<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
---------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
_________ ________
Commission File Number 000-20873
CONNECT, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0431045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
515 Ellis Street
Mountain View, California 94043-2242
(Address of principal executive offices) (Zip code)
(650) 254-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
As of April 30, 1998 there were 12,867,701 shares of the Registrant's Common
Stock outstanding.
-1-
<PAGE>
CONNECT, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Condensed Balance Sheets as of 3
March 31, 1998 and December 31, 1997
Condensed Statements of Operations for the three months 4
ended March 31, 1998 and 1997
Condensed Statements of Cash Flows for the 5
three months ended March 31, 1998 and 1997
Notes to Condensed Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 2 Changes in Securities and Use of Proceeds 11
ITEM 3 Defaults Upon Senior Securities 12
ITEM 4. Submission of Matters to Vote of Security Holders. 12
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K. 12
</TABLE>
SIGNATURES
-2-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
CONNECT, INC.
CONDENSED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 7,572 $ 9,644
Accounts receivable, less allowances for doubtful
accounts of $788 at March 31, 1998 and $642 at
December 31, 1997................................ 1,800 2,298
Prepaid expenses and other current assets......... 714 895
-------- --------
Total current assets................................ 10,086 12,837
Property and equipment, net......................... 2,199 2,442
Other assets........................................ 73 85
-------- --------
Total assets..................................... $ 12,358 $ 15,364
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable..................................... $ 644 $ 620
Accounts payable.................................. 1,120 1,279
Accrued payroll and related expenses.............. 587 609
Other accrued liabilities......................... 1,793 1,588
Deferred revenue.................................. 943 681
Current portion of extended vendor liabilities.... 274 272
Obligations under capital leases.................. 276 355
-------- --------
Total current liabilities........................... 5,637 5,404
Notes payable..................................... 548 713
Long-term portion of extended vendor liabilities.. 187 224
Long-term obligations under capital leases........ -- 2
Convertible notes................................. -- 9,654
Commitments and contingencies
Stockholders' equity:
Preferred stock:
Authorized shares--10,000,000
Issued and outstanding shares--4,634,772......... 8,412 --
Common stock: $.001 par value
Authorized shares--60,000,000
Issued and outstanding shares--4,765,800 at
March 31, 1998 and 3,706,293 at December 31,
1997............................................. 24 19
Additional paid-in capital........................ 62,142 61,001
Deferred compensation............................. (85) (96)
Accumulated deficit............................... 64,507 (61,557)
-------- --------
Total stockholders' equity.......................... 5,986 (633)
-------- --------
Total liabilities and stockholders' equity.......... $ 12,358 $ 15,364
======== ========
</TABLE>
See accompanying notes.
-3-
<PAGE>
CONNECT, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except loss per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1998 1997
---- ----
<S> <C> <C>
REVENUE:
License............................... $ 1,025 $ 403
Service............................... 1,227 1,484
------- -------
Total revenue..................... 2,252 1,887
COST OF REVENUE:
License............................... 178 176
Service............................... 1,402 2,683
------- -------
Total cost of revenue............. 1,580 2,859
------- -------
Gross profit (loss) 672 (972)
OPERATING EXPENSES:
Research and development.............. 1,311 1,408
Sales and marketing................... 1,440 2,218
General and administrative............ 736 651
------- -------
Total operating expenses.......... 3,487 4,277
------- -------
LOSS FROM OPERATIONS.................. (2,815) (5,249)
Interest expense......................... (222) (70)
Interest income and other income, net.... 87 121
------- -------
LOSS BEFORE INCOME TAXES.............. (2,950) (5,198)
Provision (benefit) for income taxes..... -- --
------- -------
NET LOSS........................... $(2,950) $(5,198)
======= =======
BASIC AND DILUTED NET LOSS PER SHARE...... ($0.73) ($1.40)
======= =======
Weighted average common shares
outstanding........................ 3,987 3,731
</TABLE>
See accompanying notes.
-4-
<PAGE>
CONNECT, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................... $ (2,950) $ (5,198)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization........................ 426 448
Amortization of deferred compensation................ 11 10
Changes in operating assets and liabilities:
Accounts receivable............................... 498 729
Prepaid expenses and other current assets......... 181 (39)
Deposits and other assets......................... 12 1
Accounts payable, accrued payroll and related
expenses, other accrued liabilities, and
extended vendor liabilities....................... 26 (543)
Deferred revenue.................................. 262 (26)
-------- --------
Net cash used in operating activities................. (1,534) (4,618)
INVESTING ACTIVITIES
Purchases of property and equipment.................... (183) (185)
-------- --------
Net cash used in investing activities................. (183) (185)
FINANCING ACTIVITIES
Proceeds from issuance of common stock................. 318
Cost associated with issuance of convertible preferred
stock (133) --
Proceeds from issuance of notes payable................ -- 1,437
Repayment of principal on notes payable................ (141) (92)
Repayment of principal under capital lease
obligations....................................... (81) (127)
-------- --------
Net cash provided (used) by financing activities...... (355) 1,536
-------- --------
Net increase (decrease) in cash and cash equivalents (2,072) (3,267)
Cash and cash equivalents at beginning of period....... 9,644 12,214
-------- --------
Cash and cash equivalents at end of period............ $ 7,572 $ 8,947
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest................................. $ 222 $ 70
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING
INFORMATION
Conversion of convertible notes into preferred stock
and common stock.................................. $ 9,654 --
</TABLE>
See accompanying notes.
-5-
<PAGE>
CONNECT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1) THE COMPANY AND SIGNIFICANT ACCOUNTING P0LICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The financial information should be read in conjunction with the
financial statements and notes thereto included in CONNECT, Inc.'s ("CONNECT" or
the "Company") Annual Report on Form 10-K for the year ended December 31, 1997
(the "Annual Report"). The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for the full fiscal year or for any future periods.
2) NET LOSS PER SHARE
Except as noted below, net loss per share is based on the weighted average
number of shares of common stock outstanding during the period presented. Per
share information calculated on this basis is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
---- ----
<S> <C> <C>
Basic and diluted net loss per
share $(0.73) $(1.40)
Shares used in computing net loss
per share 3,987 3,731
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which was required to be adopted on December 31,
1997. At that time, the Company was required to change the method used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. There is no impact of Statement 128 on the
calculation of net loss per share for the quarters ended March 31, 1998 and
1997.
3) SUBSEQUENT EVENT
On April 1, 1998, one day after the end of the quarter being reported on, the
Company announced that it reached agreement with all holders of CONNECT's Series
A Preferred Stock to exchange all outstanding shares of Series A Preferred Stock
for Common Stock. As a result of the exchange, each outstanding share of Series
A Preferred Stock has been exchanged for 1.739 shares of Common Stock,
representing a price per share of Common Stock of $1.15. The closing of the
exchange occurred on April 1, 1998. An aggregate of 8,096,911 shares of Common
Stock was issued as a result of the exchange and 12,862,711 share of Common
Stock were outstanding immediately after the exchange.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains, in addition to historical information, forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
-6-
<PAGE>
amended that involve risks and uncertainties. The Company's actual results
could differ materially from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed under the caption, "Risk Factors" in the
Annual Report on Form 10-K for the year ended December 31, 1997 as well as the
risks discussed elsewhere in this Quarterly Report. In particular such factors
include: the Company's ability to sell and implement its products; acceptance by
the marketplace of the Company's products and services; the Company's ability to
obtain addition capital on terms favorable to the Company, or at all; the
Company's ability to develop new products and services to meet market demand or
incorporate evolving industry standards; the Company's ability to compete
effectively; acceptance of the Internet as a medium for electronic commerce and
order management; the Company's dependence on the Internet infrastructure; the
Company's dependence on certain third party software and services vendors; and
the Company's ability to protect its intellectual property. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. Readers should carefully review
the risk factors described in other documents the Company files from time to
time with the Securities and Exchange Commission, including, the Annual Report
on Form 10-K, the Quarterly Reports on Form 10-Q, and any Current Reports on
Form 8-K filed by the Company.
OVERVIEW
The Company designs, develops, markets and supports application software for
Internet-based interactive commerce. The Company was founded in 1987 to provide
on-line information services to businesses. During the period 1987 through
1992, the Company's primary business was the operation and management of a
private on-line service and the licensing of related client software. In 1993
and 1994, the Company also offered software for creation, access and operation
of custom on-line systems. In late 1994, the Company began to shift its focus
from providing on-line services to developing packaged software applications for
Internet-based interactive commerce. During 1994 and 1995, the Company derived
a significant portion of its revenue from contract software development projects
with two companies under which the Company retained ownership of the technology
developed. These projects formed the foundation for the development of
OneServer, the Company's core software application, which was commercially
released in September 1995, and OrderStream, the first pre-configured
implementation of OneServer, which was commercially released in June 1996.
In the second quarter of 1997, the Company announced a new product,
PurchaseStream. The PurchaseStream application is an Internet-based purchasing
system that simplifies and streamlines acquisition of indirect goods and
services. With PurchaseStream, end-user requisitioners are empowered to place
secure online orders for routine transactions through an electronic mall of
approved suppliers. PurchaseStream was available on a limited basis and became
commercially available in December 1997. (OneServer, OrderStream, and
PurchaseStream are trademarks of the Company).
The Company transferred, effective December 31, 1997, its legacy online
services business to a new company formed primarily by former CONNECT employees,
thus allowing the company to focus entirely on its electronic commerce
applications software business. The online services business accounted for $1.7
million of revenue in 1997. As a result, the Company will be dependent solely
on OrderStream and PurchaseStream products and related services for revenue in
fiscal 1998, and the Company's past results of operations should not be relied
upon as indicative of future results.
The Company derives revenue from software license fees and services. License
fees primarily consist of revenue from licenses of the Company's application
software. Service revenue consists of fees from implementation (including
customization of licensed software), training, maintenance and support, contract
software development projects, and system hosting and on-line
-7-
<PAGE>
services. On January 1, 1998, the Company adopted Statement of Position No. 97-
2, "Software Revenue Recognition" (SOP 97-2) which superceded Statement of
Position 91-1, "Software Revenue Recognition" (SOP 91-1). Arrangements with
effective dates prior to January 1, 1998 have been and will be accounted for
under SOP 91-1. Any amendments after January 1, 1998 to arrangements with
effective dates prior to January 1, 1998 will be accounted for under SOP 97-2.
The implementation of SOP 97-2 did not have a material adverse affect on the
Company's business or revenue accounting practices or on the Company's reported
revenues and earnings for the three months ended March 31, 1998. In accordance
with SOP 97-2, license revenue is recognized on shipment of the application
software provided there are no significant remaining obligations and the Company
deems the collectability probable. License fees under contracts requiring
significant implementation, including customization, of licensed application
software are recognized on a percentage-of-completion basis. Revenue from
implementation services is recognized as the services are performed.
The Company also typically enters into maintenance agreements in connection
with licenses of its application software under which revenue is recognized
ratably over the term of the agreement, generally one year. Usage fees related
to the Company's training, system-hosting services, private on-line services and
consulting services are recognized as the services are performed.
The Company incurred net losses in each fiscal year since its inception and
as of March 31, 1998, has an accumulated deficit of $64.5 million. The Company's
operating expenses increased in 1997 and 1996 as the Company made investments
related to the development and introduction of OneServer, OrderStream and
PurchaseStream. To date, all research and development costs have been expensed
as incurred, instead of being capitalized, because the costs have not been
material. The Company anticipates its operating expenses will decrease during
the 1998 fiscal year as compared to 1997, primarily as a result of the reduction
of headcount affected at the beginning of the second quarter of 1998. Although
the reduction in headcount could help the Company meet its operating expense
objectives, such reduction could adversely impact the Company's sales, marketing
and product development efforts. As the market for Internet-based electronic
commerce continues to evolve, the combination of an evolving market and the
Company's dependence on a relatively small number of large value transactions
has created additional complexities in forecasting revenues and, therefore,
staffing requirements. Because of these conditions, and the Company's limited
resources, the Company has focused on controlling expenses and has reduced
headcount until a clearer picture of market demands, and its abilities to meet
them, exists. The Company anticipates that operating expenses will continue to
exceed revenues, resulting in continuing net losses and negative cash flow from
operations for the foreseeable future.
The Company's prospects are dependent upon the successful acceptance of its
products by the market, and must be evaluated in light of the risks and
uncertainties frequently encountered by companies dependent upon such early
stage products. In addition, the Company's markets are new and rapidly evolving,
which heightens these risks and uncertainties. To address these risks, the
Company must, among other things, successfully implement its marketing strategy,
respond to competitive developments, continue to develop and upgrade its
products and technologies more rapidly than its competitors, and commercialize
its products and services incorporating these enhanced technologies. There can
be no assurance that the Company will succeed in addressing any or all of these
risks. See "Risk Factors" in the Annual Report, as well as the risks discussed
elsewhere in this Quarterly Report.
Revenue
Total revenue was $2,252,000 for the three months ended March 31, 1998,
compared to $1,887,000 for the three months ended March 31, 1997, an increase of
19%.
License. License revenue was $1,026,000 or 46% of total revenue for the
three months ended March 31, 1998, compared to $403,000, or 21% of total
revenue, for the comparable period in 1997, representing an increase of $623,000
or 155%.
Service. Service revenue was $1,226,000, or 54% of total revenue, for the
quarter ended March 31, 1998 compared to $1,484,000, or 79% of total revenue,
for the comparable period in 1997, representing a decrease of $258,000 or 17%.
Service revenue in 1998 was lower than 1997 primarily due to reduced staff
because of fewer software implementation projects.
-8-
<PAGE>
Cost of Revenue
Cost of License. Cost of license revenue includes sub-license fees and
expenses relating to product media duplication and manuals. Cost of license
revenue was $178,000, or 17% of license revenue, for the quarter ended March 31,
1998 compared to $176,000, or 44% of license revenue for the quarter ended March
31, 1997. The 27% decline in cost of license as a percentage of revenue from
1997 to 1998, is primarily related to fixed departmental costs associated with
product documentation efforts.
Cost of Service. Cost of service revenue consists of cost of implementation
services including fees for third-party contract developers, Company personnel
costs, training and customer support costs for OneServer; costs associated with
contract software development projects, telecommunications, personnel costs,
depreciation related to hosting services and the operation of the Company's
private online service. Cost of service revenue was $1,402,000 or 114% of
service revenue, for the quarter ended March 31, 1998 compared to $2,683,000, or
181% of service revenue, for the quarter ended March 31, 1997. The cost as a
percent of revenue declined due to cost reduction steps taken in the Company's
services business and the absence of charges in the first quarter of 1998
related to fixed price contracts that existed in the first quarter of 1997.
Operating Expenses
Research and Development. Research and development expenses consist primarily
of personnel and equipment costs. Research and development expenses for the
three months ended March 31, 1998 were $1,311,000 or 58% of total revenue
compared with $1,408,000 or 75% for the comparable period in 1997. The decline
in total research and development expense is related to staffing and cost
reduction measures. The Company expects expense in 1998 to be lower than 1997
levels.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions of sales and marketing personnel, travel, and marketing
and promotional expense. Sales and marketing expenses were approximately
$1,440,000 or 64% of total revenue for the three months ended March 31, 1998
compared with $2,218,000 or 118% of total revenue for the comparable period in
1997. The decrease in 1998 from 1997 was attributable to decreased staffing and
reductions in marketing expenditures.
General and Administrative. General and administrative expenses consist
primarily of salaries of financial, administrative and management personnel and
related travel expenses, as well as legal, accounting and public company related
expenses. General and administrative expenses were $736,000 or 33% of total
revenue for the three months ended March 31, 1998, compared with $651,000 or 34%
of total revenue for the comparable period in 1997. The Company expects 1998
general and administrative expenses to remain relatively constant in absolute
dollars with general and administrative expense in 1997.
Other Income(Expense)
Other income (expense) consists primarily of interest expense and interest
income. Interest expense, which results principally from interest incurred
under notes payable and capital lease obligations, was $222,000 or 10% of total
revenue for the three months ended March 31, 1998, compared with $70,000 or 4%
for the comparable period in 1997. Interest expense increased in 1998 from 1997
due to interest associated with the convertible notes issued in November 1997.
Interest income and other principally represents interest earned on cash
balances. Interest and other income was $87,000 or 4% of total revenue for the
three months ended March 31, 1998, compared with $121,000 or 6% of total revenue
for the comparable period in 1997. This decrease is primarily due to lower cash
balances in 1998.
The Company has a tax loss carry forward and is currently incurring losses
-9-
<PAGE>
for tax purposes. Accordingly, there is no provision for income taxes.
FACTORS AFFECTING QUARTERLY OPERATING RESULTS
The Company has experienced and expects to continue to experience significant
fluctuations in quarterly operating results that may be caused by many factors
including, among others, the number, timing and significance of product
enhancements and new product announcements by the Company or its competitors,
the ability of the Company to develop, introduce and market new and enhanced
versions of the Company's products on a timely basis, the length of the
Company's sales cycle, market acceptance of and demand for the Company's
products, the pace of development of electronic commerce conducted on the
Internet, the mix of the Company's products sold, customer order deferrals in
anticipation of enhancements or new products offered by the Company or its
competitors, non-renewal of service agreements, software defects and other
product quality problems, the Company's ability to attract and retain key
personnel, the extent of international sales, changes in the level of operating
expenses and general economic conditions. The Company anticipates that a
significant portion of its revenue will be derived from a limited number of
orders placed by large corporations, and the timing of receipt and fulfillment
of any such orders is expected to cause material fluctuations in the Company's
operating results, particularly on a quarterly basis. The Company expects to
recognize the majority of its license revenue in the last month of each quarter.
As a result, any delay in delivery of products at the end of a quarter could
materially adversely affect operating results for that quarter. Furthermore,
the operating results of many software companies reflect seasonal trends, and
the Company expects to be affected by such trends in the future due to the
foregoing factors, quarterly revenue and operating results are difficult to
forecast. Revenue is also difficult to forecast because the market for
Internet-based packaged applications software is rapidly evolving and the
Company's sales cycle may vary substantially from customer to customer.
Further, the Company's expense levels are based, in significant part, on the
Company's expectations as to future revenue and are therefore relatively fixed
in the short term. If revenue levels fall below expectations, net loss is
likely to be disproportionately adversely affected because a proportionately
smaller amount of the Company's expenses varies with its revenue. There can be
no assurance that the Company will be able to achieve profitability on a
quarterly or annual basis in the future. Due to all the foregoing factors, the
Company's future operating results may be below the expectations of securities
analysts and investors as happened in the quarters ended March 31, 1997 and
March 31, 1998. In such event, the price of the Company's Common Stock would
likely be materially adversely affected. See "Risk Factors - Fluctuations in
Quarterly Operating Results" in the Company's Annual Report on Form 10-K.
YEAR 2000 COMPLIANCE
The Company has determined that it will need to modify or replace significant
portions of its software so that its internal computer systems will function
properly with respect to dates in the Year 2000 and beyond. The Company has
initiated discussions with its significant suppliers and financial institutions
to ensure that those parties have appropriate plans to mediate Year 2000 issues
where their systems interface with the Company's systems or otherwise impact its
operations. The Company is assessing the extent to which its operations would be
affected in the event that such third parties fail to mediate Year 2000 issues.
A team of internal staff is managing the Company's Year 2000 initiative. The
activities are designed to ensure that there is no adverse effect on the
Company's core business operations and that transactions with suppliers and
financial institutions are fully supported. While the Company believes its
planning efforts are adequate to address year 2000 concerns, there can be no
assurance that the systems of third parties on which the Company's systems and
operations rely will be converted on a timely basis. The cost of the Year 2000
initiatives is not expected to be material to the Company's results of
operations or financial condition. There can be no assurance that another
company's failure to ensure year 2000 capability would not have an adverse
effect on the Company.
The Company believes that all of its existing products are Year 2000
compliant and new products are being designed to be Year 2000 compliant.
Although products have undergone, and will undergo, the Company's normal quality
testing procedures, there can be no assurance that the Company's products will
contain all necessary data code changes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily through the private
and public sale of debt and equity securities and the use of capitalized leases
for equipment financing. The Company had working capital of $4.4 million and
$7.4 million at March 31, 1998 and 1997, respectively.
During the quarters ended March 31, 1998 and 1997, net cash used in operating
activities was $1.5 million and $4.6 million respectively, primarily due to net
losses incurred by the Company.
During the quarters ended March 31, 1998 and 1997, the Company used $183,000
and $185,000 respectively, in investing activities primarily for the purchase of
property and equipment. Net cash used by financing activities for the three
months ended March 31, 1998 was $355,000, primarily from the costs associated
with issuance of convertible preferred stock and repayment of notes payable.
Net cash provided by financing activities for the three months ended March 31,
1997 was $1.5 million, primarily from the issuance of notes payable.
The Company has incurred net losses and experienced significant negative
-10-
<PAGE>
cash flow from operations since inception. As of March 31, 1998, the Company has
an accumulated deficit of $64.5 million. Based upon its current operating plan,
the Company believes it has adequate cash balances to fund its operations
through at least December 31, 1998. There can be no assurance, however, that the
Company's actual cash requirements will not exceed anticipated levels, or that
the Company will generate sufficient revenue to fund its operations in the
absence of additional funding sources. If additional funds are raised through
the issuance of equity securities, stockholders of the Company may experience
additional dilution, or the securities may have rights preferences or privileges
senior to those of the Company's Common Stock. There can be no assurance that
such additional financing will be available on acceptable terms, if at all. If
adequate funds are not available or are not available on acceptable terms, the
Company me be unable to continue operations, develop or enhance its products,
take advantage of future opportunities or respond to competitive pressures of
other requirements, any of which would have a material adverse effect on the
Company's business, operating results and financial condition.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
On November 18, 1997, the Company closed the private placement (the
"Private Placement") of 250 Units consisting of one (1) convertible
note (a "Note")in the principal amount of $40,000 and one (1) warrant
(a "Warrant") to purchase 2,666 shares of Common Stock of the Company.
The Units were priced at $40,000 per Unit, resulting in gross proceeds
of approximately $10 million. Lehman Brothers, Inc. received a
placement fee of 8% of gross proceeds (excluding proceeds from sales
of up to $2,000,000 of Units to current stockholders of the Company)
from the Private Placement for services rendered in connection with
the Private Placement, 50% of which have been paid in cash and the
balance of which has been paid in Units (consisting of 8 Units issued
to LBI holdings, an affiliate of Lehman Brothers, Inc.). Each Note
accrued interest at a rate of 5% per annum and was convertible at the
option of the holder into shares of the Company's Common Stock at a
price per share equal to the lesser of (i) $10.00 or (ii) 80% of the
average closing bid price of the Company's Common Stock during the 10
trading days prior to conversion. The Company relied on Rule 506 of
Regulation D under the Securities Act of 1933, as amended (the "Act"),
which among other things, provides an exemption from the registration
requirements of the Act for sales to accredited investors (as defined
by Rule 501 (a) of regulation D under the Act).
On February 26, 1998, the Company and each holder of the Notes
exchanged all of the Notes that had not been converted as of such date
(which Notes had an aggregate principal amount of $9,744,250) for
4,905,209 shares of the Company's Series A Preferred Stock, plus
accrued interest on such Notes. The Company relied on Section 3(a)(9)
of the Act, which provides an exemption for exchange of securities
with existing security holders.
Each share of Series A Preferred Stock issued in exchange for the
Notes is convertible at the option of the holder into that number of
shares of Common Stock equal to the greater of (i) the quotient
obtained by dividing $2.00, plus accumulated but unpaid dividends, by
the conversion price (which initially is $10.00 per share and shifts
to $7.50 per share on December 15, 1999) or (ii) the quotient obtained
by dividing $2.00, plus accumulated but unpaid
-11-
<PAGE>
dividends, by 80% (or 60% if the conversion occurs after December 15,
1999) of the average closing bid price for the 10 trading days prior
to conversion. The initial conversion price will be subject to
adjustment in the event of issuance's of capital stock at a purchase
price of less than $10.00 (other than issuance of Common Stock to
employees, directors or consultants of the Company) and convertible
securities with a conversion price of less than $10.00 per share, as
well as stock splits, stock combinations and the like.
On April 1, 1998, each outstanding share of Series A Preferred Stock
was exchanged for 1.739 shares of Common Stock, representing a price
per share of Common Stock of $1.15. An aggregate of 8,096,911 shares
of Common Stock were issued as a result of the exchange. The Company
relied on Section 3(a)(9) of the Act, which provides an exemption for
exchange of securities with existing security holders.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a Special Meeting of Stockholders on February
24, 1998 at which the stockholders approved the following actions:
1. Five for One Reverse Split.
<TABLE>
<CAPTION>
Favor Opposed Abstain
----- ------- -------
<S> <C> <C>
15,948,292 1,156,463 23,460
</TABLE>
2. Approval of Increase in Authorized Shares of Common Stock to 60
million.
<TABLE>
<CAPTION>
Favor Opposed Abstain
----- ------- -------
<S> <C> <C>
15,670,546 1,425,931 31,710
</TABLE>
3. Approval of Issuance of Series A Preferred Stock, (and Common
Stock upon conversion thereof) of Outstanding Notes.
<TABLE>
<CAPTION>
Favor Opposed Abstain
----- ------- -------
<S> <C> <C>
12,611,940 1,388,323 56,328
</TABLE>
There were 19,271,074 share of Common Stock entitled to vote at the
meeting, of which 17,128,205 were present in person or by proxy.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
ITEM DESCRIPTION
---- -----------
4.1 Form of Exchange Agreement between the Company and holders of Series
A Preferred Stock (incorporated by reference to The Company's current
report of From 8-K filed on April 3,1998).
10.28 Consulting Agreement dated April 2, 1998 between the Company and
Gordon J. Bridge.
10.29 Agreement dated April 1, 1998 between the Company and Craig Norris.
10.30 Agreement and Mutual Release dated March 27, 1998 between the
Company and Bart Foster.
10.31 Amended and Restated Change of Control Agreement between the Company
and Kenneth M. Ross dated as of April 30, 1998.
-12-
<PAGE>
10.32 Amended and Restated Change of Control Agreement between the Company
and Joseph G. Girata dated as of April 30, 1998.
10.33 Amended and Restated Change of Control Agreement between the Company
and Lucille Hoger dated as of April 30, 1998.
10.34 Amended and Restated Change of Control Agreement between the Company
and Craig D. Norris dated as of April 30, 1998.
27 Financial Data Schedule
B) REPORT ON FORM 8-K
1. Form 8-K filed on April 3, 1998.
(i) Item 5. Other Events. (Press Releases relating to
exchange and management restructure.)
2. Form 8-K filed on February 27, 1998.
(i) Item 5. Other Events. (Exchange of notes for
Preferred Stock.)
3. Form 8-K filed on February 27, 1998.
(i) Item 5. Other Events. (Disclosure of effect of
adoption of Fas128.)
4. Form 8-K filed on January 29, 1998.
(i) Item 5. Other Events. (transfer of on-line
Services division.)
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONNECT, Inc.
Date: May 11, 1998 /s/ Craig D. Norris
- ------------------------- --------------------------
Craig D. Norris
President and Chief Executive
Officer
(Principal Executive Officer)
Date: May 11, 1998 /s/ Joseph G. Girata
- ------------------------- --------------------------
Joseph G. Girata
Vice President, Finance &
Administration, and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-14-
<PAGE>
EXHIBIT 10.28
CONNECT, INC.
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is made by and between CONNECT,
---------
Inc. (the "Company"), and Gordon J. Bridge ("Mr. Bridge").
------- ----------
RECITALS
Since November 1995, Mr. Bridge served as the Chairman of the Company's
Board of Directors and since April 1997 he has also served as its President and
Chief Executive Officer. The Company and Mr. Bridge have mutually agreed to end
Mr. Bridge's employment relationship with the Company, to release each other
from any claims arising from or related to the employment relationship and to
enter into a consulting arrangement pursuant to which Mr. Bridge will continue
to act as Chairman of the Board and to perform consulting services for the
Company as described below.
In consideration of the mutual promises made herein, the Company and Mr.
Bridge (collectively referred to as the "Parties") hereby agree as follows:
-------
1. TRANSITION. The Company and Mr. Bridge acknowledge and agree that Mr.
----------
Bridge's employment with the Company ended effective at the close of business on
April 1, 1998. The Company and Mr. Bridge further acknowledge and agree that
from April 2, 1998 through March 31, 1999 (the "Consulting Period") Mr. Bridge
-----------------
will (a) provide consulting services to the Company, and (b) contingent upon his
being re-elected to the Board of Directors at the 1998 Annual Meeting of the
Company's Stockholders, continue as Chairman of the Board of Directors of the
Company. Notwithstanding the preceding sentence, Mr. Bridge acknowledges that
the Company is under no obligation to cause him to be elected or retained as a
Board member during any period.
2. CONSULTING ARRANGEMENTS. Effective as of April 2, 1998, and subject to
-----------------------
the terms of this Agreement, the Company agrees to retain Mr. Bridge as a
consultant to perform such services as directed by the Board of Directors of the
Company (the "Consulting Arrangement"). The Consulting Arrangement shall
----------------------
continue until March 31, 1999, unless earlier terminated by Mr. Bridge for any
reason or by the Company pursuant to Section 13 below. In addition to normal
services to the Company in his role as Chairman of the Board, the services to be
provided by Mr. Bridge pursuant to the Consulting Arrangement shall include
resolving certain issues related to the Company's capitalization, establishing a
strategic partnership relationship between the Company and another entity
approved by the Board which results in either a significant equity investment in
the Company or significant licensing revenues to the Company, providing selected
customer support, supporting the Chief Executive Officer/President as requested
and performing such other duties, if any, as shall from time to time be agreed
upon by Mr. Bridge and the Board. In his role as a consultant, Mr. Bridge
agrees to make himself reasonably available to provide the services requested by
the Company from time to time during the Consulting Period.
<PAGE>
3. CONSIDERATION.
-------------
(a) CONSULTING FEE. The Company shall pay Mr. Bridge a fee of $18,750
--------------
per month for the Consulting Period as a retainer for his services as Chairman
of the Board of Directors of the Company and for performing consulting services
as specified above.
(b) BONUSES.
-------
(i) Mr. Bridge acknowledges receipt from the Company of a bonus
relating to the first quarter of fiscal year 1998 in the amount of $23,125 (the
"Q1 98 Bonus").
- -------------
(ii) Contingent upon the Company's achieving its fiscal 1998
operating margin objectives (which objectives may be established and/or altered,
in good faith, by the Board of Directors after the Effective Date (as defined in
Section 23 below) of this Agreement), Mr. Bridge shall be entitled to a bonus
payable in January 1999 equal to the amount, if any, of the Q1 98 Bonus.
(c) EXPENSES. In lieu of providing Mr. Bridge with office space
--------
during the Consulting Period, the Company agrees to reimburse him for home
office expenses incurred by him in connection with his performance of services
hereunder in an amount of $500 per month provided that such expenses are
substantiated in accordance with Company policy. Notwithstanding the preceding
sentence, should Mr. Bridge secure employment with another employer during the
Consulting Period, the Company's obligations under this Section 3(c) shall
terminate upon commencement of such employment.
(d) LOAN FORGIVENESS. In April 1997, the Company loaned Mr. Bridge
----------------
$150,000, which loan is evidenced by a promissory note in the form attached
hereto as Exhibit A (the "Note"). Pursuant to its terms, all amounts owing
--------- ----
under the Note become due and payable upon the earlier of April 1, 2000 or the
date of termination of Mr. Bridge's employment relationship with the Company.
In consideration for Mr. Bridge's agreement hereunder to enter into the
Consulting Arrangement and for his release of claims set forth in this
Agreement, the Company agrees to the following with respect to the Note:
(i) To the extent that any amounts remain outstanding under the
Note at such time, outstanding principal, plus all accrued but unpaid interest,
under the Note shall become due and payable in full on March 31, 1999; and
(ii) Outstanding principal, plus accrued but unpaid interest,
shall be forgiven in the following amounts and upon the occurrence of the
following events:
(A) Fifty percent (50%) of outstanding principal, plus
accrued but unpaid interest, shall be forgiven in consideration for Mr. Bridge's
having entered into this Agreement. Assuming satisfaction of the above
condition, such amount shall be considered forgiven for all purposes as of the
Effective Date (as defined in Section 23 below) of this Agreement.
<PAGE>
(B) Twenty-five percent (25%) of outstanding principal,
plus accrued but unpaid interest, shall be forgiven in consideration for Mr.
Bridge's having resolved certain issues relating to the Company's
capitalization.
(C) Twenty-five percent (25%) of outstanding principal,
plus accrued but unpaid interest, shall be forgiven in consideration for Mr.
Bridge's having brought about the establishment of a strategic partnership
between the Company and a third party which results in either a significant
equity investment in the Company or significant licensing revenues to the
Company.
The Board of Directors has determined that the condition specified in subsection
(b) above has been satisfied and the applicable principal and accrued interest
amount shall be forgiven for all purposes as of the Effective Date (as defined
in Section 23 below) of this Agreement. The Board shall determine in good faith
whether the condition specified in subsection (C) above has been satisfied for
purposes of this Section 3(d) and the applicable principal and accrued interest
amount shall be forgiven for all purposes as of the date of such Board
determination.
(e) LAPTOP COMPUTER. The Parties agree Mr. Bridge shall be entitled to
---------------
retain possession of a Compaq laptop computer previously provided to him by the
Company.
4. STOCK OPTIONS. Under the terms of the Stock Option Agreements issued
-------------
to Mr. Bridge over the course of his employment with the Company, Mr. Bridge was
granted options to purchase 39,000 (the "November Options"), 25,000 (the
----------------
"January 1996 Options"), 5,000 (the "April 1996 Options"), 79,999 (the "April
- --------------------- -----
1997 Options") and 79,999 (the "January 1998 Options") shares (after giving
- ------------ --------------------
effect to a one-for-five reverse stock split in February 1998), respectively, of
the Company's Common Stock under the Company's 1989 Stock Option Plan and 1996
Stock Option Plan (the "Options").
-------
(a) ACCELERATION OF OPTIONS. The Parties agree that pursuant to the
-----------------------
terms of that certain letter agreement between Mr. Bridge and the Company dated
October 19, 1995, as modified by a letter dated June 7, 1996 (collectively, the
"Offer Letter"), the November Options, the January 1996 Options and the April
------------
1996 Options (to purchase an aggregate of 69,000 shares) became exercisable in
full as of April 1, 1998 (the "Vested Options"). The Vested Options shall remain
--------------
exercisable until the end of business on April 30, 1999, as of which time such
options shall terminate if not exercised. Mr. Bridge acknowledges that the
Vested Options shall lose their status as incentive stock options upon the
Effective Date (as defined in Section 23 below) of this Agreement.
(b) CONTINUED VESTING OF OPTIONS. The Parties agree that the April
----------------------------
1997 Options and the January 1998 Options (to purchase an aggregate of 159,998
shares) (the "Vesting Options") shall continue to vest according to their
---------------
respective vesting schedules through March 31, 1999; that that portion of the
Vesting Options which are vested as of March 31, 1999 shall remain exercisable
until the end of business on April 30, 1999, as of which time such options shall
terminate if not exercised; and that that portion of the Vesting Options which
have not vested as of March 31, 1999 shall terminate as of such date. Mr. Bridge
acknowledges that the Vesting Options shall lose their status as incentive stock
options upon the Effective Date (as defined in Section 23 below) of this
Agreement.
<PAGE>
(c) CHANGE OF CONTROL. Upon a Change of Control of the Company (as
-----------------
defined below), the vesting of all the Vesting Options shall be accelerated and
such options shall become fully exercisable upon the occurrence of such
transaction. A "Change of Control" for purposes of this Section 4(c) shall mean
-----------------
the closing on or prior to March 31, 1999 of (i) a merger or consolidation of
the Company, whether or not approved by the Board of Directors, other than a
merger or consolidation which would result in holders of more than fifty percent
(50%) of the voting power represented by the voting securities of the Company
outstanding immediately prior thereto continuing to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the total
voting power represented by the voting securities of the Company, or of such
surviving entity, outstanding immediately after such merger or consolidation, or
(ii) the Company's sale of all or substantially all of its assets; provided
however that a transaction described in (i) or (ii) above which closes after
March 31, 1999 but on or before April 30, 1999 shall be considered a Change of
Control if a definitive agreement with respect to such transaction was entered
into by the Company on or before March 31, 1999.
(d) NO FURTHER RIGHTS. Except as set forth in this Section 4, Mr.
-----------------
Bridge acknowledges that as of April 1, 1998, he owns 14,069 shares of the
Company's Common Stock (which shares were purchased upon exercise of a portion
of the November Options) and holds the Options described in Section 4(a) (to the
extent not previously exercised) and has no further right, title or interest in
or to any additional shares of the Company's capital stock under any document,
instrument or arrangement with the Company. Mr. Bridge further acknowledges
that, upon the Effective Date (as defined below in Section 23) of this Agreement
and in connection with the transition of his relationship with the Company from
an employment to a consulting relationship, he shall have no rights, other than
as set forth in this Section 4, to any stock option vesting acceleration
benefits relating to a change of control or termination of employment, including
those set forth in (i) the Offer Letter, (ii) the change of control agreement
between Mr. Bridge and the Company dated June 11, 1997 (the "Change of Control
-----------------
Agreement"), (iii) any option agreement pursuant to which the Options were
- ---------
issued, or (iv) any other agreement, instrument or arrangement with the Company.
5. BENEFITS.
--------
(a) Provided that Mr. Bridge timely and accurately elects such
coverage, he shall have the right following April 1, 1998 to continue, at his
own expense, coverage under the Company's medical, dental and vision (but not
life) insurance programs as provided by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), for the period required by
-----
COBRA.
(b) Except as set forth in this Section 5 and as required by
applicable law, Mr. Bridge shall not be entitled to participate in any benefit
plans or programs provided to employees of the Company following April 1, 1998.
6. TERMINATION OF PRIOR AGREEMENTS. Mr. Bridge and the Company agree that
-------------------------------
each of (a) the Offer Letter, (b) the Change of Control Agreement, (c) the
letter agreement
<PAGE>
between Mr. Bridge and the Company dated April 28, 1997, and (d) the letter
agreement between the Mr. Bridge and the Company date January 28, 1998,
(collectively, the "Prior Agreements") are hereby expressly terminated as
----------------
between Mr. Bridge and the Company, and that any rights, obligations, interests
or claims that Employee may have arising out of the Prior Agreements are
terminated and have no further force and effect.
7. NO OTHER PAYMENTS DUE. Mr. Bridge acknowledges and agrees that he has
---------------------
received all salary, accrued vacation, commissions, bonuses, compensation or
other sums due to him, other than amounts to be paid pursuant to Section 3 of
this Agreement. In light of the payment by the Company of all wages due, or to
become due, to Mr. Bridge, the Parties further acknowledge and agree that
California Labor Code Section 206.5 is not applicable to the Parties hereto.
That section provides in pertinent part as follows:
No employer shall require the execution of any release of any
claim or right on account of wages due, or to become due, or made
as an advance on wages to be earned, unless payment of such wages
has been made.
8. RELEASE OF CLAIMS. Mr. Bridge agrees that the foregoing consideration
-----------------
represents settlement in full of all outstanding obligations owed to Mr. Bridge
by the Company. Mr. Bridge and the Company, on behalf of themselves, and their
respective heirs, executors, officers, directors, employees, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor and successor
corporations, and assigns, hereby fully and forever release each other and their
respective heirs, executors, officers, directors, employees, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor and successor
corporations, and assigns, of and from any claim, duty, obligation or cause of
action relating to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, that any of them may possess arising from any
omissions, acts or facts that have occurred up until and including April 1, 1998
including, without limitation:
(a) any and all claims relating to or arising from Mr. Bridge's
employment relationship with the Company and the termination of that
relationship;
(b) any and all claims for wrongful discharge of employment; breach of
contract, both express and implied; breach of a covenant of good faith and fair
dealing, both express and implied, negligent or intentional infliction of
emotional distress; negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic advantage;
negligence; and defamation;
(c) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, and the California
Fair Employment and Housing Act;
(d) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
<PAGE>
(e) any and all claims for attorneys' fees and costs.
The Company and Mr. Bridge agree that the release set forth in this Section
8 shall be and remain in effect in all respects as a complete general release as
to the matters released. This release does not extend to any obligations
incurred under this Agreement.
9. ACKNOWLEDGMENT OF WAIVER OF CLAIMS UNDER ADEA. Mr. Bridge acknowledges
---------------------------------------------
that he is waiving and releasing any rights he may have under the Age
Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
----
release is knowing and voluntary. Mr. Bridge and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
ADEA after the Effective Date (as defined in Section 23 below) of this
Agreement. Mr. Bridge acknowledges that the consideration given for this waiver
and release Agreement is in addition to anything of value to which Mr. Bridge
was already entitled. Mr. Bridge further acknowledges that he has been advised
by this writing that (a) he should consult with an attorney prior to executing
-----
this Agreement; (b) he has at least twenty-one (21) days within which to
consider this Agreement; (c) he has at least seven (7) days following the
execution of this Agreement by the Parties to revoke the Agreement (the
"Revocation Period"); and (d) this Agreement shall not be effective until the
- ------------------
Revocation Period has expired.
10. CIVIL CODE SECTION 1542. The Parties represent that they are not
-----------------------
aware of any claim by either of them other than the claims that are released by
this Agreement. Mr. Bridge and the Company acknowledge that they have been
advised by legal counsel and are familiar with the provisions of California
Civil Code Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Mr. Bridge and the Company, being aware of said Code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.
11. NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION. Mr. Bridge
---------------------------------------------------------
understands and agrees that his obligations to the Company under his existing
Proprietary Information and Inventions Assignment and Confidentiality Agreement
with the Company (the "Confidentiality Agreement"), a copy of which is attached
-------------------------
hereto as Exhibit B, shall continue through the Consulting Period and shall
---------
survive termination of his relationship with the Company under this Agreement
and that Mr. Bridge shall continue to maintain the confidentiality of all
confidential and proprietary information of the Company as provided by the
Confidentiality Agreement. Mr. Bridge agrees that at all times hereafter, he
shall not intentionally divulge, furnish or make available to any party any of
the trade secrets, patents, patent applications, price decisions or
determinations, inventions, customers, proprietary information or other
intellectual property of the Company, until after such time as such information
has become publicly known otherwise than by act of collusion of Mr. Bridge.
<PAGE>
12. NONCOMPETITION AND NONSOLICITATION. Mr. Bridge agrees that through the
----------------------------------
end of the Consulting Period, he shall not, without the prior written consent of
the Company, at any time during the term of this Agreement, directly or
indirectly, whether or not for compensation, (a) engage in, or have any interest
in any person, firm, corporation or business (whether as an employee, officer,
director, agent, security holder, creditor, consultant, partner or otherwise)
that engages in any activity that is in direct competition with the Company,
including, without limitation, OMI and BroadVision, but excluding companies that
may on their own decide to build interactive commerce software as part of a
broader business initiative but that do not specifically aim to license
application software to others in direct competition with the Company, (b)
divert or attempt to divert from the Company, or any affiliated company, any
business of a kind involving the professional specialties or product lines
indicated in clause (a) above, or (c) induce or attempt to induce any person who
is an employee of the Company, or any affiliated company, to leave the Company,
or any affiliated company, to become an employee of any person, firm,
corporation or business described in clause (a) above; provided, however, that
-------- -------
Mr. Bridge may own up to 1% of the securities of any company whose securities
are publicly traded that is of a sort described in clause (a) above.
The Parties intend that the covenant contained in the preceding paragraph
shall be construed as a series of separate covenants, one for each county or
other geographic or political subdivision of each jurisdiction in which the
Company conducts business. If, in any judicial proceeding, a court shall refuse
to enforce any of the separate covenants deemed included in this paragraph, then
the unenforceable covenant shall be deemed eliminated from the provisions for
the purpose of those proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
13. BREACH OF THIS AGREEMENT. Mr. Bridge acknowledges that upon breach of
------------------------
the Confidentiality, Nondisclosure of Confidential and Proprietary Information
and the Noncompetition and Nonsolicitation provisions contained in Sections 11
and 12 of this Agreement, the Company would sustain irreparable harm from such
breach, and, therefore, Mr. Bridge agrees that in addition to any other remedies
which the Company may have under this Agreement or otherwise, the Company shall
be entitled to obtain equitable relief, including specific performance and
injunctions, restraining Mr. Bridge from committing or continuing any such
violation of this Agreement. Mr. Bridge acknowledges and agrees that upon Mr.
Bridge's material or intentional breach of any of the provisions of this
Agreement (including Sections 11 and 12) and following written notice of such
breach by the Company to Mr. Bridge and an opportunity to cure such breach
within five (5) business days where such breach may be cured, in addition to any
other remedies the Company may have under this Agreement or otherwise, the
Company's obligations to (i) provide payments and benefits, including any
further vesting of any of the Options after the date upon which an uncured
breach occurred, to Mr. Bridge as described in Sections 3 and 4 of this
Agreement, (ii) continue its Consulting Arrangement with Mr. Bridge, and (iii)
continue having Mr. Bridge serve as Chairman of the Company's Board of Directors
shall immediately terminate.
14. NON-DISPARAGEMENT. Each Party agrees to refrain from any
-----------------
disparagement, criticism, defamation, slander of the other, or tortious
interference with the contracts and relationships of the other.
<PAGE>
15. TAX CONSEQUENCES. The Company makes no representations or warranties
----------------
with respect to the tax consequences of the payment of any sums to Mr. Bridge
under the terms of this Agreement, provided however that Mr. Bridge acknowledges
that he is aware that any amounts payable by him under the Note that are
forgiven by the Company pursuant to Section 3(d) above shall constitute taxable
income to him at the time of such forgiveness. Mr. Bridge agrees and
understands that he is responsible for payment, if any, of local, state and/or
federal taxes on any and all sums paid hereunder by the Company and any
penalties or assessments thereon. Mr. Bridge further agrees to indemnify and
hold the Company harmless from any claims, demands, deficiencies, penalties,
assessments, executions, judgments, or recoveries by any government agency
against the Company for any amounts claimed due on account of Mr. Bridge's
failure to pay federal or state taxes or damages sustained by the Company by
reason of any such claims, including reasonable attorneys' fees.
16. AUTHORITY. The Company represents and warrants that the individual
---------
signing this Agreement on behalf of the Company has the authority to act on
behalf of the Company and to bind the Company and all who may claim through it
to the terms and conditions of this Agreement. Mr. Bridge represents and
warrants that he has the capacity to act on his own behalf and on behalf of all
who might claim through him to bind them to the terms and conditions of this
Agreement. Each Party warrants and represents that there are no liens or claims
of lien or assignments in law or equity or otherwise of or against any of the
claims or causes of action released herein.
17. NO REPRESENTATIONS. Neither Party has relied upon any representations
------------------
or statements made by the other Party hereto which are not specifically set
forth in this Agreement.
18. SEVERABILITY. In the event that any provision hereof becomes or is
------------
declared by a court or other tribunal of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
19. ARBITRATION. The Parties shall attempt to settle all disputes arising
-----------
in connection with this Agreement (or any of the exhibits hereto) through good
faith consultation. In the event no agreement can be reached on such dispute
within fifteen (15) days after notification in writing by either Party to the
other concerning such dispute, the dispute shall be settled by binding
arbitration to be conducted in Santa Clara County, California in accordance with
the then prevailing rules of the American Arbitration Association. The
arbitration decision shall be final, conclusive and binding on both Parties and
any arbitration award or decision may be entered in any court having
jurisdiction. The prevailing Party in any such proceeding shall be entitled to
recover its costs and expenses and attorneys' fees from the other Party. THE
PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO
ARBITRABLE CLAIMS.
20. ENTIRE AGREEMENT. Except for obligations which continue after
----------------
termination of Mr. Bridge's relationship with the Company pursuant to the
Confidentiality Agreement, this Agreement, and the exhibits thereto, represent
the entire agreement and understanding between the Company and Mr. Bridge
concerning Mr. Bridge's transition from an employee of the Company to a
consultant to the Company and his separation from the Company following the end
of the Consulting Period, and supersede and replace any and all prior agreements
and
<PAGE>
understandings concerning Mr. Bridge's relationship with the Company and his
compensation by the Company.
21. NO ORAL MODIFICATION. This Agreement may only be amended in writing
--------------------
signed by Mr. Bridge and the Company.
22. GOVERNING LAW. This Agreement shall be governed by the laws of the
-------------
State of California, without regard to its conflicts of law provisions.
23. EFFECTIVE DATE. This Agreement shall be effective upon the expiration
--------------
of the Revocation Period defined in Section 9 above. Such date is referred to in
this Agreement as the "Effective Date."
--------------
24. COUNTERPARTS. This Agreement may be executed in counterparts, and
------------
each counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
25. ASSIGNMENT. This Agreement may not be assigned by Mr. Bridge or the
----------
Company without the prior written consent of the other party. Notwithstanding
the foregoing, this Agreement may be assigned by the Company to a corporation
controlling, controlled by or under common control with the Company without the
consent of Mr. Bridge.
26. VOLUNTARY EXECUTION OF AGREEMENT. THIS AGREEMENT IS EXECUTED
--------------------------------
VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE ON THE PART OR BEHALF OF
THE PARTIES HERETO, WITH THE FULL INTENT OF RELEASING ALL CLAIMS. THE PARTIES
ACKNOWLEDGE THAT:
(a) THEY HAVE READ THIS AGREEMENT;
(b) THEY HAVE BEEN REPRESENTED IN THE PREPARATION, NEGOTIATION, AND
EXECUTION OF THIS AGREEMENT BY LEGAL COUNSEL OF THEIR OWN CHOICE OR THAT THEY
HAVE VOLUNTARILY DECLINED TO SEEK SUCH COUNSEL;
(c) THEY UNDERSTAND THE TERMS AND CONSEQUENCES OF THIS AGREEMENT AND
OF THE RELEASES IT CONTAINS; AND
(d) THEY ARE FULLY AWARE OF THE LEGAL AND BINDING EFFECT OF THIS
AGREEMENT.
[Signature Page Follows]
<PAGE>
The Parties have executed this Agreement on the respective dates set forth
below.
CONNECT, INC.
Dated as of April 2, 1998 /s/ JOSEPH G. GIRATA
-------------------------------------
(Signature)
By:
----------------------------------
Title:
-------------------------------
GORDON J. BRIDGE, an individual
Dated as of April 2, 1998 /s/ GORDON J. BRIDGE
-------------------------------------
Gordon J. Bridge
<PAGE>
EXHIBIT 10.29
April 1, 1998
Mr. Craig Norris
CONNECT, Inc.
515 Ellis Street
Mountain View, CA 94043
1998 EMPLOYMENT LETTER
----------------------
Dear Craig:
The Board of Directors of CONNECT, Inc. (the "Company") is pleased to offer
-------
you the position of President and Chief Executive Officer commencing as of April
1, 1998. You will report directly to the Board and all CONNECT officers will
report to you.
1. SALARY. Your salary for the calendar year 1998 will be $225,000 per
------
annum, payable in accordance with the Company's standard payroll policy,
commencing effective as of April 1, 1998.
2. PERFORMANCE BONUS. For each of the second, third and fourth quarters
-----------------
of fiscal 1998, you will be eligible to receive aggregate bonus payments of up
to $150,000 payable in accordance with the Company's standard Executive Bonus
Plan for the 1998 Fiscal Year, a copy of which is attached to this letter as
Attachment A.
- ------------
3. STRATEGIC BONUS. During the 1998 calendar year, you will be eligible
---------------
to receive a strategic bonus in an amount to be determined by the Company's
Board of Directors and payable when you have met the strategic objectives set by
the Board, as determined in good faith by the Board.
4. GRANT OF STOCK OPTIONS. Effective upon the date of the Company's 1998
----------------------
Annual Meeting of Stockholders and assuming that at such meeting the Company's
stockholders approve an amendment to the Company's 1996 Stock Option Plan
increasing the number of shares available for issuance thereunder, the Board of
Directors will grant to you a stock option (the "Option") (which will be an
------
incentive stock option to the maximum extent permitted by applicable law) to
purchase 780,000 shares of the Company's Common Stock. The Option will have an
exercise price equal to the fair market value of such shares as of such grant
date and will vest on a monthly basis over a period of 36 months, with such
vesting beginning as of April 1, 1998 and becoming fully vested on April 1,
2001, assuming that you satisfy certain conditions related to your continued
employment with the Company. In connection with the grant of the
<PAGE>
Option, you will be required to execute the Company's standard form of stock
option agreement, which will set forth with greater specificity the terms of the
Option.
5. CHANGE OF CONTROL BENEFITS. You will enter into an amended change of
--------------------------
control agreement amending the terms of that Change of Control Agreement dated
June 11, 1997 between you and the Company, which amended Change of Control
Agreement will provide you with certain benefits upon a change of control (as
defined therein) and certain additional benefits if you are terminated within
two years after a change of control.
6. RELOCATION EXPENSES. For the period April 1, 1998 through March 31,
-------------------
1999, the Company will reimburse you for rental expenses in connection with your
renting an apartment in the Bay Area and will reimburse you for expenses of up
to $35,000 in connection with relocating your family to the Bay Area. Any
amounts received by you for housing and relocation expense reimbursement will be
reported as taxable income to you in the year received as required by applicable
tax law.
7. WHOLE AGREEMENT. This letter supersedes any previous letters and e-
---------------
mails between you and the Company or the Board of Directors relating to the
subject matter of this letter, as well as any current employment and consulting
agreements you may have with the Company, except that the benefits provided
pursuant to this letter are in addition to any benefits provided under any stock
option agreements entered into by you and the Company prior to the date of this
letter and to any benefits provided pursuant to your Change of Control
Agreement, as amended from time to time after the date hereof.
[Signature Page Follows]
<PAGE>
This letter may be signed in one or more counterparts, all of which
together shall constitute one original.
Regards,
/s/ RORY O'DRISCOLL
Rory O'Driscoll
For the Board of Directors
CONNECT, Inc.
I accept this offer. /s/ CRAIG NORRIS April 1, 1998
---------------------- -------------
Craig Norris Date
<PAGE>
EXHIBIT 10.30
CONNECT, INC.
AGREEMENT AND MUTUAL RELEASE
This Agreement and Mutual Release ("Agreement") is entered into by and
between CONNECT, Inc., (the "Company"), and Barton S. Foster ("Employee").
WHEREAS, Employee has been employed by the Company;
WHEREAS, the Company and Employee have entered into an agreement regarding
confidential information and ownership of inventions (the "Confidentiality
Agreement");
WHEREAS, the Company and Employee have mutually agreed to terminate the
employment relationship and to release each other from any claims arising from
or related to the employment relationship;
NOW, THEREFORE, in consideration of the mutual promises made herein, the
Company and Employee (collectively referred to as the "Parties") hereby agree as
follows:
1. Resignation and Termination. The Company and Employee acknowledge and
---------------------------
agree that Employee will resign as Executive Vice President of Sales and
Marketing of the Company effective April 15, 1998 (the "Resignation Date") and
that Employee's employment with the Company will terminate effective July 15,
1998 (the "Termination Date"). As a condition to Employee's continued
employment with the Company, Employee agrees to provide services to assist the
President, or other employees of the Company as designated by the President, in
fulfilling certain tasks. All of such tasks will fall within the normal scope
of Employee's prior duties in Sales and Marketing.
2. Consideration. In consideration for the release of claims set forth
-------------
below and other obligations under this Agreement, the Company agrees to pay
Employee his regular salary (less applicable tax withholding) each month through
the Termination Date, in accordance with the Company's normal payroll practices.
3. Stock Options. Vesting of Employee's options to purchase shares of
-------------
Common Stock granted to Employee under the Company's 1989 and 1996 Stock Option
Plans that have not been exercised as of the date of this Agreement shall
continue through the Resignation Date. No additional option shares shall vest
after such date. In accordance with the terms of the Option Agreements issued
to Employee, vested options will be exercisable until August 15, 1998.
4. Benefits.
--------
(a) Employee shall continue to receive the Company's standard medical,
dental and life insurance benefits through July 31, 1998. After such date,
Employee shall have the right to continue, at his own expense, coverage under
the Company's health insurance as
<PAGE>
provided by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA");
(b) Employee shall be eligible to receive a bonus for Q1 1998 under
the Company's executive bonus program, if such bonus is determined to be payable
by the Company's Board of Directors; and
(c) The Company agrees to maintain Employee's voicemail and electronic
mail addresses on the Company's systems through the Termination Date.
(d) Employee's eligibility or coverage under all other Company benefit
programs shall end on the Termination Date, provided, however, that accrual of
paid time off benefits shall end on the Resignation Date.
5. Repayment of Loan. Employee acknowledges and agrees that he has an
-----------------
outstanding loan from the Company in the face amount of $30,000 (the "Loan") as
set forth in a Promissory Note executed on December 16, 1997 (the "Note") by
Employee. The Company and Employee acknowledge and agree that pursuant to the
terms of the Note, the amount accrued and owing on the Note is due and payable
on the Termination Date. In consideration for the release of claims set forth
below and other obligations of the parties under this Agreement, the Company
agrees to forgive all interest accrued on the Note. In addition, Employee and
the Company agree that the following amounts that will or may become due and
payable by the Company to Employee shall not be paid to Employee but shall be
applied in full toward repayment of the Note (after reduction for applicable tax
withholding), thereby reducing the amount due on the Note: (i) Employee's
accrued vacation balance; (ii) any bonus payable for Q1 1998 under the Company's
executive bonus program, if such bonus is determined to be payable by the
Company's Board of Directors; (iii) special commissions earned for all licensing
transactions booked in April and May 1998 with the accounts listed on Exhibit A
attached hereto. Employee further agrees that any gain realized by Employee
from the exercise and sale of Company stock option shares on or before August
15, 1998 shall be paid directly to the Company to repay amounts due on the Note.
In the event that Employee has commenced new employment on or before June 30,
1998, the severance payments to be paid to Employee pursuant to Section 2 of
this Agreement for the period of June 15 - July 15, 1998, shall be applied
toward repayment of the Note (after reduction for applicable tax withholding).
If Employee has not commenced new employment on or before June 30, 1998, the
Company shall not reduce such severance payments. In any event, Employee agrees
to execute a new promissory note in the amount of the principal and accrued
interest due on the Note on the date on which the final payment has been made to
the Company under this Section 5 (the "Second Note"), which amount shall be due
and payable by Employee in three equal monthly installments commencing on August
1, 1998. In exchange for Employee's satisfaction of the terms set forth in this
Section 5, the Company agrees to waive its right to repayment of the lesser of
$10,000 or the remaining balance owed on the Note and to reduce the principal
amount otherwise payable under the Second Note by a like amount.
6. No Other Payments Due. Employee acknowledges and agrees that he has
---------------------
received, or will receive on the Resignation Date, all salary, accrued vacation,
commissions,
<PAGE>
bonuses, compensation, shares of stock options therefore or other such sums as
may then be due to Employee other than amounts to be paid pursuant to Sections 2
and 4 of this Agreement. In light of the payment by the Company of all wages
due, or to become due to the Employee, the Parties further acknowledge and agree
that California Labor Code Section 206.5 is not applicable to the Parties
hereto. That section provides in pertinent part as follows:
No employer shall require the execution of any release of any
claim or right on account of wages due, or to become due, or made
as an advance on wages to be earned, unless payment of such wages
has been made.
7. Release of Claims. Employee agrees that the foregoing consideration
-----------------
represents settlement in full of all outstanding obligations owed to Employee by
the Company. Employee and the Company, on behalf of themselves, and their
respective heirs, executors, officers, directors, employees, investors,
shareholders, administrators, predecessor and successor corporations and
assigns, hereby fully and forever release each other and their respective heirs,
executors, officers, directors, employees, investors, shareholders,
administrators, predecessor and successor corporations and assigns from any
claim, duty, obligation or cause of action relating to any matters of any kind,
whether known or unknown, suspected or unsuspected, that either of them may
possess arising from any omissions, acts or facts that have occurred up until
and including the Effective Date of this Agreement including, without
limitation:
(a) any and all claims relating to or arising from Employee's
employment relationship with the Company and termination of that relationship;
(b) any and all claims relating to, or arising from, Employee's right
to purchase, or actual purchase of shares of stock of the Company;
(c) any and all claims for wrongful discharge of employment; breach of
contract, both express and implied; breach of a covenant of good faith and fair
dealing, both express and implied; negligent or intentional infliction of
emotional distress; negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic advantage; and
defamation;
(d) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Age Discrimination in Employment Act of 1967, and the
California Fair Employment and Housing Act;
(e) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
(f) any and all claims for attorney's fees and costs.
The Company and Employee agree that the release set forth in this section 6
shall be and remain in effect in all respects as a complete and general release
as to the matters released. This release does not extend to any obligations
incurred under this Agreement.
<PAGE>
8. Civil Code Section 1542. The parties represent that they are not aware
-----------------------
of any claim by either of them other than the claims that are released by this
Agreement. Employee and the Company acknowledge that they are familiar with the
provisions of California Civil Code Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Employee and the Company, being aware of such code section, agree to waive
any rights they may have thereunder, as well as under any other stature or
common law principles of similar effect.
9. Confidentiality. The parties each agree to use their best efforts to
---------------
maintain in confidence the existence of this Agreement, the contents and terms
of this Agreement, and the consideration for this Agreement (hereinafter
collectively referred to as "Settlement Information"). Each Party hereto agrees
to take every reasonable precaution to prevent disclosure of any Settlement
Information to third parties, and each agrees that there will be no publicity,
directly or indirectly, concerning any Settlement Information. The Parties
hereto agree to take every precaution to disclose Settlement Information only to
those employees, officers, directors, attorneys, accountants, governmental
entities, and family members who have a reasonable need to know of such
Settlement Information.
10. Nondisclosure of Confidential and Proprietary Information. Employee
---------------------------------------------------------
shall continue to maintain the confidentiality of all confidential and propriety
information of the Company as provided by the Confidentiality Agreement
previously entered into between the Company and the Employee, a copy of which is
attached hereto as Exhibit B. Employee agrees that at all times hereafter,
Employee shall not intentionally divulge, furnish or make available to any party
any of the trade secrets, patents, patent applications, price decisions or
determinations, inventions, customers, proprietary information or other
intellectual property rights of the Company, until after such time as such
information has become publicly known otherwise than by act of collusion of
Employee. Employee further agrees that he will return all the Company's
property and confidential and proprietary information in his possession to the
Company within five business days after the Resignation Date.
11. Breach of this Agreement. Employee acknowledges that upon breach of
------------------------
the confidential and proprietary information provision contained in Section 10
of this Agreement, the Company would sustain irreparable harm from such breach,
and, therefore, Employee agrees that in addition to any other remedies which the
Company may have for any breach of this Agreement or otherwise, including
termination of the Company's obligations to provide benefits to Employee as
described in Sections 2, 3, 4 and 5 of this Agreement, the Company shall be
entitled to obtain equitable relief, including specific performance and
injunctions, restraining Employee from committing or continuing any such
violation of this Agreement.
<PAGE>
12. Non-Disparagement. Each party agrees to refrain from any
-----------------
disparagement, criticism, defamation, slander of the other, or tortious
interference with the contracts and relationships of the other.
13. Authority. The Company represents and warrants that the undersigned
---------
has the authority to act on behalf of the Company and to bind the Company and
all who may claim through it to the terms and conditions of this Agreement.
Employee represents and warrants that he has the capacity to act on his own
behalf and on behalf of all who might claim through him to bind them to the
terms and conditions of this Agreement. Each Party warrants and represents that
there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of action released herein.
14. No Representations. Each party represents that it has carefully read
------------------
and understands the scope and effect of the provisions of this Agreement.
Neither party has relied upon any representations or statements made by the
other party which are not specifically set forth in this Agreement.
15. Costs. The Parties shall each bear their own costs, attorneys' fees
-----
and other fees incurred in connection with this Agreement.
16. Severability. In the event that any provision hereof becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
17. Arbitration. The Parties shall attempt to settle all disputes arising
-----------
in connection with this Agreement (or any of the exhibits hereto) through good
faith consultation. In the event no agreement can be reached on such dispute
within fifteen (15) days after notification in writing by either Party to the
other concerning such dispute, the dispute shall be settled by binding
arbitration to be conducted in Santa Clara County before the American
Arbitration Association under its California Employment Dispute Resolution
Rules, or by a judge to be mutually agreed upon. The arbitration decision shall
be final, conclusive and binding on both Parties and any arbitration award or
decision may be entered in any court having jurisdiction. The Parties agree
that the prevailing party in any arbitration shall be entitled to injunctive
relief in any court of competent jurisdiction to enforce the arbitration award.
The Parties further agree that the prevailing Party in any such proceeding shall
be awarded reasonable attorneys' fees and costs.
18. Entire Agreement. This Agreement represents the entire agreement and
----------------
understanding between the Company and Employee concerning Employee's separation
from the Company and supersedes and replaces any and all prior agreements and
understandings concerning Employee's relationship with the Company and his
compensation by the Company other than the stock option agreements described in
Section 3 and the Confidentiality Agreement described in Section 10.
19. No Oral Modification. This Agreement may only be amended in writing
--------------------
signed by Employee and the Company.
<PAGE>
20. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of California without reference to conflict of law provisions.
21. Effective Date. This Agreement shall be effective when it has been
--------------
signed by both parties and such date is referred to herein as the "Effective
Date".
22. Counterparts. This Agreement may be executed in counterparts, and
------------
each counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
23. Assignment. This Agreement may not be assigned by Employee or the
----------
Company without the prior written consent of the other party. Notwithstanding
the foregoing, this Agreement may be assigned by the Company to a corporation
controlling, controlled by or under common control with the Company without the
consent of Employee.
24. Voluntary Execution of Agreement. This Agreement is executed
--------------------------------
voluntarily and without any duress or undue influence on the part or behalf of
the parties hereto, with the full intent of releasing all claims. The parties
acknowledge that:
(a) They have read this Agreement;
(b) They have been represented in the preparation, negotiation and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(c) They understand the terms and consequences of this Agreement and
of the releases it contains; and
(d) They are fully aware of the legal and binding effect of this
Agreement.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and Mutual
Release on the respective dates set forth below.
CONNECT, INC.
By: /s/ JOSEPH G. GIRATA
---------------------------------
Title: Chief Financial Officer
-------------------------------
Dated: March 27, 1998
BARTON S. FOSTER, AN INDIVIDUAL
/s/ BARTON S. FOSTER
-------------------------------------
Barton S. Foster
Dated: March 27, 1998
<PAGE>
EXHIBIT 10.31
CONNECT, INC.
AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
This Amended and Restated Change of Control Agreement (the "Agreement") is
--------
made and entered into effective as of April __, 1998, by and between
Kenneth Ross (the "Employee") and CONNECT, Inc., a Delaware corporation (the
--------
"Company").
- -------
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
-----
a distraction to the Employee, an executive corporate officer of the Company,
and can cause the Employee to consider alternative employment opportunities.
The Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Hostile Takeover or a Change of Control (as each are defined
below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment with the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control or a Hostile Takeover and, under
certain circumstances, upon termination of the Employee's employment in
connection with a Change of Control, which benefits are intended to provide the
Employee with financial security and provide sufficient income and encouragement
to the Employee to remain with the Company notwithstanding the possibility of
such transactions.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. The Board, for the reasons set forth above, authorized the Company to
enter into Change of Control Agreements with each of its executive corporate
officers substantially in the form hereof.
F. Certain capitalized terms used in the Agreement are defined in Section
4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
<PAGE>
1. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that
------------------
the Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of Employee's offer letter from the Company, if applicable, and the
Company's established employee plans and written policies at the time of
termination. The terms of this Agreement shall terminate upon the earlier of
(i) the date on which Employee ceases to be employed as an executive corporate
officer of the Company, (ii) the date that all obligations of the parties
hereunder have been satisfied, or (iii) two (2) years after a Change of Control.
A termination of the terms of this Agreement pursuant to the preceding sentence
shall be effective for all purposes, except that such termination shall not
affect the payment or provision of compensation or benefits on account of a
termination of employment occurring prior to the termination of the terms of
this Agreement.
2. HOSTILE TAKEOVER. Subject to Section 7(1) below, in the event of
----------------
a Hostile Takeover and regardless of whether the Employee's employment with the
Company is terminated in connection with such takeover, each stock option
granted for the Company's securities held by the Employee shall become
immediately exercisable and vested, and shall be considered "Vested Shares"
-------------
under each such stock option, on the effective date of the Hostile Takeover as
to 100% of the shares issuable upon exercise of such option and shall be
exercisable in full in accordance with the provisions of the Option Agreement
and Plan pursuant to which such option was granted; and the Company's right of
repurchase with respect to such shares and any shares previously issued upon
exercise of stock options held by the Employee shall immediately lapse on such
date.
3. CHANGE OF CONTROL.
-----------------
(a) PAYMENT UPON CHANGE OF CONTROL. Except as limited by Section
------------------------------
7(l) below, the Employee shall be entitled to receive a cash payment equal to
2.99 times his or her total compensation for fiscal 1997 (base salary plus any
bonus received) on or prior to the closing of a Change of Control (as defined in
Section 4(a) below); provided however that such payment shall be reduced as
follows if the following circumstances apply: (i) if the payment to the Employee
would exceed one and one-quarter percent (1-1/4%) of the aggregate value
received by the stockholders of the Company in connection with such Change of
Control, such payment would be reduced to an amount equal to one and one-quarter
percent (1-1/4%) of such aggregate value, and (ii) if the aggregate value
received by the stockholders of the Company in connection with such Change of
Control was equal to or less than $25,000,000, such payment would be reduced to
zero.
(b) TERMINATION FOLLOWING A CHANGE OF CONTROL. Subject to Section
-----------------------------------------
7(1) below, if the Employee's employment with the Company is terminated at any
time within two (2) years after a Change of Control, then the Employee shall be
entitled to receive severance benefits as follows:
<PAGE>
(i) VOLUNTARY RESIGNATION. If the Employee voluntarily resigns
---------------------
from the Company (other than as an Involuntary Termination (as defined below),
or if the Company terminates the Employee's employment for Cause (as defined
below), then the Employee shall not be entitled to receive severance payments.
The Employee's benefits will be terminated under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination or as otherwise determined by the Board of Directors
of the Company.
(ii) INVOLUNTARY TERMINATION. If the Employee's employment is
-----------------------
terminated as a result of an Involuntary Termination other than for Cause, the
Employee shall be entitled to receive the following benefits: (i) monthly
severance payments during the period from the date of the Employee's termination
until the date 12 months after the effective date of the termination (the
"Severance Period") equal to the monthly salary which the Employee was receiving
- -----------------
immediately prior to the Change of Control; (ii) monthly severance payments
during the Severance Period equal to 1/12th of the Employee's "target bonus" (as
defined below) for the fiscal year in which the termination occurs; (iii)
continuation of health and life insurance benefits through the end of the
Severance Period substantially identical to those to which the Employee was
entitled immediately prior to the Change of Control; (iv) each stock option held
by the Employee shall become immediately exercisable and vested, and shall be
considered "Vested Shares" under each such stock option, on the date of
-------------
termination as to 100% of the shares issuable upon exercise of such option and
shall be exercisable in full in accordance with the provisions of the Option
Agreement and Plan pursuant to which such option was granted; and the Company's
right of repurchase with respect to such shares and any shares previously issued
upon exercise of stock options held by the Employee shall immediately lapse on
such date; and (v) outplacement services with a total value not to exceed
$15,000. The severance payments described in subsections (i) and (ii) above
shall be paid during the Severance Period in accordance with the Company's
standard payroll practices. For purposes of this Agreement, the term "target
------
bonus" shall mean that percentage of the Employee's base salary that is
- -----
prescribed by the Company under its Management Bonus Program as the percentage
of such base salary payable to the Company as a bonus if the Company pays
bonuses at one-hundred percent (100%) of its operating plan.
(iii) INVOLUNTARY TERMINATION FOR CAUSE. If the Employee's
---------------------------------
employment is terminated for Cause, then the Employee shall not be entitled to
receive severance payments. The Employee's benefits will be terminated under
the Company's then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination.
(b) TERMINATION APART FROM A CHANGE OF CONTROL. In the event the
------------------------------------------
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after the two year period following the effective date
of a Change of Control, then the Employee shall not be entitled to receive any
severance payments under this Agreement. The Employee's benefits will be
terminated under the terms of the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination or as otherwise determined by the Board of Directors of the Company.
<PAGE>
4. DEFINITION OF TERMS. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) CHANGE OF CONTROL. "Change of Control" shall mean the
----------------- -----------------
occurrence of any of the following events:
(i) OWNERSHIP. Any "Person" (as such term is used in Sections
--------- ------
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or
becomes the "Beneficial Owner" (as defined in Rule 13d-3 under said Act),
----------------
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company; or
(ii) MERGER/SALE OF ASSETS. A merger or consolidation of the
---------------------
Company, whether or not approved by the Board of Directors of the Company, other
than a merger or consolidation which would result in holders of more than fifty
percent (50%) of the voting power represented by the voting securities of the
Company outstanding immediately prior thereto continuing to hold (either by the
voting securities remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the total
voting power represented by the voting securities of the Company, or such
surviving entity outstanding immediately after such merger or consolidation, or
the Company sells all substantially all of the Company's assets.
(iii) CHANGE IN BOARD COMPOSITION. A change in the composition
---------------------------
of the Board of Directors of the Company, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
-------------------
mean directors who either (A) are directors of the Company as of the date of
this Agreement or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(b) CAUSE. "Cause" shall mean (i) gross negligence or willful
----- -----
misconduct in the performance of the Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries (ii) repeated
unexplained or unjustified absence from the Company, (iii) a material and
willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company; or (v) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and reputation
of the Company, in each case as determined in good faith by the Board of
Directors of the Company.
(c) HOSTILE TAKEOVER. "Hostile Takeover" shall mean a transaction
---------------- ----------------
or series of transactions that results in any person becoming the Beneficial
Owner, directly or indirectly, of securities of the Company representing more
than fifty percent (50%) of the total voting power represented by the Company's
then outstanding voting securities without the approval of the Board of
Directors of the Company.
<PAGE>
(d) INVOLUNTARY TERMINATION. "Involuntary Termination" shall
----------------------- -----------------------
include any termination by the Company other than for Cause and the Employee's
voluntary termination, following (i) a material reduction or change in job
duties, responsibilities and requirements inconsistent with the Employee's
position with the Company and the Employee's prior duties, responsibilities and
requirements; (ii) any reduction of the Employee's base compensation (other than
in connection with a general decrease in base salaries for most officers of the
Company and any successor corporation); or (iii) the Employee's refusal to
relocate to a facility or location more than 50 miles from the Company's current
location.
5. SUCCESSORS. Any successor to the Company (whether direct or
----------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees.
6. NOTICE. Notices and all other communications contemplated by
------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
7. MISCELLANEOUS PROVISIONS.
------------------------
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that the Employee may receive from any other source.
(b) WAIVER. No provision of this Agreement shall be modified,
------
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) WHOLE AGREEMENT. No agreements, representations or
---------------
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of
<PAGE>
this Agreement both parties agree that any such predecessor agreement shall be
deemed null and void. Effective upon the executive of this Agreement, that
Change of Control Agreement between Employee and the Company dated June 11, 1997
is declared null and void and is hereby amended and restated in its entirety as
set forth in this Agreement.
(d) CHOICE OF LAW. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) SEVERABILITY. If any term or provision of this Agreement or
------------
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and enforceable, the
intent and purpose of the invalid or unenforceable term or provision.
(f) ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Santa Clara, California, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) LEGAL FEES AND EXPENSES. The parties shall each bear their own
-----------------------
expenses, legal fees and other fees incurred in connection with this Agreement.
(h) NO ASSIGNMENT OF BENEFITS. The rights of any person to
-------------------------
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) EMPLOYMENT TAXES. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
(j) ASSIGNMENT BY COMPANY. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs the Employee.
(k) COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
<PAGE>
(l) LIMITATION ON PAYMENTS. In the event that the severance and
----------------------
other benefits provided for in this Agreement to the Employee (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
- -------------------
Code of 1986, as amended (the "Code") and (ii) but for this Section, would be
----
subject to the excise tax imposed by Section 4999 of the Code, then the
Employee's benefits under Sections 2 and 3 shall be payable either:
(a) in full, or
(b) as to such lesser amount which would result in no portion
of such severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax basis, of the
greatest amount of benefits under Sections 2 and 3, notwithstanding that all or
some portion of such benefits may be taxable under Section 4999 of the Code.
Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 7(1) shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
-----------
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. For purposes of making the calculations required by this
Section 7(1), the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the Code.
The Company and the Employee shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 7(1).
<PAGE>
Each of the parties has executed this Agreement, in the case of the Company
by its duly authorized officer, as of the day and year first above written.
CONNECT, INC. KENNETH ROSS
/s/ CONNECT, INC. /s/ KENNETH ROSS
____________________________________ ________________________________
By:_________________________________
Title:______________________________
<PAGE>
EXHIBIT 10.32
CONNECT, INC.
AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
This Amended and Restated Change of Control Agreement (the "Agreement") is
--------
made and entered into effective as of April 30, 1998, by and between Joseph G.
Girata (the "Employee") and CONNECT, Inc., a Delaware corporation (the
--------
"Company").
------
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
-----
a distraction to the Employee, an executive corporate officer of the Company,
and can cause the Employee to consider alternative employment opportunities.
The Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Hostile Takeover or a Change of Control (as each are defined
below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment with the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control or a Hostile Takeover and, under
certain circumstances, upon termination of the Employee's employment in
connection with a Change of Control, which benefits are intended to provide the
Employee with financial security and provide sufficient income and encouragement
to the Employee to remain with the Company notwithstanding the possibility of
such transactions.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. The Board, for the reasons set forth above, authorized the Company to
enter into Change of Control Agreements with each of its executive corporate
officers substantially in the form hereof.
F. Certain capitalized terms used in the Agreement are defined in Section
4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
<PAGE>
1. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that
------------------
the Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of Employee's offer letter from the Company, if applicable, and the
Company's established employee plans and written policies at the time of
termination. The terms of this Agreement shall terminate upon the earlier of
(i) the date on which Employee ceases to be employed as an executive corporate
officer of the Company, (ii) the date that all obligations of the parties
hereunder have been satisfied, or (iii) two (2) years after a Change of Control.
A termination of the terms of this Agreement pursuant to the preceding sentence
shall be effective for all purposes, except that such termination shall not
affect the payment or provision of compensation or benefits on account of a
termination of employment occurring prior to the termination of the terms of
this Agreement.
2. HOSTILE TAKEOVER. Subject to Section 7(1) below, in the event of
----------------
a Hostile Takeover and regardless of whether the Employee's employment with the
Company is terminated in connection with such takeover, each stock option
granted for the Company's securities held by the Employee shall become
immediately exercisable and vested, and shall be considered "Vested Shares"
-------------
under each such stock option, on the effective date of the Hostile Takeover as
to 100% of the shares issuable upon exercise of such option and shall be
exercisable in full in accordance with the provisions of the Option Agreement
and Plan pursuant to which such option was granted; and the Company's right of
repurchase with respect to such shares and any shares previously issued upon
exercise of stock options held by the Employee shall immediately lapse on such
date.
3. CHANGE OF CONTROL.
-----------------
(a) PAYMENT UPON CHANGE OF CONTROL. Except as limited by Section 7(l)
------------------------------
below, the Employee shall be entitled to receive a cash payment equal to 2.99
times his or her total compensation for fiscal 1997 (base salary plus any bonus
received) on or prior to the closing of a Change of Control (as defined in
Section 4(a) below); provided however that such payment shall be reduced as
follows if the following circumstances apply: (i) if the payment to the
Employee would exceed one percent (1%) of the aggregate value received by the
stockholders of the Company in connection with such Change of Control, such
payment would be reduced to an amount equal to one percent (1%) of such
aggregate value, and (ii) if the aggregate value received by the stockholders of
the Company in connection with such Change of Control was equal to or less than
$25,000,000, such payment would be reduced to zero.
(b) TERMINATION FOLLOWING A CHANGE OF CONTROL. Subject to Section
-----------------------------------------
7(1) below, if the Employee's employment with the Company is terminated at any
time within two (2) years after a Change of Control, then the Employee shall be
entitled to receive severance benefits as follows:
<PAGE>
(i) VOLUNTARY RESIGNATION. If the Employee voluntarily resigns
---------------------
from the Company (other than as an Involuntary Termination (as defined below),
or if the Company terminates the Employee's employment for Cause (as defined
below), then the Employee shall not be entitled to receive severance payments.
The Employee's benefits will be terminated under the Company's then existing
benefit plans and policies in accordance with such plans and policies in
effect on the date of termination or as otherwise determined by the Board of
Directors of the Company.
(ii) INVOLUNTARY TERMINATION. If the Employee's employment is
-----------------------
terminated as a result of an Involuntary Termination other than for Cause, the
Employee shall be entitled to receive the following benefits: (i) monthly
severance payments during the period from the date of the Employee's termination
until the date 12 months after the effective date of the termination (the
"Severance Period") equal to the monthly salary which the Employee was receiving
- -----------------
immediately prior to the Change of Control; (ii) monthly severance payments
during the Severance Period equal to 1/12th of the Employee's "target bonus" (as
defined below) for the fiscal year in which the termination occurs; (iii)
continuation of health and life insurance benefits through the end of the
Severance Period substantially identical to those to which the Employee was
entitled immediately prior to the Change of Control; (iv) each stock option held
by the Employee shall become immediately exercisable and vested, and shall be
considered "Vested Shares" under each such stock option, on the date of
-------------
termination as to 100% of the shares issuable upon exercise of such option and
shall be exercisable in full in accordance with the provisions of the Option
Agreement and Plan pursuant to which such option was granted; and the Company's
right of repurchase with respect to such shares and any shares previously issued
upon exercise of stock options held by the Employee shall immediately lapse on
such date; and (v) outplacement services with a total value not to exceed
$15,000. The severance payments described in subsections (i) and (ii) above
shall be paid during the Severance Period in accordance with the Company's
standard payroll practices. For purposes of this Agreement, the term "target
------
bonus" shall mean that percentage of the Employee's base salary that is
- -----
prescribed by the Company under its Management Bonus Program as the percentage
of such base salary payable to the Company as a bonus if the Company pays
bonuses at one-hundred percent (100%) of its operating plan.
(iii) INVOLUNTARY TERMINATION FOR CAUSE. If the Employee's
---------------------------------
employment is terminated for Cause, then the Employee shall not be entitled to
receive severance payments. The Employee's benefits will be terminated under
the Company's then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination.
(b) TERMINATION APART FROM A CHANGE OF CONTROL. In the event the
------------------------------------------
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after the two year period following the effective date
of a Change of Control, then the Employee shall not be entitled to receive any
severance payments under this Agreement. The Employee's benefits will be
terminated under the terms of the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination or as otherwise determined by the Board of Directors of the Company.
<PAGE>
4. DEFINITION OF TERMS. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) CHANGE OF CONTROL. "Change of Control" shall mean the
----------------- -----------------
occurrence of any of the following events:
(i) OWNERSHIP. Any "Person" (as such term is used in
---------- ------
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
is or becomes the "Beneficial Owner" (as defined in Rule 13d- 3 under said
----------------
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company's
then outstanding voting securities without the approval of the Board of
Directors of the Company; or
(ii) MERGER/SALE OF ASSETS. A merger or consolidation of
---------------------
the Company, whether or not approved by the Board of Directors of the Company,
other than a merger or consolidation which would result in holders of more
than fifty percent (50%) of the voting power represented by the voting
securities of the Company outstanding immediately prior thereto continuing to
hold (either by the voting securities remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the voting securities
of the Company, or such surviving entity outstanding immediately after such
merger or consolidation, or the Company sells all substantially all of the
Company's assets.
(iii) CHANGE IN BOARD COMPOSITION. A change in the
---------------------------
composition of the Board of Directors of the Company, as a result of which
fewer than a majority of the directors are Incumbent Directors. "Incumbent
---------
Directors" shall mean directors who either (A) are directors of the Company as
- ---------
of the date of this Agreement or (B) are elected, or nominated for election,
to the Board of Directors of the Company with the affirmative votes of at
least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination
is in connection with an actual or threatened proxy contest relating to the
election of directors to the Company).
(b) CAUSE. "Cause" shall mean (i) gross negligence or willful
----- -----
misconduct in the performance of the Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries (ii) repeated
unexplained or unjustified absence from the Company, (iii) a material and
willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company; or (v) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and reputation
of the Company, in each case as determined in good faith by the Board of
Directors of the Company.
(c) HOSTILE TAKEOVER. "Hostile Takeover" shall mean a transaction or
---------------- ----------------
series of transactions that results in any person becoming the Beneficial Owner,
directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company.
<PAGE>
(d) INVOLUNTARY TERMINATION. "Involuntary Termination" shall include
----------------------- -----------------------
any termination by the Company other than for Cause and the Employee's voluntary
termination, following (i) a material reduction or change in job duties,
responsibilities and requirements inconsistent with the Employee's position with
the Company and the Employee's prior duties, responsibilities and requirements;
(ii) any reduction of the Employee's base compensation (other than in connection
with a general decrease in base salaries for most officers of the Company and
any successor corporation); or (iii) the Employee's refusal to relocate to a
facility or location more than 50 miles from the Company's current location.
5. SUCCESSORS. Any successor to the Company (whether direct or
----------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees.
6. NOTICE. Notices and all other communications contemplated by
------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
7. MISCELLANEOUS PROVISIONS.
------------------------
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that the Employee may receive from any other source.
(b) WAIVER. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) WHOLE AGREEMENT. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof. This Agreement supersedes any agreement
of the same title and concerning similar subject matter dated prior to the date
of this Agreement, and by execution of
<PAGE>
this Agreement both parties agree that any such predecessor agreement shall be
deemed null and void. Effective upon the executive of this Agreement, that
Change of Control Agreement between Employee and the Company dated June 11,
1997 is declared null and void and is hereby amended and restated in its
entirety as set forth in this Agreement.
(d) CHOICE OF LAW. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) SEVERABILITY. If any term or provision of this Agreement or the
------------
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or unenforceable,
and a suitable and equitable term or provision shall be substituted therefor to
carry out, insofar as may be valid and enforceable, the intent and purpose of
the invalid or unenforceable term or provision.
(f) ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Santa Clara, California, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) LEGAL FEES AND EXPENSES. The parties shall each bear their own
-----------------------
expenses, legal fees and other fees incurred in connection with this Agreement.
(h) NO ASSIGNMENT OF BENEFITS. The rights of any person to payments
-------------------------
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) EMPLOYMENT TAXES. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
(j) ASSIGNMENT BY COMPANY. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case
of any such assignment, the term "Company" when used in a section of this
Agreement shall mean the corporation that actually employs the Employee.
(k) COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
<PAGE>
(l) LIMITATION ON PAYMENTS. In the event that the severance and other
----------------------
benefits provided for in this Agreement to the Employee (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
- -------------------
Code of 1986, as amended (the "Code") and (ii) but for this Section, would be
----
subject to the excise tax imposed by Section 4999 of the Code, then the
Employee's benefits under Sections 2 and 3 shall be payable either:
(a) in full, or
(b) as to such lesser amount which would result in no portion of
such severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax basis, of the
greatest amount of benefits under Sections 2 and 3, notwithstanding that all
or some portion of such benefits may be taxable under Section 4999 of the
Code. Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 7(1) shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
-----------
determination shall be conclusive and binding upon the Employee and the
Company for all purposes. For purposes of making the calculations required by
this Section 7(1), the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Section 280G and 4999 of
the Code. The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order
to make a determination under this Section. The Company shall bear all costs
the Accountants may reasonably incur in connection with any calculations
contemplated by this Section 7(1).
<PAGE>
Each of the parties has executed this Agreement, in the case of the Company
by its duly authorized officer, as of the day and year first above written.
CONNECT, INC. JOSEPH G. GIRATA
/s/ Craig D. Norris /s/ Joseph G. Girata
- ---------------------------------- --------------------------------------
By: Craig D. Norris
-------------------------------
Title: President and Chief Executive Officer
---------------------------------------
<PAGE>
EXHIBIT 10.33
CONNECT, INC.
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered into
--------
effective as of April 30, 1998, by and between Lucille Hoger (the "Employee")
--------
and CONNECT, Inc., a Delaware corporation (the "Company").
------
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
-----
a distraction to the Employee, an executive corporate officer of the Company,
and can cause the Employee to consider alternative employment opportunities.
The Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Hostile Takeover or a Change of Control (as each are defined
below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment with the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control or a Hostile Takeover and, under
certain circumstances, upon termination of the Employee's employment in
connection with a Change of Control, which benefits are intended to provide the
Employee with financial security and provide sufficient income and encouragement
to the Employee to remain with the Company notwithstanding the possibility of
such transactions.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. The Board, for the reasons set forth above, authorized the Company to
enter into Change of Control Agreements with each of its executive corporate
officers substantially in the form hereof.
F. Certain capitalized terms used in the Agreement are defined in Section
4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that
------------------
the Employee's employment is and shall continue to be at-will, as defined under
applicable
<PAGE>
law. If the Employee's employment terminates for any reason, including
(without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance
with the terms of Employee's offer letter from the Company, if applicable, and
the Company's established employee plans and written policies at the time of
termination. The terms of this Agreement shall terminate upon the earlier of
(i) the date on which Employee ceases to be employed as an executive corporate
officer of the Company, (ii) the date that all obligations of the parties
hereunder have been satisfied, or (iii) two (2) years after a Change of
Control. A termination of the terms of this Agreement pursuant to the
preceding sentence shall be effective for all purposes, except that such
termination shall not affect the payment or provision of compensation or
benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement.
2. HOSTILE TAKEOVER. Subject to Section 7(1) below, in the event of
----------------
a Hostile Takeover and regardless of whether the Employee's employment with the
Company is terminated in connection with such takeover, each stock option
granted for the Company's securities held by the Employee shall become
immediately exercisable and vested, and shall be considered "Vested Shares"
-------------
under each such stock option, on the effective date of the Hostile Takeover as
to 100% of the shares issuable upon exercise of such option and shall be
exercisable in full in accordance with the provisions of the Option Agreement
and Plan pursuant to which such option was granted; and the Company's right of
repurchase with respect to such shares and any shares previously issued upon
exercise of stock options held by the Employee shall immediately lapse on such
date.
3. CHANGE OF CONTROL.
-----------------
(a) PAYMENT UPON CHANGE OF CONTROL. Except as limited by Section 7(l)
------------------------------
below, the Employee shall be entitled to receive a cash payment equal to 2.99
times his or her total compensation for fiscal 1997 (base salary plus any bonus
received) on or prior to the closing of a Change of Control (as defined in
Section 4(a) below); provided however that such payment shall be reduced as
follows if the following circumstances apply: (i) if the payment to the
Employee would exceed one percent (1%) of the aggregate value received by the
stockholders of the Company in connection with such Change of Control, such
payment would be reduced to an amount equal to one percent (1%) of such
aggregate value, and (ii) if the aggregate value received by the stockholders of
the Company in connection with such Change of Control was equal to or less than
$25,000,000, such payment would be reduced to zero.
(b) TERMINATION FOLLOWING A CHANGE OF CONTROL. Subject to Section
-----------------------------------------
7(1) below, if the Employee's employment with the Company is terminated at any
time within two (2) years after a Change of Control, then the Employee shall be
entitled to receive severance benefits as follows:
(i) VOLUNTARY RESIGNATION. If the Employee voluntarily resigns
---------------------
from the Company (other than as an Involuntary Termination (as defined below),
or if the Company terminates the Employee's employment for Cause (as defined
below), then the
<PAGE>
Employee shall not be entitled to receive severance payments. The Employee's
benefits will be terminated under the Company's then existing benefit plans
and policies in accordance with such plans and policies in effect on the date
of termination or as otherwise determined by the Board of Directors of the
Company.
(ii) INVOLUNTARY TERMINATION. If the Employee's employment is
-----------------------
terminated as a result of an Involuntary Termination other than for Cause, the
Employee shall be entitled to receive the following benefits: (i) monthly
severance payments during the period from the date of the Employee's termination
until the date 12 months after the effective date of the termination (the
"Severance Period") equal to the monthly salary which the Employee was receiving
- -----------------
immediately prior to the Change of Control; (ii) monthly severance payments
during the Severance Period equal to 1/12th of the Employee's "target bonus" (as
defined below) for the fiscal year in which the termination occurs; (iii)
continuation of health and life insurance benefits through the end of the
Severance Period substantially identical to those to which the Employee was
entitled immediately prior to the Change of Control; (iv) each stock option held
by the Employee shall become immediately exercisable and vested, and shall be
considered "Vested Shares" under each such stock option, on the date of
-------------
termination as to 100% of the shares issuable upon exercise of such option and
shall be exercisable in full in accordance with the provisions of the Option
Agreement and Plan pursuant to which such option was granted; and the Company's
right of repurchase with respect to such shares and any shares previously issued
upon exercise of stock options held by the Employee shall immediately lapse on
such date; and (v) outplacement services with a total value not to exceed
$15,000. The severance payments described in subsections (i) and (ii) above
shall be paid during the Severance Period in accordance with the Company's
standard payroll practices. For purposes of this Agreement, the term "target
------
bonus" shall mean that percentage of the Employee's base salary that is
- -----
prescribed by the Company under its Management Bonus Program as the percentage
of such base salary payable to the Company as a bonus if the Company pays
bonuses at one-hundred percent (100%) of its operating plan.
(iii) INVOLUNTARY TERMINATION FOR CAUSE. If the Employee's
---------------------------------
employment is terminated for Cause, then the Employee shall not be entitled to
receive severance payments. The Employee's benefits will be terminated under
the Company's then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination.
(b) TERMINATION APART FROM A CHANGE OF CONTROL. In the event the
------------------------------------------
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after the two year period following the effective date
of a Change of Control, then the Employee shall not be entitled to receive any
severance payments under this Agreement. The Employee's benefits will be
terminated under the terms of the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination or as otherwise determined by the Board of Directors of the Company.
4. DEFINITION OF TERMS. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
<PAGE>
(a) CHANGE OF CONTROL. "Change of Control" shall mean the
----------------- -----------------
occurrence of any of the following events:
(i) OWNERSHIP. Any "Person" (as such term is used in
---------- ------
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
is or becomes the "Beneficial Owner" (as defined in Rule 13d- 3 under said
----------------
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company's
then outstanding voting securities without the approval of the Board of
Directors of the Company; or
(ii) MERGER/SALE OF ASSETS. A merger or consolidation of
---------------------
the Company, whether or not approved by the Board of Directors of the Company,
other than a merger or consolidation which would result in holders of more
than fifty percent (50%) of the voting power represented by the voting
securities of the Company outstanding immediately prior thereto continuing to
hold (either by the voting securities remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the voting securities
of the Company, or such surviving entity outstanding immediately after such
merger or consolidation, or the Company sells all substantially all of the
Company's assets.
(iii) CHANGE IN BOARD COMPOSITION. A change in the
---------------------------
composition of the Board of Directors of the Company, as a result of which
fewer than a majority of the directors are Incumbent Directors. "Incumbent
---------
Directors" shall mean directors who either (A) are directors of the Company as
- ---------
of the date of this Agreement or (B) are elected, or nominated for election,
to the Board of Directors of the Company with the affirmative votes of at
least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination
is in connection with an actual or threatened proxy contest relating to the
election of directors to the Company).
(b) CAUSE. "Cause" shall mean (i) gross negligence or willful
----- -----
misconduct in the performance of the Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries (ii) repeated
unexplained or unjustified absence from the Company, (iii) a material and
willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company; or (v) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and reputation
of the Company, in each case as determined in good faith by the Board of
Directors of the Company.
(c) HOSTILE TAKEOVER. "Hostile Takeover" shall mean a transaction or
---------------- ----------------
series of transactions that results in any person becoming the Beneficial Owner,
directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company.
(d) INVOLUNTARY TERMINATION. "Involuntary Termination" shall include
----------------------- -----------------------
any termination by the Company other than for Cause and the Employee's voluntary
<PAGE>
termination, following (i) a material reduction or change in job duties,
responsibilities and requirements inconsistent with the Employee's position with
the Company and the Employee's prior duties, responsibilities and requirements;
(ii) any reduction of the Employee's base compensation (other than in connection
with a general decrease in base salaries for most officers of the Company and
any successor corporation); or (iii) the Employee's refusal to relocate to a
facility or location more than 50 miles from the Company's current location.
5. SUCCESSORS. Any successor to the Company (whether direct or
----------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees.
6. NOTICE. Notices and all other communications contemplated by
------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
7. MISCELLANEOUS PROVISIONS.
------------------------
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that the Employee may receive from any other source.
(b) WAIVER. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) WHOLE AGREEMENT. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof. This Agreement supersedes any agreement
of the same title and concerning similar subject matter dated prior to the date
of this Agreement, and by execution of this Agreement both parties agree that
any such predecessor agreement shall be deemed null and void.
<PAGE>
(d) CHOICE OF LAW. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) SEVERABILITY. If any term or provision of this Agreement or the
------------
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or unenforceable,
and a suitable and equitable term or provision shall be substituted therefor to
carry out, insofar as may be valid and enforceable, the intent and purpose of
the invalid or unenforceable term or provision.
(f) ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Santa Clara, California, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) LEGAL FEES AND EXPENSES. The parties shall each bear their own
-----------------------
expenses, legal fees and other fees incurred in connection with this Agreement.
(h) NO ASSIGNMENT OF BENEFITS. The rights of any person to payments
-------------------------
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) EMPLOYMENT TAXES. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
(j) ASSIGNMENT BY COMPANY. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case
of any such assignment, the term "Company" when used in a section of this
Agreement shall mean the corporation that actually employs the Employee.
(k) COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(l) LIMITATION ON PAYMENTS. In the event that the severance and other
----------------------
benefits provided for in this Agreement to the Employee (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
- -------------------
Code of 1986, as amended (the "Code") and (ii) but for this Section, would be
----
subject to the excise tax imposed
<PAGE>
by Section 4999 of the Code, then the Employee's benefits under Sections 2 and
3 shall be payable either:
(a) in full, or
(b) as to such lesser amount which would result in no portion of such
severance benefits being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax basis, of the greatest amount of
benefits under Sections 2 and 3, notwithstanding that all or some portion of
such benefits may be taxable under Section 4999 of the Code. Unless the Company
and the Employee otherwise agree in writing, any determination required under
this Section 7(1) shall be made in writing by the Company's independent public
accountants (the "Accountants"), whose determination shall be conclusive and
-----------
binding upon the Employee and the Company for all purposes. For purposes of
making the calculations required by this Section 7(1), the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Section 280G and 4999 of the Code. The Company and the Employee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 7(1).
<PAGE>
Each of the parties has executed this Agreement, in the case of the Company
by its duly authorized officer, as of the day and year first above written.
CONNECT, INC. LUCILLE HOGER
/s/ Craig D. Norris /s/ Lucille Hoger
- ----------------------------------- ---------------------------------------
By: Craig D. Norris
--------------------------------
Title: President and Chief Executive Officer
-------------------------------------
<PAGE>
EXHIBIT 10.34
CONNECT, INC.
AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT
This Amended and Restated Change of Control Agreement (the "Agreement") is
--------
made and entered into effective as of April 30, 1998, by and between Craig D.
Norris (the "Employee") and CONNECT, Inc., a Delaware corporation (the
--------
"Company").
------
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
-----
a distraction to the Employee, an executive corporate officer of the Company,
and can cause the Employee to consider alternative employment opportunities.
The Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Hostile Takeover or a Change of Control (as each are defined
below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his or
her employment with the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control or a Hostile Takeover and, under
certain circumstances, upon termination of the Employee's employment in
connection with a Change of Control, which benefits are intended to provide the
Employee with financial security and provide sufficient income and encouragement
to the Employee to remain with the Company notwithstanding the possibility of
such transactions.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. The Board, for the reasons set forth above, authorized the Company to
enter into Change of Control Agreements with each of its executive corporate
officers substantially in the form hereof.
F. Certain capitalized terms used in the Agreement are defined in Section
4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
<PAGE>
1. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that
------------------
the Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of Employee's offer letter from the Company, if applicable, and the
Company's established employee plans and written policies at the time of
termination. The terms of this Agreement shall terminate upon the earlier of
(i) the date on which Employee ceases to be employed as an executive corporate
officer of the Company, (ii) the date that all obligations of the parties
hereunder have been satisfied, or (iii) two (2) years after a Change of Control.
A termination of the terms of this Agreement pursuant to the preceding sentence
shall be effective for all purposes, except that such termination shall not
affect the payment or provision of compensation or benefits on account of a
termination of employment occurring prior to the termination of the terms of
this Agreement.
2. HOSTILE TAKEOVER. Subject to Section 7(1) below, in the event of
----------------
a Hostile Takeover and regardless of whether the Employee's employment with the
Company is terminated in connection with such takeover, each stock option
granted for the Company's securities held by the Employee shall become
immediately exercisable and vested, and shall be considered "Vested Shares"
-------------
under each such stock option, on the effective date of the Hostile Takeover as
to 100% of the shares issuable upon exercise of such option and shall be
exercisable in full in accordance with the provisions of the Option Agreement
and Plan pursuant to which such option was granted; and the Company's right of
repurchase with respect to such shares and any shares previously issued upon
exercise of stock options held by the Employee shall immediately lapse on such
date.
3. CHANGE OF CONTROL.
-----------------
(a) PAYMENT UPON CHANGE OF CONTROL. Except as limited by Section 7(l)
------------------------------
below, the Employee shall be entitled to receive a cash payment equal to 2.99
times his or her total compensation for fiscal 1997 (base salary plus any bonus
received) on or prior to the closing of a Change of Control (as defined in
Section 4(a) below); provided however that such payment shall be reduced as
follows if the following circumstances apply: (i) if the payment to the
Employee would exceed two and one-half percent (2.5%) of the aggregate value
received by the stockholders of the Company in connection with such Change of
Control, such payment would be reduced to an amount equal to two and one-half
percent (2.5%) of such aggregate value, (ii) if the aggregate value received by
the stockholders of the Company in connection with such Change of Control was
equal to or less than $25,000,000, such payment would be reduced to zero; and
(iii) , and (iii) such payment shall be reduced by that amount of net gains, if
any, that the Employee would recognize if the Employee exercised, on the date of
closing of such Change of Control, any vested options held by him as of such
date.
(b) TERMINATION FOLLOWING A CHANGE OF CONTROL. Subject to Section
-----------------------------------------
7(1) below, if the Employee's employment with the Company is terminated at any
time
<PAGE>
within two (2) years after a Change of Control, then the Employee shall be
entitled to receive severance benefits as follows:
(i) VOLUNTARY RESIGNATION. If the Employee voluntarily resigns
---------------------
from the Company (other than as an Involuntary Termination (as defined below),
or if the Company terminates the Employee's employment for Cause (as defined
below), then the Employee shall not be entitled to receive severance payments.
The Employee's benefits will be terminated under the Company's then existing
benefit plans and policies in accordance with such plans and policies in
effect on the date of termination or as otherwise determined by the Board of
Directors of the Company.
(ii) INVOLUNTARY TERMINATION. If the Employee's employment is
-----------------------
terminated as a result of an Involuntary Termination other than for Cause, the
Employee shall be entitled to receive the following benefits: (i) monthly
severance payments during the period from the date of the Employee's termination
until the date 12 months after the effective date of the termination (the
"Severance Period") equal to the monthly salary which the Employee was receiving
- -----------------
immediately prior to the Change of Control; (ii) monthly severance payments
during the Severance Period equal to 1/12th of the Employee's "target bonus" (as
defined below) for the fiscal year in which the termination occurs; (iii)
continuation of health and life insurance benefits through the end of the
Severance Period substantially identical to those to which the Employee was
entitled immediately prior to the Change of Control; (iv) each stock option held
by the Employee shall become immediately exercisable and vested, and shall be
considered "Vested Shares" under each such stock option, on the date of
-------------
termination as to 100% of the shares issuable upon exercise of such option and
shall be exercisable in full in accordance with the provisions of the Option
Agreement and Plan pursuant to which such option was granted; and the Company's
right of repurchase with respect to such shares and any shares previously issued
upon exercise of stock options held by the Employee shall immediately lapse on
such date; and (v) outplacement services with a total value not to exceed
$15,000. The severance payments described in subsections (i) and (ii) above
shall be paid during the Severance Period in accordance with the Company's
standard payroll practices. For purposes of this Agreement, the term "target
------
bonus" shall mean that percentage of the Employee's base salary that is
- -----
prescribed by the Company under its Management Bonus Program as the percentage
of such base salary payable to the Company as a bonus if the Company pays
bonuses at one-hundred percent (100%) of its operating plan.
(iii) INVOLUNTARY TERMINATION FOR CAUSE. If the Employee's
---------------------------------
employment is terminated for Cause, then the Employee shall not be entitled to
receive severance payments. The Employee's benefits will be terminated under
the Company's then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination.
(b) TERMINATION APART FROM A CHANGE OF CONTROL. In the event the
------------------------------------------
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after the two year period following the effective date
of a Change of Control, then the Employee shall not be entitled to receive any
severance payments under this Agreement. The
<PAGE>
Employee's benefits will be terminated under the terms of the Company's then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination or as otherwise determined by the Board
of Directors of the Company.
4. DEFINITION OF TERMS. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) CHANGE OF CONTROL. "Change of Control" shall mean the
----------------- -----------------
occurrence of any of the following events:
(i) OWNERSHIP. Any "Person" (as such term is used in Sections 13
---------- ------
(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or
becomes the "Beneficial Owner" (as defined in Rule 13d- 3 under said Act),
----------------
directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company's
then outstanding voting securities without the approval of the Board of
Directors of the Company; or
(ii) MERGER/SALE OF ASSETS. A merger or consolidation of the
---------------------
Company, whether or not approved by the Board of Directors of the Company,
other than a merger or consolidation which would result in holders of more
than fifty percent (50%) of the voting power represented by the voting
securities of the Company outstanding immediately prior thereto continuing to
hold (either by the voting securities remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the voting securities
of the Company, or such surviving entity outstanding immediately after such
merger or consolidation, or the Company sells all substantially all of the
Company's assets.
(iii) CHANGE IN BOARD COMPOSITION. A change in the composition
---------------------------
of the Board of Directors of the Company, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
-------------------
mean directors who either (A) are directors of the Company as of the date of
this Agreement or (B) are elected, or nominated for election, to the Board of
Directors of the Company with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
(b) CAUSE. "Cause" shall mean (i) gross negligence or willful
----- -----
misconduct in the performance of the Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries (ii) repeated
unexplained or unjustified absence from the Company, (iii) a material and
willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company; or (v) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and reputation
of the Company, in each case as determined in good faith by the Board of
Directors of the Company.
<PAGE>
(c) HOSTILE TAKEOVER. "Hostile Takeover" shall mean a transaction or
---------------- ----------------
series of transactions that results in any person becoming the Beneficial Owner,
directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company.
(d) INVOLUNTARY TERMINATION. "Involuntary Termination" shall include
----------------------- -----------------------
any termination by the Company other than for Cause and the Employee's voluntary
termination, following (i) a material reduction or change in job duties,
responsibilities and requirements inconsistent with the Employee's position with
the Company and the Employee's prior duties, responsibilities and requirements;
(ii) any reduction of the Employee's base compensation (other than in connection
with a general decrease in base salaries for most officers of the Company and
any successor corporation); or (iii) the Employee's refusal to relocate to a
facility or location more than 50 miles from the Company's current location.
5. SUCCESSORS. Any successor to the Company (whether direct or
----------
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees.
6. NOTICE. Notices and all other communications contemplated by
------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
7. MISCELLANEOUS PROVISIONS.
------------------------
(a) NO DUTY TO MITIGATE. The Employee shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement (whether by
seeking new employment or in any other manner), nor, except as otherwise
provided in this Agreement, shall any such payment be reduced by any earnings
that the Employee may receive from any other source.
(b) WAIVER. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
<PAGE>
(c) WHOLE AGREEMENT. No agreements, representations or understandings
---------------
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof. This Agreement supersedes any agreement
of the same title and concerning similar subject matter dated prior to the date
of this Agreement, and by execution of this Agreement both parties agree that
any such predecessor agreement shall be deemed null and void. Effective upon
the executive of this Agreement, that Change of Control Agreement between
Employee and the Company dated June 11, 1997 is declared null and void and is
hereby amended and restated in its entirety as set forth in this Agreement.
(d) CHOICE OF LAW. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) SEVERABILITY. If any term or provision of this Agreement or the
------------
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or unenforceable,
and a suitable and equitable term or provision shall be substituted therefor to
carry out, insofar as may be valid and enforceable, the intent and purpose of
the invalid or unenforceable term or provision.
(f) ARBITRATION. Any dispute or controversy arising under or in
-----------
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Santa Clara, California, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) LEGAL FEES AND EXPENSES. The parties shall each bear their own
-----------------------
expenses, legal fees and other fees incurred in connection with this Agreement.
(h) NO ASSIGNMENT OF BENEFITS. The rights of any person to payments
-------------------------
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) EMPLOYMENT TAXES. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
(j) ASSIGNMENT BY COMPANY. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the
<PAGE>
time of assignment. In the case of any such assignment, the term "Company"
when used in a section of this Agreement shall mean the corporation that
actually employs the Employee.
(k) COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(l) LIMITATION ON PAYMENTS. In the event that the severance and other
----------------------
benefits provided for in this Agreement to the Employee (i) constitute
"parachute payments" within the meaning of Section 280G of the Internal Revenue
- -------------------
Code of 1986, as amended (the "Code") and (ii) but for this Section, would be
----
subject to the excise tax imposed by Section 4999 of the Code, then the
Employee's benefits under Sections 2 and 3 shall be payable either:
(a) in full, or
(b) as to such lesser amount which would result in no portion of
such severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-tax basis, of the
greatest amount of benefits under Sections 2 and 3, notwithstanding that all
or some portion of such benefits may be taxable under Section 4999 of the
Code. Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section 7(1) shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
-----------
determination shall be conclusive and binding upon the Employee and the
Company for all purposes. For purposes of making the calculations required by
this Section 7(1), the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Section 280G and 4999 of
the Code. The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order
to make a determination under this Section. The Company shall bear all costs
the Accountants may reasonably incur in connection with any calculations
contemplated by this Section 7(1).
<PAGE>
Each of the parties has executed this Agreement, in the case of the Company
by its duly authorized officer, as of the day and year first above written.
CONNECT, INC. CRAIG D. NORRIS
/s/ Joseph G. Girata /s/ Craig D. Norris
- ---------------------------------- ----------------------------------------
By: Joseph G. Girata
-------------------------------
Title: Chief Financial Officer
---------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,572
<SECURITIES> 0
<RECEIVABLES> 2,588
<ALLOWANCES> 788
<INVENTORY> 0
<CURRENT-ASSETS> 714
<PP&E> 7,407
<DEPRECIATION> 5,208
<TOTAL-ASSETS> 12,358
<CURRENT-LIABILITIES> 5,637
<BONDS> 6,372
0
8,436
<COMMON> 24
<OTHER-SE> (2,474)
<TOTAL-LIABILITY-AND-EQUITY> 12,358
<SALES> 2,252
<TOTAL-REVENUES> 2,252
<CGS> 1,580
<TOTAL-COSTS> 1,580
<OTHER-EXPENSES> 3,487
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> (2,950)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,950)
<EPS-PRIMARY> (.73)
<EPS-DILUTED> (.73)
</TABLE>
