applications Software; Connect Software. TWC
acknowledges that, as between TWC and Connect, Connect is the owner of all
right, title and interest in and to the Connect Software and the Non-exclusive
Applications Software, including any copyright, trademark and patent rights
therein. TWC will not decompile or disassemble the Connect Software.
9.2 Exclusive Applications Software; DreamShop. Connect acknowledges
that, as between Connect and TWC, TWC holds an exclusive license to the TWC
Exclusive Software, and Connect will not use, reproduce, distribute, make, sell,
perform, display or prepare derivative works from such Software. Furthermore,
Connect acknowledges that, as between Connect and TWC, TWC is the owner of all
right, title and interest to all trademarks (registered or unregistered),
tradenames and logos included in DreamShop, including, without limitation,
"DreamShop," and any copyright, trademark and patent rights therein.
10. Term and Termination.
10.1 Termination. Either party may terminate this agreement for cause by
giving written notice to the other party. For purposes of this Section 10,
"termination for cause" shall include termination pursuant to Sections 2.6 and
8.2 of this Agreement. In addition, "termination for cause" shall include
termination by either party, by giving written notice to the other party, upon
the occurrence of any of the following events: (a) there occurs a material
breach of this Agreement by the other party and such breach remains uncured for
thirty (30) days after receipt of written notice thereof by the other party, or
(b) the other party petitions for or consents to any relief under any
bankruptcy, reorganization or similar statute, makes an assignment for the
benefit of its creditors, or petitions for the appointment of a receiver,
liquidator, trustee or custodian of all or a substantial part of its assets, or
a receiver, liquidator, trustee or custodian is appointed for all or a
substantial part of its assets and is not discharged within thirty (30) days
after the date of such appointment. A party's right to terminate for cause will
be in addition to any other remedies it may have under this Agreement or under
applicable law.
10.2 Effect of Termination. Upon termination of this Agreement, both
parties' rights and obligations under this Agreement will terminate, provided
that Sections 3,4, 5.1, 7.2, 9-13 and 15-17, inclusive, will survive termination
of this Agreement, and, in the event that TWC has terminated the Agreement
without cause, Section 6.1 will survive termination to the extent that TWC will
remain obligated to pay amounts which have become due and payable at the time of
termination. In this event this Agreement is terminated by TWC for cause, TWC
shall be refunded all fees paid hereunder, except the fees designated on
Exhibit B as "non-refundable."
- ---------
9
<PAGE>
11. Warranties.
11.1 Connect Warranties. Connect represents, warrants and covenants
that (a) Connect has full corporate power to enter into this Agreement and
to perform its obligations hereunder; (b) Connect has the right to grant
the rights, licenses and sub-licenses contemplated by this Agreement, and
Connect owns or has obtained all necessary licenses, releases, assignments
or other rights necessary therefor, (c) the Software, during the period of
one hundred eighty (180) days following acceptance by TWC, will operate
substantially in accordance with and further comply in all material
respects with the Specifications; and (d) the Software and the
Documentation and the use thereof as contemplated by this Agreement do not
infringe or misappropriate any copyright, trademark, trade secret, patent,
publicity, privacy or other rights of any person, and are not and will not
be defamatory or obscene, and Connect has no knowledge of any basis for a
claim of such infringement, misappropriation, defamation or obscenity.
Connect warranties do not apply to any modifications made by TWC.
11.2 No Other Warranties. THE WARRANTIES IN THIS SECTION 11 ARE IN
LIEU OF ALL OTHER WARRANTIES, AND EACH PARTY DISCLAIMS ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
12. Limitation of Liability. Neither party will, under any
circumstances, be liable to the other party for loss of profits, loss of
revenue, or any special, indirect or consequential damages of whatever
nature arising from or relating to this Agreement, even if the party has
been notified of the possibility of such damages, provided that this
limitation of liability will not affect the parties' obligations under
Section 13.
13. Indemnification.
13.1 Connect Obligations. Connect will indemnify, hold harmless and
defend TWC and its Affiliates against any claim, suit or proceeding and any
damages or liability therefrom or settlement thereof (including reasonable
fees of attorneys and related costs) to the extent (a) based on a claim
that the Software or the Documentation infringes any copyright, trademark,
patent, trade secret, publicity, privacy or other rights of any person,
provided that Connect will have no liability for any modifications to the
Software made by TWC or its Affiliates, or (b) resulting from a breach, or
based on a claim that, if true, would be a breach, of this Agreement by
Connect, including, without limitation, a breach of the representations,
warranties and covenants of Section 11.1.
13.2 TWC Obligations. TWC will indemnify, hold harmless and defend
Connect against any claim, suit or proceeding and any damages or liability
therefrom or settlement thereof (including reasonable fees of attorneys and
related costs) to the extent (a) based on a claim that, as a result of
modifications to the Software or the Documentation made by TWC or its
Affiliates, the Software infringes any copyright, trademark, trade secret,
patent, publicity, privacy, or other rights of any person, or
10
<PAGE>
(b) resulting from a breach, or based on a claim that, if true, would be a
breach, of this Agreement by TWC.
13.3 Indemnification Procedures. A party ("indemnifying party") will
not be obligated to indemnify, hold harmless or defend the other party
("indemnified party") unless the indemnified party (a) provides prompt
notice of the commencement of the claim, suit or proceeding for which
indemnification is sought, (b) cooperates with the indemnifying party, and
(c) allows the indemnifying party to control the defense, provided that (i)
the indemnified party may, at its option and expense, participate and
appear on an equal footing with the indemnifying party in the claim, suit
or proceeding and (ii) neither party may settle a claim, suit or proceeding
without approval of the other party, which approval will not be
unreasonably withheld or delayed. If there is a finding of infringement or
misappropriation of any copyright, trademark, trade secret, patent,
publicity, privacy, or other rights of any person, or of defamation or
obscenity, the indemnifying party will have the right, at its option, to
the extent practicable, to mitigate its liability by replacing the affected
products with noninfringing products that offer substantially the same
functionality performance and other benefits as the affected products.
14. Insurance. Connect will at all times maintain liability insurance
in an amount sufficient to satisfy its potential liability hereunder and in
no event less than Two Million Dollars ($2,000,000).
15. Confidential Information. "Confidential Information" of each party
means information that is disclosed by such party to the other party in
connection with this Agreement and conveyed (a) in written, graphic,
machine-readable or other tangible form and conspicuously marked
"confidential," "proprietary" or in some other manner to indicate its
confidential nature; or (b) orally, provided that such information is
designated as confidential or proprietary at the time of such oral
disclosure and is confirmed in writing as confidential within ten (10) days
after the oral disclosure (collectively, "Confidential Information").
Confidential Information includes, without limitation, the terms and
conditions of this Agreement and the Specifications relating to the
Exclusive Applications Software. A party will not use, or disclose to a
third party, the Confidential Information of the other party, except for
the purposes contemplated by, or in exercise of the rights and licenses
granted under, this Agreement. Notwithstanding the above, information will
not be deemed Confidential Information if the information (i) is or becomes
generally known to the public through no unlawful act of the recipient;
(ii) was known to the recipient at the time of disclosure; (iii) was
independently developed by the recipient; or (iv) becomes known to the
recipient from a source other than the disclosing party without breach of
the disclosing party's rights. A party may also disclose Confidential
Information of the other party to the extent (A) authorized in writing by
the other party, or (B) required by applicable law or a court of competent
jurisdiction.
16. Publicity. Connect will not make any public announcement
concerning the existence of this Agreement without the prior written
consent of TWC. TWC will have
11
<PAGE>
the right to approve the text of any such public announcement in its sole
discretion, which approval will not be unreasonably withheld.
17. Miscellaneous.
17.1 Rights of Affiliates. TWC may have its rights and licensed under
this Agreement exercised by, and to sublicense its rights and licenses
hereunder to, Affiliates of TWC, provided that (a) such Affiliates acting
hereunder will be subject to the terms and conditions of this Agreement,
and (b) no act or omission of an Affiliate will affect TWC's obligations
under this Agreement.
17.2 Governing Law. This Agreement will be interpreted according to
the laws of the State of New York (except for its choice-of-law rules).
17.3 Relationship of Parties. The relationship of the parties will be
that of independent contractors. Neither party will have the right to bind,
represent or act for the other party. The parties will have no agency,
partnership, joint venture or fiduciary duties to each other. Except as
otherwise expressly provided herein, each party will bear its own costs and
expenses, including travel expenses, in connection with performing its
obligations and exercising its rights in connection with this Agreement.
The parties acknowledge that TWC will have no right to control the manner,
means or method by which Connect performs the services called for by this
Agreement. Rather, TWC will be entitled only to direct Connect with respect
to the elements of services to be performed by Connect and the results to
be derived by TWC, to inform Connect as to such services by Connect for the
limited purposes of assuring that such services have been performed and
confirming that such results were satisfactory.
17.4 Hyper-text Links. As long as TWC uses the Connect Software in
connection with DreamShop, TWC will maintain an active hyper-text link on
the World Wide Web site www.dreamshop.com to www.connectinc.com and Connect
will maintain an active hyper-text link on the customer page of the World
Wide Web site www.connectinc.com to www.dreamshop.com.
17.5 Joint Marketing. The parties agree to cooperate with respect to
jointly marketing and selling the Application Software to third parties
under terms and conditions to be negotiated. In the event that TWC enters
into an agreement for license of the Applications Software to a third party
and TWC has provided Connect with written notice setting forth the identity
and address of such third party no less than ten (10) business days prior
to entering into such an agreement, Connect shall license the Connect
Software to such third party for license fees no greater than the license
fees charged by Connect to Connect's customer generally for the Connect
Software, and pursuant to terms and conditions no less favorable than the
terms and conditions offered to Connect's customers generally.
Notwithstanding the foregoing, Connect shall not be required to provide a
license to the Connect Software to any third party that is engaged in the
business of the engineering and development of World Wide Web server
platform software for electronic commerce applications. Nothing in this
Section 17.5 shall require
12
<PAGE>
Connect to bear responsibility for compatibility between the Connect
Software and the Applications Software to the extent such Applications
Software has been modified by TWC or any third party subsequent to delivery
to TWC by Connect.
17.6 Assignment. This Agreement may not be assigned or delegated by
either party without the prior written approval of the other party, except
that (a) either party may assign all its rights, and delegate all its
obligations, as part of a merger, reorganization or sale of all or
substantially all the assets of the business to which this Agreement
relates, and (b) TWC may assign all its rights, and delegate all its
obligations, to an Affiliate. Subject to the foregoing, this Agreement is
binding on the parties and their successors and assigns.
17.7 Waiver. Waiver by either party of a breach by the other party of
any provision contained herein will be in writing. The waiver of a breach
will in no way be construed as a waiver of any succeeding breach of such
provision or a waiver of the provision itself.
17.8 Severability. If any provision of this Agreement is
unenforceable or invalid under any applicable law or is so held by
applicable court decision, such unenforceability or invalidity will not
render this Agreement unenforceable or invalid as a whole, and, in such
event, such provision will be changed and interpreted so as to best
accomplish the objectives of such provision within the limits of applicable
law or applicable court decision.
17.9 U.S. Government Rights. All software is provided with restricted
rights. Use, duplication, or disclosure by the U.S. Government is subject
to restrictions as set forth in subparagraph (c)(l)(ii) of the Rights in
Technical Data and Computer Software at 252.227-7013 or subparagraph
(c)(l)-(2) of the Commercial Software-Restricted Rights Clause at
48 CFR 52.227-19, as applicable. Contractor/manufacturer is Connect, Inc.,
515 Ellis Street, Mountain View, CA 94043-2242.
17.10 Force Majeure. Non-performance of either party will be excused
to the extent that performance is rendered impossible by strike, fire,
flood, government act or similar causes, beyond the control, and not caused
by the negligence, of the non-performing party.
13
<PAGE>
17.11 Entire Agreement. This Agreement constitutes the entire
agreement between the parties relating to the subject matter hereof and
supersedes all prior or contemporaneous representations, discussions,
negotiations, conditions and agreements, whether written or oral. This
Agreement may be amended only by a writing signed by an authorized
representative of the party against which enforcement is sought.
The foregoing Agreement is hereby executed as of the date first
written above.
TIME WARNER CABLE, a division of CONNECT, INC.
TIME WARNER ENTERTAINMENT
COMPANY.
By: /s/ Jennifer Carney By: /s/ Thomas P. Kehler
------------------------------- ------------------------------
Name: Jennifer Carney Name: Thomas P. Kehler
---------------------------- ----------------------------
Title: Vice President Title: President & CEO
--------------------------- ---------------------------
Digital Marketing Group 515 Ellis Street
Time Warner Entertainment Company Mountain View, CA 94043-2242
1271 Avenue of the Americas Attention:
New York, NY 10020 Fax: (415) 254-4800
Attention: Jennifer Carney
Telephone: (212) 522-2692
Fax: (212) 522-0556
14
<PAGE>
<PAGE>
EXHIBIT A
DESIGNATED PLATFORM
The models and locations of the servers which constituted the initial
Designated Platform are:
Sun:
[*]
[*] mhz processors
[*]MB of RAM
Operating System: [*]
[*]
[*]
The initial designated platform may be located at the following locations:
Connect's Data Center
515 Ellis St.
Mountain View, CA 94043
Time, Inc. New Media
1251 Avenue of the Americas
Rockefeller Center
New York, NY 10020
Paragon Cable
3311 South Main Street
Horseheads, NY 14845
Warner Cable
1655 Brittain Road
Akron, OH 44310-3998
Time Warner Southwestern Cable TV
8949 Ware Court
San Diego, CA 92121
* Confidential treatment requested
1
<PAGE>
SERVER CLASS
The Server class consists of the following [*]. The Server Class further
consists of the following [*].
MAXIMUM NUMBER OF CONCURRENT USERS
The initial maximum number of concurrent users is [*].
THIRD-PARTY SOFTWARE
Title/Owner
-----------
Oracle (RDBMS Runtime version 7.1)
Fulcrum (Searchtools version 2)
RSA (BSafe version 2.1)
DREAMSHOP SPECIFICATIONS
The overall scope of the Software is set forth in the [*]. The following
documents (the "Additional Documents") set forth the detailed design and
implementation of the Software: [*] To the degree, if any, that
there is a conflict between the Specifications set forth in the NDOFS and
Specifications set forth in the Additional Documents, the Specifications set
forth in the Additional Documents shall govern.
TWC EXCLUSIVE SOFTWARE
The following components of the Applications Software are TWC Exclusive
Software:
a. the "look and feel" of DreamShop, including any "look and feel"
provided by [*],
* Confidential treatment requested
2
<PAGE>
b. HTML text and directives used to implement the [*]
c. the actual DreamShop [*] hierarchy,
---------
d. the [*] DreamShop departments,
---------
e. any DreamShop [*] defined by DreamShop production
---------
personal
f. the DreamShop specific lists of [*]
---------
g. the DreamShop specific [*]
---------
h. the DreamShop specific formats for [*]
---------
i. the DreamShop specific lists of available [*]
---------
j. the DreamShop specific, substantive [*]
---------
k. the DreamShop specific, substantive [*]
---------
l. the actual DreamShop [*]
---------
m. the DreamShop specific assets loaded into the database, that is the [*]
---------
n. the DreamShop specific defined [*]
---------
associated with [*] of products as defined in the DreamShop [*] and
o. the DreamShop [*]
--------
NON-EXCLUSIVE APPLICATIONS SOFTWARE
Connect must own and protect those components of the application software
which are generalized software mechanisms. The following application elements
are included in this category:
*Confidential treatment requested
3
<PAGE>
a. OneServer node definitions incorporated into the Applications software,
other than as set forth in this Exhibit A under heading "TWC EXCLUSIVE
SOFTWARE."
b. override methods installed on nodes incorporated into the Applications
software, other than as set forth in this Exhibit A under heading "TWC
EXCLUSIVE SOFTWARE;"
c. hierarchical relations between nodes incorporated into the Applications
software, other than as set forth in this Exhibit A under heading "TWC
EXCLUSIVE SOFTWARE;" and
d. access control of functionality by user type incorporated into the
Applications software, other than as set forth in this Exhibit A under
heading "TWC EXCLUSIVE SOFTWARE."
4
<PAGE>
EXHIBIT B
DELIVERY SCHEDULE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Date Deliverables Payment
- ---- ------------ -------
- --------------------------------------------------------------------------------
<S> <C> <C>
Deposit upon execution of $[*] professional
letter of intent services - non-
refundable)(paid)
- --------------------------------------------------------------------------------
Paid on [*] The Specifications $[*] professional
services - non-
refundable)(paid)
- --------------------------------------------------------------------------------
[*] data conversion $[*]
tables; intermediate (professional
design formats services - non-
refundable)(paid)
- --------------------------------------------------------------------------------
[*] $[*]
(professional
services)(paid)
- --------------------------------------------------------------------------------
Execution of Contract $[*] (down
payment for
the Connect
Software and
the Third Party
Software)
- --------------------------------------------------------------------------------
[*] The Specifications
</TABLE>
1
* Confidential Treatment Requested
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C>
[*] The Software - Sections $[*] (license
IA lB, IIA of Delivery fee for the Connect
Schedule dated Software and the
February 20, 1996 Third Party
Software)
$[*]
(professional
services)
- --------------------------------------------------------------------------------
[*] The Specifications for
the Software set forth
on Section IIB of the
Delivery Schedule dated
February 20, 1996.
- --------------------------------------------------------------------------------
Date to be determined The Software - Section $[*]
IIB of the Delivery (professional
Schedule dated services)
February 20, 1996
- --------------------------------------------------------------------------------
Date to be determined Three additional web $0
server elements of the
Connect Software to
operate on the
Cable Modem Platforms
- --------------------------------------------------------------------------------
</TABLE>
* Confidential treatment requested
2
<PAGE>
EXHIBIT C
PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number ___________
This Agreement is March 29, l996, among Data Securities International, Inc.
("DSI"), Connect, Inc. ("Depositor"), and Time Warner Cable, a division of Time
Warner Entertainment Company, L.P. ("Preferred Registrant"), who collectively
may be referred to in this Agreement as "the parties."
A. Depositor and Preferred Registrant have entered into that certain
Development and License Agreement, dated as of March 29, 1996 ("License
Agreement") regarding certain proprietary technology of Depositor.
B. Depositor desires to avoid disclosure of its proprietary technology
except under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical
to Preferred Registrant in the conduct of its business and, therefore, Preferred
Registrant needs access to the proprietary technology under limited
circumstances.
D. Depositor and Preferred Registrant desire to establish an escrow with
DSI to provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the License
Agreement pursuant to 11 United States Bankruptcy Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Pursuant to the terms of the License
--------------------------
Agreement by the parties, Depositor shall deliver to DSI the proprietary
information and other materials ("deposit materials") required to be deposited
by the License Agreement, including those set forth in Exhibit A hereto.
1.2 Identification of Tangible Media. Prior to the delivery of
--------------------------------
the deposit materials to DSI, Depositor shall conspicuously label for
identification each document, magnetic tape, disk, or other tangible media upon
which the deposit materials are written or stored. Additionally, Depositor shall
complete an Exhibit B to list each such tangible media by the item label
description, the type of media and the quantity. The Exhibit B must be signed by
Depositor and delivered to DSI with the deposit materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the obligation to notify the parties regarding
the status of the deposit account as required in Section 2.2 below.
1
<PAGE>
EXHIBIT C
1.3 Deposit Inspection. When DSI receives the deposit materials
------------------
and the Exhibit B, DSI will conduct a deposit inspection by visually matching
the labeling of the tangible media containing the deposit materials to the item
descriptions and quantity listed on the Exhibit B. In addition to the deposit
inspection, Preferred Registrant may elect to cause a verification of the
deposit materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
---------------------
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit B, DSI will sign the Exhibit B and mail a copy thereof
to Depositor and Preferred Registrant. If DSI determines the labeling does not
match the item descriptions or quantity on the Exhibit B, DSI will (a) note the
discrepancies in writing on the Exhibit B; (b) sign the Exhibit B with the
exceptions noted; and (c) provide a copy of the Exhibit B to Depositor and
Preferred Registrant. DSI's acceptance of the deposit occurs upon the signing of
the Exhibit B by DSI. Delivery of the signed Exhibit B to Preferred Registrant
is Preferred Registrant's notice that the deposit materials have been received
and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows as to
---------------------------
each deposit of the deposit materials:
a. Depositor lawfully possesses all title, rights, and interest in
and to all of the deposit materials deposited with DSI;
b. With respect to all of the deposit materials, Depositor has the
right and authority to grant to DSI and Preferred Registrant the
rights as provided in this Agreement;
c. The deposit materials are not subject to any lien or other
encumbrance; and
d. The deposit materials consist of the proprietary information and
other materials required by the License Agreement to be deposited
with DSI.
1.6 Verification. Preferred Registrant shall have the right at any time,
------------
at Preferred Registrant's expense, to verify any deposit materials, including
inspection and testing of the deposit materials. A verification determines, in
different levels of detail, the accuracy, completeness, sufficiency and quality
of the deposit materials.
1.7 Deposit Updates. Depositor shall deposit any updates, modifications
---------------
and enhancements to the deposit materials on a quarterly basis, within thirty
(30) days after the end of the quarter, unless Preferred Registrant agrees in
writing that less frequent deposits are acceptable, provided that in no event
will updates be made less frequently than once a year. Such updates will be
added to the existing deposit. All deposit updates shall be listed on a new
Exhibit B, and the new Exhibit B shall be signed by Depositor. The processing of
all deposit updates shall be in accordance with Sections 1.2 through 1.6 above.
All references in this Agreement to the deposit materials shall include the
initial deposit materials and any updates.
2
<PAGE>
EXHIBIT C
1.8 Removal of Deposit Materials. The deposit materials may be removed,
----------------------------
exchanged and/or destroyed only on written instructions signed by Depositor and
Preferred Registrant, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
---------------
environmentally safe, locked receptacle which is accessible only to authorized
employees of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the deposit materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the deposit materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the deposit materials, DSI will
immediately notify the parties to this Agreement. It shall be the responsibility
of Depositor and/or Preferred Registrant to challenge any such order; provided,
however, that DSI does not waive its rights to present its position with respect
to any such order. DSI will not be required to disobey any court or other
judicial tribunal order. (See Section 7.5 below for notices of requested
orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred
--------------
Registrant a report profiling the account history at least semi-annually. DSI
may provide copies of the account history pertaining to this Agreement upon the
request of any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor
------------
and Preferred Registrant shall each have the right to inspect the written
records of DSI pertaining to this Agreement. Any inspection shall be held during
normal business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfers to DSI the title to the
--------------
media upon which the proprietary information and materials are written or
stored. However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of the
--------------------
deposit materials as reasonably necessary to perform this Agreement. DSI shall
copy all copyright, nondisclosure, and other proprietary notices and titles
contained on the original deposit materials onto any copies made by DSI.
3.3 Right to Sublicense Upon Release. As of the effective date of this
--------------------------------
Agreement, Depositor hereby grants to DSI a non-exclusive, irrevocable,
perpetual, and royalty-free license to sublicense the deposit materials to
Preferred Registrant upon the release, if any, of the deposit materials in
accordance with Section 4.5 below. Except upon such a release, DSI shall not
sublicense or otherwise transfer the deposit materials.
3
<PAGE>
EXHIBIT C
ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Conditions"
------------------
shall mean the following:
a. Depositor abandons its business relating to the Connect Software
(as defined in the License Agreement) in the ordinary course of
business; a receiver, trustee, or other custodian is applied for,
consented to, or appointed for Depositor or its property;
Depositor becomes insolvent or unable to pay its debts as they
mature in the ordinary course or makes an assignment for the
benefit of its creditors; Depositor is liquidated or dissolved;
or any proceedings are commenced by or against Depositor under
any bankruptcy, insolvency or debtor's relief law; or
b. Depositor materially breaches its obligations under this
Agreement to make deposits and updates and does not cure such
breach within thirty (30) days alter receiving written notice of
such breach from Preferred Registrant;
c. Preferred Registrant becomes entitled to the Source Code pursuant
to the Annual Maintenance Agreement; or
d. Preferred Registrant otherwise has rights to the deposit
materials in accordance with the terms and conditions of the
License Agreement.
4.2 Filing For Release. If Preferred Registrant believes in good faith
------------------
that a Release Condition has occurred, Preferred Registrant may provide to DSI
written notice of the occurrence of the Release Condition and a request for the
release of the deposit materials. Upon receipt of such notice, DSI shall provide
a copy of the notice to Depositor by Federal Express or other recognized
commercial courier.
4.3 Release. Ten business days after the date DSI mails the notice
-------
requesting release of the deposit materials, DSI is authorized and shall release
the deposit materials to Preferred Registrant. However, DSI is entitled to
receive any fees due DSI before making the release. This Agreement will
terminate upon the release of the deposit materials held by DSI.
4.4 Use License Following Release. Upon release of the deposit materials
-----------------------------
in accordance with this Article 4, Preferred Registrant shall have the rights
and licenses set forth in the License Agreement. Preferred Registrant shall
remain subject to the confidentiality obligations of Section 15 of the License
Agreement.
ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period
-----------------
of one year. Thereafter, this Agreement shall automatically renew from year to
year unless (a) Depositor and Preferred Registrant jointly instruct DSI in
writing at any time after one year that the Agreement is terminated; or (b) the
Agreement is terminated by DSI for nonpayment in accordance with
4
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EXHIBIT C
Section 5.2. If the deposit materials are subject to another escrow agreement
with DSI, DSI reserves the right, after the initial one-year term, to adjust the
anniversary date of this Agreement to match the then prevailing anniversary date
of such other escrow arrangements.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees
--------------- ----------
owed to DSI, DSI shall provide written notice of delinquency to all parties to
this Agreement. Any party to this Agreement shall have the right to make the
payment to DSI to cure the default. If the past-due payment is not received in
full by DSI within one month of the date of such notice, then DSI shall have the
right to terminate this Agreement 10 days thereafter by sending written notice
of termination to all parties, unless the past-due payment is made during such
l0-day period. DSI shall have no obligation to take any other action under this
Agreement so long as any payment due to DSI remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon any
-------------------------------------------------
termination of this Agreement by joint instruction of Depositor and Preferred
Registrant, DSI shall destroy, return, or otherwise deliver the deposit
materials in accordance with such instructions. Upon any termination for
nonpayment, DSI may, at its sole discretion, destroy the deposit materials or
return them to Depositor. DSI shall have no obligation to return or destroy the
deposit materials if the deposit materials are subject to another escrow
agreement with DSI.
5.4 Survival of Terms Following Termination. Upon any termination of this
---------------------------------------
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5)
b. The obligations of confidentiality described herein with respect
to the deposit materials.
c. The licenses granted in the sections entitled Right to Sublicense
Upon Release (Section 3.3) and Use License Following Release
(Section 4.4), if a release of the deposit materials has occurred
prior to termination.
d. The obligation to pay DSI any fees and expenses due.
e. The provisions of Article 7.
f. Any provisions in this Agreement which specifically state they
survive the termination or expiration of this Agreement.
ARTICLE 6 -- DSI'S FEES
6.1 Fee Schedule. Preferred Registrant shall pay DSI its standard fees and
------------
expenses applicable to the services provided. The fees shall be the standard
fees charged by DSI from time to time. DSI shall notify the parties at least 90
days prior to any increase in fees. For any service not listed on DSI's standard
fee schedule, DSI will provide a quote prior to rendering the service, if
requested.
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EXHIBIT C
6.2 Payment Terms. DSI shall not be required to perform any service unless
-------------
the payment for such service and any outstanding balances owed to DSI are paid
in full. All other fees are due upon receipt of invoice. If invoiced fees are
not paid, DSI may terminate this Agreement in accordance with Section 5.2. Late
fees on past-due amounts shall accrue at the rate of one and one-half percent
per month (18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any
-----------------------------
instruction, instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
7.2 Indemnification. DSI shall be responsible to perform its obligations
---------------
under this Agreement and to act in a reasonable and prudent manner with regard
to this escrow arrangement. Provided DSI has acted in the manner stated in the
preceding sentence, Depositor and Preferred Registrant each agree to indemnify,
defend and hold harmless DSI from any and all claims, actions, damages,
arbitration fees and expenses, costs, attorney's fees and other liabilities
incurred by DSI relating in any way to this escrow arrangement.
7.3 Dispute Resolution. Any dispute relating to or arising from this
------------------
Agreement shall be brought in, and shall be subject to the exclusive
jurisdiction of the U.S. District Court for the Southern District of New York,
sitting in New York, NY.
7.4 Controlling Law. This Agreement is to be governed and construed in
---------------
accordance with the laws of the State of New York, without regard to its
conflict of law provisions.
7.5 Notice of Requested Order. If any party intends to obtain an order
-------------------------
from any court of competent jurisdiction which may direct DSI to take, or
refrain from taking, any action, that party shall:
a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's
obligation, DSI be paid in full for any past-due fees and be paid
for the reasonable value of the services to be rendered pursuant
to such order; and
c. Ensure that DSI not be required to deliver the original (as
opposed to a copy) of the deposit materials if DSI may need to
retain the original in its possession to fulfill any of its other
escrow duties.
7.6 Method of Notice. Unless otherwise provided in this Agreement, all
----------------
documents and communications may be delivered by First Class Mail.
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EXHIBIT C
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits
----------------
described herein, embodies the entire understanding between all of the parties
with respect to its subject matter and supersedes all previous communications,
representations or understandings, either oral or written. No amendment or
modification of this Agreement shall be valid or binding unless signed by all
parties hereto, except Exhibit A need not be signed by DSI and Exhibit B need
not be signed by Preferred Registrant.
8.2 Notices. All notices, invoices, payments, deposits and other documents
-------
and communications shall be given to the parties at the addresses specified in
the attached Exhibit C. It shall be the responsibility of the parties to notify
each other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Any notice provided for or permitted under this Agreement shall be in
writing and will be treated as having been given (i) when delivered personally,
(ii) when sent by confirmed facsimile, (iii) three days after sent by a
recognized commercial courier with written verification of receipt, or (iv) one
week after mailed postage prepaid by certified or registered mail, return
receipt requested, to the party to be notified, at the address and to the person
set forth in Exhibit C, or at such other place of which, and to the attention of
such person of whom, the other party has been notified in accordance with the
provisions of this Section.
8.3 Severability. In the event any provision of this Agreement is found to
------------
be invalid, voidable or unenforceable, the parties agree that unless it
materially affects the entire intent and purpose of this Agreement, such
invalidity, voidability or unenforceability shall affect neither the validity
of this Agreement nor the remaining provisions herein, and the provision in
question shall be deemed to be replaced with a valid and enforceable provision
most closely reflecting the intent and purpose of the original provision.
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EXHIBIT C
8.4 Successors. This Agreement shall be binding upon and shall inure to
----------
the benefit of the successors and assigns of the parties. However, DSI shall
have no obligation in performing this Agreement to recognize any successor of
Depositor or Preferred Registrant unless DSI receives clear, authoritative and
conclusive written evidence of the change of parties.
CONNECT, INC. TIME WARNER CABLE, a division of
Depositor Time Warner Entertainment Company, L.P.
Preferred Registrant
By: /s/ Thomas P. Kehler By: /s/ Jennifer Carney
---------------------------- ----------------------------
Name: Thomas P. Kehler Name: Jennifer Carney
-------------------------- ---------------------------
Title: President & CEO Title: Vice President
------------------------- --------------------------
Date: 4/8/96 Date: March 29, 1996
-------------------------- ---------------------------
DATA SECURITIES INTERNATIONAL, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
8
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<PAGE>
EXHIBIT C
EXHIBIT A
DEPOSIT MATERIALS
All Source Code for all Connect Software (capitalized terms as defined in
the Licensed Agreement), in each case in its updated form as of the time of the
deposit.
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<PAGE>
EXHIBIT C
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIAL
Deposit Account Number ________________________________________________________
Depositor Company Name ________________________________________________________
DEPOSIT TYPE: ________ Initial _______ Supplemental
ENVIRONMENT:
Host System CPU/OS_________ Version _________ Backup __________
Source System CPU/OS_______ Version ______ Compiler ____________
Special Instructions:__________________________________________________________
_______________________________________________________________________________
DEPOSIT MATERIAL:
Exhibit B Name____________________________________________ Version_____________
Item label description Media Quantity
For Depositor, I certify that the above For DSI, I certify that the
described deposit materials have been deposit inspection has been
transmitted to DSI: completed (any exceptions are
noted above):
By__________________________________ By______________________________
Print Name__________________________ Print Name______________________
Date________________________________ Date____________________________
ISE________ EX.B#_______
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EXHIBIT C
DESIGNATED CONTACT
Account Number_________________
Notices, Deposit Material returns and Invoices to Depositor
communications, including delinquencies should be addressed to:
to Depositor, should addressed to:
Company Name: CONNECT, INC.
Address: 515 Ellis Street
Mountain View, CA 94043-2242
Designated Contact: [__________________________] Invoices to Preferred
Telephone: (415) 254A863 Registrant should be
Facsimile: (415) 2544800 addressed to:
TIME WARNER CABLE
State of Incorporation: ______________________ Digital Marketing Group
1271 Avenue of the Americas
Notices and communications, including delinquencies New York, NY 10020
to Preferred Registrants should be addressed to: Designated
Contact: Jennifer Carney
Company Name: TIME WARNER CABLE Telephone: (212)522-6359
Digital Marketing Group Facsimile: (212)522-0556
1271 Avenue of the Americas
New York, NY 10020
Designated Contact: Jennifer Carney
Telephone: (212) 522-2692
Facsimile: (212) 5224)556
Requests from Depositor or Preferred Registrant to change the Designated Contact
should be given in writing by the Designated Contact or an authorized employee
of Depositor or Preferred Registrant.
Contracts, Deposit Material and notices Invoice inquiries and fee
to DSI should be addresses to: remittance to DSI should be
addressed to:
DSI
Contract Administration DSI
Suite 200 Accounts Receivable
9555 Chesapeake Drive Suite 1450
San Diego, CA 92123 425 California Street
San Francisco, CA 94104
Telephone: (619) 694-1900
Facsimile: (619) 694-1919 (415) 398-7900
(415) 398-7914
Date:____________________________________
1
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EXHIBIT D
ANNUAL MAINTENANCE AGREEMENT
This Annual Maintenance Agreement (this "Agreement") is made as of
_____________ (the "Effective Date") by and between Time Warner Cable, a
division of Time Warner Entertainment Company, L.P., a Delaware limited
partnership ("TWC"), and Connect, Inc., a California corporation ("Connect").
RECITALS
A. TWC and Connect have entered into the Development and License Agreement
dated March 29, 1996 (the "License Agreement") pursuant to which TWC has
licensed the Connect Software (as defined in the License Agreement) from
Connect.
B. In connection with the License Agreement, TWC and Connect have entered
into an Escrow Agreement dated March 29, 1996 (the "Escrow Agreement").
C. TWC wishes to have, and Connect wishes to provide, support and
maintenance services with respect to the Connect Software.
Accordingly, the parties agree as follows:
AGREEMENT
l. DEFINITIONS. The following defined terms, and other capitalized terms,
defined herein, will govern the interpretation of this agreement. Capitalized
terms that are used and not otherwise defined will have the meaning set forth in
the License Agreement.
1.1 "COMPATIBLE SOFTWARE" means any third party software designated by
Connect as compatible for use in combination with the Connect Software. In the
event that TWC provides Connect with notice of its intention to use specified
third party software in combination with the Connect Software and Connect does
not respond to Time Warner in writing within thirty (30) days of such notice,
such specified software shall be Compatible Software.
1.2 "EFFECTIVE DATE" has the meaning set forth in the preamble of
this Agreement.
1.3 "ERROR" means a material failure of the Connect Software to comply
with the Specifications which causes a substantial negative impact on the
operation of DreamShop. A failure resulting from modifications or damage to the
Connect Software by TWC, or TWC's use of the Connect Software on a CPU or with
an operating system other than the Designated Platform or in combination with
any third party software other than Compatible Software, is not considered an
Error.
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1.4 "ERROR CORRECTION" means either a modification or addition that, when
made or added to the Connect Software, brings the Connect Software into
compliance with the Specifications.
1.5 "MAJOR ERROR" means any Error in the Connect Software which (a) causes
the Connect Software to halt, (b) causes data to be lost or destroyed, (c)
prevents the Connect Software from being installed or executed on the properly
configured environment, (d) prevents the user from running any major sub-system
of the Connect Software, or (e) prevents end-users from accessing DreamShop.
1.6 "MINOR ERROR" means any Error which is not a Major Error.
1.7 "MAINTENANCE UPDATE" means an updated revision of the Connect
Software that includes Error Corrections.
2. MAINTENANCE SERVICES
2.1 ERROR CORRECTION.
(a) Major Errors. Connect will, within twenty-four (24) hours of the
receipt of notice of any Major Error, initiate work to correct such Major Error
and use its best efforts to correct the Major Error, including any necessary
modification to the Connect Software. In the event that Connect is unable to
replicate the Major Error within five (5) business days of receiving notice of
such Major Error from TWC, Connect will, at Connect's expense, dispatch to the
site of the Designated Platform a skilled, knowledgeable and experienced
technical person or team to work on-site to diagnose and resolve the error and
TWC will cooperate with such person in the diagnosis and resolution of the
error. In the event that Connect is unable to correct any Major Error within ten
(10) business days of receipt of notice of the Major Error, TWC may, at its
option: (i) terminate this Agreement and be refunded all amounts paid hereunder
or (ii) request that Connect provide TWC with the Source Code for the Connect
Software. In the event that Connect fails to provide TWC with the Source Code
within ten (10) business days of TWC's written request, TWC may obtain the
source code from the escrow agent designated pursuant to the Escrow Agreement.
(b) Minor Errors. In the event of a Minor Error TWC will provide
Connect with notice of such Minor Error. Connect will exercise its best efforts
to include an Error Correction for such Minor Error in the first Maintenance
Update issued following notice of such Minor Error. In the event that Connect
has not issued a Maintenance Update within ninety (90) days of receipt of notice
of the Minor Error which includes an Error Correction for such Minor Error, TWC
will be entitled to terminate this Agreement and be refunded all amounts paid
hereunder.
2
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2.2 TWC RESPONSIBILITIES. TWC agrees to notify Connect in writing promptly
following the discovery of any Error. Further, upon discovery of an Error, TWC
agrees, if requested by Connect, to submit to Connect a listing of output and
any other data that Connect may require in order to reproduce the Error and the
operating conditions under which the Error occurred or was discovered.
2.3 TELEPHONE SUPPORT. At all times, Connect will make a member of its
maintenance staff available by telephone to TWC's Project Manager to assist
TWC's installation, use or modification of the Connect Software.
2.4 FIELD MAINTENANCE. Upon request, Connect will provide field support and
maintenance services at any TWC sites.
2.5 DOCUMENTATION. Connect will provide TWC with reasonably complete
information from time to time on the operation, administration, maintenance,
diagnosis of problems with, provisioning, modification and other support of the
Connect Software, in accordance with standards generally observed in the
industry. The information will be in documentation and supplemented by telephone
consultation with Connect personnel.
2.6 EXCLUSIONS FROM MAINTENANCE SERVICES. This Exhibit also does not cover
maintenance services for any failure or defect in the Connect Software caused by
any of the following:
(a) modifications to the Connect Software not made or authorized by
Connect;
(b) software other than the Connect Software;
(c) application interfacing between the Connect Software and other
software;
(d) use of Connect Software (i) with hardware that has not been
approved by Connect, or (ii) on a CPU other than the Designated Platform; or
(e) Errors in any version of the Connect Software other than the most
recent installed and accepted version and the version installed and accepted
immediately prior to the most recent installed and accepted version.
2.7 PAYMENT. In consideration for the maintenance services, TWC shall pay
Connect a fee in an amount computed as [*] percent [*] of the licensing
fee of the Connect Software and the Third Party Software under the License
Agreement, which sum shall be due and payable in twelve equal monthly
installments commencing on the Effective Date.
* Confidential treatment requested
3
<PAGE>
3. SOURCE CODE
3.1 SOURCE CODE LICENSE. In the event that TWC requests that Connect
provide TWC with Connect Software source code ("Source Code") pursuant to
Section 2.1(a) of this Agreement, Connect will provide TWC with one (1) copy of
such Source Code and will grant TWC a non-exclusive, non-assignable license to
use, boot, load, execute, modify, translate, and disassemble such Source Code
for the sole purpose of correcting any Major Error.
3.2 OWNERSHIP OF COPYRIGHT; RESTRICTIONS ON USE OR TRANSFER. TWC
acknowledges that the source code is copyrighted and contains trade secrets and
proprietary information of Connect. TWC may not copy or otherwise reproduce any
part of the Source Code except that TWC may load the Source Code into the
Designated Platform in connection with correcting any Major Error. TWC may not
boot, load, execute, use, transfer, promote, market, distribute, sublicense,
sell, modify, translate, reverse engineer, reverse compile, or disassemble the
Source Code, or any copy, modification, or merged portion, in whole or in part,
except as expressly provided in this Section 3.
3.3 NON-DISCLOSURE OF SOURCE CODE. TWC will not use the Source Code for its
own use except as provided in this Section 3. TWC will not disclose the Source
Code to third parties or to any employees of TWC, except TWC may disclose the
Source Code to employees or contractors in connection with the correction of any
Major Error. TWC shall require all employees or contractors to whom the Source
Code is disclosed to execute a non-disclosure agreement in content substantially
similar to this Section 3.3. TWC agrees that it shall protect the
confidentiality of and take all reasonable steps to prevent disclosure or use of
the Source Code to prevent them from falling into the public domain or the
possession of unauthorized persons, including placing any source tapes and
listings for the Source Code in a secure location or vault at all reasonable
times.
3.4 PROTECTION AND SECURITY OF LICENSED MATERIALS. TWC will take
appropriate action, by instruction, agreement or otherwise, with any persons
permitted access to the Source Code so as to enable TWC to satisfy its
obligations under this Section 3.4. TWC will not remove any legal notice,
copyright notice, trademark or trade name which may appear on, or in, the Source
Code.
3.5 TERMINATION OF LICENSE. The license granted pursuant to Section 3.1
will terminate upon the earliest to occur of the following:
(a) there is no outstanding Major Error; or
(b) the filing of an Order for Relief against TWC by a Federal Court
under Title 11 of the United States Code; the appointment of a receiver for TWC
due to TWC's insolvency; or the general assignment of the assets and business of
TWC for the benefit of its creditors.
4
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Upon termination of the license granted pursuant to Section 3.1, TWC will
immediately return to Connect the Source Code and will certify in writing to
Connect that it has complied with this Section 3.5.
4. MAINTENANCE UPDATES/RELEASES
4.1 MAINTENANCE UPDATES. Connect may, from time to time, issue Maintenance
Updates of the Connect Software containing Error Corrections. Without charge,
Connect will provide TWC with one (1) copy of each Maintenance Update for each
copy of the Connect Software being maintained under this Agreement and will
provide assistance to TWC to install and operate each Maintenance Update, which
assistance will include, if necessary, the dispatching of a skilled,
knowledgeable and experienced technical person to the site of the Designated
Platform for a fee in an amount no greater than an amount computed on the basis
of Connect's standard hourly rates charged to Connect's customers generally. The
parties acknowledge that each Maintenance Update is functional only if TWC has
obtained and installed all prior applicable Maintenance Updates. If TWC chooses
not to install any Maintenance Update, Connect will maintain back-level support
of the previous version to the current update accordingly on a best efforts
basis.
4.2 RELEASES. During the term of this Agreement, TWC will be entitled to
any new release of the Connect Software (each a "New Release") [*].
4.3 DIAGNOSTICS AND DOCUMENTATION. Each Maintenance Update and New Release
will be accompanied by diagnostics and documentation, including, without
limitation, installation and operations information and release notes, in
accordance with standards generally observed in the industry.
5. TERM. The term of this Agreement is one year commencing on the Effective
Date.
6. DISPUTES. All disputes relating to whether an Error constitutes a Major Error
or a Minor Error shall be resolved by binding arbitration pursuant to this
Section 6. All such disputes shall be resolved by binding arbitration according
to the then-current Commercial Arbitration Association Rules of the American
Arbitration Association ("AAA") as modified by this Section 6. There shall be
one arbitrator who shall be appointed by the AAA and who shall be a licensed
attorney. The location of the arbitration shall be New York, New York. There
will be such discovery as the arbitrator determines to be necessary for a just
and speedy resolution of the dispute. The sole issue to be resolved will be
whether an error in the Software constitutes a Major Error or a Minor Error.
Hearings shall commence within ten (10) business days after the appointment of
the arbitrator. The arbitrator shall provide their decision to the parties
within ten (10) business days after conclusion of the evidentiary hearings. The
decision of the arbitrator shall be binding upon the parties. If there is no
final decision by the
* Confidential treatment requested
5
<PAGE>
arbitrator within thirty (30) days after the request for arbitration is filed
with the AAA, TWC will be entitled to the Source Code and the license described
in Section 3, unless the arbitrator's delay in reaching a decision is caused by
TWC.
7. MISCELLANEOUS. TWC may have its rights and licensed under this Agreement
exercised by, and to sublicense its rights and licenses hereunder to, Affiliates
of TWC, provided that (a) such Affiliates acting hereunder will be subject to
the terms and conditions of this Agreement, and (b) no act or omission of an
Affiliate will affect TWC's obligations under this Agreement. This Agreement
will be interpreted according to the laws of the State of New York (except for
its choice-of-law rules). The relationship of the parties will be that of
independent contractors. Except as otherwise expressly provided herein, each
party will bear its own costs and expenses, including travel expenses, in
Connection with performing its obligations and exercising its rights in
Connection with this Agreement. Waiver by either party of a breach by the other
party of any provision contained herein will be in writing. The waiver of a
breach will in no way be construed as a waiver of any succeeding breach of such
provision or a waiver of the provision itself. If any provision of this
Agreement is unenforceable or invalid under any applicable law or is so held by
applicable court decision, such unenforceability or invalidity will not render
this Agreement unenforceable or invalid as a whole, and, in such event, such
provision will be changed and interpreted so as to best accomplish the
objectives of such provision within the limits of applicable law or applicable
court decision. This Agreement constitutes the entire agreement between the
parties relating to the subject matter hereof and supersedes all prior or
contemporaneous representations, discussions, negotiations, conditions and
agreements, whether written or oral.
The foregoing Agreement is hereby executed as of the date first written
above.
Time Warner Cable Connect
By:______________________________ By:______________________________
Name: ___________________________ Name: ___________________________
Title: ____________________________ Title: __________________________
6
