CONNECT INC, S-8, 1996-09-26

CONNECT INC
S-8, 1996-09-26
PREPACKAGED SOFTWARE

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<PAGE>

As filed with the Securities and Exchange Commission on September 26, 1996
Registration No. 33-__________
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________

FORM S-8

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________

CONNECT, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 77-0431045
(State of incorporation) (I.R.S. Employer Identification No.)

515 ELLIS STREET
MOUNTAIN VIEW, CALIFORNIA 94043-2242
(Address of principal executive offices)
_______________________

1996 EMPLOYEE STOCK PURCHASE PLAN
1996 DIRECTORS' STOCK OPTION PLAN
(Full title of the Plans)
_______________________

THOMAS P. KEHLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CONNECT, INC.
515 ELLIS STREET
MOUNTAIN VIEW, CALIFORNIA 94043-2242
(415) 254-4000
(Name, address and telephone number, including area code, of agent for service)
_______________________
Copy to:

Donald M. Keller, Jr.
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(415) 854-4488

(Calculation of Registration Fee on following page)
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------

CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------

Proposed Maximum Proposed Maximum
Title of Securities to be Maximum Amount to be Offering Price Aggregate Offering Amount of
Registered Registered(1) Per Share Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 EMPLOYEE STOCK PURCHASE PLAN
Common Stock,
$.001 par value................. 500,000 Shares $5.3125(2) $2,656,250 $ 916

1996 DIRECTORS' STOCK OPTION PLAN
Common Stock,
$.001 par value................. 250,000 Shares $ 6.25(3) $1,562,500 $ 539
------------------- ------------
TOTAL 750,000 Shares $1,455
-----
</TABLE>
_______________________
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under any of the Plans being registered
pursuant to this Registration Statement by reason of any stock dividend,
stock split, recapitalization or any other similar transaction effected
without the receipt of consideration which results in an increase in the
number of the Registrant's outstanding shares of Common Stock.

(2) Estimated in accordance with Rule 457(h) under the Securities Act of
1933 (the "Securities Act") solely for the purpose of calculating the
--------------

registration fee. The computation is based upon the average of the high and
low sale prices of the Common Stock as reported on The Nasdaq National
Market on September 24, 1996, multiplied by 85%, which is the percentage of
the trading purchase price applicable to purchases under the referenced
Plan.

(3) Estimated in accordance with Rule 457(h) under the Securities Act solely
for the purpose of calculating the registration fee. The computation with
respect to unissued options is based upon the average high and low sale
prices of the Common Stock as reported on the Nasdaq National Market on
September 24, 1996.

2
<PAGE>

PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
---------------------------------------

The following documents filed with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference:
----------

(a) The Registrant's Prospectus filed on August 14, 1996 pursuant to
Rule 424(b) of the Securities Act, which contains audited financial statements
for the Registrant's latest fiscal year for which such statements have been
filed.

(b) Not Applicable.

(c) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A filed with the Commission under
Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act")
------------
on August 12, 1996, including any amendment or report filed for the purpose
of updating such description.

All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities offered hereby have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be part
hereof from the date of filing such documents.

ITEM 4. DESCRIPTION OF SECURITIES. Not applicable.
-------------------------

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. Not applicable.
--------------------------------------

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
-----------------------------------------

The Registrant's Certificate of Incorporation reduces the liability of
a director to the corporation or its shareholders for monetary damages for
breaches of his or her fiduciary duty of care to the fullest extent permissible
under Delaware law. The Bylaws of the Registrant further provide for
indemnification of corporate agents to the maximum extent permitted by the
Delaware General Corporation Law. In addition, the Registrant has entered into
Indemnification Agreements with its officers and directors.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable.
-----------------------------------

ITEM 8. EXHIBITS.
--------

Exhibit
Number
-------
4.1 1996 Employee Stock Purchase Plan, and related forms of
agreement.

4.2 1996 Directors' Stock Option Plan, and related forms of
agreement.

5.1 Opinion of Venture Law Group, a Professional Corporation.

23.1 Consent of Venture Law Group, a Professional Corporation
(included in Exhibit 5.1).

23.2 Consent of Ernst & Young LLP, Independent Auditors
(see p. 7).

24.1 Powers of Attorney (see p. 6).

3
<PAGE>

ITEM 9. UNDERTAKINGS.
------------

The undersigned Registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.

(2) that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

Insofar as the indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in a
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the question has already been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

[Signature Pages Follow]

4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant,
CONNECT, Inc., a corporation organized and existing under the laws of the State
of Delaware, certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Mountain View, State of California, on this 26th
day of September, 1996.

CONNECT, Inc.

By: /s/ Joseph G. Girata
----------------------------
Joseph G. Girata
Vice President of Finance and Administration,
and Chief Financial Officer

5
<PAGE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Thomas P. Kehler and Joseph G. Girata,
jointly and severally, his or her attorneys-in-fact and agents, each with the
power of substitution and resubstitution, for him or her and in his or her name,
place or stead, in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8, and to file such amendments, together with
exhibits and other documents in connection therewith, with the Securities and
Exchange Commission, granting to each attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as he or she might or could do in
person, and ratifying and confirming all that the attorneys-in-fact and agents,
or his or her substitute or substitutes, may do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas P. Kehler President, Chief Executive September 26, 1996
- ----------------------------- Officer and Director
Thomas P. Kehler (Principal Executive Officer)

/s/ Joseph G. Girata Vice President of Finance September 26, 1996
- ----------------------------- and Administration, and
Joseph G. Girata Chief Financial Officer
(Principal Financial and
Accounting Officer)

/s/ Gordon J. Bridge Director September 26, 1996
- -----------------------------
Gordon J. Bridge

/s/ Promod Haque Director September 26, 1996
- -----------------------------
Promod Haque

/s/ Richard H. Lussier Director September 26, 1996
- -----------------------------
Richard H. Lussier

/s/ Terry R. McGowan Director September 26, 1996
- -----------------------------
Terry R. McGowan

/s/ Rory T. O'Driscoll Director September 26, 1996
- -----------------------------
Rory T. O'Driscoll

/s/ Richard W. Weening Director September 26, 1996
- -----------------------------
Richard W. Weening

/s/ William B. Welty Director September 26, 1996
- -----------------------------
William B. Welty
</TABLE>

6
<PAGE>

EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
---------------------------------------------------

We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1996 Employee Stock Purchase Plan and the 1996
Directors' Stock Option Plan of CONNECT, Inc. of our reports dated February 23,
1996, except for Note 14, as to which the date is July 15, 1996, with respect to
the financial statements and schedule of CONNECT, Inc. included in its
Prospectus (Form S-1 No. 333-05901) filed with the Securities and Exchange
Commission.

September 24, 1996

7
<PAGE>

INDEX TO EXHIBITS
<TABLE>
<CAPTION>

Exhibit Page
Number No.
------- ----
<S> <C> <C>
4.1 1996 Employee Stock Purchase Plan, and related forms of agreement.

4.2 1996 Directors' Stock Option Plan, and related forms of agreement.

5.1 Opinion of Venture Law Group, a Professional Corporation

23.1 Consent of Venture Law Group, a Professional Corporation
(included in Exhibit 5.1).

23.2 Consent of Ernst & Young LLP, Independent Auditors (see p. 7).

24.1 Powers of Attorney (see p. 6).

</TABLE>

<PAGE>

EXHIBIT 4.1

CONNECT, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN

The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of CONNECT, Inc.

1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal
Revenue Code of 1986, as amended. The provisions of the Plan shall, accordingly,
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.

2. Definitions.
-----------

(a) "Board" shall mean the Board of Directors of the Company.
-----

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----

(d) "Company" shall mean CONNECT, Inc., a Delaware corporation
-------
(formerly, CONNECT, Inc., a California corporation).

(e) "Compensation" shall mean all regular straight time gross earnings
------------
and shall not include payments for overtime, shift premium, incentive
compensation, incentive payments, commissions, bonuses and other compensation.

(f) "Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that 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.

(g) "Contributions" shall mean all amounts credited to the account of
-------------
a participant pursuant to the Plan.

(h) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.

(i) "Employee" shall mean any person, including an Officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
<PAGE>

(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.

(k) "Purchase Date" shall mean the last day of each Purchase Period of
-------------
the Plan.

(l) "Offering Date" shall mean the first business day of each Offering
-------------
Period of the Plan.

(m) "Offering Period" shall mean a period of twenty-four (24) months
---------------
commencing on February 16 and August 16 of each year, except for the first
Offering Period as set forth in Section 4(a).

(n) "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.

(o) "Plan" shall mean this Employee Stock Purchase Plan.
----

(p) "Purchase Period" shall mean a period of six (6) months within an
---------------
Offering Period, except for the first Purchase Period as set forth in Section
4(b).

(q) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.

3. Eligibility.
-----------

(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.

(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company or (ii) if such option would permit
his or her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its Subsidiaries to
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time.

-2-
<PAGE>

4. Offering Periods and Purchase Periods.
--------------------------------------

(a) Offering Periods. The Plan shall be implemented by a series of
----------------
Offering Periods of twenty-four (24) months duration, with new Offering Periods
commencing on or about February 16 and August 16 of each year and ending on the
second February 15 and August 15, respectively, occurring thereafter (or at such
other time or times as may be determined by the Board of Directors). The first
Offering Period shall commence on the beginning of the effective date of the
Registration Statement on Form S-1 for the initial public offering of the
Company's Common Stock (the "IPO Date") and continue until August 15, 1998. The
Plan shall continue until terminated in accordance with Section 19 hereof. The
Board of Directors of the Company shall have the power to change the duration
and/or the frequency of Offering Periods with respect to future offerings
without stockholder approval if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first Offering Period to be
affected. Eligible employees may not participate in more than one Offering
Period at a time.

(b) Purchase Periods. Each Offering Period shall consist of four (4)
----------------
consecutive purchase periods of six (6) months duration. The last day of each
Purchase Period shall be the "Purchase Date" for such Purchase Period. A
Purchase Period commencing on February 16 shall end on the next August 15. A
Purchase Period commencing on August 16 shall end on the next February 15. The
first Purchase Period shall commence on the IPO Date and shall end on February
15, 1997. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without Stockholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Purchase Period
to be affected.

5. Participation.
-------------

(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 10%) to be paid
as Contributions pursuant to the Plan.

(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
9.

6. Method of Payment of Contributions.
----------------------------------

(a) The participant shall elect to have payroll deductions made on
each payday during the Offering Period in an amount not less than one percent
(1%) and not more than ten percent (10%) of such participant's Compensation on
each such payday. All payroll deductions

-3-
<PAGE>

made by a participant shall be credited to his or her account under the Plan. A
participant may not make any additional payments into such account.

(b) A participant may discontinue his or her participation in the Plan
as provided in Section 9, or, on one occasion only during the Offering Period,
may decrease the rate of his or her Contributions during the Offering Period by
completing and filing with the Company a new subscription agreement. The change
in rate shall be effective as of the beginning of the next calendar month
following the date of filing of the new subscription agreement, if the agreement
is filed at least ten (10) business days prior to such date and, if not, as of
the beginning of the next succeeding calendar month.

(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period that the aggregate of all payroll deductions accumulated with respect to
this Plan in the same calendar year would cause a participant to purchase in
excess of the value limitation set forth under Section 423(b)(8) of the Code
(such limitation to be based upon the value per share as of the beginning of the
Offering Period). Payroll deductions shall re-commence at the rate provided in
such participant's subscription Agreement at the beginning of the next calendar
year, unless terminated by the participant as provided in Section 9.

7. Grant of Option.
---------------

(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the participant's account as of the Purchase Date
by the lower of (i) eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date, or (ii) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Purchase Date; provided however, that the maximum number of shares an
Employee may purchase during each calendar year for which an option is
outstanding shall be determined by dividing $25,000 by the fair market value of
a share of the Company's Common Stock on the Offering Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12. The fair market value of a share of the Company's Common Stock
shall be determined as provided in Section 7(b).

(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Purchase Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion based on the closing
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market or, if such price is not reported, the mean of the bid
and asked prices per share of the Common Stock as reported by

-4-
<PAGE>

Nasdaq or, in the event the Common Stock is listed on a stock exchange, the fair
market value per share shall be the closing price on such exchange on such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported in The Wall Street Journal. For
purposes of the Offering Date under the first Offering Period under the Plan,
the fair market value of a share of the Common Stock of the Company shall be the
Price to Public as set forth in the final prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424 under the Securities Act of 1933,
as amended.

8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full shares subject to the option will be purchased at the
applicable option price with the accumulated Contributions in his or her
account. The shares purchased upon exercise of an option hereunder shall be
deemed to be transferred to the participant on the Purchase Date. During his or
her lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.

As promptly as practicable after each Purchase Date of each Offering
Period, the Company shall arrange the transfer of the shares purchased upon
exercise of options under the Plan to the participant's account with the broker
selected by the Company for administration of the stock issuances. Stock
certificates representing the shares purchased shall not be issued to plan
participants. Any cash remaining to the credit of a participant's account under
the Plan after a purchase by him or her of shares at the termination of each
Purchase Period, or which is insufficient to purchase a full share of Common
Stock of the Company, shall be carried over to the next Purchase Period if the
Employee continues to participate in the Plan, or if the Employee does not
continue to participate, shall be returned to said participant.

9. Voluntary Withdrawal; Termination of Employment.
-----------------------------------------------

(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of shares will be made during the Offering
Period.

(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.

(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.

-5-
<PAGE>

(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.

10. Automatic Withdrawal. If the fair market value of the shares on any
--------------------
Purchase Date of an Offering Period, other than the final Purchase Date of such
Offering Period, is less than the fair market value of the shares on the
Offering Date for such Offering Period, then every participant shall
automatically (i) be withdrawn from such Offering Period at the close of such
Purchase Date and after the acquisition of shares for such Purchase Period, and
(ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period.

11. Interest. No interest shall accrue on the Contributions of a
--------
participant in the Plan.

12. Stock.
-----

(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 500,000 (as adjusted to
reflect the reincorporation of the Company in Delaware), subject to adjustment
upon changes in capitalization of the Company as provided in Section 18. If the
total number of shares which would otherwise be subject to options granted
pursuant to Section 7(a) on the Offering Date of an Offering Period exceeds the
number of shares then available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares remaining available for option
grant in as uniform a manner as shall be practicable and as it shall determine
to be equitable. In such event, the Company shall give written notice of such
reduction of the number of shares subject to the option to each Employee
affected thereby and shall similarly reduce the rate of Contributions, if
necessary.

(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.

(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.

13. Administration. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.

-6-
<PAGE>

14. Designation of Beneficiary.
--------------------------

(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.

15. Transferability. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 9.

16. Use of Funds. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.

17. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees
promptly following the Purchase Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.

18. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------

(a) Adjustment. Subject to any required action by the stockholders of
----------
the Company, the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse

-7-
<PAGE>

stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of 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 Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issue 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 Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. 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, each option under the Plan 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 Board determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Purchase Date (the "New
Purchase Date"). If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least ten (10) days prior
to the New Purchase Date, that the Purchase Date for his or her option has been
changed to the New Purchase Date and that his or her option will be exercised
automatically on the New Purchase Date, unless prior to such date he or she has
withdrawn from the Offering Period as provided in Section 9. For purposes of
this paragraph, an option granted under the Plan shall be deemed to be assumed
if, following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective date of the
transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if such consideration received
in the sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock and the
sale of assets or merger.

The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.

-8-
<PAGE>

19. Amendment or Termination.
------------------------

(a) The Board of Directors of the Company may at any time terminate or
amend the Plan. Except as provided in Section 18, no such termination may
affect options previously granted, nor may an amendment make any change in any
option theretofore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or under Section 423 of the Code (or any successor rule
or provision or any applicable law or regulation), the Company shall obtain
Stockholder approval in such a manner and to such a degree as so required.

(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.

20. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

21. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, 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.

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 applicable provisions of law.

22. Term of Plan; Effective Date. The Plan shall become effective upon
----------------------------
the earlier to occur of its adoption by the Board of Directors or its approval
by the stockholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under Section 19.

-9-
<PAGE>

23. Additional Restrictions of Rule 16b-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.

-10-
<PAGE>

CONNECT, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT

New Election ______
Change of Election ______

1. I, ________________________, hereby elect to participate in the
CONNECT, Inc. 1996 Employee Stock Purchase Plan (the "Plan") for the Offering
Period ______________, 19__ to _______________, 19__, and subscribe to purchase
shares of the Company's Common Stock in accordance with this Subscription
Agreement and the Plan.

2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).

3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.

4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 9 of the Plan. I also
understand that I can decrease the rate of my Contributions to not less than 1%
on one occasion only during any Offering Period by completing and filing a new
Subscription Agreement with such decrease taking effect as of the beginning of
the calendar month following the date of filing of the new Subscription
Agreement, if filed at least ten (10) business days prior to the beginning of
such month. Further, I may change the rate of deductions for future Offering
Periods by filing a new Subscription Agreement, and any such change will be
effective as of the beginning of the next Offering Period. In addition, I
acknowledge that, unless I discontinue my participation in the Plan as provided
in Section 9 of the Plan, my election will continue to be effective for each
successive Offering Period.
<PAGE>

5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "CONNECT, Inc. 1996 Employee Stock Purchase
Plan." I understand that my participation in the Plan is in all respects
subject to the terms of the Plan.

6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):

____________________________________

7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:

NAME: (Please print) __________________________________________
(First) (Middle) (Last)

______________________ _______________________________________
(Relationship) (Address)

_______________________________________

8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.

I hereby agree to notify the Company in writing within 30 days after
--------------------------------------------------------------------
the date of any such disposition, and I will make adequate provision for
- ------------------------------------------------------------------------
federal, state or other tax withholding obligations, if any, which arise upon
- -----------------------------------------------------------------------------
the disposition of the Common Stock. The Company may, but will not be obligated
- -----------------------------------
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.

9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 5% of the fair market value of the shares

-2-
<PAGE>

on the Offering Date. The remainder of the gain or loss, if any, recognized on
such disposition will be treated as capital gain or loss.

I understand that this tax summary is only a summary and is subject to
----------------------------------------------------------------------
change. I further understand that I should consult a tax advisor concerning the
- ------
tax implications of the purchase and sale of stock under the Plan.

10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.

SIGNATURE: ____________________________

SOCIAL SECURITY #:_____________________

DATE:__________________________________

SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):

_______________________________________
(Signature)

_______________________________________
(Print name)

-3-
<PAGE>

CONNECT, INC.

1996 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

I, __________________________, hereby elect to withdraw my participation in
the CONNECT, Inc. 1996 Employee Stock Purchase Plan (the "Plan") for the
Offering Period _________. This withdrawal covers all Contributions credited to
my account and is effective on the date designated below.

I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.

The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.

Dated:___________________ __________________________________
Signature of Employee

__________________________________
Social Security Number

<PAGE>

EXHIBIT 4.2

CONNECT, INC.

1996 DIRECTORS' STOCK OPTION PLAN

1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.

All options granted hereunder shall be "nonstatutory stock options".

2. Definitions. As used herein, the following definitions shall apply:
-----------

(a) "Board" shall mean the Board of Directors of the Company.
-----

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----

(c) "Common Stock" shall mean the Common Stock of the Company
------------
(formerly, CONNECT, Inc., a California corporation).

(d) "Company" shall mean CONNECT, Inc., a Delaware corporation.
-------

(e) "Continuous Status as a Director" shall mean the absence of any
-------------------------------
interruption or termination of service as a Director.

(f) "Director" shall mean a member of the Board.
--------

(g) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.

(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.

(i) "Option" shall mean a stock option granted pursuant to the Plan.
------
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).

(j) "Optioned Stock" shall mean the Common Stock subject to an
--------------
Option.

(k) "Optionee" shall mean an Outside Director who receives an Option.
--------

(l) "Outside Director" shall mean a Director who is not an Employee.
----------------

(m) "Parent" shall mean a "parent corporation", whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
<PAGE>

(n) "Plan" shall mean this 1996 Directors' Stock Option Plan.
----

(o) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.

(p) "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 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 250,000 (as adjusted to reflect the reincorporation of the
Company in Delaware) Shares (the "Pool") 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 which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.

4. Administration of and Grants of Options under the Plan.
------------------------------------------------------

(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.

(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:

(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.

(ii) Each Outside Director shall be automatically granted an
Option to purchase 20,000 (as adjusted to reflect the reincorporation of the
Company in Delaware) Shares (the "First Option") on the date on which such
person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board of Directors to fill a
vacancy.

(iii) Each Outside Director shall be automatically granted an
Option to purchase 5,000 (as adjusted to reflect the reincorporation of the
Company in Delaware) Shares (a "Subsequent Option") on the date of each Annual
Meeting of the Company's stockholders following which such Outside Director is
serving on the Board, provided that, on such date, he or she shall have served
on the Board for at least six (6) months prior to the date of such Annual
Meeting.

(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the

-2-
<PAGE>

number of Shares previously purchased upon exercise of Options to exceed the
Pool, then each such automatic grant shall be for that number of Shares
determined by dividing the total number of Shares remaining available for grant
by the number of Outside Directors on the automatic grant date. Any further
grants shall then be deferred until such time, if any, as additional Shares
become available for grant under the Plan through action of the stockholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.

(v) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any grant of an Option made before the Company has obtained stockholder
approval of the Plan in accordance with Section 17 hereof shall be conditioned
upon obtaining such stockholder approval of the Plan in accordance with Section
17 hereof.

(vi) The terms of each First Option granted hereunder shall be as
follows:

(1) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Section 9
hereof.

(2) the exercise price per Share shall be 100% of the fair market
value per Share at the beginning of the date of grant of the First Option,
determined in accordance with Section 8 hereof.

(3) the First Option shall become exercisable in installments
cumulatively as to 25% of the Shares subject to the First Option on each of the
first, second, third and fourth anniversaries of the date of grant of the First
Option.

(vii) The terms of each Subsequent Option granted hereunder shall be
as follows:

(1) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof.

(2) the exercise price per Share shall be 100% of the fair market
value per Share at the beginning of the date of grant of the Subsequent Option,
determined in accordance with Section 8 hereof.

(3) the Subsequent Option shall become exercisable as to one
hundred percent (100%) of the Shares subject to the Subsequent Option on the
first anniversary of the date of grant of the Subsequent Option.

(c) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option

-3-
<PAGE>

previously granted hereunder; and (vi) to make all other determinations deemed
necessary or advisable for the administration of the Plan.

(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

(e) Suspension or Termination of Option. If the President or his or
-----------------------------------
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.

5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof.

The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.

6. Term of Plan; Effective Date. The Plan shall become effective on the
----------------------------
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.

7. Term of Option. The term of each Option shall be ten (10) years from
--------------
the date of grant thereof.

8. 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 100% of the fair market value
per Share on the date of grant of the Option.

(b) Fair Market Value. The fair market value shall be determined by
-----------------
the Board in its discretion; provided, however, that where there is a public
market for the Common Stock, the

-4-
<PAGE>

fair market value per Share shall be the mean of the bid and asked prices of the
Common Stock in the over-the-counter market on the date of grant, as reported in
The Wall Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation ("NASDAQ" System)
or, in the event the Common Stock is traded on the Nasdaq National Market or
listed on a stock exchange, the fair market value per Share shall be the closing
price on such system or exchange on the date of grant of the Option (or, in the
event that the Common Stock is not traded on such date, on the immediately
preceding trading date), as reported in The Wall Street Journal. With respect to
any Options granted hereunder concurrently with the initial effectiveness of the
Plan, the fair market value shall be the Price to Public as set forth in the
final prospectus relating to such initial public offering.

(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having 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 (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.

9. Exercise of Option.
------------------

(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 hereof has been
obtained.

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 consist of any consideration and method of payment
allowable under Section 8(c) 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 stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after 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 11 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 a Director. If an Outside Director
-----------------------------------
ceases to serve as a Director, he or she may, but only within ninety (90) days
after the date he or she ceases to be a Director of the Company, exercise his or
her Option to the extent that he or she was entitled to

-5-
<PAGE>

exercise it at the date of such termination. Notwithstanding the foregoing, in
no event may the Option be exercised after its term set forth in Section 7 has
expired. To the extent that such Outside Director was not entitled to exercise
an Option at the date of such termination, or 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 the provisions of Section
----------------------
9(b) above, in the event a Director is unable to continue his or her service as
a Director with the Company as a result of his or her total and permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code), he or
she may, but only within six (6) months from the date of such termination,
exercise his or her Option to the extent he or she was entitled to exercise it
at the date of such termination. Notwithstanding the foregoing, in no event may
the Option be exercised after its term set forth in Section 7 has expired. To
the extent that he or she was not entitled to exercise the Option at the date of
termination, or if he or she does not exercise such Option (which he or she 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 or
her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of death, 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 Director for six (6) months after the date of death. Notwithstanding
the foregoing, in no event may the Option be exercised after its term set forth
in Section 7 has expired.

(ii) Within three (3) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within six (6)
months following the date of death, 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.
Notwithstanding the foregoing, in no event may the option be exercised after its
term set forth in Section 7 has expired.

10. Nontransferability 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 or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.

11. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------

(a) Adjustments. Subject to any required action by the stockholders
-----------
of the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of shares of Common Stock which 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

-6-
<PAGE>

cancellation or expiration of an Option, and the number of shares of Common
Stock to be granted under the provisions set forth in Section 4 of the Plan, as
well as 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 Board, 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 (i) a dissolution or
----------------------
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, the Company shall give to the Optionee, at the time of adoption of
the plan for liquidation, dissolution, sale, merger, consolidation or
reorganization, either a reasonable time thereafter within which to exercise the
Option, including Shares as to which the Option would not be otherwise
exercisable, prior to the effectiveness of such liquidation, dissolution, sale,
merger, consolidation or reorganization, at the end of which time the Option
shall terminate, or the right to exercise the Option, including Shares as to
which the Option would not be otherwise exercisable (or receive a substitute
option with comparable terms), as to an equivalent number of shares of stock of
the corporation succeeding the Company or acquiring its business by reason of
such liquidation, dissolution, sale, merger, consolidation or reorganization.

12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.

13. 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, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
Notwithstanding the foregoing, the provisions set forth in Section 4 of this
Plan (and any other Sections of this Plan that affect the formula award terms
required to be specified in this Plan by Rule 16b-3) shall not be amended more
than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.

-7-
<PAGE>

(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee 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.

14. 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, state securities laws, 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. 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.

15. 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. 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.

16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.

17. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within one year of its adoption by
the Board. If such stockholder approval is obtained at a duly held
stockholders' meeting, it may be obtained by the affirmative vote of the holders
of a majority of the outstanding shares of the Company present or represented
and entitled to vote thereon. If such stockholder approval is obtained by
written consent, it may be obtained by the written consent of the holders of a
majority of the outstanding shares of the Company. Options may be granted, but
not exercised before such stockholder approval.

-8-
<PAGE>

CONNECT, INC.

1996 DIRECTORS' STOCK OPTION PLAN

DIRECTOR NONSTATUTORY STOCK OPTION AGREEMENT
--------------------------------------------

Optionee:

Address:

Total Shares Subject to Option:

Exercise Price Per Share:

Date of Grant:

Expiration Date:

Type of Stock Option: Nonstatutory Stock Option

1. Grant of Option. CONNECT, Inc. (the "Company"), a California
---------------
corporation, hereby grants to the Optionee named above ("Optionee") an option
(the "Option") to purchase a total of up to ____________________ shares of
Common Stock of the Company (the "Shares") at the exercise price per share set
forth above (the "Exercise Price"), subject to all of the terms and conditions
of this Director Nonstatutory Stock Option Agreement ("Agreement") and the
Company's 1996 Directors' Stock Option Plan (the "Plan"). The terms defined in
the Plan shall have the same defined meanings herein.

A. Nature of the Option. This Option is a nonstatutory stock option
--------------------
and is not intended to qualify for any special tax benefits to the Optionee.

B. Exercise Price. The exercise price is ___________ for each share
--------------
of Common Stock, which is 100% of the Fair Market Value of the Common Stock as
determined on the date of grant of this Option.

2. Exercise Period of Option. Subject to the terms and conditions of the
-------------------------
Plan and this Grant, this Option shall become exercisable as follows:

____________________________________________

3. Restrictions on Exercise. Exercise of this Option is subject to the
------------------------
following limitations:

A. This Option may not be exercised unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable state
securities laws, as they are in effect on the date of exercise.

<PAGE>

B. If, at the time of the exercise of this Option, the Optionee is
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), then the Optionee must comply with Rule 16b-3 under the
Exchange Act and 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.

4. Termination of Status as a Director. If an Outside Director ceases to
-----------------------------------
serve as a Director for any reason other than death or disability, he or she
may, but only within ninety (90) days after the date he or she ceases to be a
Director of the Company, 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
he or she was not entitled to exercise an Option at the date of such
termination, or if he or she does not exercise such Option (which he or she was
entitled to exercise) within the time specified herein, the Option shall
terminate.

5. Disability of Director. Notwithstanding Section 4 above, in the event
----------------------
an Outside Director is unable to continue his or her service as a Director with
the Company as a result of total and permanent disability (as defined in Section
22(e)(3) of the Code), he or she may, but only within six (6) months from the
date of termination of such service (but in no event later than the date of
expiration of the term of this Option as set forth in the Notice of Stock Option
Grant), exercise the Option to the extent otherwise so entitled 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 or she does not exercise such Option
(to the extent otherwise so entitled) within the time specified in this
Agreement, the Option shall terminate.

6. Death of Director. Notwithstanding Section 4 above, in the event of
-----------------
the death an Outside Director while serving as a Director of the Company or
within three (3) months of terminating such service, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the date of expiration of the term of this Option as set
forth in the Notice of Stock Option Grant), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance to the
extent the Optionee was entitled to exercise such Option on the date of death,
provided, however, that if the Director dies while serving as a Director, the
Option will be exercisable to the extent of the right to exercise that would
have accrued had the Director continued living and serving as a Director for six
(6) months after the date of death.

7. Manner of Exercise.
------------------

A. This Option shall be exercisable by delivery to the Company of an
executed written Director Stock Option Exercise Notice and Agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Company, which shall set forth Optionee's election to exercise this Option, the
number of Shares being purchased, any restrictions imposed on the Shares and
such other representations and agreements regarding Optionee's investment intent
and access to information as may be required by the Company to comply with
applicable securities laws.

B. The Director Stock Option Exercise Notice and Agreement shall be
accompanied by full payment of the Exercise Price for the Shares being purchased
(i) in cash, (ii) by

-2-

<PAGE>

check, (iii) by delivery of other shares of Common Stock having a fair market
value on the date of surrender equal to the aggregate exercise price of the
Shares being purchased (which, if acquired from the Company, shall have been
held for at least six months) or (iv) by any combination of the foregoing
methods of payment and/or any other method of payment as shall be permitted
under applicable corporate law.

C. Prior to the issuance of the Shares upon exercise of this Option,
Optionee must pay or make adequate provision for any applicable federal or state
withholding obligations of the Company.

D. Provided that such notice and payment are in form and substance
satisfactory to counsel for the Company, the Company shall issue the Shares
registered in the name of Optionee or Optionee's legal representative.

8. Compliance with Laws and Regulations. The issuance and transfer of
------------------------------------
Shares shall be subject to compliance by the Company and the Optionee with all
applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Optionee
understands that the Company is under no obligation to register or qualify the
Shares with the Securities and Exchange Commission, any state securities
commission or any stock exchange to effect such compliance.

9. Nontransferability of Option. This Option may not be transferred in
----------------------------
any manner other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order (as defined by the Code or the
rules thereunder) and may be exercised during the lifetime of the Optionee only
by the Optionee or a transferee permitted by Section 10 of the Plan. The terms
of this option shall be binding upon the executors, administrators, successors
and assigns of the Optionee.

10. Federal Tax Consequences. Set forth below is a brief summary as of
------------------------
the date of this Option of some of the federal tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES. THIS SUMMARY DOES NOT DISCUSS STATE OR LOCAL TAX
CONSEQUENCES OF EXERCISE OF THIS OPTION AND DISPOSITION OF THE SHARES.

A. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then fair market value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is likely to
be subject to Section 16(b) of the Securities Exchange Act of 1934, as amended,
the measurement and timing of such income may be deferred, and the Optionee is
advised to contact a tax adviser concerning the desirability of filing an
election pursuant to Section 83(b) of the Code in connection with the exercise
of the Option. Upon a resale of such Shares by the Optionee, any difference
between the sale price and the exercise price of the Shares, to the extent not
included in income as described above, will be treated as capital gain or loss,
which will be long-term if the shares have been held for more than one year.

-3-
<PAGE>

11. Interpretation. Any dispute regarding the interpretation of this
--------------
agreement shall be submitted by Optionee or the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.

12. Entire Agreement. The Plan and the Director Stock Option Exercise
----------------
Notice and Agreement attached as Exhibit A are incorporated herein by reference.
This Grant, the Plan and the Director Stock Option Exercise Notice and Agreement
constitute the entire agreement of the parties regarding the Option and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.

CONNECT, INC.

By:________________________

Its:_______________________

-4-
<PAGE>

ACCEPTANCE

Optionee hereby acknowledges receipt of a copy of the Plan, represents that
Optionee has read and understands the terms and provisions thereof, and accepts
this Option subject to all the terms and conditions of the Plan and this Grant.
Optionee acknowledges that there may be adverse tax consequences upon exercise
of this Option or disposition of the Shares and that Optionee should consult a
tax adviser prior to such exercise or disposition.

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

-5-
<PAGE>

EXHIBIT A
---------
DIRECTOR NONSTATUTORY STOCK OPTION EXERCISE NOTICE AND AGREEMENT
----------------------------------------------------------------

CONNECT, Inc.
515 Ellis Street

Mountain View, CA 94043

Attention: Chief Financial Officer

1. Exercise of Option. The undersigned ("Optionee") hereby elects
------------------
to exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of CONNECT, Inc. (the "Company") under and pursuant to the Company's
1996 Directors' Stock Option Plan and the Director Nonstatutory Stock Option
Agreement dated _______________ (the "Grant Agreement").

2. Representations of Optionee. Optionee acknowledges that Optionee
---------------------------
has received, read and understood the Grant Agreement.

3. Federal Restrictions on Transfer. Optionee understands that the Shares
--------------------------------
must be held indefinitely unless they are registered under the Securities Act of
1933, as amended (the "1933 Act") or unless an exemption from such registration
is available and that the certificate(s) representing the Shares may bear a
legend to that effect. Optionee understands that the Company is under no
obligation to register the Shares and that an exemption may not be available or
may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.

4. Tax Consequences. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

5. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.

<PAGE>

6. Entire Agreement. The Grant Agreement is incorporated herein by
----------------
reference. This Agreement and the Grant Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof. This Agreement and the Grant Agreement are governed by California law
except for that body of law pertaining to conflict of laws.

Submitted by: Accepted by:

OPTIONEE: CONNECT, INC.

__________________________ By:_____________________________

Its: ___________________________

Address:

Dated:____________________ Dated:__________________________

-2-

<PAGE>

EXHIBIT 5.1

[LETTERHEAD OF VENTURE LAW GROUP]
---------------------------------

September 26, 1996

CONNECT, Inc.
515 Ellis Street
Mountain View, CA 94043

Registration Statement on Form S-8
----------------------------------

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-8 (the "Registration
------------
Statement") filed by you with the Securities and Exchange Commission (the
- ---------
"Commission") on or about September 26, 1996 in connection with the registration
----------
under the Securities Act of 1933, as amended, of a total of 500,000 shares of
your Common Stock reserved for issuance under the 1996 Employee Stock Purchase
Plan and 250,000 shares of your Common Stock reserved for issuance under the
1996 Directors' Stock Option Plan (collectively the "Shares"). As your counsel
in connection with this transaction, we have examined the proceedings taken and
are familiar with the proceedings proposed to be taken by you in connection with
the sale and issuance of the Shares.

It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued and sold in the manner
described in the Registration Statement will be legally and validly issued,
fully paid and non-assessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and in any amendment thereto.

Very truly yours,

VENTURE LAW GROUP
A Professional Corporation