<PAGE>
As filed with the Securities and Exchange Commission on February 10, 1997
Registration No. 333-
================================================================================
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, CA 94043-2242
(Address of principal executive offices)
---------------------------------
1989 STOCK OPTION PLAN
1996 STOCK OPTION PLAN
(Full title of the Plan)
---------------------------------
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 Proposed
Maximum Maximum Maximum Amount of
Amount to be Offering Price Aggregate Registration
Title of Securities to be Registered Registered(1) Per Share Offering Price Fee
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1989 STOCK OPTION PLAN
Common Stock,
$.001 par value..................... 2,074,738 Shares $0.48 (2) $ 995,875 $ 302
1996 STOCK OPTION PLAN
Common Stock,
$.001 par value..................... 1,362,653 Shares $4.77 (2) $6,499,855 $1,970
Common Stock,
$.001 par value..................... 1,137,347 Shares $6.6875 (3) $7,606,008 $2,305
--------- ------
2,500,000
---------
TOTAL 4,574,738 Shares $4,577
========= ======
</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) Computed in accordance with Rule 457(h) under the Securities Act of 1933
(the "Securities Act") solely for the purpose of calculating the
--------------
registration fee. Computation based on the weighted average per share
exercise price (rounded to nearest cent) of outstanding options under the
referenced plan, the shares issuable under which are registered hereby.
(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
February 5, 1997.
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<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) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Prospectus referred
to in (a) above.
(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 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 stockholders 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* 1989 Stock Option Plan, and related form of
agreement.
4.2 1996 Stock Option Plan, and related form 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).
-----------------------------
* Incorporated by reference to the Form S-1 Registration
Statement filed June 13, 1996, File No. 333-05391.
-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]
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<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 10th
day of February, 1997.
CONNECT, Inc.
By: /s/ Joseph G. Girata
----------------------------------------------
Vice President of Finance and Administration
and Chief Financial Officer
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<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 and Chief February 10, 1997
- ----------------------------- Executive Officer (Principal
Thomas P. Kehler Executive Officer)
/s/ Joseph G. Girata Vice President of Finance February 10, 1997
- ----------------------------- and Administration and Chief
Joseph G. Girata Financial Officer (Principal
Financial and Accounting
Officer)
/s/ Promod Haque Director February 10, 1997
- -----------------------------
Promod Haque
/s/ Richard H. Lussier Director February 10, 1997
- -----------------------------
Richard H. Lussier
- ----------------------------- Director
Terry R. McGowan
/s/ Richard W. Weening Director February 10, 1997
- -----------------------------
Richard W. Weening
/s/ William B. Welty Director February 10, 1997
- -----------------------------
William B. Welty
/s/ Gordon J. Bridge Director February 10, 1997
- -----------------------------
Gordon J. Bridge
/s/ Rory T. O'Driscoll Director February 10, 1997
- -----------------------------
Rory T. O'Driscoll
</TABLE>
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<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------------------------
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1989 Stock Option Plan and 1996 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
schedules of CONNECT, Inc. included in its Prospectus (Form S-1 No. 333-05391)
filed with the Securities and Exchange Commission.
San Jose, California
February 7, 1997 Ernst & Young LLP
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<PAGE>
INDEX TO EXHIBITS
Exhibit Page
Number No.
- -------- -----
4.1* 1989 Stock Option Plan, and related form of agreement.
4.2 1996 Stock Option Plan, and related form 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).
- -----------------------
* Incorporated by reference to the Form S-1 Registration Statement filed June
13, 1996, File No. 333-05391
<PAGE>
EXHIBIT 4.2
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 Delaware corporation
-------
(formerly, 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 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
<PAGE>
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.
(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.
-2-
<PAGE>
(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 2,500,000 shares (adjusted to reflect the Delaware
reincorporation) 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 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
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<PAGE>
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;
(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.
-4-
<PAGE>
(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 stockholders 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.
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 1,000,000 shares (adjusted to reflect the Delaware reincorporation).
-5-
<PAGE>
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 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
-6-
<PAGE>
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 STOCKHOLDER. 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 stockholder 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 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.
-7-
<PAGE>
(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 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.
-8-
<PAGE>
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 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
-9-
<PAGE>
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 stockholders
----------
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.
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.
-10-
<PAGE>
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 stockholders 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 stockholder approval to qualify options granted hereunder as
performance-based compensation under Section 162(m) of the Code; or
(iv) any revision or amendment requiring stockholder approval
in order to preserve the qualification of the Plan under Rule 16b-3.
(b) STOCKHOLDER APPROVAL. If any amendment requiring stockholder
--------------------
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 stockholder 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.
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.
-11-
<PAGE>
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. STOCKHOLDER APPROVAL.
--------------------
(a) Stockholder 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 stockholder 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. Stockholder 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 stockholders 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 stockholders 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 stockholders 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
(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 stockholders.
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
-12-
<PAGE>
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>
CONNECT, INC.
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 ((DateofGrant)).
(c) "Number of Option Shares" shall mean ((NumberofShares)) shares of
common stock of the Company as adjusted from time to time pursuant to paragraph
9 below.
(d) "Exercise Price" shall mean ((ExercisePrice)) per share as
adjusted from time to time pursuant to paragraph 9 below.
(e) "Option Term Date" shall mean ten (10) years after the Date of
Option Grant.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Company" shall mean CONNECT, Inc., a Delaware corporation, and
any successor corporation thereto.
(h) "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 424(e) and 424(f) of the Code.
(i) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(j) "Plan" shall mean the CONNECT, Inc. 1996 Stock Option Plan.
(k) "Vesting Commencement Date" shall be ((VestingStartDate)).
(l) "Vesting Schedule" shall be as follows:
This Option may be exercised, in whole or in part, in accordance
with the following schedule: 1/4 of the shares subject to the
Option shall vest on the 12 month anniversary of the Vesting
Commencement Date and 1/48 of the total number of shares subject
to the Option shall vest on the ((MonthlyVestDate)) of each month
thereafter.
<PAGE>
2. Status of the Option. This Option is intended to be an incentive stock
--------------------
option as described in Section 422 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 422 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.
4. Exercise of the Option.
----------------------
(a) Right to Exercise. The Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule. Notwithstanding the foregoing,
except as provided in paragraph 12 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 422(d) of the Code, shall not exceed One Hundred
Thousand Dollars ($100,000). Such limitation on exercise described in Section
422(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 (in the form attached as Exhibit A) 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.
-2-
<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. 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.
-3-
<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 422(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 to the extent shares have not vested in accordance
with the Vesting Schedule.
(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) 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 the Vesting Schedule 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.
-4-
<PAGE>
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) a merger of the Control Company with or into another corporation;
or
(b) the proposed sale, exchange, or transfer (including without
limitation, pursuant to a liquidation or dissolution) of all or substantially
all of the Control Company's assets.
(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 an Ownership Change, 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 unless the Plan Administrator determines that, in connection with
the Ownership Change, the Optionee shall have the right to exercise the Option
as to all or a portion of the shares, including shares that would not otherwise
be exercisable. The Option shall terminate effective as of the date of the
Ownership Change to the extent that the Option is neither assumed, or an
equivalent option substituted, by the Acquiring Corporation nor exercised as of
the date of the Ownership Change.
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
-5-
<PAGE>
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. 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 notify
the Chief Financial Officer of the Company within thirty (30) days 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.
12. 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 shares in accordance with the Vesting Schedule 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 422(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.
13. Legends. The Company may at any time place legends referencing any
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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:
"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."
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<PAGE>
14. 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.
15. 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.
16. Integrated Agreement. This Option Agreement and the Plan constitute
--------------------
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.
17. 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.
18. 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.
CONNECT, INC.
By:
---------------------------------------
Title:
------------------------------------
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<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES IN ACCORDANCE WITH
THE VESTING SCHEDULE 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 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.
Dated:
-----------------------
-------------------------------------------
((Optionee)) Optionee
Residence Address:
-------------------------
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Social Security No.
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-8-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
To: CONNECT, Inc.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
--------------------------------------------
This is official notice that the undersigned ("Optionee") intends to
--------
exercise Optionee's option to purchase __________ shares of CONNECT, Inc. Common
Stock, under and pursuant to the Company's 1996 Stock Option Plan and the Stock
Option Agreement dated ___________, as follows:
Grant Number: ________________________________
Date of Purchase: ________________________________
Number of Shares: ________________________________
Purchase Price: ________________________________
Method of Payment
of Purchase Price: ________________________________
Social Security No.: ________________________________
The shares should be issued as follows:
Name: __________________________________
Address: _______________________________
_______________________________
_______________________________
Signed: _______________________________
Date: __________________________________
<PAGE>
CONSENT OF SPOUSE
-----------------
I, _________ , spouse of ((Optionee)), have read and approved the foregoing
Agreement. In consideration of granting of the right to my spouse to purchase
shares of Connect, Inc., as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact in respect to the exercise of any rights under the
Agreement and agree to be bound by the provisions of the Agreement insofar as I
may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws of the State of California or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: _______, 19__.
_______________________________
<PAGE>
EXHIBIT 5.1
February 10, 1997
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 February 10, 1997 in connection with the registration under the
- -----------
Securities Act of 1933, as amended, of a total of 2,074,738 shares and 2,500,000
shares of your Common Stock (collectively, the "Shares") reserved for issuance
------
under the 1989 Stock Option Plan and 1996 Stock Option Plan, respectively, of
CONNECT, Inc. 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
