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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Connect, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
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CONNECT, INC.
515 Ellis Street
Mountain View, California 94043
----------------
Notice of Annual Meeting of Stockholders
To Be Held On August 12, 1999
To The Stockholders Of Connect, Inc.:
Notice Is Hereby Given that the Annual Meeting of Stockholders of Connect,
Inc., a Delaware corporation (the "Company"), will be held on Thursday, August
12, 1999 at 1:00 p.m. local time at the principal executive offices of the
Company, located at 515 Ellis Street, Mountain View, California 94043, for the
purposes of considering and voting upon the following matters, as more fully
described in the attached proxy statement:
1. To elect three Class I directors of the Company to serve until the 2001
Annual Meeting of Stockholders or until their respective successors are
elected and qualified, and to elect two Class II directors of the
Company to serve until the 2000 Annual Meeting of Stockholders or until
their respective successors are elected and qualified;
2. To approve an amendment to the Company's Second Amended and Restated
Certificate of Incorporation to change the Company's name to
ConnectInc.com, Co.;
3. To approve the adoption of the Company's 1999 Stock Option Plan for Non-
Employee Directors and Advisors and the reservation of 500,000 shares of
the Company's Common Stock for issuance thereunder.
4. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1999; and
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on June 30, 1999, as
the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting of Stockholders and at any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ Alan C. Mendelson
---------------------------
Alan C. Mendelson
Secretary
Mountain View, California
July 8, 1999
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE
YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE
PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN
IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
CONNECT, INC.
515 Ellis Street
Mountain View, California 94043
----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 12, 1999
Information Concerning Solicitation And Voting
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Connect, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on August 12, 1999, at 1:00 p.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at the principal executive offices of the
Company, located at 515 Ellis Street, Mountain View, California 94043. The
Company intends to mail this proxy statement and accompanying proxy card on or
about July 9, 1999, to all stockholders entitled to vote at the Annual
Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on June 30,
1999 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on June 30, 1999 the Company had outstanding and entitled to
vote 14,826,629 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual
Meeting.
The inspector of election appointed for the meeting will tabulate all votes
and will separately tabulate affirmative and negative votes, abstentions and
broker non-votes. The presence, in person or by proxy, of the holders of a
majority of the votes entitled to be cast by the stockholders entitled to vote
at the Annual Meeting is necessary to constitute a quorum. Abstentions and
broker "non-votes" are counted as present and entitled to vote for purposes of
determining a quorum. A broker "non-vote" occurs when a nominee holding shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power for that particular item and
has not received instructions from the beneficial owner.
A plurality of the votes cast is required for the election of directors.
Abstentions and broker "non-votes" are not counted for purposes of the
election of directors.
The affirmative vote of a majority of outstanding shares of Common Stock
entitled to vote is required to approve the proposal to amend the Company's
Second Amended and Restated Certificate of Incorporation to change the name of
the Company. Abstentions and broker "non-votes" will have the same effect as a
vote cast "against" this proposal.
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The affirmative vote of a majority of the shares of Common Stock present in
person or represented by proxy and entitled to vote is required to approve (i)
the proposal to approve the 1999 Stock Option Plan for Non-Employee Directors
and Advisors and (ii) the appointment of Ernst & Young LLP. Abstentions will
have the same effect as a vote cast "against" this proposal. Broker "non-
votes" are not counted for purposes of approving these matters.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 515
Ellis Street, Mountain View, CA 94043, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending
the meeting and voting in person. Attendance at the meeting will not, by
itself, revoke a proxy.
Stockholder Proposals
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2000 Annual
Meeting of Stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission (the "SEC") is March 10, 2000. Such proposals must meet the
requirements set forth in the rules and regulations of the SEC in order to be
eligible for inclusion in the proxy statement for the 2000 annual meeting of
stockholders. In addition to the SEC rules concerning stockholder proposals,
the Company's bylaws establish advance notice procedures as to: (i) business
to be brought before an annual meeting of stockholders other than by or at the
direction of the Company's Board of Directors (the "Board") and (ii) the
nomination, other than by or at the direction of the Board, of candidates for
election as directors. Any stockholder who wishes to submit a proposal to be
acted upon at the 2000 annual meeting or who wishes to nominate a candidate
for election as director must deliver written notice of such stockholder's
proposal or nomination to the Secretary of the Company not later than 20 days
prior to the 2000 annual meeting and otherwise in accordance with the
Company's bylaws; provided, however, that if less than 30 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received not later than the
10th day following the day upon which such notice of the date of the meeting
was mailed or such public disclosure was made. A copy of the applicable bylaw
provisions may be obtained by written request addressed to the Company at 515
Ellis Street, Mountain View, California 94043. Stockholder proposals should be
sent to the Company's Secretary at the above listed address.
The Chairman of the Annual Meeting may refuse to allow the transaction of
any business not presented beforehand, or to acknowledge the nomination of any
person not made, in compliance with the advance notice procedures required by
the Company's bylaws.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Second Amended and Restated Certificate of Incorporation
provides that the Board shall be divided into two classes, each class
consisting, as nearly as possible, of one-half of the total number of
directors, with each class having a two-year term. Vacancies on the Board may
be filled by either (i) the affirmative vote of the holders of a majority of
the voting power of the shares of the Company or (ii) by the affirmative vote
of a majority of the remaining directors. A director elected by the Board to
fill a vacancy (including a vacancy created by an increase in the authorized
size of the Board) shall serve for the remainder of the full term of the class
of directors in which the vacancy occurred and until such director's successor
is elected and qualified.
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The Board is presently composed of five members. There are three directors
in Class I (Radha R. Basu, Gordon J. Bridge and Craig D. Norris) and two
directors in Class II (Richard H. Lussier and Rory T. O'Driscoll). If elected
at the Annual Meeting, each of the Class I nominees will be elected to a two
year term expiring at the 2001 annual meeting and until his or her successor
is elected and has qualified, or until such director's earlier death,
resignation or removal. If elected at the Annual Meeting, each of the Class II
directors will be elected to a one year term expiring at the 2000 annual
meeting and until his or her successor is elected and has qualified, or until
such director's earlier death, resignation or removal. After the Annual
Meeting, one class of directors will be elected at each successive annual
meeting to serve for two-year terms. Each nominee listed below is currently a
director of the Company, four directors having been elected by the
stockholders, and one director, Radha R. Basu, having been elected by the
Board.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented
by executed proxies will be voted, if authority to do so is not withheld, for
the election of the five nominees named below. In the event that any nominee
should be unavailable for election as a result of an unexpected occurrence,
such shares will be voted for the election of such substitute nominee as
management may propose. Each person nominated for election has agreed to serve
if elected, and management has no reason to believe that any nominee will be
unable to serve.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
The names of the current directors and nominees, their ages (as of December
31, 1998) and certain information about them are set forth below:
<TABLE>
<CAPTION>
Principal Occupation/ Director
Name Age Position Held With the Company Since
---- --- ------------------------------ --------
<S> <C> <C> <C>
Radha R. Basu........... 49 General Manager, Electronic Business Software 1999
Division, Hewlett Packard Corporation
Gordon J. Bridge........ 56 Chairman of the Board of Directors of the 1995
Company
Richard H. Lussier...... 61 Retired 1992
Craig D. Norris......... 51 Chief Executive Officer and President of the 1998
Company
Rory T. O'Driscoll...... 34 Principal, BankAmerica Ventures and Vice 1995
President, BA Venture Partners I
</TABLE>
Certain additional information about the directors and nominees is given
below.
Nominees for Election for a Two-year Term Expiring at the 2001 Annual Meeting
of Stockholders
Radha R. Basu became a member of the Board in March 1999. Ms. Basu joined
Hewlett Packard Corporation ("HP"), a computer and office equipment company,
in 1978 as a research & development engineer in HP's laboratories. She has
held a number of positions with HP since joining the company including most
recently, General Manger of the Electronic Business Software Division. Ms.
Basu currently serves as a director of SEEC, Inc. a computer software company.
Ms. Basu holds a bachelor of engineering degree from the University of Madras
and a master's degree in Electrical Engineering and Computer Science from the
University of Southern California.
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Gordon J. Bridge joined the Company in November 1995 as the Chairman of the
Board and served as President and Chief Executive Officer of the Company from
April 1997 to April 1998. Currently, he is Chairman of the Board and, since
April 1998, a consultant to the Company. Since November 1995 Mr. Bridge has
also served as the chief business development officer of the Company. From
January 1, 1998 through March 31, 1998, Mr. Bridge served as Chairman and Co-
Chief Executive Officer of Paradigm Computer Systems, a private computer
company. From November 1995 to April 1997, Mr. Bridge was an Executive Vice
President and director of Quaestus Management Corporation ("Quaestus"), a
venture capital investment and private equity fund management company, which
funds are stockholders of the Company, although Mr. Bridge does not hold an
equity interest in the Quaestus funds. From 1988 to 1995, Mr. Bridge held
executive management positions with AT&T Corporation, a telecommunications
company, including President of AT&T Computer Systems, President of AT&T
EasyLink Services, President of Consumer Interactive Services and most
recently Vice President, Corporate Strategy responsible for Emerging Services
and Products. Prior to joining AT&T Corporation in 1988, he served for 23
years with IBM Corporation in various positions, including Vice President of
Marketing and Vice President of U.S. Sales. Mr. Bridge is a director of ARI
Network Services, Inc., an electronic commerce services provider. Mr. Bridge
holds a B.S. in Mathematics from Bradley University.
Craig D. Norris joined the Company in January 1996 as Vice President of
Professional Services. In July 1997 he was promoted to the position of
Executive Vice President of Services and Operations and in April 1998 to the
positions of Chief Executive Officer and President. In addition, in April
1998, Mr. Norris was appointed to the Company's Board. Prior to joining the
Company, Mr. Norris was a management consultant with Gemini Consulting Inc., a
consulting firm, from October 1992 to December 1995. From October 1988 to
October 1992, Mr. Norris was Vice President, West Area at Cap Gemini America,
a consulting firm. Mr. Norris holds a B.A. in Economics from Macalester
College and an M.B.A. from Fairleigh Dickenson University.
Nominees for Election for a One-year Term Expiring at the 2000 Annual Meeting
of Stockholders
Richard H. Lussier became a member of the Board in June 1992. Until
September 1996, when Mr. Lussier retired, he was President and Chief Executive
Officer of Siemens Nixdorf Information Systems Inc., a computer company and a
subsidiary of Siemens Nixdorf Informationssysteme AG ("Siemens Nixdorf"). From
November 1986 to March 1995 he was Chairman and Chief Executive Officer of
Pyramid Technology Corporation, a computer company, which was acquired by
Siemens Nixdorf in March 1995. Mr. Lussier holds a B.A. in Economics from
College of the Holy Cross and completed coursework at Boston College Graduate
School of Business.
Rory T. O'Driscoll became a member of the Board in December 1995. Mr.
O'Driscoll is a Principal of BankAmerica Ventures, a venture capital firm and
through its managed investment funds a stockholder of the Company, and a
General Partner of BA Venture Partners I. Prior to joining BankAmerica
Ventures in September 1993, Mr. O'Driscoll served in the Corporate Development
department of BankAmerica Corporation from March 1992 to September 1993.
Before his employment with BankAmerica Corporation, he worked as a financial
advisor to a number of privately held companies in the United Kingdom from
March 1991 to December 1991. Mr. O'Driscoll also serves as a director of
several private companies. Mr. O'Driscoll holds a B.Sc. in Economics from the
London School of Economics.
Board Committees and Meetings
During the fiscal year ended December 31, 1998 the Board held seven
meetings. The Board has an Audit Committee and a Compensation Committee. The
Board does not have a standing nominating committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained;
and receives and considers the accountants' comments as to controls, adequacy
of staff and management performance and procedures in connection with audit
and financial controls. The Audit Committee was composed of two non-employee
directors during 1998: Messrs. O'Driscoll and Welty. It met seven times during
such fiscal year.
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The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants
under the Company's stock option plans and otherwise determines compensation
levels and performs such other functions regarding compensation as the Board
may delegate. From January 1, 1998 through March 31, 1998, the Compensation
Committee was composed of three non-employee directors: Messrs. Haque, Weening
and Lussier. From March 31, 1998 until December 31, 1998, the Compensation
Committee was composed of two non-employee directors: Messrs. Haque and
Lussier. The Compensation Committee met seven times during such fiscal year.
During the fiscal year ended December 31, 1998, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the
committees on which he served, held during the period for which he was a
director or committee member, respectively.
PROPOSAL 2
AMENDMENT TO THE COMPANY'S SECOND AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
In January 1999, the Board approved an amendment to the Company's Second
Amended and Restated Certificate of Incorporation in the form attached to this
Proxy Statement as Exhibit A (the "Amendment"), subject to stockholder
approval. The Board now seeks approval of the Amendment by the Company's
stockholders.
The Amendment changes the Company's name to ConnectInc.com, Co. In
furtherance of the changing focus of the Company to providing more Internet-
related services, the Board believes that it is in the best interests of the
Company to change its name.
Approval of Proposal No. 2 requires the affirmative vote of a majority of
the outstanding shares of Common Stock of the Company.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
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PROPOSAL 3
APPROVAL OF THE 1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS AND ADVISORS
In June 1999, the Board adopted the Company's 1999 Stock Option Plan for
Non-Employee Directors and Advisors (the "Option Plan"), subject to
stockholder approval. There are 500,000 shares of Common Stock reserved for
issuance under the Option Plan. As of June 15, 1999 no option had been granted
under the Option Plan.
Stockholders are requested in this Proposal 3 to approve the Option Plan.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the meeting is required
to approve the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
The material features of the Option Plan are summarized below, which summary
is qualified in its entirety by reference to the actual plan attached as
Appendix A to this Proxy Statement.
General
The Option Plan provides for the grant of nonstatutory stock options.
Nonstatutory stock options granted under the Option Plan are not intended to
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). See "Federal Income Tax Information"
for a discussion of the tax treatment of options.
Purpose
The Board adopted the Option Plan to provide a means by which non- employee
directors and certain advisors of the Company and its affiliates may be given
an opportunity to purchase stock in the Company, to assist in retaining the
services of such persons, to secure and retain the services of persons capable
of filling such positions and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its affiliates. All of the
Company's non-employee directors and members of advisory boards of the Company
are eligible to participate in the Option Plan.
Administration
The Board administers the Option Plan. Subject to the provisions of the
Option Plan, the Board has the power to construe and interpret the Option Plan
and to determine the persons to whom and the dates upon which options will be
granted, the number of shares of Common Stock to be subject to each option,
the time or times during the term of each option within which all or a portion
of such option may be exercised, the exercise price, the type of consideration
and other terms of the option.
The Board has the power to delegate administration of the Option Plan to a
committee composed of not fewer than two members of the Board. In the
discretion of the Board, a committee may consist solely of two or more non-
employee directors in accordance with Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). As used herein with respect to
the Option Plan, the "Board" refers to any committee the Board appoints as
well as to the Board itself. The Board also may delegate to a committee of one
or more members of the Board the power to grant options to persons who are not
subject to Section 16 of the Exchange Act.
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Eligibility
Any director who is not an employee of the Company or an affiliate of the
Company at the time of grant is eligible to receive nonstatutory stock options
under the Option Plan. Any members of an advisory board established by the
Board is eligible to receive nonstatutory stock options under the Option Plan.
Stock Subject to the Option Plan
Subject to the Proposal, an aggregate of 500,000 shares of Common Stock is
reserved for issuance under the Option Plan. If options granted under the
Option Plan expire or otherwise terminate without being exercised, the shares
of Common Stock not acquired pursuant to such options again becomes available
for issuance under the Option Plan. If the Company reacquires unvested stock
issued under the Option Plan, the reacquired stock will not again become
available for reissuance under the Option Plan.
Terms of Options
The following is a description of the permissible terms of options under the
Option Plan. Individual option grants may be more restrictive as to any or all
of the permissible terms described below.
Exercise Price; Payment. The exercise price of nonstatutory options may not
be less than 85% of the fair market value of the stock on the date of grant.
The exercise price of options granted under the Option Plan must be paid
either in cash at the time the option is exercised or at the discretion of the
Board, (i) by delivery of other Common Stock of the Company, (ii) pursuant to
a deferred payment arrangement or (iii) in any other form of legal
consideration acceptable to the Board.
Repricing. In the event of a decline in the value of the Company's Common
Stock, the Board has the authority to offer optionholders the opportunity to
replace outstanding higher priced options with new lower priced options.
Option Exercise. Options granted under the Option Plan may become
exercisable in cumulative increments ("vest") as determined by the Board. The
Board has the power to accelerate the time during which an option may vest or
be exercised. In addition, options granted under the Option Plan may permit
exercise prior to vesting, but in such event the optionholder may be required
to enter into an early exercise stock purchase agreement that allows the
Company to repurchase unvested shares, generally at their exercise price,
should the optionholder's service terminate before vesting. To the extent
provided by the terms of an option, an optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise of such
option by a cash payment upon exercise, by authorizing the Company to withhold
a portion of the stock otherwise issuable to the optionholder, by delivering
already-owned Common Stock of the Company or by a combination of these means.
Term. The maximum term of options under the Option Plan is 10 years. Options
under the Option Plan generally terminate three months after termination of
the optionholder's service unless (i) such termination is due to the
optionholder's permanent and total disability (as defined in the Code), in
which case the option may, but need not, provide that it may be exercised (to
the extent the option was exercisable at the time of the termination of
service) at any time within 12 months of such termination; (ii) the
optionholder dies before the optionholder's service has terminated, or within
three months after termination of such service, in which case the option may,
but need not, provide that it may be exercised (to the extent the option was
exercisable at the time of the optionholder's death) within 18 months of the
optionholder's death by the person or persons to whom the rights to such
option pass by will or by the laws of descent and distribution; or (iii) the
option by its terms specifically provides otherwise. An optionholder may
designate a beneficiary who may exercise the option following the
optionholder's death. Individual option grants by their terms may provide for
exercise within a longer period of time following termination of service.
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Restrictions on Transfer
Except as provided in an option agreement, an optionholder may not transfer
an option otherwise that by will or by the laws of descent and distribution.
During the lifetime of the optionholder, only the optionholder may exercise an
option. Shares subject to repurchase by the Company under an early exercise
stock purchase agreement may be subject to restrictions on transfer that the
Board deems appropriate.
Adjustment Provisions
Transactions not involving receipt of consideration by the Company, such as
a merger, consolidation, reorganization, stock dividend, or stock split, may
change the class and number of shares of Common Stock subject to the Option
Plan and outstanding options. In that event, the Option Plan will be
appropriately adjusted as to the class and the maximum number of shares of
Common Stock subject to the Option Plan, and outstanding options will be
adjusted as to the class, number of shares and price per share of Common Stock
subject to such options.
Effect of Certain Corporate Events
The Option Plan provides that, in the event of a dissolution, liquidation of
the Company, all outstanding options shall terminate if not exercised prior to
such event. The Option Plan provides that, in the event of a sale of all or
substantially all of the assets of the Company, specified types of merger, or
other corporate reorganization ("change in control"), any acquiring or
surviving corporation may either assume options outstanding under the Option
Plan or substitute similar options for those outstanding under the Option
Plan, otherwise such outstanding options will continue in full force and
effect. If any acquiring or surviving corporation declines to assume options
outstanding under the Option Plan, or to substitute similar options, the
options shall accelerate in full and such options may be exercised during the
15 days following such acceleration and then terminate to the extent
unexercised. With respect to any other outstanding options, such options shall
terminate to the extent not exercised prior to such event. The acceleration of
an option in the event of an acquisition or similar corporate event may be
viewed as an anti-takeover provision, which may have the effect of
discouraging a proposal to acquire or otherwise obtain control of the Company.
Duration, Amendment and Termination
The Board may suspend or terminate the Option Plan without stockholder
approval or ratification at any time or from time to time.
The Board may also amend the Option Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within 12 months before or after its adoption by the Board if the
amendment would (i) modify the requirements as to eligibility for
participation; (ii) increase the number of shares reserved for issuance upon
exercise of options; or (iii) change any other provision of the Option Plan in
any other way if such modification requires stockholder approval in order to
comply with applicable law or any securities exchange listing requirements.
Federal Income Tax Information
Long-term capital gains currently are generally subject to lower tax rates
than ordinary income or short-term capital gains. The maximum long-term
capital gains rate for federal income tax purposes is currently 20% while the
maximum ordinary income rate and short-term capital gains rate is effectively
39.6%. Slightly different rules may apply to optionholders who acquire stock
subject to certain repurchase options or who are subject to Section 16(b) of
the Exchange Act.
Nonstatutory stock options granted under the Option Plan generally have the
following federal income tax consequences:
There are no tax consequences to the optionholder or the Company by reason
of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionholder normally will recognize taxable
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ordinary income equal to the excess, if any, of the stock's fair market value
on the date of exercise over the option exercise price. However, to the extent
the stock is subject to certain types of vesting restrictions, the taxable
event will be delayed until the vesting restrictions lapse unless the
participant elects to be taxed on receipt of the stock. With respect to
employees, the Company is generally required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirements of reasonableness and the satisfaction of a tax
reporting obligation, the Company will generally be entitled to a business
expense deduction equal to the taxable ordinary income realized by the
optionholder.
Upon disposition of the stock the optionholder will recognize a capital gain
or loss equal to the difference between the selling price and the sum of the
amount paid for such stock plus any amount recognized an ordinary income upon
exercise of the option (or vesting of the stock). Such gain or loss will be
long-term or short-term depending on whether the stock was held for more than
one year. Slightly different rules may apply to optionholders who acquire
stock subject to certain repurchase options or who are subject to Section
16(b) of the Exchange Act.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 1999 and has further directed
that management submit the selection of independent auditors for ratification
by the stockholders at the Annual Meeting. Ernst & Young LLP has audited the
Company's financial statements since 1995. Representatives of Ernst & Young
LLP are expected to be present at the Annual Meeting, will have an opportunity
to make a statement if they so desire and are expected to be available to
respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee and the Board in their discretion
may direct the appointment of different independent auditors at any time
during the year if they determine that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required to ratify the selection of Ernst & Young LLP.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
9
<PAGE>
IDENTIFICATION OF EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company as of December 31, 1998, including (as of
such date) their ages:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Gordon J. Bridge......................... 56 Chairman of the Board
Lucille Hoger............................ 45 Chief Operating Officer
Greigory Park............................ 41 Chief Financial Officer
Craig D. Norris.......................... 51 President, Chief Executive Officer
</TABLE>
Gordon J. Bridge joined the Company in November 1995 as the Chairman of the
Board of Directors and served as President and Chief Executive Officer of the
Company from April 1997 to April 1998. Currently, he is Chairman of the Board
and, since April 1998, a consultant to the Company. Since November 1995 Mr.
Bridge has also served as the chief business development officer of the
Company. From January 1, 1998 through March 31, 1998, Mr. Bridge served as
Chairman and Co-Chief Executive Officer of Paradigm Computer Systems, a
private computer company. From November 1995 to April 1997, Mr. Bridge was an
Executive Vice President and Director of Quaestus, a venture capital
investment and private equity fund management company, which funds are
stockholders of the Company, although Mr. Bridge does not hold an equity
interest in the Quaestus funds. From 1988 to 1995, Mr. Bridge held executive
management positions with AT&T Corporation, a telecommunications company,
including President of AT&T Computer Systems, President of AT&T EasyLink
Services, President of Consumer Interactive Services and most recently Vice
President, Corporate Strategy responsible for Emerging Services and Products.
Prior to joining AT&T Corporation in 1988, he served for 23 years with IBM
Corporation in various positions, including Vice President of Marketing and
Vice President of U.S. Sales. Mr. Bridge is a director of ARI Network
Services, Inc., an electronic commerce services provider. Mr. Bridge holds a
B.S. in Mathematics from Bradley University.
Lucille Hoger joined the Company in January 1996 as Director of Professional
Services. In October 1998 she was promoted to Chief Operating Officer of the
Company. Prior to joining the Company, from 1993 to 1996, Ms. Hoger was a
principal with Gemini Consulting. Ms. Hoger's industry experience includes
consumer products, higher education, government, technology, and
oil/gas/chemicals. Ms. Hoger holds a B.A. in accounting from Southwest Texas
State University.
Greigory Park joined the Company in April 1998 as Vice President of Finance.
In September 1998 he was promoted to Chief Financial Officer of the Company.
Prior to joining the Company, from 1994 through 1998, Mr. Park was Corporate
Controller for International Microcomputer Software, Inc., a leading developer
and publisher of visual productivity software for businesses and consumers,
and Copart Inc., a national provider of salvage vehicle auction services. Mr.
Park holds an MBA from St. Mary's College and a BSC from Santa Clara
University. In April 1999, Mr. Park resigned as Chief Financial Officer of the
Company and is no longer an employee of the Company.
Craig D. Norris joined the Company in January 1996 as Vice President of
Professional Services. In July 1997 he was promoted to the position of
Executive Vice President of Services and Operations and in April 1998 to the
positions of Chief Executive Officer and President. In addition, in April
1998, Mr. Norris was appointed to the Company's Board of Directors. Prior to
joining the Company, Mr. Norris was a management consultant with Gemini
Consulting Inc., a consulting firm, from October 1992 to December 1995. From
October 1988 to October 1992, Mr. Norris was Vice President, West Area at Cap
Gemini America, a consulting firm. Mr. Norris holds a B.A. in Economics from
Macalester College and an M.B.A. from Fairleigh Dickenson University.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of May 15, 1999 by: (i) each director and
nominee; (ii) each of the Named Executive Officers (as defined in "Executive
Compensation"); (iii) all executive officers and directors of the Company as a
group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership (2)
Number of Percent of
Beneficial Owner (1) Shares Total
-------------------- ---------- -------------
<S> <C> <C>
RRE Connect Investors, LP............................................ 1,174,242 7.92%
126 East 56th Street, 22nd Floor
New York, NY 10022
Entities affiliated with Special Situations Fund, L.P. .............. 961,539 6.49%
133 East 53rd Street
New York, NY 10022 (3)
Craig D. Norris (4).................................................. 467,371 3.15%
Radha R. Basu........................................................ -- *
Gordon J. Bridge (5)................................................. 52,138 *
Barton S. Foster (6)................................................. -- *
Joseph G. Girata (7)................................................. -- *
Lucille Hoger (8).................................................... 88,699 *
Richard H. Lussier (9)............................................... 8,735 *
Rory T. O'Driscoll (10).............................................. 2,000 *
All directors and executive officers as a group (7 persons) (11)..... 618,943 4.18%
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the named individuals
is: c/o Connect, Inc., 515 Ellis Street, Mountain View, CA 94043.
(2) This table is based on information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the SEC.
Unless otherwise indicated in the footnotes to this table and subject to
community property laws where applicable, the Company believes that each
of the stockholders named in this table has sole voting and investment
power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 14,821,449 shares of common stock
outstanding on May 15, 1999, adjusted as required by rules promulgated by
the SEC.
(3) Includes 134,615 shares held by Special Situations Cayman Fund L.P.,
442,308 shares held by Special Situations Fund III, 288,462 shares held
by Special Situations Private Equity Fund L.P. and 96,154 shares held by
Special Situations Technology Fund L.P.
(4) Includes 467,121 shares subject to stock options held by Mr. Norris
exercisable within 60 days of the date of this table. A portion of the
shares issued or issuable upon exercise of stock options is subject to
repurchase by the Company at the original exercise price in the event of
termination of employment, which repurchase right lapses over time.
Substantially all of the shares and stock options held by Mr. Norris are
subject to a lockup agreement which expires in September 1999.
(5) Includes 52,138 shares subject to stock options held by Mr. Bridge
exercisable within 60 days of the date of this table. A portion of the
shares issued or issuable upon exercise of stock options is subject to
repurchase by the Company at the original exercise price in the event of
termination of employment, which repurchase right lapses over time.
(6) In April 1998, Mr. Foster resigned from the Company as its Executive Vice
President of Sales and Marketing.
11
<PAGE>
(7) In September, 1998, Mr. Girata resigned from the Company as its Chief
Financial Officer.
(8) Includes 88,699 shares subject to stock options held by Ms. Hoger
exercisable within 60 days of the date of this table. A portion of the
shares issued or issuable upon exercise of stock options is subject to
repurchase by the Company at the original exercise price in the event of
termination of employment, which repurchase right lapses over time.
Substantially all of the shares and stock options held by Ms. Hoger are
subject to a lockup agreement which expires in September 1999.
(9) Includes 8,735 shares subject to stock options held by Mr. Lussier
exercisable within 60 days of the date of this table. A portion of the
shares issued or issuable upon exercise of stock options is subject to
repurchase by the Company at the original exercise price upon cessation
of service as a director of the Company, which repurchase right lapses
over time.
(10) Includes 2,000 shares subject to stock options held by Mr. O'Driscoll on
behalf of BankAmerica Ventures exercisable within 6 0 days of the date of
this table. Mr. O'Driscoll is a Principal of BankAmerica Ventures. Mr.
O'Driscoll disclaims beneficial ownership of the shares held by such
entities except to the extent of his pro rata interest therein.
(11) Includes shares described in the notes above, as applicable. Includes
shares which certain executive officers and directors of the Company have
the right to acquire within 60 days of the date of this table pursuant to
outstanding options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
Compensation of Directors
The Company's nonemployee directors are eligible to receive stock option
grants pursuant to the Company's 1996 Directors' Stock Option Plan (the
"Directors' Plan") and 1996 Stock Option Plan. Except as described below,
directors do not otherwise receive compensation for their service as
directors, except that non-employee directors are reimbursed for out-of-pocket
expenses incurred in connection with attendance at meetings of the Board and
its committees.
The Directors' Plan provides for the grant of nonstatutory stock options to
nonemployee directors of the Company. The Directors' Plan provides that each
person who first becomes a nonemployee director of the Company after the date
of effectiveness of the Company's initial public offering will be granted an
option to purchase 4,000 shares of common stock on the date on which the
optionee first becomes a nonemployee director of the Company. Thereafter, on
the date of each annual meeting of the Company's stockholders following which
a nonemployee director is serving on the Board, each such nonemployee director
will be granted an option to purchase 1,000 shares of common stock, provided
that on such date, he or she shall have served on the Board for at least three
months prior to the date of such annual meeting.
12
<PAGE>
Mr. Bridge, Chairman of the Board, entered into a consulting relationship
with the Company in April 1998 pursuant to which he received cash compensation
of $18,750 per month. Upon the termination of this arrangement at the end of
March 1999, Mr. Bridge was retained as a consultant to the Company for an
additional six months and will receive cash compensation of $13,542 per month.
For a full description of the terms of Mr. Bridge's consulting arrangement
with the Company, see "Employment Contracts, Termination of Employment and
Change-in-Control Agreements--Employee Agreements."
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Compensation
The following table shows for the fiscal years ended December 31, 1998, 1997
and 1996, compensation awarded or paid to, or earned by, (i) all individuals
who have served as the Company's Chief Executive Officer during 1998 (Mr.
Bridge and Mr. Norris), (ii) the Company's other most highly compensated
executive officers at December 31, 1998 (Ms. Hoger), and (iii) the two
individuals that would have otherwise been listed pursuant to (ii) except that
they were not executive officers at December 31, 1998 (Mr. Foster and Mr.
Girata) (collectively, the "Names Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------ ------------
Other Securities
Annual Underlying All Other
Name and Salary Bonus(1) Compensation Options/ Compensation
Principal Position Year ($) ($) ($) SARs(#) ($)
------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gordon J. Bridge(2)..... 1998 $ 68,366 $23,125 $ -- 85,000 $84,127(13)
Chairman of the Board,
Former President 1997 $206,251 $45,000 $ -- 124,821 $ --
and Chief Executive 1996 $150,000 $87,344 $ -- 30,000 $ --
Officer
Barton S. Foster(3)..... 1998 $ 96,360 $51,705 $ -- -- $12,900(14)
Former Executive Vice
President of 1997 $159,583 $53,266 $ -- 19,999 $ --
Sales and Marketing 1996 $110,981 $21,875 $15,000(4) -- $ --
Joseph G. Girata(5)..... 1998 $151,422 $35,892 $ -- 140,000 $ --
Former Chief Financial
Officer 1997 $145,000 $24,034 $ -- 50,248(6) $ --
1996 $ 78,526 $ 5,907 $ -- 35,000 $ --
Craig D. Norris(8)...... 1998 $208,750 $42,891 $ -- 842,000(9) $ --
President and Chief
Executive Officer 1997 $150,000 $16,250 $ 8,522(10) 15,000 $ --
1996 $140,000 $46,020 $ -- 29,000 $ --
Lucille Hoger(11)....... 1998 $166,320 $35,522 $ -- 158,028(12) $ --
Chief Operating Officer 1997 $119,722 $16,250 $ -- 13,828 $ --
1996 $125,493 $15,000 $ -- 7,720 $ --
</TABLE>
- --------
(1) Includes bonuses paid in January of the following year based upon the
individual's performance in the indicated years.
(2) In April 1998, Mr. Bridge resigned as President and Chief Executive
Officer of the Company. Mr. Bridge continues to serve as the Company's
Chairman of the Board, a position he has held since November 1995.
(3) In April 1998, Mr. Foster resigned as Executive Vice President of Sales
and Marketing of the Company and is no longer an executive officer of the
Company.
(4) Represents amounts paid as a signing bonus in 1996.
(5) In September 1998, Mr. Girata resigned as Chief Financial Officer of the
Company and is no longer an executive officer of the Company.
(6) Includes a grant of a new option to purchase 10,000 shares and a grant of
options to purchase 40,248 shares of common stock that was made pursuant
to a repricing program whereby outstanding options for an equal number of
shares having higher exercise prices were canceled and new options having
an exercise price of
13
<PAGE>
$8.125 were issued in their place. The vesting terms of such repriced
options did not change. See "Ten-Year Option Repricings" for further
details on this repricing.
(7) Represents 35,000 shares of common stock issuable upon exercise of an
option with an original exercise price of $48 per share, which option was
exchanged in September 1996 for a new option to purchase 35,000 shares
with an exercise price of $30.625 per share. See "Ten-Year Option
Repricings" for further details on this repricing.
(8) Mr. Norris became Chief Executive Officer and President of the Company in
April 1998.
(9) Incudes 842,000 shares subject to stock options re-granted pursuant to
option repricing in November 1998. See "Ten-Year Option Repricings" for
further details on this repricing.
(10) Represents amounts paid as commissions in 1997.
(11) Ms. Hoger became Chief Operating Officer of the Company in October 1998.
(12) Includes 158,020 shares subject to stock options re-granted pursuant to
option repricing in November 1998. See "Ten-Year Option Repricings" for
further details on this repricing.
(13) Consists of principal and interest forgiven by the Company in connection
with a loan to Mr. Bridge. The forgiveness was done in connection with
Mr. Bridge's consulting arrangement. See "Certain Relationships and
Related Transactions."
(14) Consists of principal and interest forgiven by the Company in connection
with a loan to Mr. Foster. The forgiveness was done in connection with
Mr. Foster's consulting arrangement. See "Certain Relationships and
Related Transactions."
Mr. Norris and the other executive officers of the Company are entitled to
cash and option acceleration benefits relating to a change of control of the
Company pursuant to Change of Control Agreements between such officers and the
Company. See "Employment Contracts, Termination of Employment and Change-in-
Control Arrangements--Change-in-Control Arrangements."
Stock Option Grants And Exercises
The Company grants options to its executive officers under its 1989 Stock
Option Plan and 1996 Stock Option Plan (the "Incentive Plans"). Unless
otherwise indicated options vest as to 1/36 of the total number of shares
subject to the option each month after the grant until the option is fully
vested. The exercisability of options may be accelerated upon a change in
control. Options are, under most circumstances, cancelled thirty (30) days
after an optionee's termination as an employee or consultant. As of March 10,
1999, options to purchase a total of 1,816,301 shares were outstanding under
the Incentive Plans and options to purchase 982,816 shares remained available
for grant thereunder.
14
<PAGE>
The following tables show for the fiscal year ended December 31, 1998,
certain information regarding options granted to, exercised by, and held at
year-end by, the Named Executive Officers:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------------- Value at Assumed
Number of % of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Exercise Appreciation for
Options Employees Or Base Option Term(2)
Granted In Fiscal Price Expiration ---------------------
Name (#) Year(1) ($/Sh) Date 5% ($) 10% ($)
---- ---------- ---------- -------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gordon J. Bridge (3).... 79,999 2.16% 4.375 April 2008 130,310 207,497
1,000 0.02% 2.063 May 2008 1,628 2,593
Barton S. Foster (4).... -- -- -- -- -- --
Joseph G. Girata (5).... -- -- -- -- -- --
Craig D. Norris (6)..... 20,000(7)(8) 0.54% 0.500 April 2008 32,578 51,875
780,000(7)(8) 21.09% 0.500 May 2008 1,270,538 2,023,119
15,000(7) 0.40% 0.500 July 2007 24,433 38,906
10,000(7) 0.27% 0.500 April 2006 16,289 25,937
17,000(7) 0.46% 0.500 December 2005 27,691 44,094
Lucille Hoger (9)....... 10,000(7)(8) 0.27% 0.500 April 2008 18,289 51,837
130,000(7)(8) 3.52% 0.500 May 2008 211,756 337,187
6,000(7) 0.16% 0.500 December 2007 9,773 15,562
2,000(7) 0.05% 0.500 November 2007 3,258 5,187
4,028(7) 0.11% 0.500 April 2007 6,561 10,448
6,000(7) 0.16% 0.500 January 2006 9,773 15,562
</TABLE>
- --------
(1) Based on options to purchase an aggregate of 3,698,349 shares granted to
employees (including employee directors) during the fiscal year ended
December 31, 1998 (including 1,122,950 options granted in November 1998
pursuant to option repricing, see "Ten-Year Option Repricing"). The
foregoing total excludes options granted to consultants and nonemployee
directors. There were no stock appreciation rights granted during 1998.
(2) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their terms, assuming the specified compounded
rates of appreciation of the market price per share from the date of grant
to the end of the option term. Actual gains, if any, on stock option
exercise are dependent upon a number of factors, including the future
performance of the Company's Common Stock and the timing of option
exercises, as well as the optionee's continued employment through the
vesting period. There can be no assurance that the amounts reflected in
this table will be achieved.
(3) In April 1988, Mr. Bridge resigned as President and Chief Executive
Officer of the Company. Mr. Bridge continues to serve as the Company's
Chairman of the Board, a position he has held since November 1995.
(4) In April 1998, Mr. Foster resigned as Executive Vice President of Sales
and Marketing of the Company and is no longer an executive officer of the
Company.
(5) In September 1998, Mr. Girata resigned as Chief Financial Officer of the
Company and is no longer an executive officer of the Company.
(6) Mr. Norris became Chief Executive Officer and President of the Company in
April 1998.
(7) Such stock options granted pursuant to option repricing in November 1998.
(8) Such repriced stock options were originally granted in 1998.
(9) Ms. Hoger became Chief Operating Officer of the Company in October 1998.
15
<PAGE>
Aggregated Option Exercises in Last Fiscal Year,
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying In-the-
Acquired Unexercised Options at Money Options a
on Value FY-End (#) FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) (1) Unexercisable Unexercisable (2)
---- -------- -------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Gordon J. Bridge (3).... 133,395 449,974 119,622/25,803 $ 311/$3,435
Barton S. Foster (4).... 0 0 0/0 $ 0/$0
Joseph G. Girata (5).... 0 0 0/0 $ 0/$0
Craig D. Norris (6)..... 0 0 268,242/573,758(7) $603,545/$1,290,956(7)
Lucille Hoger (8)....... 0 0 532,532/104,496(9) $ 120,447/$235,116(9)
</TABLE>
- --------
(1) This amount represents the market value of the underlying securities on
the exercise date minus the exercise price of such options.
(2) Based on the $2.75 per share closing price of the Company's Common Stock
on The Nasdaq National Market on December 31, 1998, less the exercise
prices.
(3) In April 1998, Mr. Bridge resigned as President and Chief Executive
Officer of the Company. Mr. Bridge continues to serve as the Company's
Chairman of the Board, a position he has held since November 1995.
(4) In April 1998, Mr. Foster resigned as Executive Vice President of Sales
and Marketing of the Company and is no longer an executive officer of the
Company.
(5) In September 1998, Mr. Girata resigned as Chief Financial Officer of the
Company and is no longer an executive officer of the Company.
(6) Mr. Norris became Chief Executive Officer and President of the Company in
April 1998.
(7) Substantially all of Mr. Norris' stock options are subject to a lock-up
agreement which expires in September 1999.
(8) Ms. Hoger became Chief Operating Officer of the Company in October 1998.
(9) Substantially all of Ms. Hoger's stock options are subject to a lock-up
agreement which expires in September 1999.
16
<PAGE>
TEN-YEAR OPTION REPRICINGS
In order to reincentivize its employees, the Board, upon the recommendation
of the Compensation Committee, approved in November 1998 an option repricing
program pursuant to which employees could surrender options granted by the
Company with an exercise price greater than $0.50 per share and receive in
place of the surrendered options, new options with an exercise price to $0.50
per share, the fair market value of the Company's Common Stock on the date of
Board approval. The new options issued pursuant to this repricing program were
subject to the same vesting provisions as the surrendered options. Options
representing 1,122,950 shares of Common Stock were repriced.
The following table sets forth certain information as of December 31, 1998
with respect to the repricing of certain stock options held by the Company's
executive officers since the Company's initial public offering.
<TABLE>
<CAPTION>
Number of Market Length of
Securities Price of Exercise Original
Underlying Stock at Price at Option Term
Options/SARs Time of Time of New Remaining at
Repriced or Repricing or Repricing or Exercise Date of
Amended Amendment Amendment Price Repricing or
Name Date (#) ($) ($) ($) Amendment
---- -------- ------------ ------------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph G. Girata(1)..... 4/14/97(3) 13,060 8.125 30.625 8.125 110 mos.
Former Chief Financial
Officer 4/14/97(3) 21,939 8.125 30.625 8.125 110 mos.
4/14/97(3) 4,391 8.125 31.875 8.125 113 mos.
4/14/97(3) 858 8.125 31.875 8.125 113 mos.
9/10/96(2) 35,000 30.625 48.000 30.625 117 mos.
Craig Norris............ 11/13/98 17,000 0.500 2.500 0.500 85 mos.
President and Chief 11/13/98 10,000 0.500 2.500 0.500 89 mos.
Executive
Officer 11/13/98 15,000 0.500 11.250 0.500 103 mos.
11/13/98 20,000 0.500 1.312 0.500 113 mos.
11/13/98 780,000 0.500 2.063 0.500 114 mos.
Lucille Hoger........... 11/13/98 6,000 0.500 2.500 0.500 85 mos.
Chief Operating Officer 11/13/98 4,028 0.500 8.125 0.500 89 mos.
11/13/98 2,000 0.500 7.188 0.500 108 mos.
11/13/98 6,000 0.500 5.470 0.500 109 mos.
11/13/98 10,000 0.500 1.312 0.500 112 mos.
11/13/98 130,000 0.500 2.063 0.500 113 mos.
Victor L. Fischer(4).... 4/14/97(3) 19,999 8.125 31.875 8.125 113 mos.
Former Vice President
of Management
Information Services
</TABLE>
- --------
(1) In September 1998, Mr. Girata resigned as Chief Financial Officer of the
Company and is no longer an executive officer of the Company.
(2) This option grant to Mr. Girata was done pursuant to a repricing program
approved by the Compensation Committee of the Board in September 1996 that
allowed employees to surrender outstanding options with exercise prices of
$48.00 per share or greater and to receive in the place of such
surrendered options new options with an exercise price of $30.625 per
share, the fair market value of the Company's Common Stock on the date the
repricing program was approved. The new options are subject to the same
vesting schedule as the surrendered options. Options representing 163,334
shares of Common Stock were repriced pursuant to this repricing program.
(3) In April 1997, the Board approved a repricing program pursuant to which
employees could surrender options granted by the Company between May 1996
and March 1997 having exercise prices greater than $15.00 per share and
receive in place of the surrendered options, new options having an
exercise price of $8.125 per share, the fair market value of the Company's
Common Stock on the date of Board approval. The new options issued
pursuant to the 1997 repricing program were subject to the same vesting
provisions as the surrendered options. Options representing 166,708 shares
of Common Stock were repriced.
(4) Mr. Fischer resigned from his position as an executive officer of the
Company in January 1998.
17
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
Employment Agreements
In connection with Mr. Bridge's appointment in April 1997 as the Company's
Chief Executive Officer and President, Mr. Bridge and the Company entered into
an agreement (the "1997 Letter") providing that Mr. Bridge would receive an
annual salary for fiscal 1997 of $225,000 and be eligible to receive a bonus,
based on the achievement of certain financial objectives, of up to $285,000.
Actual amounts paid to Mr. Bridge during 1997 are as reflected in the Summary
Compensation Table. In addition, pursuant to the 1997 Letter, Mr. Bridge was
granted an option to purchase 79,999 shares of the Company's Common Stock at
an exercise price of $6.25 per share, the fair market value of such stock on
the grant date. Pursuant to the terms of this option, 12.5% of the shares
issuable upon exercise of the option were to vest in October 1997, with the
remainder of the shares vesting in equal monthly installments thereafter
through the fourth anniversary of the grant date. In July 1997, the
Compensation Committee of the Board amended the vesting terms of this option
grant to Mr. Bridge such that 16.67% of the shares issuable on exercise became
vested in October 1997, with the remainder of the shares vesting in equal
monthly installments thereafter through the third anniversary of the grant
date. The 1997 Letter also provided that the Company would loan Mr. Bridge
$150,000 pursuant to a full recourse, three-year promissory note to which
interest at the then-current minimum applicable federal rate would apply. The
1997 Letter provides that, should the Company terminate Mr. Bridge without
cause, he would be entitled to continue working as a consultant to the Company
for a period of one year following such termination and that the option
described above would continue to vest through such consultancy period. In
addition, the 1997 Letter provides that certain performance objectives set
forth in stock option agreements relating to options to purchase an aggregate
of 30,000 shares issued to Mr. Bridge in January 1996 and April 1996 had been
achieved and that, pursuant to the terms of such stock option agreements, the
vesting schedules for the options converted from a 72-month to a 48-month
schedule.
In January 1998, the Company and Mr. Bridge entered into an agreement (the
"1998 Letter") pursuant to which Mr. Bridge would receive an annual salary for
fiscal 1998 of $225,000 and be eligible to receive a performance bonus, based
upon the Company's achievement of certain financial objectives, of up to
$200,000. In addition, Mr. Bridge would be eligible to receive a strategic
bonus, payable upon the achievement of certain strategic objectives set by the
Board, of up to $500,000 during fiscal 1998. Actual amounts paid to Mr. Bridge
during 1998 are as reflected in the Summary Compensation Table. Mr. Bridge was
granted an option to purchase 79,999 shares of the Company's Common Stock in
January 1998 pursuant to the 1998 Letter, which options were to vest in equal
monthly installments over a three-year period.
In April 1998, Mr. Bridge resigned his positions as the Company's Chief
Executive Officer and President. He continues to serve as its Chairman of the
Board. In connection with his resignation as Chief Executive Officer and
President and pursuant to the 1997 Letter, Mr. Bridge entered into an
agreement with the Company whereby he agreed to remain as a consultant to the
Company through March 1999. Pursuant to this agreement, Mr. Bridge received
through March 1999 an amount equal to his regular monthly salary prior to his
resignation ($18,750), acceleration of the exercisability of certain options
to purchase 69,000 shares of the Company's Common Stock, continued vesting of
other unvested options and reimbursement for certain business expenses
associated with his consulting relationship. Upon the termination of this
arrangement at the end of March 1999, Mr. Bridge was retained as a consultant
to the Company for an additional six months and will receive cash compensation
of $13,542 per month. In addition, the Company has agreed to forgive 50% of
the total principal and outstanding interest of the loan described above in
exchange for Mr. Bridge's remaining a consultant to the Company and, if Mr.
Bridge achieves certain specified goals, he may be entitled to forgiveness of
the remainder of outstanding principal and interest on his loan.
In April 1998, the Company entered into an employment letter with Craig
Norris in connection with his appointment as the Company's President and Chief
Executive Officer. Pursuant to the terms of this letter agreement, Mr. Norris
was to receive an annual salary of $225,000 for 1998 and was to be eligible
for a bonus,
18
<PAGE>
payable upon the Company's achievement of certain quarterly and annual
financial objectives, of up to $150,000. The employment letter also provides
that Mr. Norris was to be eligible to receive a strategic bonus, payable upon
the achievement of certain strategic objectives set by the Board during fiscal
1998 in an amount to be determined by the Board. Actual amounts paid to Mr.
Norris during 1998 are as reflected in the Summary Compensation Table. In
addition, on May 28, 1998, Mr. Norris received an option to purchase 780,000
shares of Common Stock at an exercise price of $2.063 per share.
Change-in-Control Arrangements
In June 1997, the Company entered into Change of Control Agreements with
each of Gordon Bridge, Joseph Girata and Craig Norris. In April 1998, pursuant
to Mr. Bridge's resignation as Chief Executive Officer and President of the
Company, his Change of Control Agreement was terminated. In April 1998,
Lucille Hoger, the Company's newly appointed Vice President of Professional
Services, entered into a Change of Control Agreement and Mr. Norris' Change of
Control Agreement was amended. In September 1998, Greigory Park, the Company's
newly appointed Chief Financial Officer, entered into a Change of Control
Agreement. In April 1999, pursuant to Mr. Park's termination as Chief
Financial Officer, his Change of Control Agreement was terminated. Pursuant to
the terms of such Change of Control Agreements, as amended, each executive
officer will be entitled to a cash payment equal to 2.99 times such officer's
total compensation during fiscal year 1998 upon certain change of control
transactions involving the Company (generally, a merger or acquisition of the
Company). Such cash payments are subject to reduction in certain circumstances
and would be reduced to zero if the aggregate value to be received by the
Company's stockholders in connection with such change of control transaction
were equal to or less than $25 million. Each executive officer would also be
entitled to acceleration of vesting of all options held by him or her in the
event of a hostile takeover of the Company. In addition, if such officer were
to be terminated involuntarily within two years of a change of control, he or
she would be entitled for a period of twelve months following such termination
to continuation of his or her monthly salary, payment on a monthly basis of
one-twelfth of the performance bonus to which he or she would have been
entitled assuming full achievement of all performance objectives of the
Company for such year, acceleration of vesting of all stock options held at
the time of termination, certain benefits under the Company's health and other
benefit plans, and outplacement services not to exceed $15,000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is a report of the Compensation Committee of the Board (the
"Committee") describing the compensation policies applicable to the Company's
executive officers (including the Named Executive Officers) during the fiscal
year ended December 31, 1998. The Committee is responsible for establishing
and monitoring the general compensation policies and compensation plans of the
Company, as well as the specific compensation levels for executive officers.
The Committee also administers the Company's stock plans and determines the
terms and conditions of stock option grants. Executive officers who are also
directors have not participated in deliberations or decisions involving their
own compensation.
General Policies
The Company's compensation policies are designed to link the executive
officers' compensation to the annual and long-term performance of the Company
and to provide compensation that is competitive with the compensation paid to
other executives in the industry and that will attract and retain superior
talent and reward performance. The compensation mix reflects a balance of
annual cash payments, consisting of annual base salary payments and incentive
bonus payments, and long-term stock-based incentives in the form of stock
options. The emphasis in incentive compensation is placed on the more
strategic stock-based options that more closely align the financial interests
of the Company's employees with those of its stockholders.
19
<PAGE>
Base Salaries
The salary component of executive compensation is based on the executive's
level of responsibility for meeting Company objectives and performance, and
comparable to similar positions in the Company and to comparable companies.
Base salaries for executives are reviewed and adjusted at least annually based
on information regarding competitive salaries, the results of industry
compensation surveys, individual experience and performance.
Cash Bonuses
The Company's incentive program for executive officers provides direct
financial incentives in the form of cash bonuses. Executive bonuses are based
entirely on Company financial performance.
Stock Options
The Company's 1996 Stock Option Plan and 1989 Stock Option Plan provide for
the issuance of stock options to officers and employees of the Company to
purchase shares of the Company's common stock at an exercise price equal to
the fair market value of such stock on the date of grant. The Company's stock
options typically vest over a 36-month period.
The Company's compensation policies recognize the importance of stock
ownership by senior executives and stock options are an integral part of each
executive's compensation. The Committee believes that the opportunity for
stock appreciation through stock options that vest over time promotes the
relationship between long-term interests of executive officers and
stockholders. The size of specific grants takes into account the executive
officer's salary and the number of options previously granted to the officer,
as well as his or her contributions to the Company's success.
Compensation of the Chief Executive Officer
In April 1997, Gordon J. Bridge was appointed the Company's President and
Chief Executive Officer (the "CEO"). He resigned such positions in April 1998,
at which time Craig Norris, previously the Company's Executive Vice President
of Services and Operations, was appointed as the Company's CEO and President.
At the time Mr. Bridge was appointed CEO in April 1997, he entered into the
1997 Letter with the Company, the terms of which are described in more detail
in "Employment Contracts, Termination of Employment and Change-in-Control
Arrangements."
During fiscal 1998, Mr. Norris, the current Chief Executive Officer of the
Company received $251,642. In reviewing the compensation paid to Mr. Norris
for fiscal 1998, the Committee applied the factors discussed above in this
Report under the headings "Base Salaries," "Cash Bonuses", and "Stock
Options". In addition, in determining Mr. Norris' 1998 compensation the
Committee considered a number of other factors, including competitive market
compensation packages, Mr. Norris' past performance at the Company and the
responsibilities he was undertaking in assuming the position of CEO. Based on
its survey data and informal information reviewed by the Committee, the
Committee believes that the base salary level for the CEO is commensurate with
salaries paid to chief executive officers of comparable companies engaged in
similar industries.
Overall, the Committee believes that Mr. Norris is being appropriately
compensated in a manner that is consistent with the long-term interests of
stockholders.
Deductibility of Executive Compensation
The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993,
which section disallows a deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable year for the CEO
and four other
20
<PAGE>
most highly compensated executive officers, unless such compensation meets the
requirements for the "performance-based" exception to the general rule. Since
the cash compensation paid by the Company to each of its executive officers is
expected to be below $1 million and the Committee believes that options
granted under the Company's 1996 Stock Option Plan and 1989 Stock Option Plan
will meet the requirements for qualifying as performance-based, the Committee
believes that this section will not affect the tax deductions available to the
Company. It will be the Committee's policy to qualify, to the extent
reasonable, the executive officers' compensation for deductibility under
applicable tax law. However, the Company may from time to time pay
compensation to its executive officers that may not be deductible.
The members of the Committee submit the foregoing report.
Compensation Committee:
Promod Haque
Richard Lussier
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Radha R. Basu and Richard
Lussier. From March 31, 1998 until March 10, 1999, the Compensation Committee
consisted of directors Promod Haque and Richard Lussier. From January 1, 1998
through March 31, 1998, it consisted of directors Promod Haque, Richard
Weening and Richard Lussier.
21
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph compares the cumulative total stockholder return for the
Company's stock since August 15, 1996, the date the Company's Common Stock
began to trade on The Nasdaq Stock Market, Inc., through December 31, 1998,
the last trading date of fiscal 1998, to the cumulative return over such
period of (i) the Nasdaq Market Index and (ii) the MG Internet Software &
Services Index (provided by Media General Financial Services, Inc.). The graph
assumes that $100 was invested in the Common Stock of the Company and the
respective indices on August 15, 1996 (including reinvestment of dividends).
The stock price performance on the following graph is not necessarily
indicative of future stock price performance.
[graph]
<TABLE>
<CAPTION>
Period Ending
------------------------------------
Index 08/15/96* 12/31/96 12/31/97 12/31/98
- ----- --------- -------- -------- --------
<S> <C> <C> <C> <C>
Connect, Inc............................... 100 102 14 9
Nasdaq Market Index........................ 100 112 137 193
MG Internet Software & Services Index...... 100 123 73 192
</TABLE>
- --------
* Assumes $100 invested at August 15, 1996 in Common Stock of the Company and
in each of the comparative indices.
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended, or the Exchange Act
whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain stock option grants to directors and executive officers of the
Company are described herein under the caption "Executive Compensation."
Certain agreements between the Company and its directors are described herein
under the caption "Employment Contracts, Termination of Employment and Change-
in-Control Agreements."
In April 1998, Mr. Foster resigned his position as Executive Vice President
of Sales and Marketing. Pursuant to the terms of an agreement between Mr.
Foster and the Company in connection with his resignation, Mr. Foster remained
as a consultant to the Company through July 1998, during which time he
received compensation equal to his regular monthly salary prior to his
resignation ($14,167), continued vesting of unvested options and health
benefits. Actual amounts paid to Mr. Foster during 1998 are reflected in the
Summary Compensation Table. In addition, pursuant to the terms of this
agreement, the Company agreed to forgive accrued interest on, and a portion of
the principal of, a $30,000 loan to Mr. Foster, which principal amount to be
forgiven was not to exceed $10,000. The total amount forgiven was $12,900.
Mr. Bridge entered into the 1997 Letter and the 1998 Letter with the
Company, which letters governed the terms of his employment relationship with
the Company for fiscal years 1997 and 1998, respectively. The 1998 Letter has
been superseded by Mr. Bridge's consulting arrangement with the Company in
April 1998. Pursuant to the 1997 Letter, the Company in April 1997 loaned Mr.
Bridge $150,000 pursuant to a three-year, full recourse promissory note which
is subject to interest, compounded annually, at the rate of 5.91%. In exchange
for Mr. Bridge's remaining a consultant to the Company for the twelve-month
period from April 1998 through March 1999, the Company has agreed to forgive
50% of the total principal and outstanding interest of this loan and, if Mr.
Bridge achieves certain specified goals prior to March 31, 1999, he may be
entitled to forgiveness of the remainder of outstanding principal and interest
on his loan. The total amount of principal and accrued interest on such note
as of April 2, 1999 is approximately $84,127. Other material terms of each of
the 1997 Letter, the 1998 Letter and Mr. Bridge's consulting relationship with
the Company are described in "Employment Contracts, Termination of Employment
and Change-in-Control Arrangements--Employment Agreements."
On November 18, 1997, BankAmerica Ventures and BankAmerica Venture Partners
I (collectively "BankAmerica"), entities with which Rory T. O'Driscoll, a
director of the Company, is affiliated, were issued convertible notes by the
Company in the aggregate principal amount of $1,200,000 and warrants to
purchase an aggregate of 399,990 shares of the Company's Common Stock. On
February 26, 1998, the notes plus the accrued interest thereon were converted
into 608,219 shares of the Company's Series A Preferred Stock. On April 1,
1998, all of the shares of Series A Preferred Stock held by BankAmerica plus
accrued but unpaid dividends thereon were converted into 1,062,555 shares of
the Company's Common Stock and the warrants held by BankAmerica were canceled.
Mr. O'Driscoll disclaims beneficial ownership of the securities held by
BankAmerica, except to the extent of his proportionate interest therein.
On November 18, 1997, Norwest Equity Partners V, L.L.P. ("Norwest"), an
entity with which Promod Haque, a former director of the Company, is
affiliated, was issued a $1,240,000 principal amount convertible note by the
Company and a warrant to purchase 413,323 shares of the Company's Common
Stock. On February 26, 1998, the note plus the accrued interest thereon was
converted into 628,493 shares of the Company's Series A Preferred Stock. On
April 1, 1998, all of the shares of Series A Preferred Stock held by Norwest
plus accrued but unpaid dividends thereon were converted into 1,097,972 shares
of the Company's Common Stock and the warrants held by Norwest were canceled.
Mr. Haque disclaims beneficial ownership of the securities held by Norwest,
except to the extent of his proportionate interest therein.
The Company has entered into indemnification agreements with its officers
and directors containing provisions that may require the Company, among other
things, to indemnify its officers and directors against certain liabilities
that may arise by reason of their status or service as officers or directors
(other than liabilities arising from willful misconduct of a culpable nature)
and to advance their expenses incurred as a result of any proceeding against
them as to which they could be indemnified.
23
<PAGE>
OTHER MATTERS
The Board knows of no other matters that will be presented for consideration
at the Annual Meeting. If any other matters are properly brought before the
meeting, it is the intention of the persons named in the accompanying proxy to
vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/Alan C. Mendelson
Alan C. Mendelson
Secretary
July 8, 1999
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December 31, 1998 is
included along with this Proxy Statement.
24
<PAGE>
APPENDIX A
CONNECT, INC.
1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS AND ADVISORS
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. Purposes............................................................. A-1
2. Definitions.......................................................... A-1
3. Administration....................................................... A-2
4. Shares Subject to the Plan........................................... A-3
5. Eligibility.......................................................... A-3
6. Option Provisions.................................................... A-4
7. Covenants of the Company............................................. A-6
8. Use of Proceeds from Stock........................................... A-6
9. Miscellaneous........................................................ A-6
10. Adjustments upon Changes in Stock.................................... A-7
11. Amendment of the Plan and Options.................................... A-8
12. Termination or Suspension of the Plan................................ A-8
13. Effective Date of Plan.............................................. A-8
</TABLE>
<PAGE>
Connect, Inc.
1999 Stock Option Plan for Non-Employee Directors and Advisors
Adopted June, 1999
Approved By Stockholders , 1999
1. Purposes.
(a) Specific Purpose. The purpose of the Plan is to provide a means by which
eligible recipients of Options may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Options.
(b) General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Options, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Advisor" means any person engaged by the Company or an Affiliate to
render services and who is compensated for such services, provided that the
term "Advisor" shall not include Directors who are paid only a director's fee
by the Company or who are not compensated by the Company for their services as
Directors.
(b) "Affiliate" means a "parent" or a "subsidiary" (as those terms are
defined under Rule 405 promulgated under the Securities Act) or either as the
context may require.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c).
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Connect, Inc., a Delaware corporation.
(h) "Continuous Service" means an Optionholder's service with the Company or
an Affiliate, whether as an Employee, Director or Advisor, is not interrupted
or terminated. An Optionholder's Continuous Service shall not be deemed to
have terminated merely because of a change in the capacity in which the
Optionholder renders service as an Employee, Advisor or Director or a change
in the entity for which the Optionholder renders such service. For example, a
change in status from a Director of the Company to an Advisor of an Affiliate
or an Employee of the Company will not constitute an interruption of
Continuous Service.
(i) "Director" means a member of the Board of Directors of the Company.
(j) "Disability" means the permanent and total disability of a person within
the meaning of Section 22(e)(3) of the Code.
(k) "Employee" means any person employed by the Company or an Affiliate
within the meaning of Section 3121(d)(1) or (2) of the Code (and any successor
provision). Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate as an Employee.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
A-1
<PAGE>
(m) "Fair Market Value" means, as of any date, the value of the Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market System or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the last market trading
day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.
(n) "Non-Employee Director" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act ("Regulation S-K")), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of
Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
(o) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means an stock option granted pursuant to the Plan and not
intended to qualify as an "incentive stock option" within the meaning of
Section 422 of the Code.
(q) "Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.
(r) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(s) "Plan" means this Connect, Inc. 1999 Stock Option Plan for Non-Employee
Directors and Advisors.
(t) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
(u) "Securities Act" means the Securities Act of 1933, as amended.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be
granted; what type of Option shall be granted; the provisions of each
Option granted (which need not be identical), including the time or times
when a person shall be permitted to receive stock pursuant to an Option;
and the number of shares with respect to which an Option shall be granted
to each such person.
(ii) To construe and interpret the Plan and Options granted under it, and
to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect,
A-2
<PAGE>
omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective. Provided however, that the Board, the Committee, or
the chief executive officer of the Company, in that party's sole
discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal leave.
(iii) To amend the Plan or an Option as provided in Section 11.
(iv) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan,
the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee any of the administrative powers the Committee
is authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
(ii) Committee Composition. In the discretion of the Board, a Committee
may consist solely of two or more Non-Employee Directors, in accordance
with Rule 16b-3. Within the scope of such authority, the Board or the
Committee may delegate to a committee of one or more members of the Board
who are not Non-Employee Directors the authority to grant Options to
eligible persons who are not then subject to Section 16 of the Exchange
Act.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 10 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Options shall not exceed in the aggregate five hundred thousand (500,000)
shares of Common Stock.
(b) Reversion of Shares to the Share Reserve. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not acquired under such Option shall revert to
and again become available for issuance under the Plan. If any Common Stock
acquired pursuant to the exercise of an Option shall for any reason be
repurchased by the Company under an unvested share repurchase option provided
under the Plan, the stock repurchased by the Company under such repurchase
option shall not revert to and again become available for issuance under the
Plan.
(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
5. Eligibility.
(a) Eligibility for Options Generally. An Option may only be granted to a
person who is a Director or an Advisor at the time of grant and not also an
Employee.
(b) Eligibility of Advisors.
(i) Advisor shall only be eligible for the grant of an Option if, at the
time of grant, such Advisor has been appointed to serve on one or more
advisory boards established by the Board. An advisory board may consist of
one or more Advisors.
A-3
<PAGE>
(ii) An Advisor shall not be eligible for the grant of an Option if, at
the time of grant, a Form S-8 Registration Statement under the Securities
Act ("Form S-8") is not available to register either the offer or the sale
of the Company's securities to such Advisor because of the nature of the
services that the Advisor is providing to the Company, or because the
Advisor is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (1) that
such grant (A) shall be registered in another manner under the Securities
Act (e.g., on a Form S-3 Registration Statement) or (B) does not require
registration under the Securities Act in order to comply with the
requirements of the Securities Act, if applicable, and (2) that such grant
complies with the securities laws of all other relevant jurisdictions.
(iii) As of April 7, 1999 Form S-8 generally is available to Advisors
only if they are natural persons; (2) they provide bona fide services to
the issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent; and (3) the services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market
for the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be
separately documented at the time of grant, and a separate certificate or
certificates will be issued for shares purchased on exercise of each Option.
The provisions of separate Options need not be identical, but each Option
shall include (through incorporation of provisions hereof by reference in the
Option Agreement or otherwise) the substance of each of the following
provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Exercise Price of an Option. The exercise price of each Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Option may be granted with an exercise
price lower than that set forth in the preceding sentence if such Option is
granted pursuant to an assumption or substitution for another option in a
manner satisfying the provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii)
at the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of an Option) by (1) delivery to the Company of
other Common Stock, (2) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Optionholder or (3) in
any other form of legal consideration that may be acceptable to the Board;
provided, however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(d) Transferability of an Option. An Option shall be transferable to the
extent provided in the Option Agreement. If the Option does not provide for
transferability, then the Option shall not be transferable except by will
or by the laws of descent and distribution and shall be exercisable during
the lifetime of the Optionholder only by the Optionholder. Notwithstanding
the foregoing provisions of this subsection 6(d), the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
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<PAGE>
(e) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may
be exercised (which may be based on performance or other criteria) as the
Board may deem appropriate. The vesting provisions of individual Options
may vary. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may
be exercised.
(f) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent
that the Optionholder was entitled to exercise it as of the date of
termination) but only within such period of time ending on the earlier of
(i) the date three (3) months following the termination of the
Optionholder's Continuous Service (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
in the Option Agreement, the Option shall terminate.
(g) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination
of the Optionholder's Continuous Service (other than upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements
under the Securities Act, then the Option shall terminate on the earlier of
(i) the expiration of the term of the Option as set forth in the Option
Agreement or (ii) the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the
exercise of the Option would not be in violation of such registration
requirements.
(h) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise it as of the date of termination),
but only within such period of time ending on the earlier of (i) the date
twelve (12) months following such termination (or such longer or shorter
period specified in the Option Agreement, or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within
the time specified herein, the Option shall terminate.
(i) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service
for a reason other than death, then the Option may be exercised (to the
extent the Optionholder was entitled to exercise the Option as of the date
of death) by the Optionholder's estate, by a person who acquired the right
to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionholder's death pursuant to subsection
6(d), but only within the period ending on the earlier of (1) the date
eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement) or (2) the expiration of the term
of such Option as set forth in the Option Agreement. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all
of the shares subject to the Option prior to the full vesting of the
Option. Subject to the "Repurchase Limitation" in subsection 9(f), any
unvested shares so purchased may be subject to an unvested share repurchase
option in favor of the Company or to any other restriction the Board
determines to be appropriate.
(k) Re-Load Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall
have the authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionholder to a further Option (a
"Re-Load Option") in the event the Optionholder exercises the Option
evidenced by the Option Agreement, in whole or in part, by surrendering
other shares of Common Stock in accordance with this Plan and the terms and
conditions
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of the Option Agreement. Any such Re-Load Option shall (i) provide for a
number of shares equal to the number of shares surrendered as part or all
of the exercise price of such Option; (ii) have an expiration date which is
the same as the expiration date of the Option the exercise of which gave
rise to such Re-Load Option; and (iii) have an exercise price which is
equal to one hundred percent (100%) of the Fair Market Value of the Common
Stock subject to the Re-Load Option on the date of exercise of the original
Option. Notwithstanding the foregoing, a Re-Load Option shall be subject to
the same exercise price and term provisions heretofore described for
Options under the Plan. There shall be no Re-Load Options on a Re-Load
Option.
7. Covenants of the Company.
(a) Availability of Shares. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock
required to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the Options; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any stock issued or issuable pursuant to any such
Option. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue
and sell stock upon exercise of such Options unless and until such authority
is obtained.
8. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall constitute general
funds of the Company.
9. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which an Option may first be exercised or the
time during which an Option or any part thereof will vest in accordance with
the Plan, notwithstanding the provisions in the Option stating the time at
which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Optionholder shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all
requirements for exercise of the Option pursuant to its terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Option granted pursuant thereto shall confer upon any
Optionholder any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Option was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of
an Advisor pursuant to the terms of such Advisor's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of
the Company or an Affiliate, and any applicable provisions of the corporate
law of the state in which the Company or the Affiliate is incorporated, as the
case may be.
(d) Investment Assurances. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give
written assurances satisfactory to the Company as to the Optionholder's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (ii) to
give written assurances satisfactory to the Company stating that the
Optionholder is acquiring the stock subject to the Option for the
Optionholder's own account and
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<PAGE>
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (iii) the issuance of the shares upon
the exercise or acquisition of stock under the Option has been registered
under a then currently effective registration statement under the Securities
Act or (iv) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(e) Withholding Obligations. To the extent provided by the terms of an
Option Agreement, the Optionholder may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under
an Option by any of the following means (in addition to the Company's right to
withhold from any compensation paid to the Optionholder by the Company) or by
a combination of such means: (i) tendering a cash payment; (ii) authorizing
the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Optionholder as a result of the exercise or acquisition of
stock under the Option; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(f) Repurchase Limitation. The terms of any repurchase option shall be
specified in the Option and may be either at Fair Market Value at the time of
repurchase or at not less than the original purchase price.
(g) Cancellation and Re-Grant of Options. The Board shall have the authority
to effect, at any time and from time to time, (i) the repricing of any
outstanding Options under the Plan and/or (ii) with the consent of any
adversely affected holders of Options, the cancellation of any outstanding
Options under the Plan and the grant in substitution therefor of new Options
under the Plan covering the same or different numbers of shares of Common
Stock. The exercise price per share shall be not less than that specified
under the Plan for newly granted Options. Notwithstanding the foregoing, the
Board may grant an Option with an exercise price lower than that set forth
above if such Option is granted as part of a transaction to which Section
424(a) of the Code applies.
(h) Except as may be provided in an employment or other agreement that has
been reduced to writing and approved by the Board or Committee, the Option
Agreement and the Plan shall together constitute the entire understanding
between an Optionee and the Company regarding the acquisition of stock in the
Company pursuant to the Option represented by such Option Agreement, and shall
supersede all prior oral and written agreements pertaining to such Option.
10. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Option, without the receipt of consideration by
the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the outstanding Options will be appropriately adjusted in
the class(es) and number of securities and price per share of stock subject to
such outstanding Options. The Board, the determination of which shall be
final, binding and conclusive, shall make such adjustments. (The conversion of
any convertible securities of the Company shall not be treated as a
transaction "without receipt of consideration" by the Company.)
(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, Options shall terminate to the
extent not exercised (if applicable) prior to such event.
(c) Change in Control--Asset Sale. In the event of a sale of all or
substantially all of the assets of the Company, then the acquiring corporation
shall assume any Options outstanding under the Plan or shall substitute
similar Options (including an option to acquire the same consideration paid to
the stockholders in the transaction described in this subsection for those
outstanding under the Plan. In the event there is no acquiring corporation,
A-7
<PAGE>
or the acquiring corporation refuses to assume such Options or to substitute
similar Options for those outstanding under the Plan, then with respect to
Options held by Optionholders whose Continuous Service has not terminated, the
vesting of such Options shall automatically accelerate in full, and such
Options shall be exercisable for fifteen (15) days following such acceleration
and then terminate to the extent unexercised. With respect to any other
Options outstanding under the Plan, such Options shall terminate to the extent
not exercised prior to such event.
(d) Change in Control--Merger, Consolidation or Reverse Merger. In the event
of (i) a merger or consolidation in which the Company is not the surviving
corporation or (ii) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding
the merger are converted by virtue of the merger into other property, whether
in the form of securities, cash or otherwise, then any surviving corporation
or acquiring corporation shall assume any Options outstanding under the Plan
or shall substitute similar Options (including an option to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection for those outstanding under the Plan. In the event any surviving
corporation or acquiring corporation refuses to assume such Options or to
substitute similar Options for those outstanding under the Plan, then with
respect to Options held by Optionholders whose Continuous Service has not
terminated, the vesting of such Options shall automatically accelerate in
full, and such Options shall be exercisable for fifteen (15) days following
such acceleration and then terminate to the extent unexercised. With respect
to any other Options outstanding under the Plan, such Options shall terminate
to the extent not exercised prior to such event.
11. Amendment of the Plan and Options.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 10 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval.
(c) No Impairment of Rights. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(d) Amendment of Options. The Board at any time, and from time to time, may
amend the terms of any one or more Options; provided, however, that the rights
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
12. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time. No
Options may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall not
impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.
13. Effective Date of Plan.
The Plan shall become effective on adoption by the Board, but no Option
shall be exercised unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.
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<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT OF SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF CONNECT, INC.
Connect, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"), Does
Hereby Certify:
First: The name of the Corporation is Connect, Inc.
Second: The date on which the Certificate of Incorporation of the
Corporation was originally filed with the Secretary of State of the State of
Delaware is May 20, 1996.
Third: The Board of Directors of the Corporation, acting in accordance with
the provisions of Sections 141 and 242 of the General Corporation Law of the
State of Delaware, adopted resolutions amending its Certificate and
Incorporation as follows:
Article I shall be amended and restated to read in its entirety as follows:
"The name of the Corporation is ConnectInc.com, Co."
Fourth: thereafter pursuant to a resolution of the Board of Directors this
Certificate of Amendment was submitted to the stockholders of the Corporation
for their approval, and was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
In Witness Whereof, Connect, Inc. has caused this Certificate of Amendment
to be signed by its President and attested to by its Secretary this ___ day of
________, 1999.
Connect, Inc.
By:__________________________________
Craig D. Norris, President
Attest:
_____________________________________
Alan C. Mendelson, Secretary
<PAGE>
CONNECT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 12, 1999
The undersigned hereby appoints Craig D. Norris and Gordon J. Bridge, and
each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Connect, Inc. that the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Connect, Inc. to be held at Connect, Inc.'s principal executive offices, 515
Ellis Street, Mountain View, CA 94043 on August 12, 1999 at 1:00 p.m. (local
time), and at any and all postponements, continuations and adjournments
thereof, with all powers that the undersigned would possess if personally
present, upon and in respect of the following matters and in accordance with
the following instructions, with discretionary authority as to any and all
other matters that may properly come before the meeting.
Unless a contrary direction is indicated, this Proxy will be voted for all
nominees listed in Proposal 1 and for Proposals 2, 3 and 4, as more specifically
described in the Proxy Statement. If specific instructions are indicated, this
Proxy will be voted in accordance therewith.
Management recommends a vote for the nominees for director listed below.
Proposal 1: To elect three directors to Class I of the Board of Directors, to
hold office until the 2001 Annual Meeting of Stockholders, and to
elect two directors to Class II of the Board of Directors to hold
office until the 2000 Annual Meeting of Stockholders.
[_] For all nominees listed below [_] Withhold Authority to
(except as marked to the contrary vote for all nominees
below). listed below.
Class I Nominees: Radha R. Basu, Gordon J. Bridge, Craig D. Norris
Class II Nominees: Richard H. Lussier, Rory T. O'Driscoll
To withhold authority to vote for any nominee(s) write such nominee(s)' name(s)
below:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Management recommends a vote for Proposals 2, 3 and 4.
Proposal 2: To approve an amendment to the Company's Second Amended and
Restated Certificate of Incorporation to change the Company's name
to "ConnectInc.com, Co."
[_] For [_] Against [_] Abstain
Proposal 3: To approve the adoption of the Company's 1999 Stock Option Plan for
Non-Employee Directors and Advisors and the reservation of 500,000
shares of the Company's Common Stock for issuance thereunder.
[_] For [_] Against [_] Abstain
Proposal 4: To ratify selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1999.
[_] For [_] Against [_] Abstain
Dated:_______________________________
_____________________________________
_____________________________________
Signature(s)
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators, trustees,
guardians and attorney-in-fact should
add their titles, If signer is a
corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If signer is a partnership,
please sign in partnership name by
authorized person.
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
<PAGE>
Proposal 4: To ratify selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1999.
For [_] Against [_] Abstain [_]
DATED _________________ _____________________________________
_____________________________________
SIGNATURE(S)
Please sign exactly as your name appears hereon.
If the stock is registered in the names of two or
more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-
in-fact should add their titles. If signer is a
corporation, please give full corporate name and
have a duly authorized officer sign, stating
title. If signer is a partnership, please sign in
partnership name by authorized person.
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
